Allotment and Issue of Shares
When a company limited by shares is incorporated the subscribers to the Memorandum of Association agree to take at least one share in the company and therefore automatically become the first members of the company. Although nothing further is required it is considered good practice to document the subscriber share issue in the first board meeting minutes of the company and to specify therein whether the shares are being paid up .
Authorised Share Capital
The requirement for a company to have an authorised share capital was abolished under the Companies Act 2006 and so companies incorporated after 1st October 2009 have no restriction on the number of shares it can issue, (unless a limit is set in the company's articles). Companies registered before that date will still be subject to the authorised capital figure in their memorandum and articles until they are amended.
Directors' Authority to Allot
Authorisation must state the maximum amount of shares that may be allotted under it, and specify the date on which it will expire, which must be not more than five years from either:
- in the case of authorisation contained in the company's articles at the time of its original incorporation, the date of that incorporation;
- in any other case, the date on which the resolution is passed by virtue of which the authorisation is given.
The authorisation may be renewed or revoked at any time by ordinary resolution.
Under the Companies Act 2006, existing shareholders have the right to be offered shares pro rata to their existing shareholdings before any new shares are allotted. This is called a pre-emption right. The directors of a company may be given the power to allot shares as if the pre-emption rights did not apply by the shareholders passing an appropriately worded special resolution.