(1)A company's shares must not be allotted at a discount.
(2)If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.
Definitions used in section 580
- company
“company” means a company formed and registered under this Act, that is—
Defined in s.1(1) · see it in the full Act(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).
(4) In this section and that Schedule “company” includes any body corporate.
Defined in s.1159(4) · 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- appropriate rate
(1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.
Defined in s.592(1) · see it in the full Act
Cases considering section 580 (7)
Chalcot Training Ltd v Ralph & Anor
Section 580 prohibits allotting shares on terms that the allottee will pay less than their nominal value. The court held that the prohibition was not engaged because the allottees remained liable for the unpaid balance of each share when called, and the payments received were genuine remuneration rather than a reduction of that liability (see paras [39]-[40]; [66]-[77]).
Dr Rohit Kulkarni v Gwent Holdings Limited & Anor
Limits the construction of the shareholders’ agreement by prohibiting allotment of shares at a discount. The court rejected the precise illegality argument because the separate allotment contract required payment, but regarded the statutory context as inconsistent with the alleged estoppel (see para [409]).
DR ROHIT KULKARNI v GWENT HOLDINGS LIMITED & Anor.
Limits the estoppel case by prohibiting allotment of shares at a discount. The claimant could not use the recitals to avoid liability for unpaid share capital where that would conflict with the statutory rule and public policy (see para [79(1)]).
- Chalcot Training Ltd v Ralph & Anor
- Timothy Bunting v The Commissioners for HMRC
- Chancery Client Partners Ltd & Ors v MRC 957 Ltd & Ors
- Blomqvist v Zavarco Plc & Ors
What each judgment says about section 580 is in the case-law panel in the full Act.