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GLOSSARY

Ordinary share definition

Published by a LexisNexis Corporate expert

What does Ordinary share mean?

Ordinary shares, often known as equity or risk capital, are the default type of shares of a company (CA 2006, s 560). Generally, ordinary shares carry voting rights and rights to dividends and give a right to participate on a winding up in any excess assets. It is not uncommon for companies to issue different classes of ordinary shares, such as A Ordinary, B Ordinary and C Ordinary, each with their own distinct rights. Different classes of ordinary shares may have a preference with regard to voting, return of capital and dividends.

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Classifying overseas entities for UK tax purposes—checklist

Classifying overseas entities for UK tax purposes—checklist This Checklist is for use when determining whether an overseas entity will be treated as transparent or opaque for UK tax purposes. This is especially relevant when working out the direct tax position of a UK-resident investor in the entity. The factors for consideration are based on HMRC’s guidance and the applicable UK case law, discussed further in Practice Note: Entity classification case law and HMRC's interpretation. Unlike the equivalent pre-1997 rules in the US, the relevant factors do not explicitly include whether or not membership interests in the overseas entity are freely transferable. No one factor or factors are conclusive. However, following the Anson case, the right of the members to profits as they arise is considered to be a very important factor in determining entity classification. If members have the right to profits as they arise (rather than once it has been determined to distribute them), the entity is likely to be transparent (although it is less clear whether this...

Allotment of shares and disapplication of pre-emption rights—listed company—checklist

Allotment of shares and disapplication of pre-emption rights—listed company—checklist STOP PRESS: A significant restructuring of the UK listing regime came into effect on 29 July 2024, which included the removal of the premium and standard listing segments and the creation of a single listing category for equity shares in commercial companies. The commercial companies category is heavily disclosure-based and sits alongside other listing categories such as the shell companies, secondary listing and closed ended investment fund categories. A new UK Listing Rules sourcebook came into force to implement the changes and the previous Listing Rules sourcebook was revoked. For further information see Practice Note: Reform of the UK listing regime—fundamentals. This Checklist reflects the listing regime as it was prior to 29 July 2024. The allotment and issue of shares is governed by statutory rules, which differ according to the type of company which is proposing the allotment (private or public, listed or unlisted) and whether that company has a single or multiple classes of shares. This checklist sets out...

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Court procedure—reduction of capital—effect of the reduction

Court procedure—reduction of capital—effect of the reduction It is a fundamental rule of English company law that a limited company having a share capital must maintain that capital. Therefore, a company must not reduce its capital, except as prescribed by law. This capital maintenance rule is intended to protect a company’s creditors by ensuring that the assets representing the capital of a company remain available to them for future recourse. There are provisions in the Companies Act 2006 (CA 2006) governing how a limited company may reduce its capital. The restrictions in CA 2006 relating to reductions of capital do not apply to unlimited companies. For further information on this type of company, see Practice Note: Unlimited companies. The focus of this Practice Note is on reductions of capital in accordance with CA 2006, Pt 17, Ch 10, in particular, those carried out by a special resolution confirmed by court order (the court procedure) rather than those carried out by a special resolution supported by a solvency...

Setting up a corporate joint venture—initial considerations

Setting up a corporate joint venture—initial considerations Joint venture The term joint venture has no specific legal meaning under UK law. It is essentially a commercial arrangement between two or more parties who agree to pool their resources for the purpose of accomplishing an intended project (or other business activity) and share the resulting rewards. It describes many different types of situations that range from structural arrangements that create or change the economic control of a legal entity, such as joint venture companies or partnerships, to non-structural arrangements such as contractual joint projects and informal (undocumented) collaborations. A joint venture can be formed for one specific project, period or a continuing business relationship. Joint ventures are used in a variety of sectors. There are a variety of reasons why parties may consider forming a joint venture to pursue a project or business, such as: • they lack the necessary knowledge, expertise, technology, resources and/or funding • by sharing the requirement to provide funding, they thereby reduces the financial risk...

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Phantom share option agreement

Phantom share option agreement This AGREEMENT is made on [insert date of execution of the phantom share option agreement] Parties 1 [insert name of company whose shares are relevant to the phantom option] (registered number [insert registered number of company]) whose registered office is at [insert registered address of company] (the Company); and 2 [insert name of option holder] of [insert address of option holder] (the Option Holder) Background (A) The Company has agreed to grant to the Option Holder as at the date of this Agreement a Phantom Option on the terms set out in this Agreement. (B) The Phantom Option provides an entitlement to cash and not shares. 1 Definitions In this Agreement, except where the context otherwise requires, the words and expressions set out below will bear the following meanings, namely: Cash Payment • means the cash sum payable on the exercise of the Phantom Option, which shall be calculated in accordance with clause 6.2; Control • has the meaning given...

Irrevocable undertaking—shareholder—scheme of arrangement

Irrevocable undertaking—shareholder—scheme of arrangement The Directors [insert offeror's name] ([Offeror]) [insert address] [and] [The Directors] [[insert name of financial adviser] (the Adviser) [insert address]] [insert date] Dear Directors Proposed acquisition of [name of offeree] ([Offeree]) We understand that [Offeror] proposes to acquire (the Acquisition) [all] the issued [and to be issued] [ordinary] shares of [insert nominal value] each in [Offeree] (the Shares) for the consideration, and otherwise substantially on the terms and subject to the conditions, set out in the draft press announcement attached to this letter (the Announcement), subject to such amendments or additions to such terms and conditions as may be required by the City Code on Takeovers and Mergers (the Code), the Panel on Takeovers and Mergers (the Panel), the High Court of Justice in England and Wales (the Court) or any applicable law or regulation. We also understand that the Acquisition is expected to be implemented by way of a scheme of arrangement under...

Dive into our 62 Precedents related to Ordinary share

Does a bonus issue have to be carried out so that the shares are offered to all existing shareholders in a company or can a company choose which shareholders to allot bonus shares to?

Does a bonus issue have to be carried out so that the shares are offered to all existing shareholders in a company or can a company choose which shareholders to allot bonus shares to? In this Q&A, we have assumed that the company proposing to carry out a bonus issue is a private company limited by shares. A bonus issue is the allotment of shares by a company to its existing shareholders, usually on the basis that they are fully-paid (as that is often a requirement of its articles of association), and without any payment being required by shareholders for those shares. In essence, a bonus issue will involve a resolution of a company to effect the capitalisation of existing reserves into (normally) fully-paid shares by allotting the shares and applying reserves in paying them up. It is not possible for a shareholder in a company that is making a bonus issue to refuse the allotment of any shares that they are entitled to or to...

Will the UK remain a signatory to the Basle Capital Convergence Agreement of July 1988 post Brexit?

Will the UK remain a signatory to the Basle Capital Convergence Agreement of July 1988 post Brexit? The Basel Accords—Basel I, II and III The Basle (or Basel) Capital Convergence Agreement of July 1988, is the original text of the first Basel Capital Accord (Basel I), which set down an agreement among the G-10 central banks (including the UK and non-EU countries such as the United States of America and Japan) to apply common minimum capital standards to their banking industries originally to be achieved by end of 1992. It focused mainly on credit risk by creating a bank asset classification system and the appropriate risk weighting of assets. The second Basel Accord, the Revised Capital Framework (Basel II) served as an update of Basel I and focused on three main areas, minimum capital requirements, supervisory review of an institution’s capital adequacy and internal assessment process and an effective use of disclosure to strengthen market discipline and encourage sound banking practices (ie the three pillars). Following...

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FTT confirms consortium relief ownership proportion based on collective entitlement of link companies (Eastern Power Networks plc and others v HMRC)

Tax analysis: In Eastern Power Networks plc and others v HMRC, the First-tier Tax Tribunal (FTT) held that, when determining the ownership proportion for the purposes of consortium relief, the entitlement of multiple link companies must be assessed collectively, not by aggregating individual entitlements. Additionally, it ruled that a corporate structure designed to enhance consortium relief entitlements constituted a scheme with a main purpose of obtaining a tax advantage.

Spreadsheet says 'no', Tribunal says 'yes'! FTT accepts rectification for entrepreneurs' relief (Cooke v HMRC)

Private Client analysis: In 2019, Jonathan Cooke sold his entire shareholding in ISG Holdings Ltd (IHL) and realised a gain of approximately £600,000. Mr Cooke had initially acquired his shareholding under a commercial agreement to take a 5% share in the company. Due to a spreadsheet error, he only actually acquired 4.999% of the ordinary share capital, or less than the 5% holding needed to qualify for entrepreneurs' relief. HMRC accordingly denied the claim. Mr Cooke appealed on grounds that if appropriate proceedings were brought in the High Court, it would order a rectification of the original acquisition documents (providing that Mr Cooke in fact held 5%) and accordingly the First-tier Tax Tribunal (FTT) should proceed on the basis the rectification had been ordered and allow the claim for entrepreneurs' relief. The taxpayer won. Written by Tom Rank, partner, and Calum Young, associate, both at DWF.

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