Shares
Shares
Can work out partners share by how much capital they contributed:
o A contributes 100k cash
o B contributes 150k plant + machinery
o C contributes 250k freehold premises
o Partnership capital = 500k
o Partners shares:
A 100K/500K = 2/10
B 150K /500K = 3/10
C 250k/500K = 5/10
Company is a separate legal entity, partnership isn't cash and assets are
transferred into the company company owns its assets
Share capital is divided into shares e.g. 500,000 shares of £1 each
Company sells shares to shareholders in exchange for cash or assets
Shares become property of shareholders.
Private company shareholders are often directors.
Public company more likely to have diverse ownership, directors are unlikely to
be majority shareholders particularly where they are listed companies
directors are often given share options in remuneration package.
Shares are property owned by shareholder
Shareholder has an ownership interest in the company
Shares are flexible can create different types which have different rights
Good way of structuring external investment
A company may be jointly owned by many shareholders.
Nominal value vs share premium
Shares have to have a nominal or par value e.g. 1p or £1 however a shareholder may
buy shares for more than nominal value amount paid over nominal value is called
share premium.
More successful the company, more the company's shares are worth
On a stock exchange it is the share premium that fluctuates.
Shareholder rights
Specified by articles
Typically:
o attend GMs and vote
o receive a share of the profits by way of dividend if one is declared
o on winding up entitled to return of capital and a share of surplus capital if
any.
Power depends on the share they have over 50% = control of the company, can
pass OR, 75% can pass SR
Negative control → can't pass on their own but can block SR.
, people buy shares for capital growth, dividends (may be regular with a well-
established company) or to take part in certain decisions reserved for shareholders.
shareholders risk losing the money they have paid/agreed to pay for their shares if
the company becomes insolvent paid last in insolvency.
Not liable for company’s debts and liabilities but will often get nothing back in
insolvency
Companies typically issue shares to raise capital can’t continuously issue new
shares or it will likely devalue current shares.
Different share classes carry different rights Voting, dividends, right of
redemption, etc.
Types of shares
Ordinary may be companies only form
Non-voting
Preference paid a dividend before other classes
Deferred ordinary
Management shares
Redeemable company may be obligated to pay back share at a later date
Class rights may be varied s.633 CA
o written consent of holders 75% class
o SR 75% majority and class meeting, 15% may object to the court
Dividends
Return on investment
Become payable of declared by directors + subject to CA rules
s.830 must be made out of profits by reference to relevant accounts
Dividend is recommended by directors must be approved by shareholders via OR
Shareholders cannot vary amount set by directors.
Allotment of shares
Shares can be issued at a premium may not be issued at a discount
Not necessary for payment on issue although they are typically paid in full
PLC must receive 1/4 of the nominal value and all of share premium on issue
don't apply to private company’s
Shares can be issued for assets other than cash cash is most common
Private cannot offer shares to public, list on stock exchange or invite people to
buy via letter etc.
Must consider:
o Authorised Share Capital (companies incorporated before 1 Oct 2009)
o Authority to allot
o Statutory pre-emption rights do they apply
also formalities/filings at CH
Authorised Share Capital
o Comps incorporated before 1 Oct 2009 memorandum of
association needed to state ASC couldn't allot more than stated unless
they obtained shareholder approval to increase ASC by requisite amount
Shares
Can work out partners share by how much capital they contributed:
o A contributes 100k cash
o B contributes 150k plant + machinery
o C contributes 250k freehold premises
o Partnership capital = 500k
o Partners shares:
A 100K/500K = 2/10
B 150K /500K = 3/10
C 250k/500K = 5/10
Company is a separate legal entity, partnership isn't cash and assets are
transferred into the company company owns its assets
Share capital is divided into shares e.g. 500,000 shares of £1 each
Company sells shares to shareholders in exchange for cash or assets
Shares become property of shareholders.
Private company shareholders are often directors.
Public company more likely to have diverse ownership, directors are unlikely to
be majority shareholders particularly where they are listed companies
directors are often given share options in remuneration package.
Shares are property owned by shareholder
Shareholder has an ownership interest in the company
Shares are flexible can create different types which have different rights
Good way of structuring external investment
A company may be jointly owned by many shareholders.
Nominal value vs share premium
Shares have to have a nominal or par value e.g. 1p or £1 however a shareholder may
buy shares for more than nominal value amount paid over nominal value is called
share premium.
More successful the company, more the company's shares are worth
On a stock exchange it is the share premium that fluctuates.
Shareholder rights
Specified by articles
Typically:
o attend GMs and vote
o receive a share of the profits by way of dividend if one is declared
o on winding up entitled to return of capital and a share of surplus capital if
any.
Power depends on the share they have over 50% = control of the company, can
pass OR, 75% can pass SR
Negative control → can't pass on their own but can block SR.
, people buy shares for capital growth, dividends (may be regular with a well-
established company) or to take part in certain decisions reserved for shareholders.
shareholders risk losing the money they have paid/agreed to pay for their shares if
the company becomes insolvent paid last in insolvency.
Not liable for company’s debts and liabilities but will often get nothing back in
insolvency
Companies typically issue shares to raise capital can’t continuously issue new
shares or it will likely devalue current shares.
Different share classes carry different rights Voting, dividends, right of
redemption, etc.
Types of shares
Ordinary may be companies only form
Non-voting
Preference paid a dividend before other classes
Deferred ordinary
Management shares
Redeemable company may be obligated to pay back share at a later date
Class rights may be varied s.633 CA
o written consent of holders 75% class
o SR 75% majority and class meeting, 15% may object to the court
Dividends
Return on investment
Become payable of declared by directors + subject to CA rules
s.830 must be made out of profits by reference to relevant accounts
Dividend is recommended by directors must be approved by shareholders via OR
Shareholders cannot vary amount set by directors.
Allotment of shares
Shares can be issued at a premium may not be issued at a discount
Not necessary for payment on issue although they are typically paid in full
PLC must receive 1/4 of the nominal value and all of share premium on issue
don't apply to private company’s
Shares can be issued for assets other than cash cash is most common
Private cannot offer shares to public, list on stock exchange or invite people to
buy via letter etc.
Must consider:
o Authorised Share Capital (companies incorporated before 1 Oct 2009)
o Authority to allot
o Statutory pre-emption rights do they apply
also formalities/filings at CH
Authorised Share Capital
o Comps incorporated before 1 Oct 2009 memorandum of
association needed to state ASC couldn't allot more than stated unless
they obtained shareholder approval to increase ASC by requisite amount
