Q&As

Can a single class of shares be sub-divided into multiple classes with differing rights if the company has articles in the form of the model articles?

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Produced in partnership with Brenda Hannigan of Southampton University
Published on LexisPSL on 14/07/2017

The following Corporate Q&A produced in partnership with Brenda Hannigan of Southampton University provides comprehensive and up to date legal information covering:

  • Can a single class of shares be sub-divided into multiple classes with differing rights if the company has articles in the form of the model articles?
  • Model articles provisions on the sub-division of shares
  • Alternative ways to create additional classes of shares
  • Procedure for sub-division

Section 617 of the Companies Act 2006 (CA 2006) allows a limited company to alter its share capital by sub-dividing its shares. CA 2006, s 618 permits a limited company to exercise a power to sub-divide its shares, or any of them, into shares of a smaller amount than its existing shares, provided that its shareholders have passed a resolution authorising it to do so. The resolution may be an ordinary resolution, unless the company’s articles of association require a higher majority (or unanimity). The proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as in the case of the share from which it derived.

There is no requirement in CA 2006 for a company to have a power or authority to sub-divide shares in its articles, although the articles may exclude or restrict the exercise of that power.

Model articles provisions on the sub-division of shares

Neither the model articles for public companies nor those for private companies limited by shares say anything about the sub-division of shares, given it is permitted and provided for by statute. In particular, the model articles do not provide for a sub-division which, as between the shares resulting from the sub-division, confers on any of them preferences or advantages as compared with the others, in contrast to regulation 32(c) of

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