Companies Act 2006, section 561

Existing shareholders' right of pre-emption

Part 17 A company's share capital

(1)A company must not allot equity securities to a person on any terms unless—

(a)it has made an offer to each person who holds ordinary shares in the company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the ordinary share capital of the company, and

(b)the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made.

(2)Securities that a company has offered to allot to a holder of ordinary shares may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening subsection (1)(b).

(3)F900. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)Shares held by the company as treasury shares are disregarded for the purposes of this section, so that—

(a)the company is not treated as a person who holds ordinary shares, and

(b)the shares are not treated as forming part of the ordinary share capital of the company.

(5)This section is subject to—

(a)sections 564 to [F901566AF901] (exceptions to pre-emption right),

(b)sections 567 and 568 (exclusion of rights of pre-emption),

(c)sections 569 to 573 (disapplication of pre-emption rights), and

(d)section 576 (saving for certain older pre-emption procedures).

Read section 561 in the full Act → Definitions (5) Cases (14)

Definitions used in section 561

company

“company” means a company formed and registered under this Act, that is—

(a)

a company so formed and registered after the commencement of this Part, or

(b)

a company that immediately before the commencement of this Part—

(i)

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

(ii)

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).

Defined in s.1(1) · see it in the full Act

(4) In this section and that Schedule “company” includes any body corporate.

Defined in s.1159(4) · see it in the full Act
equity securities

“equity securities” means—

(a)

ordinary shares in the company, or

(b)

rights to subscribe for, or to convert securities into, ordinary shares in the company;

Defined in s.560(1) · see it in the full Act
ordinary shares

“ordinary shares” means shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution.

Defined in s.560(1) · see it in the full Act
share

(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 Act
treasury shares

(5)In the Companies Acts references to a company holding shares as treasury shares are to the company holding shares that—

(a)were (or are treated as having been) purchased by it in circumstances in which this section applies, and

(b)have been held by the company continuously since they were so purchased (or treated as purchased).

Defined in s.724(5) · see it in the full Act

Cases considering section 561 (14)

Paul Wanderi Ndungu v SPG Limited (formerly known as Sportpesa Global Holdings Limited) & Ors

[2025] EWHC 3039 (Ch) · 18 November 2025

Interprets the statutory pre-emption obligation as requiring an offer to each ordinary shareholder for a proportionate number of equity securities on the same or more favourable terms. The company breached this obligation in relation to the first and second allotments. (see paras [361], [390]-[429])

Nigel Freeborn & Ors v Emery House Property Limited & Anor

[2023] EWHC 3009 (Ch) · 24 November 2023Interprets

Interprets the statutory pre-emption right as applying to the allotment of new shares because the Model Articles did not exclude it. The allotment of 12 shares to the director therefore breached the petitioners’ rights. (see para [16])

Third Eye Projects Ltd & Anor v Mint S.p.A

[2023] EWHC 1023 (Ch) · 5 May 2023

The judgment identified the claimants’ case that the allotment of shares without offering participation breached statutory pre-emption rights. The alleged breach formed part of the English company-law dispute connecting the claim to England, but the merits were not finally determined (see paras [32]; [68]; [112]).

What each judgment says about section 561 is in the case-law panel in the full Act.

Explanatory note

866.Subject to some exceptions, under section 89(1) of the 1985 Act, a company that is proposing to allot equity securities (defined in section 560) must offer them to existing shareholders first (that is, on a pre-emptive basis). The basic principle (which is unchanged by the Act) is that a shareholder should be able to protect his proportion of the total equity of a company by having the opportunity to subscribe for any new issue of equity securities. This is subject to various exceptions and subsection ( 5) provides a pointer to these exceptions.

All the explanatory notes for the Act

Amendments and notes

2 notes from legislation.gov.uk

Amendments

  1. F900S. 561(3) omitted (1.10.2009) by virtue of The Companies Act 2006 (Allotment of Shares and Right of Pre-emption) (Amendment) Regulations 2009 (S.I. 2009/2561), reg. 2(3)
  2. F901Word in s. 561(5)(a) substituted (26.6.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 9 para. 33(3)(a) (with ss. 2(2), 5(2))