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Increasing Share Capital
HOW TO INCREASE A COMPANY'S AUTHORISED SHARE CAPITAL
Under the Companies Act 2006, the term "authorised share capital" has been abolished. Shareholders who wish to increase the share capital of a company will need to reflect the increase by amending the articles of association of the company by a special resolution.
However, these new provisions will not come into force until 1 October 2009. In the meantime, the current procedure for increasing a company's authorised share capital (under the Companies Act 1985) will be as follows:
A sole director / shareholder
1. Board resolutions will have to be passed to:
- approve the increase in the authorised share capital
- approve the draft shareholders' written resolutions to: (i) to increase the authorised share capital of the company - ordinary resolution; (ii) to amend the company's memorandum of association - ordinary resolution; and iii) to authorise the directors to issue shares up to the amount of the newly increased shares - ordinary 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 the date on the written resolutions:
- a copy of the written resolution;
- a copy of the Memorandum of Association, as amended;
- Companies House Form 123; and
- Companies House Form 88(2) (if applicable - where the new shares are being issued immediately).
Multiple shareholders
1. Board resolutions will have to be passed to:
- approve the increase 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 increase the authorised share capital of the company - ordinary resolution; (ii) to amend the company's memorandum of association - ordinary resolution; and iii) to authorise the directors to issue shares up to the amount of the newly increased shares - ordinary 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.
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 and signed by the relevant number of shareholders i.e. holders of 51% of shares of the company for ordinary resolution.
- Companies House Form 123;
- a copy of the Memorandum of Association, (and articles of association, if applicable) as amended; and
- Companies House Form 88(2) (if applicable - where the new shares are being issued immediately).
From 1 October 2009
The procedure for increasing a company's share capital will be exactly the same as detailed above, except that the articles of association will need to be amended by special resolution.