Q&As

Can you convert a share that is redeemable in nature to one that is not redeemable?

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Published on LexisPSL on 03/07/2015

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

  • Can you convert a share that is redeemable in nature to one that is not redeemable?
  • Case law
  • CA 2006 provisions on the redemption of shares
  • Class rights
  • Possible alternatives

We can find no authority confirming that it is possible to convert a redeemable share into a non-redeemable share. The view reached on this question will depend on the interpretation given to the relevant case law and the statutory provisions on the redemption of shares and class rights and we can give no definitive answer.

Case law

There is case law (Re St. James' Court Estates) establishing that it is not possible to convert existing non-redeemable shares into redeemable shares, even where this process forms part of a statutory scheme of arrangement. The case was decided on the basis that section 46 of the Companies Act 1929 (the equivalent provision to section 684 of the Companies Act 2006 (CA 2006)) only contemplated the issue of redeemable shares. However, it should be noted in Forth Wines Limited, Petitioners (a Scottish case, in which Re St. James' Court Estates was distinguished), the court held that the conversion of issued ordinary shares into redeemable deferred shares was actually a reduction of capital in an unusual guise, but nevertheless could be valid if it was approved by the members of a company and did

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