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Altering Share Capital
Under the Companies Act 2006, the term "authorised share capital" has been abolished. Shareholders who wish to alter the share capital of a company will need to amend the articles of association by a special resolution.
However, these new provisions will not come into force until 1 October 2009. In the meantime, the current procedure (under the Companies Act 1985) for altering a company's authorised share capital (e.g changing the class of shares) is as follows:
A sole director / shareholder
1. Board resolutions will have to be passed to:
- approve the alteration to the authorised share capital;
- approve the draft shareholders' written resolutions to: (i) to change the class of shares - ordinary resolution; (ii) to amend the company's memorandum of association - ordinary resolution; and (iii) amend the company's articles of association (if applicable) - special resolution.; and
- approve the draft amended memorandum of association.
2. Sign the shareholders' written resolutions.
3. The following documents will have to be filed at Companies House within 15 days of date on written resolutions:
- a copy of the written resolution;
- a notice setting out the details of the classes of shares affected by the alteration, and the conditions subject to which the new shares have been or are to be issued; and
- a copy of the Memorandum of Association, as amended.
Multiple shareholders
1. Board resolutions will have to be passed to:
- approve the alteration in the authorised capital;
- approve the notice to hold a general meeting at which various resolutions are to be passed;
- approve the draft of the various resolutions as follows: (i) to change the class of shares - ordinary resolution; (ii) to amend the company's memorandum of association - ordinary resolution; and (iii) amend the company's articles of association (if applicable) - special resolution; and
- approve the draft amended memorandum of association.
2. A General meeting will have to be called to approve and sign the various resolutions above:
- For an ordinary resolution: holders of 51% of shares of the company will need to approve / sign the resolution.
- For a special resolution: holders of 75% of shares of the company will need to approve / sign the resolution.
3. The following documents will need to be filed at Companies House within 15 days of date on resolutions:
- Copies of all the resolutions that have been passed signed by the relevant number of shareholders i.e. holders of 51% of shares of the company for ordinary resolution; holders of 75% of shares of the company for special resolution;
- The details of the classes of shares affected by the alteration, and the conditions subject to which the new shares have been or are to be issued; and
- a copy of the Memorandum of Association, (and articles of association, if applicable) as amended.
From 1 October 2009
The procedure for changing the class of shares will be exactly the same as detailed above except that the articles of association will need to be amended by special resolution.
© Waterfront Solicitors LLP 2007