Issuing shares MCQ Question Help What is the different between an allotment (or issue) of shares and a transfer of shares? · Allotment of shares s.558 o Company selling brand new shares to a buyer - existing or new o Will be a contract between the company as the seller and the buyer of the shares. o Company receives payment for the shares and the buyer will receive the shares o Equity finance is raised through an allotment of shares. · Transfer of shares o Company isn't a party to any transaction that takes place. o No money is received by the company. o An existing shareholder either selling their shares or given them away to another person o Will be a buyer if it is a sale or a done if it is a gift. o A way of a shareholder realising their investment in the company. What's the purpose of issuing shares? · To raise capital · Similar to a partner making a partner contribution to a partnership to provide the business with funding - The other source of borrowing for a company is debt finance and companies will have a combination of debt and equity finance - Finance that is raised through an allotment is called equity finance - Allotment happens when the shares are set aside or sold to someone, but issue happens when the name is entered into on the register of member. This becomes important where there is a delay between allotment and issue. - Shares must have a fixed nominal value under s.542 and they can be denominated in any amount in any currency . Shares may be issued at a premium fti.e. for more than their nominal value) but, according to s.580, must not be issued at a discount. o Nominal value and premium value ftmarket value) are separate things Shares cannot be issued at a discount o Companies will issue shares at a premium where the value of the company overall has increased since shares of that type has increased. Procedure for an allotment of shares in a Private Limited Company - General rule - Directors have the power to make decisions unless the CA or articles state otherwise. - Dealt with by the directors' subject to the CA and articles.
1. The potential buyer writes to the company applying to buy the shares in the company and enclosing the payment of the price 2. The directors consider the application, decide whether or not they have the power to allot the shares and, if so, whether or not to allot the shares to the buyer - this is usually dealt with at a meeting of the directors 3. If the directors do not have the power to allot the shares, they will need to obtain this from the shareholders before the allotment can go ahead. 4. Post completion - return of allotments on Form SH01 must be sent to Companies House within 1 month s.555 Do the directors have authority to