Companies Act 2006

• (2) In the case of a private company a pre-emption requirement to which section 96(3) of the Companies Act 1985 or Article 106(3) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this Chapter shall have effect, so long as the company remains a private company, as if it were contained in the company's articles.

• (3) A pre-emption requirement to which section 96(4) of the Companies Act 1985 or Article 106(4) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this section shall be treated for the purposes of this Chapter as if it were contained in the company's articles.

Provisions about pre-emption not applicable to shares taken on formation

577

The provisions of this Chapter have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company.

Chapter 4 — Public companies: allotment where issue not fully subscribed

Public companies: allotment where issue not fully subscribed

578

• (1) No allotment shall be made of shares of a public company offered for subscription unless—

• (a) the issue is subscribed for in full, or

• (b) the offer is made on terms that the shares subscribed for may be allotted—

• (i) in any event, or

• (ii) if specified conditions are met (and those conditions are met).

• (2) If shares are prohibited from being allotted by subsection (1) and 40 days have elapsed after the first making of the offer, all money received from applicants for shares must be repaid to them forthwith, without interest.

• (3) If any of the money is not repaid within 48 days after the first making of the offer, the directors of the company are jointly and severally liable to repay it, with interest at the rate for the time being specified under section 17 of the Judgments Act 1838 (c. 110) from the expiration of the 48th day.

A director is not so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

• (4) This section applies in the case of shares offered as wholly or partly payable otherwise than in cash as it applies in the case of shares offered for subscription.

• (5) In that case—

• (a) the references in subsection (1) to subscription shall be construed accordingly;

• (b) references in subsections (2) and (3) to the repayment of money received from applicants for shares include—

• (i) the return of any other consideration so received (including, if the case so requires, the release of the applicant from any undertaking), or

• (ii) if it is not reasonably practicable to return the consideration, the payment of money equal to its value at the time it was so received;

• (c) references to interest apply accordingly.

• (6) Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this section is void.

Public companies: effect of irregular allotment where issue not fully subscribed

579

• (1) An allotment made by a public company to an applicant in contravention of section 578 (public companies: allotment where issue not fully subscribed) is voidable at the instance of the applicant within one month after the date of the allotment, and not later.

• (2) It is so voidable even if the company is in the course of being wound up.

• (3) A director of a public company who knowingly contravenes, or permits or authorises the contravention of, any provision of section 578 with respect to allotment is liable to compensate the company and the allottee respectively for any loss, damages, costs or expenses that the company or allottee may have sustained or incurred by the contravention.

• (4) Proceedings to recover any such loss, damages, costs or expenses may not be brought more than two years after the date of the allotment.

Chapter 5 — Payment for shares

General rules

Shares not to be allotted at a discount

580

• (1) A company's shares must not be allotted at a discount.

• (2) If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.

Provision for different amounts to be paid on shares

581

A company, if so authorised by its articles, may—

• (a) make arrangements on the issue of shares for a difference between the shareholders in the amounts and times of payment of calls on their shares;

• (b) accept from any member the whole or part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up;

• (c) pay a dividend in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

General rule as to means of payment

582

• (1) Shares allotted by a company, and any premium on them, may be paid up in money or money's worth (including goodwill and know-how).

• (2) This section does not prevent a company—

• (a) from allotting bonus shares to its members, or

• (b) from paying up, with sums available for the purpose, any amounts for the time being unpaid on any of its shares (whether on account of the nominal value of the shares or by way of premium).

• (3) This section has effect subject to the following provisions of this Chapter (additional rules for public companies).

Meaning of payment in cash

583

• (1) The following provisions have effect for the purposes of the Companies Acts.

• (2) A share in a company is deemed paid up (as to its nominal value or any premium on it) in cash, or allotted for cash, if the consideration received for the allotment or payment up is a cash consideration.

• (3) A “cash consideration” means—

• (a) cash received by the company,

• (b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid,

• (c) a release of a liability of the company for a liquidated sum,

• (d) an undertaking to pay cash to the company at a future date, or

• (e) payment by any other means giving rise to a present or future entitlement (of the company or a person acting on the company's behalf) to a payment, or credit equivalent to payment, in cash.

• (4) The Secretary of State may by order provide that particular means of payment specified in the order are to be regarded as falling within subsection (3)(e).

• (5) In relation to the allotment or payment up of shares in a company—

• (a) the payment of cash to a person other than the company, or

• (b) an undertaking to pay cash to a person other than the company,

counts as consideration other than cash.

This does not apply for the purposes of Chapter 3 (allotment of equity securities: existing shareholders' right of pre-emption).

• (6) For the purpose of determining whether a share is or is to be allotted for cash, or paid up in cash, “cash” includes foreign currency.

• (7) An order under this section is subject to negative resolution procedure.

Additional rules for public companies

Public companies: shares taken by subscribers of memorandum

584

Shares taken by a subscriber to the memorandum of a public company in pursuance of an undertaking of his in the memorandum, and any premium on the shares, must be paid up in cash.

Public companies: must not accept undertaking to do work or perform services

585

• (1) A public company must not accept at any time, in payment up of its shares or any premium on them, an undertaking given by any person that he or another should do work or perform services for the company or any other person.

• (2) If a public company accepts such an undertaking in payment up of its shares or any premium on them, the holder of the shares when they or the premium are treated as paid up (in whole or in part) by the undertaking is liable—

• (a) to pay the company in respect of those shares an amount equal to their nominal value, together with the whole of any premium or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking; and

• (b) to pay interest at the appropriate rate on the amount payable under paragraph (a).

• (3) The reference in subsection (2) to the holder of shares includes a person who has an unconditional right—

• (a) to be included in the company's register of members in respect of those shares, or

• (b) to have an instrument of transfer of them executed in his favour.

Public companies: shares must be at least one-quarter paid up

586

• (1) A public company must not allot a share except as paid up at least as to one-quarter of its nominal value and the whole of any premium on it.

• (2) This does not apply to shares allotted in pursuance of an employees' share scheme.

• (3) If a company allots a share in contravention of this section—

• (a) the share is to be treated as if one-quarter of its nominal value, together with the whole of any premium on it, had been received, and

• (b) the allottee is liable to pay the company the minimum amount which should have been received in respect of the share under subsection (1) (less the value of any consideration actually applied in payment up, to any extent, of the share and any premium on it), with interest at the appropriate rate.

• (4) Subsection (3) does not apply to the allotment of bonus shares, unless the allottee knew or ought to have known the shares were allotted in contravention of this section.

Public companies: payment by long-term undertaking

587

• (1) A public company must not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be, or may be, performed more than five years after the date of the allotment.

• (2) If a company allots shares in contravention of subsection (1), the allottee is liable to pay the company an amount equal to the aggregate of their nominal value and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

• (3) Where a contract for the allotment of shares does not contravene subsection (1), any variation of the contract that has the effect that the contract would have contravened the subsection, if the terms of the contract as varied had been its original terms, is void.

This applies also to the variation by a public company of the terms of a contract entered into before the company was re-registered as a public company.

• (4) Where—

• (a) a public company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking that is to be performed within five years of the allotment, and

• (b) the undertaking is not performed within the period allowed by the contract for the allotment of the shares,

the allottee is liable to pay the company, at the end of the period so allowed, an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

• (5) References in this section to a contract for the allotment of shares include an ancillary contract relating to payment in respect of them.

Supplementary provisions

Liability of subsequent holders of shares

588

• (1) If a person becomes a holder of shares in respect of which—

• (a) there has been a contravention of any provision of this Chapter, and

• (b) by virtue of that contravention another is liable to pay any amount under the provision contravened,

that person is also liable to pay that amount (jointly and severally with any other person so liable), subject as follows.

• (2) A person otherwise liable under subsection (1) is exempted from that liability if either—

• (a) he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned, or

• (b) he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1).

• (3) References in this section to a holder, in relation to shares in a company, include any person who has an unconditional right—

• (a) to be included in the company's register of members ... in respect of those shares, or

• (b) to have an instrument of transfer of the shares executed in his favour.

• (4) This section applies in relation to a failure to carry out a term of a contract as mentioned in section 587(4) (public companies: payment by long-term undertaking) as it applies in relation to a contravention of a provision of this Chapter.

Power of court to grant relief

589

• (1) This section applies in relation to liability under—

• section 585(2) (liability of allottee in case of breach by public company of prohibition on accepting undertaking to do work or perform services),

• section 587(2) or (4) (liability of allottee in case of breach by public company of prohibition on payment by long-term undertaking), or

• section 588 (liability of subsequent holders of shares),

as it applies in relation to a contravention of those sections.

• (2) A person who—

• (a) is subject to any such liability to a company in relation to payment in respect of shares in the company, or

• (b) is subject to any such liability to a company by virtue of an undertaking given to it in, or in connection with, payment for shares in the company,

may apply to the court to be exempted in whole or in part from the liability.

• (3) In the case of a liability within subsection (2)(a), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—

• (a) whether the applicant has paid, or is liable to pay, any amount in respect of—

• (i) any other liability arising in relation to those shares under any provision of this Chapter or Chapter 6, or

• (ii) any liability arising by virtue of any undertaking given in or in connection with payment for those shares;

• (b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount;

• (c) whether the applicant or any other person—

• (i) has performed in whole or in part, or is likely so to perform any such undertaking, or

• (ii) has done or is likely to do any other thing in payment or part payment for the shares.

• (4) In the case of a liability within subsection (2)(b), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—

• (a) whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any provision of this Chapter or Chapter 6;

• (b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount.

• (5) In determining whether it should exempt the applicant in whole or in part from any liability, the court must have regard to the following overriding principles—

• (a) a company that has allotted shares should receive money or money's worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up;

• (b) subject to that, where a company would, if the court did not grant the exemption, have more than one remedy against a particular person, it should be for the company to decide which remedy it should remain entitled to pursue.

• (6) If a person brings proceedings against another (“the contributor”) for a contribution in respect of liability to a company arising under any provision of this Chapter or Chapter 6 and it appears to the court that the contributor is liable to make such a contribution, the court may, if and to the extent that it appears to it just and equitable to do so having regard to the respective culpability (in respect of the liability to the company) of the contributor and the person bringing the proceedings—

• (a) exempt the contributor in whole or in part from his liability to make such a contribution, or

• (b) order the contributor to make a larger contribution than, but for this subsection, he would be liable to make.

Penalty for contravention of this Chapter

590

• (1) If a company contravenes any of the provisions of this Chapter, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (2) A person guilty of an offence under this section is liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction, to a fine not exceeding the statutory maximum.

Enforceability of undertakings to do work etc

591

• (1) An undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Chapter, is so enforceable notwithstanding that there has been a contravention in relation to it of a provision of this Chapter or Chapter 6.

• (2) This is without prejudice to section 589 (power of court to grant relief etc in respect of liabilities).

The appropriate rate of interest

592

• (1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.

• (2) An order under this section is subject to negative resolution procedure.

Chapter 6 — Public companies: independent valuation of non-cash consideration

Non-cash consideration for shares

Public company: valuation of non-cash consideration for shares

593

• (1) A public company must not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash unless—

• (a) the consideration for the allotment has been independently valued in accordance with the provisions of this Chapter,

• (b) the valuer's report has been made to the company during the six months immediately preceding the allotment of the shares, and

• (c) a copy of the report has been sent to the proposed allottee.

• (2) For this purpose the application of an amount standing to the credit of—

• (a) any of a company's reserve accounts, or

• (b) its profit and loss account,

in paying up (to any extent) shares allotted to members of the company, or premiums on shares so allotted, does not count as consideration for the allotment.

Accordingly, subsection (1) does not apply in that case.

• (3) If a company allots shares in contravention of subsection (1) and either—

• (a) the allottee has not received the valuer's report required to be sent to him, or

• (b) there has been some other contravention of the requirements of this section or section 596 that the allottee knew or ought to have known amounted to a contravention,

the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.

• (4) This section has effect subject to—

• section 594 (exception to valuation requirement: arrangement with another company), and

• section 595 (exception to valuation requirement: merger or division).

Exception to valuation requirement: arrangement with another company

594

• (1) Section 593 (valuation of non-cash consideration) does not apply to the allotment of shares by a company (“company A”) in connection with an arrangement to which this section applies.

• (2) This section applies to an arrangement for the allotment of shares in company A on terms that the whole or part of the consideration for the shares allotted is to be provided by—

• (a) the transfer to that company, or

• (b) the cancellation,

of all or some of the shares, or of all or some of the shares of a particular class, in another company (“company B”).

• (3) It is immaterial whether the arrangement provides for the issue to company A of shares, or shares of any particular class, in company B.

• (4) This section applies to an arrangement only if under the arrangement it is open to all the holders of the shares in company B (or, where the arrangement applies only to shares of a particular class, to all the holders of shares of that class) to take part in the arrangement.

• (5) In determining whether that is the case, the following shall be disregarded—

• (a) shares held by or by a nominee of company A;

• (b) shares held by or by a nominee of a company which is—

• (i) the holding company, or a subsidiary, of company A, or

• (ii) a subsidiary of such a holding company;

• (c) shares held as treasury shares by company B.

• (6) In this section—

• (a) “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with—

• (i) Part 26 or 26A (arrangements and reconstructions), or

• (ii) section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (liquidator in winding up accepting shares as consideration for sale of company property)), and

• (b) “company”, except in reference to company A, includes any body corporate.

Exception to valuation requirement: merger or division

595

• (1) Section 593 (valuation of non-cash consideration) does not apply to the allotment of shares by a company as part of a scheme to which Part 27 (mergers and divisions of public companies) applies if—

• (a) in the case of a scheme involving a merger, an expert's report is drawn up as required by section 909, or

• (b) in the case of a scheme involving a division, an expert's report is drawn up as required by section 924.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-cash consideration for shares: requirements as to valuation and report

596

• (1) The provisions of sections 1150 to 1153 (general provisions as to independent valuation and report) apply to the valuation and report required by section 593 (public company: valuation of non-cash consideration for shares).

• (2) The valuer's report must state—

• (a) the nominal value of the shares to be wholly or partly paid for by the consideration in question;

• (b) the amount of any premium payable on the shares;

• (c) the description of the consideration and, as respects so much of the consideration as he himself has valued, a description of that part of the consideration, the method used to value it and the date of the valuation;

• (d) the extent to which the nominal value of the shares and any premium are to be treated as paid up—

• (i) by the consideration;

• (ii) in cash.

• (3) The valuer's report must contain or be accompanied by a note by him—

• (a) in the case of a valuation made by a person other than himself, that it appeared to himself reasonable to arrange for it to be so made or to accept a valuation so made,

• (b) whoever made the valuation, that the method of valuation was reasonable in all the circumstances,

• (c) that it appears to the valuer that there has been no material change in the value of the consideration in question since the valuation, and

• (d) that, on the basis of the valuation, the value of the consideration, together with any cash by which the nominal value of the shares or any premium payable on them is to be paid up, is not less than so much of the aggregate of the nominal value and the whole of any such premium as is treated as paid up by the consideration and any such cash.

• (4) Where the consideration to be valued is accepted partly in payment up of the nominal value of the shares and any premium and partly for some other consideration given by the company, section 593 and the preceding provisions of this section apply as if references to the consideration accepted by the company included the proportion of that consideration that is properly attributable to the payment up of that value and any premium.

• (5) In such a case—

• (a) the valuer must carry out, or arrange for, such other valuations as will enable him to determine that proportion, and

• (b) his report must state what valuations have been made under this subsection and also the reason for, and method and date of, any such valuation and any other matters which may be relevant to that determination.

Copy of report to be delivered to registrar

597

• (1) A company to which a report is made under section 593 as to the value of any consideration for which, or partly for which, it proposes to allot shares must deliver a copy of the report to the registrar for registration.

• (2) The copy must be delivered at the same time that the company files the return of the allotment of those shares under section 555 (return of allotment by limited company).

• (3) If default is made in complying with subsection (1) or (2), an offence is committed by every officer of the company who is in default.

• (4) A person guilty of an offence under this section is liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximumone-tenth of the greater of £5,000 or the amount corresponding to level 4 on the standard scale for summary offences.

• (5) In the case of default in delivering to the registrar any document as required by this section, any person liable for the default may apply to the court for relief.

• (6) The court, if satisfied—

• (a) that the omission to deliver the document was accidental or due to inadvertence, or

• (b) that it is just and equitable to grant relief,

may make an order extending the time for delivery of the document for such period as the court thinks proper.

Transfer of non-cash asset in initial period

Public company: agreement for transfer of non-cash asset in initial period

598

• (1) A public company formed as such must not enter into an agreement—

• (a) with a person who is a subscriber to the company's memorandum,

• (b) for the transfer by him to the company, or another, before the end of the company's initial period of one or more non-cash assets, and

• (c) under which the consideration for the transfer to be given by the company is at the time of the agreement equal in value to one-tenth or more of the company's issued share capital,

unless the conditions referred to below have been complied with.

• (2) The company's “initial period” means the period of two years beginning with the date of the company being issued with a certificate under section 761 (trading certificate).

• (3) The conditions are those specified in—

• section 599 (requirement of independent valuation), and

• section 601 (requirement of approval by members).

• (4) This section does not apply where—

• (a) it is part of the company's ordinary business to acquire, or arrange for other persons to acquire, assets of a particular description, and

• (b) the agreement is entered into by the company in the ordinary course of that business.

• (5) This section does not apply to an agreement entered into by the company under the supervision of the court or of an officer authorised by the court for the purpose.

Agreement for transfer of non-cash asset: requirement of independent valuation

599

• (1) The following conditions must have been complied with—

• (a) the consideration to be received by the company, and any consideration other than cash to be given by the company, must have been independently valued in accordance with the provisions of this Chapter,

• (b) the valuer's report must have been made to the company during the six months immediately preceding the date of the agreement, and

• (c) a copy of the report must have been sent to the other party to the proposed agreement not later than the date on which copies have to be circulated to members under section 601(3).

• (2) The reference in subsection (1)(a) to the consideration to be received by the company is to the asset to be transferred to it or, as the case may be, to the advantage to the company of the asset's transfer to another person.

• (3) The reference in subsection (1)(c) to the other party to the proposed agreement is to the person referred to in section 598(1)(a).

If he has received a copy of the report under section 601 in his capacity as a member of the company, it is not necessary to send another copy under this section.

• (4) This section does not affect any requirement to value any consideration for purposes of section 593 (valuation of non-cash consideration for shares).

Agreement for transfer of non-cash asset: requirements as to valuation and report

600

• (1) The provisions of sections 1150 to 1153 (general provisions as to independent valuation and report) apply to the valuation and report required by section 599 (public company: transfer of non-cash asset).

• (2) The valuer's report must state—

• (a) the consideration to be received by the company, describing the asset in question (specifying the amount to be received in cash) and the consideration to be given by the company (specifying the amount to be given in cash), and

• (b) the method and date of valuation.

• (3) The valuer's report must contain or be accompanied by a note by him—

• (a) in the case of a valuation made by a person other than himself, that it appeared to himself reasonable to arrange for it to be so made or to accept a valuation so made,

• (b) whoever made the valuation, that the method of valuation was reasonable in all the circumstances,

• (c) that it appears to the valuer that there has been no material change in the value of the consideration in question since the valuation, and

• (d) that, on the basis of the valuation, the value of the consideration to be received by the company is not less than the value of the consideration to be given by it.

• (4) Any reference in section 599 or this section to consideration given for the transfer of an asset includes consideration given partly for its transfer.

• (5) In such a case—

• (a) the value of any consideration partly so given is to be taken as the proportion of the consideration properly attributable to its transfer,

• (b) the valuer must carry out or arrange for such valuations of anything else as will enable him to determine that proportion, and

• (c) his report must state what valuations have been made for that purpose and also the reason for and method and date of any such valuation and any other matters which may be relevant to that determination.

Agreement for transfer of non-cash asset: requirement of approval by members

601

• (1) The following conditions must have been complied with—

• (a) the terms of the agreement must have been approved by an ordinary resolution of the company,

• (b) copies of the valuer's report must have been circulated to the members entitled to notice of the meeting at which the resolution is proposed, not later than the date on which notice of the meeting is given, and

• (c) a copy of the proposed resolution must have been sent to the other party to the proposed agreement.

• (2) The reference in subsection (1)(c) to the other party to the proposed agreement is to the person referred to in section 598(1)(a).

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Copy of resolution to be delivered to registrar

602

• (1) A company that has passed a resolution under section 601 with respect to the transfer of an asset must, within 15 days of doing so, deliver to the registrar a copy of the resolution together with the valuer's report required by that section.

• (2) If a company fails to comply with subsection (1), an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, to a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Adaptation of provisions in relation to company re-registering as public

603

The provisions of sections 598 to 602 (public companies: transfer of non-cash assets) apply with the following adaptations in relation to a company re-registered as a public company—

• (a) the reference in section 598(1)(a) to a person who is a subscriber to the company's memorandum shall be read as a reference to a person who is a member of the company on the date of re-registration;

• (b) the reference in section 598(2) to the date of the company being issued with a certificate under section 761 (trading certificate) shall be read as a reference to the date of re-registration.

Agreement for transfer of non-cash asset: effect of contravention

604

• (1) This section applies where a public company enters into an agreement in contravention of section 598 and either—

• (a) the other party to the agreement has not received the valuer's report required to be sent to him, or

• (b) there has been some other contravention of the requirements of this Chapter that the other party to the agreement knew or ought to have known amounted to a contravention.

• (2) In those circumstances—

• (a) the company is entitled to recover from that person any consideration given by it under the agreement, or an amount equal to the value of the consideration at the time of the agreement, and

• (b) the agreement, so far as not carried out, is void.

• (3) If the agreement is or includes an agreement for the allotment of shares in the company, then—

• (a) whether or not the agreement also contravenes section 593 (valuation of non-cash consideration for shares), this section does not apply to it in so far as it is for the allotment of shares, and

• (b) the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.

Supplementary provisions

Liability of subsequent holders of shares

605

• (1) If a person becomes a holder of shares in respect of which—

• (a) there has been a contravention of section 593 (public company: valuation of non-cash consideration for shares), and

• (b) by virtue of that contravention another is liable to pay any amount under the provision contravened,

that person is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability under subsection (3) below.

• (2) If a company enters into an agreement in contravention of section 598 (public company: agreement for transfer of non-cash asset in initial period) and—

• (a) the agreement is or includes an agreement for the allotment of shares in the company,

• (b) a person becomes a holder of shares allotted under the agreement, and

• (c) by virtue of the agreement and allotment under it another person is liable to pay an amount under section 604,

the person who becomes the holder of the shares is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability under subsection (3) below.

This applies whether or not the agreement also contravenes section 593.

• (3) A person otherwise liable under subsection (1) or (2) is exempted from that liability if either—

• (a) he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned, or

• (b) he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1) or (2).

• (4) References in this section to a holder, in relation to shares in a company, include any person who has an unconditional right—

• (a) to be included in the company's register of members ... in respect of those shares, or

• (b) to have an instrument of transfer of the shares executed in his favour.

Power of court to grant relief

606

• (1) A person who—

• (a) is liable to a company under any provision of this Chapter in relation to payment in respect of any shares in the company, or

• (b) is liable to a company by virtue of an undertaking given to it in, or in connection with, payment for any shares in the company,

may apply to the court to be exempted in whole or in part from the liability.

• (2) In the case of a liability within subsection (1)(a), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—

• (a) whether the applicant has paid, or is liable to pay, any amount in respect of—

• (i) any other liability arising in relation to those shares under any provision of this Chapter or Chapter 5, or

• (ii) any liability arising by virtue of any undertaking given in or in connection with payment for those shares;

• (b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount;

• (c) whether the applicant or any other person—

• (i) has performed in whole or in part, or is likely so to perform any such undertaking, or

• (ii) has done or is likely to do any other thing in payment or part payment for the shares.

• (3) In the case of a liability within subsection (1)(b), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—

• (a) whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any provision of this Chapter or Chapter 5;

• (b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount.

• (4) In determining whether it should exempt the applicant in whole or in part from any liability, the court must have regard to the following overriding principles—

• (a) that a company that has allotted shares should receive money or money's worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up;

• (b) subject to this, that where such a company would, if the court did not grant the exemption, have more than one remedy against a particular person, it should be for the company to decide which remedy it should remain entitled to pursue.

• (5) If a person brings proceedings against another (“the contributor”) for a contribution in respect of liability to a company arising under any provision of this Chapter or Chapter 5 and it appears to the court that the contributor is liable to make such a contribution, the court may, if and to the extent that it appears to it, just and equitable to do so having regard to the respective culpability (in respect of the liability to the company) of the contributor and the person bringing the proceedings—

• (a) exempt the contributor in whole or in part from his liability to make such a contribution, or

• (b) order the contributor to make a larger contribution than, but for this subsection, he would be liable to make.

• (6) Where a person is liable to a company under section 604(2) (agreement for transfer of non-cash asset: effect of contravention), the court may, on application, exempt him in whole or in part from that liability if and to the extent that it appears to the court to be just and equitable to do so having regard to any benefit accruing to the company by virtue of anything done by him towards the carrying out of the agreement mentioned in that subsection.

Penalty for contravention of this Chapter

607

• (1) This section applies where a company contravenes—

• section 593 (public company allotting shares for non-cash consideration), or

• section 598 (public company entering into agreement for transfer of non-cash asset).

• (2) An offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (3) A person guilty of an offence under this section is liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction, to a fine not exceeding the statutory maximum.

Enforceability of undertakings to do work etc

608

• (1) An undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Chapter, is so enforceable notwithstanding that there has been a contravention in relation to it of a provision of this Chapter or Chapter 5.

• (2) This is without prejudice to section 606 (power of court to grant relief etc in respect of liabilities).

The appropriate rate of interest

609

• (1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.

• (2) An order under this section is subject to negative resolution procedure.

Chapter 7 — Share premiums

The share premium account

Application of share premiums

610

• (1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares must be transferred to an account called “the share premium account”.

• (2) Where, on issuing shares, a company has transferred a sum to the share premium account, it may use that sum to write off—

• (a) the expenses of the issue of those shares;

• (b) any commission paid on the issue of those shares.

• (3) The company may use the share premium account to pay up new shares to be allotted to members as fully paid bonus shares.

• (4) Subject to subsections (2) and (3), the provisions of the Companies Acts relating to the reduction of a company's share capital apply as if the share premium account were part of its paid up share capital.

• (5) This section has effect subject to—

• section 611 (group reconstruction relief);

• section 612 (merger relief);

• section 614 (power to make further provisions by regulations).

• (6) In this Chapter “the issuing company” means the company issuing shares as mentioned in subsection (1) above.

Relief from requirements as to share premiums

Group reconstruction relief

611

• (1) This section applies where the issuing company—

• (a) is a wholly-owned subsidiary of another company (“the holding company”), and

• (b) allots shares—

• (i) to the holding company, or

• (ii) to another wholly-owned subsidiary of the holding company,

in consideration for the transfer to the issuing company of non-cash assets of a company (“the transferor company”) that is a member of the group of companies that comprises the holding company and all its wholly-owned subsidiaries.

• (2) Where the shares in the issuing company allotted in consideration for the transfer are issued at a premium, the issuing company is not required by section 610 to transfer any amount in excess of the minimum premium value to the share premium account.

• (3) The minimum premium value means the amount (if any) by which the base value of the consideration for the shares allotted exceeds the aggregate nominal value of the shares.

• (4) The base value of the consideration for the shares allotted is the amount by which the base value of the assets transferred exceeds the base value of any liabilities of the transferor company assumed by the issuing company as part of the consideration for the assets transferred.

• (5) For the purposes of this section—

• (a) the base value of assets transferred is taken as—

• (i) the cost of those assets to the transferor company, or

• (ii) if less, the amount at which those assets are stated in the transferor company's accounting records immediately before the transfer;

• (b) the base value of the liabilities assumed is taken as the amount at which they are stated in the transferor company's accounting records immediately before the transfer.

Merger relief

612

• (1) This section applies where the issuing company has secured at least a 90% equity holding in another company in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided—

• (a) by the issue or transfer to the issuing company of equity shares in the other company, or

• (b) by the cancellation of any such shares not held by the issuing company.

• (2) If the equity shares in the issuing company allotted in pursuance of the arrangement in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section 610 does not apply to the premiums on those shares.

• (3) Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided—

• (a) by the issue or transfer to the issuing company of non-equity shares in the other company, or

• (b) by the cancellation of any such shares in that company not held by the issuing company,

relief under subsection (2) extends to any shares in the issuing company allotted on those terms in pursuance of the arrangement.

• (4) This section does not apply in a case falling within section 611 (group reconstruction relief).

Merger relief: meaning of 90% equity holding

613

• (1) The following provisions have effect to determine for the purposes of section 612 (merger relief) whether a company (“company A”) has secured at least a 90% equity holding in another company (“company B”) in pursuance of such an arrangement as is mentioned in subsection (1) of that section.

• (2) Company A has secured at least a 90% equity holding in company B if in consequence of an acquisition or cancellation of equity shares in company B (in pursuance of that arrangement) it holds equity shares in company B of an aggregate amount equal to 90% or more of the nominal value of that company's equity share capital.

• (3) For this purpose—

• (a) it is immaterial whether any of those shares were acquired in pursuance of the arrangement; and

• (b) shares in company B held by the company as treasury shares are excluded in determining the nominal value of company B's share capital.

• (4) Where the equity share capital of company B is divided into different classes of shares, company A is not regarded as having secured at least a 90% equity holding in company B unless the requirements of subsection (2) are met in relation to each of those classes of shares taken separately.

• (5) For the purposes of this section shares held by—

• (a) a company that is company A's holding company or subsidiary, or

• (b) a subsidiary of company A's holding company, or

• (c) its or their nominees,

are treated as held by company A.

Power to make further provision by regulations

614

• (1) The Secretary of State may by regulations make such provision as he thinks appropriate—

• (a) for relieving companies from the requirements of section 610 (application of share premiums) in relation to premiums other than cash premiums;

• (b) for restricting or otherwise modifying any relief from those requirements provided by this Chapter.

• (2) Regulations under this section are subject to affirmative resolution procedure.

Relief may be reflected in company's balance sheet

615

An amount corresponding to the amount representing the premiums, or part of the premiums, on shares issued by a company that by virtue of any relief under this Chapter is not included in the company's share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in the company's balance sheet.

Supplementary provisions

Interpretation of this Chapter

616

• (1) In this Chapter—

• “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with—Part 26 or 26A (arrangements and reconstructions), orsection 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (liquidator in winding up accepting shares as consideration for sale of company property));

• “company”, except in reference to the issuing company, includes any body corporate;

• “equity shares” means shares comprised in a company's equity share capital, and “non-equity shares” means shares (of any class) that are not so comprised;

• “the issuing company” has the meaning given by section 610(6).

• (2) References in this Chapter (however expressed) to—

• (a) the acquisition by a company of shares in another company, and

• (b) the issue or allotment of shares to, or the transfer of shares to or by, a company,

include (respectively) the acquisition of shares by, and the issue or allotment or transfer of shares to or by, a nominee of that company.

The reference in section 611 to the transferor company shall be read accordingly.

• (3) References in this Chapter to the transfer of shares in a company include the transfer of a right to be included in the company's register of members ... in respect of those shares.

Chapter 8 — Alteration of share capital

How share capital may be altered

Alteration of share capital of limited company

617

• (1) A limited company having a share capital may not alter its share capital except in the following ways.

• (2) The company may—

• (a) increase its share capital by allotting new shares in accordance with this Part, or

• (b) reduce its share capital in accordance with Chapter 10.

• (3) The company may—

• (a) sub-divide or consolidate all or any of its share capital in accordance with section 618, or

• (b) reconvert stock into shares in accordance with section 620.

• (4) The company may redenominate all or any of its shares in accordance with section 622, and may reduce its share capital in accordance with section 626 in connection with such a redenomination.

• (5) Nothing in this section affects—

• (a) the power of a company to purchase its own shares, or to redeem shares, in accordance with Part 18;

• (b) the power of a company to purchase its own shares in pursuance of an order of the court under—

• (i) section 98 (application to court to cancel resolution for re-registration as a private company),

• (ii) section 721(6) (powers of court on objection to redemption or purchase of shares out of capital),

• (iii) section 759 (remedial order in case of breach of prohibition of public offers by private company), or

• (iv) Part 30 (protection of members against unfair prejudice);

• (c) the forfeiture of shares, or the acceptance of shares surrendered in lieu, in pursuance of the company's articles, for failure to pay any sum payable in respect of the shares;

• (d) the cancellation of shares under section 662 (duty to cancel shares held by or for a public company);

• (e) the power of a company—

• (i) to enter into a compromise or arrangement in accordance with Part 26 or 26A (arrangements and reconstructions), or

• (ii) to do anything required to comply with an order of the court on an application under that Part.

• (f) the cancellation of a share warrant issued by the company and of the shares specified in it by a cancellation order or suspended cancellation order made under paragraph 6 of Schedule 4 to the Small Business, Enterprise and Employment Act 2015 (cancellation where share warrants not surrendered in accordance with that Schedule);

• (g) the cancellation of a share warrant issued by the company and of the shares specified in it pursuant to section 1028A(2) or 1032A(2) (cancellation of share warrants on restoration of a company).

Subdivision or consolidation of shares

Sub-division or consolidation of shares

618

• (1) A limited company having a share capital may—

• (a) sub-divide its shares, or any of them, into shares of a smaller nominal amount than its existing shares, or

• (b) consolidate and divide all or any of its share capital into shares of a larger nominal amount than its existing shares.

• (2) In any sub-division, consolidation or division of shares under this section, 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.

• (3) A company may exercise a power conferred by this section only if its members have passed a resolution authorising it to do so.

• (4) A resolution under subsection (3) may authorise a company—

• (a) to exercise more than one of the powers conferred by this section;

• (b) to exercise a power on more than one occasion;

• (c) to exercise a power at a specified time or in specified circumstances.

• (5) The company's articles may exclude or restrict the exercise of any power conferred by this section.

Notice to registrar of sub-division or consolidation

619

• (1) If a company exercises the power conferred by section 618 (sub-division or consolidation of shares) it must within one month after doing so give notice to the registrar, specifying the shares affected.

• (2) The notice must be accompanied by a statement of capital.

• (3) The statement of capital must state with respect to the company's share capital immediately following the exercise of the power—

• (a) the total number of shares of the company,

• (b) the aggregate nominal value of those shares,

• (ba) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and

• (c) for each class of shares—

• (i) prescribed particulars of the rights attached to the shares,

• (ii) the total number of shares of that class, and

• (iii) the aggregate nominal value of shares of that class, ...

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) If default is made in complying with this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Reconversion of stock into shares

Reconversion of stock into shares

620

• (1) A limited company that has converted paid-up shares into stock (before the repeal by this Act of the power to do so) may reconvert that stock into paid-up shares of any nominal value.

• (2) A company may exercise the power conferred by this section only if its members have passed an ordinary resolution authorising it to do so.

• (3) A resolution under subsection (2) may authorise a company to exercise the power conferred by this section—

• (a) on more than one occasion;

• (b) at a specified time or in specified circumstances.

Notice to registrar of reconversion of stock into shares

621

• (1) If a company exercises a power conferred by section 620 (reconversion of stock into shares) it must within one month after doing so give notice to the registrar, specifying the stock affected.

• (2) The notice must be accompanied by a statement of capital.

• (3) The statement of capital must state with respect to the company's share capital immediately following the exercise of the power—

• (a) the total number of shares of the company,

• (b) the aggregate nominal value of those shares,

• (ba) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and

• (c) for each class of shares—

• (i) prescribed particulars of the rights attached to the shares,

• (ii) the total number of shares of that class, and

• (iii) the aggregate nominal value of shares of that class, ...

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) If default is made in complying with this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Redenomination of share capital

Redenomination of share capital

622

• (1) A limited company having a share capital may by resolution redenominate its share capital or any class of its share capital.

• “Redenominate” means convert shares from having a fixed nominal value in one currency to having a fixed nominal value in another currency.

• (2) The conversion must be made at an appropriate spot rate of exchange specified in the resolution.

• (3) The rate must be either—

• (a) a rate prevailing on a day specified in the resolution, or

• (b) a rate determined by taking the average of rates prevailing on each consecutive day of a period specified in the resolution.

The day or period specified for the purposes of paragraph (a) or (b) must be within the period of 28 days ending on the day before the resolution is passed.

• (4) A resolution under this section may specify conditions which must be met before the redenomination takes effect.

• (5) Redenomination in accordance with a resolution under this section takes effect—

• (a) on the day on which the resolution is passed, or

• (b) on such later day as may be determined in accordance with the resolution.

• (6) A resolution under this section lapses if the redenomination for which it provides has not taken effect at the end of the period of 28 days beginning on the date on which it is passed.

• (7) A company's articles may prohibit or restrict the exercise of the power conferred by this section.

• (8) Chapter 3 of Part 3 (resolutions affecting a company's constitution) applies to a resolution under this section.

Calculation of new nominal values

623

For each class of share the new nominal value of each share is calculated as follows: Step One

Effect of redenomination

624

• (1) The redenomination of shares does not affect any rights or obligations of members under the company's constitution, or any restrictions affecting members under the company's constitution.

In particular, it does not affect entitlement to dividends (including entitlement to dividends in a particular currency), voting rights or any liability in respect of amounts unpaid on shares.

• (2) For this purpose the company's constitution includes the terms on which any shares of the company are allotted or held.

• (3) Subject to subsection (1), references to the old nominal value of the shares in any agreement or statement, or in any deed, instrument or document, shall (unless the context otherwise requires) be read after the resolution takes effect as references to the new nominal value of the shares.

Notice to registrar of redenomination

625

• (1) If a limited company having a share capital redenominates any of its share capital, it must within one month after doing so give notice to the registrar, specifying the shares redenominated.

• (2) The notice must—

• (a) state the date on which the resolution was passed, and

• (b) be accompanied by a statement of capital.

• (3) The statement of capital must state with respect to the company's share capital as redenominated by the resolution—

• (a) the total number of shares of the company,

• (b) the aggregate nominal value of those shares,

• (ba) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and

• (c) for each class of shares—

• (i) prescribed particulars of the rights attached to the shares,

• (ii) the total number of shares of that class, and

• (iii) the aggregate nominal value of shares of that class, ...

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) If default is made in complying with this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Reduction of capital in connection with redenomination

626

• (1) A limited company that passes a resolution redenominating some or all of its shares may, for the purpose of adjusting the nominal values of the redenominated shares to obtain values that are, in the opinion of the company, more suitable, reduce its share capital under this section.

• (2) A reduction of capital under this section requires a special resolution of the company.

• (3) Any such resolution must be passed within three months of the resolution effecting the redenomination.

• (4) The amount by which a company's share capital is reduced under this section must not exceed 10% of the nominal value of the company's allotted share capital immediately after the reduction.

• (5) A reduction of capital under this section does not extinguish or reduce any liability in respect of share capital not paid up.

• (6) Nothing in Chapter 10 applies to a reduction of capital under this section.

Notice to registrar of reduction of capital in connection with redenomination

627

• (1) A company that passes a resolution under section 626 (reduction of capital in connection with redenomination) must within 15 days after the resolution is passed give notice to the registrar stating—

• (a) the date of the resolution, and

• (b) the date of the resolution under section 622 in connection with which it was passed.

This is in addition to the copies of the resolutions themselves that are required to be delivered to the registrar under Chapter 3 of Part 3.

• (2) The notice must be accompanied by a statement of capital.

• (3) The statement of capital must state with respect to the company's share capital as reduced by the resolution—

• (a) the total number of shares of the company,

• (b) the aggregate nominal value of those shares,

• (ba) the aggregate amount (if any) unpaid on those shares (whether on account of their nominal value or by way of premium), and

• (c) for each class of shares—

• (i) prescribed particulars of the rights attached to the shares,

• (ii) the total number of shares of that class, and

• (iii) the aggregate nominal value of shares of that class, ...

• (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) The registrar must register the notice and the statement on receipt.

• (5) The reduction of capital is not effective until those documents are registered.

• (6) The company must also deliver to the registrar, within 15 days after the resolution is passed, a statement by the directors confirming that the reduction in share capital is in accordance with section 626(4) (reduction of capital not to exceed 10% of nominal value of allotted shares immediately after reduction).

• (7) If default is made in complying with this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (8) A person guilty of an offence under this section is liable—

• (a) on conviction on indictment to a fine, and

• (b) on summary conviction to a fine not exceeding the statutory maximum.

Redenomination reserve

628

• (1) The amount by which a company's share capital is reduced under section 626 (reduction of capital in connection with redenomination) must be transferred to a reserve, called “the redenomination reserve”.

• (2) The redenomination reserve may be applied by the company in paying up shares to be allotted to members as fully paid bonus shares.

• (3) Subject to that, the provisions of the Companies Acts relating to the reduction of a company's share capital apply as if the redenomination reserve were paid-up share capital of the company.

Chapter 9 — Classes of share and class rights

Introductory

Classes of shares

629

• (1) For the purposes of the Companies Acts shares are of one class if the rights attached to them are in all respects uniform.

• (2) For this purpose the rights attached to shares are not regarded as different from those attached to other shares by reason only that they do not carry the same rights to dividends in the twelve months immediately following their allotment.

Variation of class rights

Variation of class rights: companies having a share capital

630

• (1) This section is concerned with the variation of the rights attached to a class of shares in a company having a share capital.

• (2) Rights attached to a class of a company's shares may only be varied—

• (a) in accordance with provision in the company's articles for the variation of those rights, or

• (b) where the company's articles contain no such provision, if the holders of shares of that class consent to the variation in accordance with this section.

• (3) This is without prejudice to any other restrictions on the variation of the rights.

• (4) The consent required for the purposes of this section on the part of the holders of a class of a company's shares is—

• (a) consent in writing from the holders of at least three-quarters in nominal value of the issued shares of that class (excluding any shares held as treasury shares), or

• (b) a special resolution passed at a separate general meeting of the holders of that class sanctioning the variation.

• (5) Any amendment of a provision contained in a company's articles for the variation of the rights attached to a class of shares, or the insertion of any such provision into the articles, is itself to be treated as a variation of those rights.

• (6) In this section, and (except where the context otherwise requires) in any provision in a company's articles for the variation of the rights attached to a class of shares, references to the variation of those rights include references to their abrogation.

Variation of class rights: companies without a share capital

631

• (1) This section is concerned with the variation of the rights of a class of members of a company where the company does not have a share capital.

• (2) Rights of a class of members may only be varied—

• (a) in accordance with provision in the company's articles for the variation of those rights, or

• (b) where the company's articles contain no such provision, if the members of that class consent to the variation in accordance with this section.

• (3) This is without prejudice to any other restrictions on the variation of the rights.

• (4) The consent required for the purposes of this section on the part of the members of a class is—

• (a) consent in writing from at least three-quarters of the members of the class, or

• (b) a special resolution passed at a separate general meeting of the members of that class sanctioning the variation.

• (5) Any amendment of a provision contained in a company's articles for the variation of the rights of a class of members, or the insertion of any such provision into the articles, is itself to be treated as a variation of those rights.

• (6) In this section, and (except where the context otherwise requires) in any provision in a company's articles for the variation of the rights of a class of members, references to the variation of those rights include references to their abrogation.

Variation of class rights: saving for court's powers under other provisions

632

Nothing in section 630 or 631 (variation of class rights) affects the power of the court under—

• section 98 (application to cancel resolution for public company to be re-registered as private),

• Part 26 (arrangements and reconstructions: general)

• Part 26A (arrangements and reconstructions: companies in financial difficulty), or

• Part 30 (protection of members against unfair prejudice).

Right to object to variation: companies having a share capital

633

• (1) This section applies where the rights attached to any class of shares in a company are varied under section 630 (variation of class rights: companies having a share capital).

• (2) The holders of not less in the aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.

For this purpose any of the company's share capital held as treasury shares is disregarded.

• (3) If such an application is made, the variation has no effect unless and until it is confirmed by the court.

• (4) Application to the court—

• (a) must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be), and

• (b) may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

• (5) The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation, and shall if not so satisfied confirm it.

The decision of the court on any such application is final.

• (6) References in this section to the variation of the rights of holders of a class of shares include references to their abrogation.

Right to object to variation: companies without a share capital

634

• (1) This section applies where the rights of any class of members of a company are varied under section 631 (variation of class rights: companies without a share capital).