(1)The directors of a company may exercise a power of the company—
(a)to allot shares in the company, or
(b)to grant rights to subscribe for or to convert any security into shares in the company,
if they are authorised to do so by the company's articles or by resolution of the company.
(2)Authorisation may be given for a particular exercise of the power or for its exercise generally, and may be unconditional or subject to conditions.
(3)Authorisation must—
(a)state the maximum amount of shares that may be allotted under it, and
(b)specify the date on which it will expire, which must be not more than five years from—
(i)in the case of authorisation contained in the company's articles at the time of its original incorporation, the date of that incorporation;
(ii)in any other case, the date on which the resolution is passed by virtue of which the authorisation is given.
(4)Authorisation may—
(a)be renewed or further renewed by resolution of the company for a further period not exceeding five years, and
(b)be revoked or varied at any time by resolution of the company.
(5)A resolution renewing authorisation must—
(a)state (or restate) the maximum amount of shares that may be allotted under the authorisation or, as the case may be, the amount remaining to be allotted under it, and
(b)specify the date on which the renewed authorisation will expire.
(6)In relation to rights to subscribe for or to convert any security into shares in the company, references in this section to the maximum amount of shares that may be allotted under the authorisation are to the maximum amount of shares that may be allotted pursuant to the rights.
(7)The directors may allot shares, or grant rights to subscribe for or to convert any security into shares, after authorisation has expired if—
(a)the shares are allotted, or the rights are granted, in pursuance of an offer or agreement made by the company before the authorisation expired, and
(b)the authorisation allowed the company to make an offer or agreement which would or might require shares to be allotted, or rights to be granted, after the authorisation had expired.
(8)A resolution of a company to give, vary, revoke or renew authorisation under this section may be an ordinary resolution, even though it amends the company's articles.
(9)Chapter 3 of Part 3 (resolutions affecting a company's constitution) applies to a resolution under this section.
849.This section replaces section 80(1) and (3) to (8) of the 1985 Act and applies both to private companies which will have more than one class of shares after a proposed allotment and to public companies. It provides that the directors may only allot shares (or grant rights to subscribe for shares or to convert any security into shares) if they have been given prior authorisation for the proposed allotment by ordinary resolution of the company’s members or by the articles.
850.Subsections ( 2) to ( 5) set out details of the way in which prior authorisation (or a renewal of such authorisation) may be given and, in particular, provides that the authority may not be given for a period of more than five years. An authority given to the directors under this section, and any resolution of the company renewing such an authority, must state “the maximum amount of shares” to be allotted pursuant to the authority. This mirrors the formulation of words used in section 80 of the 1985 Act and enables the members to limit the authority to a specific number of shares or shares up to a given maximum nominal value.
851.Subsection ( 8) makes it clear that an ordinary resolution of the company’s members will suffice for the purposes of giving authority to the directors, even where the effect of the resolution is to alter the company’s articles of association (which would normally require a special resolution of the company’s members).