Q&As

If a share has been allotted to an employee benefit trust for no payment, is the allotment invalid and will the shares need to be paid for on a future date?

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Published on LexisPSL on 20/01/2016

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

  • If a share has been allotted to an employee benefit trust for no payment, is the allotment invalid and will the shares need to be paid for on a future date?

If a share has been allotted to an employee benefit trust for no payment, is the allotment invalid and will the shares need to be paid for on a future date?

Although a share may be transferred without payment from the recipient in certain circumstances, an allotment of a share cannot. This is because s 580(1) of the Companies Act 2006 (CA 2006) provides that 'a company's shares must not be allotted at a discount'. 

Nevertheless, if shares have been issued to the trustees of an employee benefit trust (EBT) for no payment, this does not make the allotment of the shares invalid, but the trustees – or any future holder of the share – may be liable to pay at least nominal value for the shares, and may also be subject to a liability for accrued interest on this amount. The position on this will depend upon the basis upon which the allotment was made to the EBT

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