Q&As

Can fully-paid shares be converted into a new class of shares with a higher nominal value than the old class, on the basis that they are only partly-paid?

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Produced in partnership with Julian Henwood of Gowling WLG
Published on LexisPSL on 03/05/2017

The following Corporate Q&A produced in partnership with Julian Henwood of Gowling WLG provides comprehensive and up to date legal information covering:

  • Can fully-paid shares be converted into a new class of shares with a higher nominal value than the old class, on the basis that they are only partly-paid?

It is not possible to convert fully-paid shares into a new class of shares with a higher nominal value than the old class, on the basis that they are only partly-paid, except perhaps as part of a reduction of capital under Chapter 10 of Part 17 of the Companies Act 2006 (CA 2006) or a scheme of arrangement approved by the court (Scheme) under CA 2006, Pt 26.

It is assumed for the purpose of this Q&A that, other than the change in nominal value, on such a conversion all the other rights attaching to the relevant class of share would remain the same.

A reduction of capital is governed by CA 2006, ss 641–657. CA 2006, s 641 which provides that, in the case of a private company limited by shares, a reduction may be effected by a special resolution supported by a solvency statement given by the directors (the solvency statement procedure) or by a special resolution confirmed by the court (the court procedure). A public company may only reduce its capital using the court procedure. For more information, see Practice Note: Reduction of capital—a quick guide.

A Scheme is a court-sanctioned compromise between a company and its creditors or members. The subject of a Scheme may cover anything that the company and its members or creditors would not otherwise be able to agree between

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