Power of directors to allot shares etc: private company with only one class of shares
Part 17 A company's share capital
Where a private company has only one class of shares, the directors may exercise any power of the company—
(a)to allot shares of that class, or
(b)to grant rights to subscribe for or to convert any security into such shares,
except to the extent that they are prohibited from doing so by the company's articles.
“company” means a company formed and registered under this Act, that is—
a company so formed and registered after the commencement of this Part, or
a company that immediately before the commencement of this Part—
was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or
was an existing company for the purposes of that Act or that Order,
(which is to be treated on commencement as if formed and registered under this Act).
(4) In this section and that Schedule “company” includes any body corporate.
Defined in s.1159(4) · see it in the full Act(1) In the Companies Acts “share”, in relation to a company, means share in the company's share capital.
Defined in s.540(1) · see it in the full ActIn the Companies Acts “director” includes any person occupying the position of director, by whatever name called.
Defined in s.250 · see it in the full Act(4) References in the Companies Acts to a company's “articles” are to its articles of association.
Defined in s.18(4) · see it in the full ActConfirms that the directors held the power to allot shares and that any valid allotment required the directors’ agreement. The absence of a valid allotment agreement contributed to the conclusion that the 2013 allotment was invalid. (see paras [5]; [71]; [111])
Applies the provision to confirm that the director had power to allot shares in a private company with one class of shares, subject to the statutory pre-emption rights and fiduciary constraints. (see para [17])
The court notes that, where a company has one class of shares and the articles do not provide otherwise, the directors exercise the company’s power to allot shares of that class. This statutory mechanism confirms that allotment involves company affairs. (see para [170])
What each judgment says about section 550 is in the case-law panel in the full Act.
848.In line with the recommendations of the CLR (Final Report, paragraph 4.5), this is a new provision which empowers the directors to allot shares (or to grant rights to subscribe for or convert any security into shares) where the company is a private company which will have only one class of shares after the proposed allotment and removes the current requirement, contained in section 80 of the 1985 Act, for the directors to have prior authority from the company’s members for such an allotment of shares. In addition, it provides that the members may, if they wish, restrict or prohibit this power through the articles. The definition of “class of shares” is contained in section 629.