May 2009 - Version 13
as modified by the Companies Act 2006
When reading these guidance notes, you need to be aware of the following:
Some, but not all, of the provisions in the Companies Act 2006 have come into force. Therefore, some provisions in the Companies Act 1985 remain relevant. We have tried as far as possible to make it clear throughout these notes which Act applies. If you would like to find out more you may wish to visit our website at www.companieshouse.gov.uk where you can find out which provisions in the respective Acts are in force. Our website also contains a link to the BERR (The Department for Business, Enterprise and Regulatory Reform) website http://www.berr.gov.uk/bbf/co-act-2006/index.html where you can find further information. Some provisions in the new Act are subject to transitional arrangements. We will as far as possible explain these in this guidance and give details on our website.
There is one final stage in the implementation of the Companies Act 2006 scheduled for October 2009. We will update any guidance notes affected by those implementations at the time. You may wish also to keep an eye on our website where we will publish more information as the implementation process continues so you can access the most up to date information.
Until October 2009, these guidance notes apply only to companies formed in Great Britain (England, Wales and Scotland). The separate system in Northern Ireland is then scheduled to merge into a single system for the whole of the United Kingdom.
The information in this guide applies to all companies, incorporated with a share capital in England, Wales or Scotland, whether private or public. It is an introductory guide to a complex subject and if you are in any doubt about anything you should consider seeking professional advice.
The information in the guide:
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1. What is share capital?
When people form a company, they decide whether to limit the members' liability by shares. The memorandum of association (a document required in the company’s formation) must state:
2. What is authorised capital?
A limited company’s authorised share capital is the amount of capital with which it starts its life (but which it can alter subsequently) and which the memorandum of association states. A company’s authorised share capital is not the same as its issued capital.
3. Can a company alter its authorised share capital?
A company can decrease its authorised share capital by passing an ordinary resolution to cancel shares which nobody has taken or agreed to take. You must send notice of the cancellation, on Form 122, to Companies House within one month. No fee is payable to Companies House.
* Please note, Companies Act 1985 'Resolution' guidance provides general information which could still be relevant to your company.
A public limited company cannot conduct business or exercise borrowing powers unless and until it has obtained a trading certificate from Companies House, confirming that it has the minimum allotted share capital. This is the ‘authorised minimum’. In order to satisfy the requirement and obtain a trading certificate, the company must have either a minimum of £50,000 of allotted share capital denominated in sterling or a minimum of €65,600 of allotted share capital denominated in euros. The company cannot satisfy the requirement by a combination of euro and sterling shares or by shares in any other currency. Further, a share allotted in pursuance of an employees’ share scheme can only be counted towards satisfying the authorised minimum if at least 25% of the nominal value of each share and any premium is paid up.
A company re-registering from a private company to a public company does not have to apply for a trading certificate. But in order to re-register, the nominal value of its allotted share capital must be not less than the authorised minimum and each of its allotted shares must be paid up as to at least 25% of its nominal value and the whole of any premium (although certain shares can be disregarded). The company must satisfy the authorised minimum, for the purposes of re-registration, either by means of sterling shares with a total nominal value of at least £50,000 or by means of euro shares with a total nominal value of at least €65,600. It cannot satisfy it by a combination of euro and sterling shares or by shares in any other currency.
If a company applying for a trading certificate or for re-registration is capable of satisfying the authorised minimum either in euro shares or in sterling shares, it must choose in its application which currency to rely on. A company that is re-registering from private to public must complete Form 43(3).
To apply for a trading certificate, the company must send Form 117 to Companies House:
(see following note)
You still need to use Form 117 for applications for a trading certificate, but only to provide the information required by section 762 of the Companies Act 2006. You do not need a statutory declaration or separate statement of compliance. A director or secretary of the company must sign the form. The company needs to adapt the form where the company is seeking to satisfy the authorised minimum in euro shares. Adapting it in this way will amount to an election to rely on euro share capital (rather than sterling share capital) for that purpose.
A company may increase its issued capital by allotting more shares, but only up to the maximum allowed by its authorised capital (i.e. a company’s issued share capital cannot exceed its authorised share capital); it must make allotments under proper authority (see question 7).
Yes, under the Companies Act 1985, a company can reduce its issued share capital in the following circumstances -
From 1 October 2008, a private company can reduce its issued capital by special resolution supported by a solvency statement. This is a new process of capital reduction under the Companies Act 2006 and is only applicable to private companies. A company must deliver to Companies House-
All the company directors must sign the solvency statement. This is a statement confirming that each director has formed the opinion that
The company must send or make available at a general meeting (depending on whether the resolution is proposed as a written resolution or at general meeting) a copy of the solvency statement to every eligible member of the company.
A memorandum of capital is a breakdown of the company’s share capital structure following the reduction.
A statement of compliance by the directors is confirmation that the company made a copy of the solvency statement available to each of the eligible members as required and that the solvency statement was not made more than 15 days before the company’s members passed the resolution.
You must send a copy of the solvency statement and resolution, and the memorandum of capital and statement of compliance by the directors, to Companies House. All of the documents should be sent to Companies House within 15 days of the passing of the resolution. Wherever possible, you should send all the forms together. In any event, the reduction of capital will not take effect until Companies House has registered a copy of the solvency statement, resolution and memorandum of capital.
Companies House has not prescribed forms for this process and you will have to produce your own documents. For further information and detail on the content of these documents, please follow the links below to the legislation:
A company may increase its issued share capital by issuing additional shares. Shares are “issued” when a person is registered as a member in the company’s register of members.
'Allotment' is the process by which the company enters into a contract with someone to allot shares and that person acquires an unconditional right to be issued with the shares. Directors allot shares on the company’s behalf, but either the company’s articles or a resolution of the company passed at a general meeting needs to authorise them to do so.8. What type of resolution does the company have to pass to give authority to allot shares?
Any public or private company with share capital may give authority by ordinary resolution. Subject to an exception for private companies (noted in the following paragraph) authority must be for a fixed period which must not exceed five years and must set a limit on the amount of shares that the directors can allot under it. The company must deliver a copy of a resolution giving, varying, revoking or renewing an authority to allot shares to Companies House within 15 days of passing it.
A private company with share capital may pass an elective resolution, authorising the directors to allot shares for an indefinite period or for a fixed period longer than five years, though such a resolution must still set a limit on the amount of shares which the directors may allot. The company must deliver a copy of any elective resolution to Companies House within 15 days of passing it. A public company cannot pass an elective resolution.
* Please note, CA 1985 Resolution guidance provides general information which could still be relevant to your company.9. Must a public company notify Companies House when it makes an offer of shares to the public?
A company does not have to register prospectuses and listing particulars at Companies House. However, the general rule is that a public company may not offer securities to the public in the UK, nor seek admission to trading on a regulated market in the UK, unless it has published a prospectus approved by the Financial Services Authority.
For more information on these requirements, please contact the Financial Services Authority (www.fsa.gov.uk or telephone 020 7066 1000).10. Must a company notify Companies House when it has made an allotment of shares?
Within one month of the allotment of shares, a company must deliver a return of allotment, on Form 88(2), to Companies House. No fee is payable to Companies House.
If it allots shares over a period of time, particularly in a rights issue (see question 15), it is not acceptable to delay delivery of the return until it has allotted all the shares if this means the form will be late for any of the allotments. Instead, the company must complete consecutive forms and deliver each form to Companies House within one month of the first allotment stated on it.
Note: in the case of a rights issue, the date(s) of allotment will usually be the date(s) on which the company allots the shares following receipt by the company of acceptances/renunciations NOT the date on which it issues the provisional allotment letters. .
If the shares are paid for in cash you must include details of the actual amount paid, or due to be paid and actually payable, on the form (including any amount paid or due and payable by way of premium). Do not include any amount that is not yet due for payment on a partly paid-up share.
Nominal value and share premium
If the company allots shares for a non-cash consideration (i.e. in return for payment otherwise than in cash) (see questions 12 and 14), the amount entered on the form against ‘Amount (if any) paid or due on each’ must be ‘nil’ or ‘0.00’.
11. Must shares be fully paid-up at the time of allotment?
As a general rule, a company may allot bonus shares to members as fully paid-up. A company which has funds available for the purpose may also pay up any amounts unpaid on its shares. See question 14.
A company must not allot shares for an amount less than the nominal value of the shares, that is, at a discount.12. Must people pay for shares in cash?
Payment for shares can be in a variety of ways including cash, goods, services, property, good will, know-how, or even shares in another company. The latter is often the case when one company takes over another. It also includes cash payments to any person other than the company allotting the shares.
There are greater restrictions on public companies in what they may accept in payment for shares. Non-cash payments must be independently valued before they allot shares (except in the case of bonus issues, mergers or arrangements whereby shares in another company are cancelled or transferred to the company). The company must deliver a copy of the valuation report to Companies House with Form 88(2).
Generally, allotted shares can be paid for;
Paid up in cash
Yes. Form 88(2) must show the extent to which the company has treated the shares as paid-up. This must be stated as a percentage of the total amount payable in respect of the nominal value and any premium.
Calculating the extent to which shares are paid-up
Form 88(2) must also include a brief description of the non-cash payment for the shares (for example, 'in return for the transfer of 100 ordinary shares of £1 in XYZ limited' or ‘capitalisation of reserves’). You must also send to Companies House the written contract which constitutes the title to the allotment.
If there is no written contract, you must deliver a Form 88(3) to Companies House with Form 88(2) within one month of the allotment. No fee is payable to Companies House. Form 88(3) is not acceptable when there is a written contract.
14. What are bonus shares?
A company can also use a capitalisation of profits to credit partly paid shares with further amounts to make them paid up.
The company must notify the allotment of bonus shares to Companies House on Form 88(2). It should show the amount paid or due on each share as ‘nil’ or ‘0.00’ and the shares as paid up ‘otherwise than in cash’.
In addition, if a listed public company issues bonus shares in respect of shares held in treasury, the company must notify Companies House on Form 169(1B). Stamp duty is not payable. No fee is payable to Companies House.
15. What are pre-emption rights?
They do not apply to allotments of shares that companies can issue as wholly or partly paid-up for a non-cash payment, or shares in an employees' share scheme. An employees' share scheme is a scheme for encouraging share ownership by employees, former employees and their families. The memorandum or articles of a private company may exclude pre-emption rights but a public company's cannot.
The Companies Act 1985 allows a company to pass a special resolution not to apply pre-emption rights. This is known as the 'disapplication of pre-emption rights'. The resolution will apply to one specific allotment and it will need to pass a further resolution if similar conditions were to apply to future allotments. A company must deliver a copy of the special resolution to Companies House within 15 days of passing it. No fee is payable to Companies House.
If a member refuses to pay all or any call on a share (i.e. where there has been a ‘call up’), the company may use forfeiture proceedings if its articles so permit.
Paragraphs 18-22 of Table A of The Companies (Tables A to F) Regulations 1985 set out a typical forfeiture procedure. If you have not adopted alternative provisions, you must follow these provisions. You must follow the provisions exactly; otherwise the court may declare forfeiture proceedings void.
Directors may sell, re-allot or otherwise dispose of a forfeited share at their discretion. You do not need to notify Companies House of the forfeiture or re-allotment except in the list of members on the company's next annual return.
If a member cannot pay a call on shares, and if the company and member agree, the member may surrender the shares to the company. The effect is the same as forfeiture, but avoids the formal procedure. The company may only accept surrendered shares if it could have used its power of forfeiture.
A private company may hold forfeited shares indefinitely pending re-allotment. A public company must cancel the forfeited shares, if it does not otherwise dispose of them, within three years. If cancellation(s) reduce a public company's allotted capital below the authorised minimum, it has to re-register as a private company within the same period.A company cannot use forfeited shares for voting purposes.
17. What is paid-up capital, uncalled capital, reserve capital and share premium?
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1. Are there different types of shares?
A company may have as many different types of shares as it wishes, all with different conditions attached to them. Generally share types fall into the following categories:
Different types of shares may be in different currencies. However, a public limited company applying to the registrar for a trading certificate, must either have at least £50,000 of allotted capital denominated in sterling or at least €65,600 of allotted share capital denominated in euros. The same requirement applies to a private company seeking to re-register as a public company3. Can a company change the currency of its shares?
A company may purchase its own shares (see questions 7 and 8) and allot shares in a different currency. Alternatively, it may seek a court order to reduce its issued capital to zero, cancel its authorised capital, and simultaneously create capital and allot shares on a proportional basis in the new currency. However, public companies are constrained by the “authorised minimum” requirement. If the effect of a capital reduction is to bring the nominal value of a public company’s allotted capital below the authorised minimum, it will generally need to re-register as a private company. For this purpose, however, a public company can satisfy the authorised minimum requirement by means of shares denominated in multiple currencies. The method of calculating whether the authorised minimum is satisfied is set out in the Companies (Authorised Minimum) Regulations 2008.4. Can a company change its shares?
If so authorised by its articles of association, a company may pass an ordinary resolution to:
* Please note, CA 1985 Resolution guidance provides general information which could still be relevant to your company.5. Can the company amend class rights?
A company may alter the rights attached to any class of shares. How it does this depends on whether the rights stem from the memorandum, articles of association or elsewhere: a company cannot convert non-redeemable shares into redeemable shares.
Dissenting shareholders, holding at least 15% of the issued shares of the class, may apply to the court to cancel the variation. They must do this within 21 days after consent was given to the variation or a resolution was passed to vary the rights. If the court grants the order, the company must deliver a copy of the court order to Companies House within 15 days of the court making the order.
6. Can a company use redeemable shares to reduce issued capital?
Yes. A company which has issued redeemable shares may reduce its issued share capital by redeeming them in accordance with the agreement under which it issued them. However, if the owner does not return the shares to the company in accordance with the agreement - for example, if they return them earlier than stated in the agreement - then the company must deal with the transaction as a purchase of the company's own shares - see question 7.
You must deliver notification of redemption of shares to Companies House within one month on Form 122. No fee is payable to Companies House.7. Can a company purchase its own shares?
If permitted by its articles, a company may pass a special resolution to authorise itself to buy some of its shares But it cannot do so if this would leave only redeemable shares in issue.
The terms of the resolution will depend on whether it is a 'market purchase' (that is, a purchase made on a recognised stock exchange) - or an 'off-market purchase' (that is, a purchase made otherwise than on a recognised stock exchange or made on a recognised stock exchange but not subject to a marketing arrangement on that exchange).
You may only make an off-market purchase:
Generally, when a company purchases its own shares, it cancels the shares on their return and you must notify the purchase to Companies House on Form 169 within 28 days.
However, a listed public company may hold the shares ‘in treasury’ for resale or transfer to an employees’ shares scheme at a later date, in which case you must notify the purchase to Companies House on Form 169(1B). For more information on holding shares in treasury, see question 8.
Purchase of own shares out of capital (private companies only)
The purchase by a company of its own shares is a chargeable transaction under the Finance Act 1986 .Stamp Duty may be payable on the aggregate amount of the re-purchase price at ½% rounded up to the nearest multiple of £5.
Please note: A single form 169 or 169(1B) can be used to notify Companies House of repurchases of shares on different dates and under different contracts.
No fees are payable to Companies House on Forms 169, Form 169(1B) or Form 173.
A transfer document is also not necessary when a listed public company buys its own shares and holds them in treasury for later disposal. Although this type of purchase does not reduce the company’s issued share capital - the company becomes a shareholder and is entered as such in the register of members – you must complete and deliver a (stamped if appropriate) Form 169(1B) to Companies House within 28 days of the purchase. No fee is payable to Companies House.
If a listed public company is buying some shares to hold in treasury and some to cancel, then it must complete Form 169 for the shares that it is going to cancel and Form 169(1B) for the shares that it is going to hold in treasury. No fee is payable to Companies House.
If the company subsequently decides to cancel treasury shares, or sell treasury shares, or transfer treasury shares to an employees’ shares scheme, it must notify Companies House within 28 days on Form 169A(2).
9. Can I buy shares from someone else?
Shares in a private company usually change hands by private agreement between seller and buyer. However, in all cases you must complete a transfer document. The articles of association of private companies often place restrictions on the transfer of shares that the company must observe.
The transfer of shares is normally a chargeable transaction under the Stamp Act. Stamp Duty (if appropriate) is payable to HM Revenue & Customs (HMRC) on the aggregate amount at ½% rounded up to the nearest multiple of £5.
10. How do I transfer shares to new owners?
To transfer shares in a private or unlimited company, a seller must complete and sign the appropriate section of a 'stock transfer form' - available from law stationers - and pass it, together with the share certificate, to the new owner.
The new owner must then complete their section of the stock transfer form, pay an appropriate stamp duty to the Inland Revenue and pass the completed form, and share certificate, to the company. The company secretary then arranges for the directors to authorise the change to the members' register and issues a share certificate in the new name.
Do not send stock transfer forms to Companies House. You should keep with them the company's own records.
11. What is transmission of shares?
On death, shares held in the sole name of the deceased vest in the personal representative or executor of the deceased. This person should inform the company and provide the necessary evidence so that it can register the fact and the personal representative can receive all notices and dividends relating to the shares. The articles of association of companies often provide that a personal representative cannot exercise the votes attaching to the deceased’s shares until he or she is registered as the holder of the shares.
On the winding up of the deceased's estate, the personal representative must inform the company of the beneficiary (or beneficiaries) of the shares so that it can make the necessary alterations to the register of members and issue new certificates.
If a share is jointly held, the survivor(s) will be the only person(s) recognised as having title to the share. You should inform the company immediately and give any necessary evidence of the death so that it can alter the register of members and issue a new share certificate.
The position of a shareholder who is made bankrupt is similar. Until a new member is registered, the rights to dividends vest in the trustee in bankruptcy. The bankrupt may remain a member and be able to vote, but only in accordance with the directions of the trustee. This is so where the name of the bankrupt shareholder remains on the register but the trustee generally has a right under the company's articles of association to apply to be registered as a member in respect of the bankrupt's shares.
Any restrictions on the transfer of shares contained in the company’s articles will normally apply to a transfer or application resulting from the death or bankruptcy of a shareholder.
12. What are share warrants?
When a company issues share warrants, it must strike out the share holder’s name from its register of members and state the date of issue of the warrant and the number of shares to which it relates. Subject to the articles, the owner of a share warrant can surrender it for cancellation. If so, the holder is entitled to be re-entered into the register of members. Companies usually issue vouchers with the share warrants in order that owners can claim any dividends.
The holder of a share warrant remains a shareholder but whether they are a member of the company depends on the articles of the company. A company which converts all its shares to share warrants must exercise care as it could become a memberless company and thereby cease to exist.
13. What happens if I lose a share certificate?
The directors will normally require the holder to give up any defaced or worn-out certificate and to sign an indemnity about the use of any lost or destroyed certificate. They may also require the holder to pay any reasonable expenses for investigating any evidence of loss.
14. Can I cancel a share if I cannot trace the holder?
No. The share belongs to the registered holder, not the company. If a person is eventually declared legally dead, then you should transmit the share to the beneficiary (or beneficiaries) - see question 11.
If authorised by its articles, a company may retain any dividends that remain unclaimed after a certain period.
Note: Currently the only share capital forms that you can file electronically are the 88(2) and 123 forms.
You may deliver documents to the Registrar by hand (personally or by courier), including outside office hours, on bank holidays and at weekends to Cardiff, London and Edinburgh.
You may also send documents by post, by the Document Exchange Service (DX) or by Legal Post (LP) in Scotland. If you send documents, please address them to:
If you are sending documents by post, courier or the Document Exchange Service (DX) and would like a receipt, Companies House will provide an acknowledgement if you enclose a copy of your covering letter with a pre-paid addressed return envelope. We will barcode your copy letter with the date of receipt and return it to you in the envelope provided.
Please note: an acknowledgement of receipt does not mean that a document has been accepted for registration at Companies House.
Please note: Companies House does not accept accounts or any other statutory documents by fax.
3. Can I file documents in other languages?
Usually, you must file documents sent to Companies House in English. There are exceptions as detailed below. You can draw up and deliver documents relating to Welsh companies in Welsh.
Companies can deliver the following documents in other languages if the document is accompanied by a certified translation into English:
In addition companies may also file voluntary certified translations of any document subject to the First Company Law Directive disclosure requirements. These are:
The voluntary translation must relate to a document delivered to Companies House on or after 1 January 2007. Voluntary translations can only be filed in an official language of the European Union and must be accompanied by Form 1106.
4. Where do I get forms and guidance?
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