Shareholder resolutions: authority to allot/pre-emption disapplication

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Shareholder resolution to grant directors general authority to allot shares and to disapply statutory pre-emption rights.

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Shareholder resolutions: template written resolutions

This template is for one or more shareholders written resolutions which have been proposed by the directors of a private limited company.

Board minutes: share issue

These minutes are for a meeting of the board of directors at which one or more subscriptions for shares in the company will be approved.  They are on the basis that any provisions of the Articles of Association or Shareholders Agreement which either restrict or regulate the allotment of shares in the company have first been complied with.

Subscription letter: shares

This form of subscription assumes that the company and the subscriber have agreed the amount which the subscriber will pay for the new shares and the number of new shares to be issued.  It includes alernative forms of subscription letter, depending on whether the subscriber for the new shares is an individual or a company.

Shareholders resolution: authority to allot/pre-emption disapplication

Shareholder resolution to grant directors general authority to allot shares and to disapply statutory pre-emption rights


Do directors need shareholder approval to issue new shares?

Directors of a company are required under the Companies Act 2006 to have shareholder authority to allot new shares.

An exception to the requirement to have authority is in the case of a private limited company with only one class of share provided that there is no prohibition on the allotment of new shares in the company’s Articles of Association.

Where a company has more than one class of share, the directors will need shareholder authority to allot new shares unless there is an existing authority in place to allot shares either in the company’s Articles of Association or by a pre-existing ordinary resolution of shareholders which remains in force.

When do pre-emption rights apply on the issue of new shares?

In addition to the authority to allot new shares, an allotment of new shares may also be subject to pre-emption rights in favour of existing shareholders.  Pre-emption rights give existing shareholders first refusal on an issue of new shares – the new shares must be offered to existing shareholders before they can be taken up by new investors or shareholders.

Under the Companies Act 2006, pre-emption rights will apply on the issue of new shares by a private limited company unless:

  • the pre-emption rights have been disapplied either in the company’s Articles of Association or by a special resolution of shareholders, or
  • the issue of new shares is under an employee share scheme, wholly or partly for non-cash consideration or a bonus issue

In addition, the company’s Shareholders Agreement may contain its own pre-emptive procedure or shareholder consent requirement applicable to the issue of new shares.

If there are applicable pre-emption rights, a company wishing to issue new shares has the choice either to follow the pre-emption procedure or to seek shareholder approval to disapply them.

About these shareholders resolutions

These resolutions provide for:

  • the grant of a general authority to the directors to allot new shares up to a maximum specified amount of share capital
  • the disapplication of the statutory pre-emption rights in the Companies Act 2006 for shares allotted pursuant to that general authority

Document features

  • Shareholders written resolutions – one ordinary resolution and one special resolution
  • Ordinary resolution to grant general authority to directors to allot shares:
    • up to specified aggregate nominal amount of capital
    • for limited time period (maximum permitted 5 years)
  • Special resolution to disapply statutory pre-emption rights on the issue of new shares in relation to shares issued pursuant to the general authority

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