Q&As

Can a shareholder in a private limited company pay amounts outstanding on their partly paid shares through the set-off of sums owed by the company to that shareholder?

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Last updated on 20/06/2019

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Can a shareholder in a private limited company pay amounts outstanding on their partly paid shares through the set-off of sums owed by the company to that shareholder?

Can a shareholder in a private limited company pay amounts outstanding on their partly paid shares through the set-off of sums owed by the company to that shareholder?

Whether a sums owed by a private limited company to a shareholder can be used to pay up that shareholder’s partly paid shares depends on whether such set-off constitutes valid payment for the amount remaining unpaid on that shareholder’s shares for the purposes of the Companies Act 2006 (CA 2006).

CA 2006 sets out various restrictions and requirements in relation to payment for shares.

Any company (whether public or private) that allots shares:

  1. must not allot the shares at a discount, ie for less than their nominal value (CA 2006, s 580), and

  2. may, if so authorised by its articles of association, provide for there to be differences between the shareholders as to the amounts to be paid up on allotment of the shares and the times that those outstanding payments will be required to be made (CA 2006, s 581)

In addition, under CA 2006, s 582, shares allotted by any company, and any premium on them, may be paid up in money or money's worth (including goodwill and know-how). This effectively means that a company may accept payment for

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Key definition:
Limited company definition
What does Limited company mean?

Three of the main types of company available under the CA 2006 are limited companies, namely the private company limited by shares, the public company limited by shares, and the (private) company limited by guarantee. All are distinguished by the limited liability of their shareholders.

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