Consolidation of Shares
A limited company having a share capital may:
- sub-divide its shares, or any of them, into shares of a smaller nominal amount than its existing shares, or
- consolidate and divide all or any of its share capital into shares of a larger nominal amount than its existing shares.
In any sub-division, consolidation or division of shares the proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as it was in the case of the share from which that share is derived.
A company can only exercise any of the above powers if its members have passed a resolution authorising it to do so. Such a resolution can either be in very general terms or be specific. It can authorise the company:
- to exercise more than one of these powers;
- to exercise a power on more than one occasion;
- to exercise at a specified time or in specified circumstances
If a company does sub-divide or consolidate its shares it must within 28 days give notice to Companies House accompanied by a Statement of Capital (Statutory Form SH02). Failure to do so is an offence.
Articles of Association
It is important to ensure that subdivision and conslidation of shares is not prohibited within the Articles of Association. For companies incorporated under the Companies Act 1985 clause 32 of Table A (unless specifically excluded) provides that the company has the power to subdivide and consolidate its shares.