Company Law Help...

[Nicki W]

I'm having a bit of a share capital issue and need your expertise.

We have a client who passed a resolution as follows:

"THAT the Share Capital of 100 £1 Ordinary Shares be increased to £20,000 by the creation of 19,9000 'A' Ordinary (participating, non-voting) shares of £1 each."

In previous years, the note to the accounts has stated that the 'A' Ordinary shares rank pari passu with the Ordinary shares, except that they are non voting.

Dividends have always previously been paid in equal proportion to 'A' Ordinary share holders and Ordinary shareholders.

However, the directors now intend to pay different levels of dividends for 'A' Ordinary shares and Ordinary shares because the resolution doesn't explicitly say that the shares rank pari passu.

What do you think?

I'm of the opinion that the precedent set in previous years of equal dividends for Ord & 'A' Ord shares, coupled with the note to the accounts stating they rank pari passu (remembering the accounts have been signed and approved by the directors) that they are treading on dodgy ground...

[thewave xmas ed']

If the shares are deemed 'pari passau' then by using that term alone ensures that they are in no way different to the original shares, and all that has happened is the share capital of the company has increased.

PS This should be in the business forum.

[Nicki W]

Well, that's the thing - are they deemed to be pari passu?

The resolution doesn't say they are.

(Didn't realise there was a special business section)

[thewave xmas ed']

Nicki W said:

Well, that's the thing - are they deemed to be pari passu?

The resolution doesn't say they are.

(Didn't realise there was a special business section)

If the resolution doesn't state they are pari passu, then it would be assumed they are not the same type of share.

However the resolution must state what right to a return on capital those shares have and whether they are at liberty to declare a dividend in respect of one or more class of share.

Can you copy and paste the resolution and remove names?

Edited by thewave xmas ed' on Wednesday 19th December 14:33

[Nicki W]

COMPANIES ACT 1985

ORDINARY RESOLUTION

OF

(Company name)

Passed on 27th Day of March 1989

At an EXTRAORDINARY GENERAL MEETING of the above-named Company duly convened and held at (Reg Office) on the 27th Day of March 1989, the following ORDINARY RESOLUTION was duly passed:

RESOLUTION:

THAT the Share Capital of 100 £1 Ordinary Shares be increased to £20,000 by the creation of 19,900 'A' Ordinary (participating, non-voting) shares of £1 each.


Signed

Company Secretary


As you can see, its a very old resolution - its only now that they're thinking of paying different levels of dividends to the two types of shares.

Edited by Nicki W on Wednesday 19th December 15:03

[thewave xmas ed']

Nicki W said:

RESOLUTION:

THAT the Share Capital of 100 £1 Ordinary Shares be increased to £20,000 by the creation of 19,900 'A' Ordinary (participating, non-voting) shares of £1 each.

I think the resolution is so vague, you could do pretty much what you like.

Ideally there should have been a statement that the shares shall confer the same rights in all respects as the existing shares, but as they don't, there can be no real arguement.

Perhaps update the resolution?