Q&As

If the articles of a private company contain bespoke pre-emption rights, do the statutory pre-emption rights still need to be disapplied and, if so, how? How do you disapply contractual pre-emption rights?

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Published on LexisPSL on 27/11/2014

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

  • If the articles of a private company contain bespoke pre-emption rights, do the statutory pre-emption rights still need to be disapplied and, if so, how? How do you disapply contractual pre-emption rights?
  • Disapplying statutory pre-emption rights
  • Private companies with more than one class of shares
  • Private companies with one class of shares
  • Disapplying contractual pre-emption rights
  • Waiving pre-emption rights
  • Amending the articles

Pre-emption rights are an important shareholder protection because they enable an existing shareholder to maintain their percentage shareholding in the company on a new issue of shares. Where a private company's articles of association contain pre-emption rights which differ from but do not exclude the statutory pre-emption rights, do the statutory pre-emption rights still need to be disapplied and, if so, how can they be disapplied? Further, what if the articles contain bespoke pre-emption rights provision but do not contain a procedure for disapplying them? How can these contractual pre-emption rights be disapplied?

Disapplying statutory pre-emption rights

The Companies Act 2006 (CA 2006) gives existing shareholders of companies a statutory right of pre-emption in respect of the allotment of new equity securities. For further information (including exceptions to the statutory pre-emption rights) see Practice Note: Pre-emption rights—general issues.

For private companies only, all or any of the pre-emption requirements in the CA 2006 may be excluded by a provision in the articles of association. The exclusion may be general or specific to a particular allotment.

Private companies with more than one class of shares

Where a company's articles of association contain provisions which are inconsistent with CA 2006, ss 561 and 562 those provisions will be treated as excluding CA 2006, ss 561 and 562, so no further action is required to disapply the statutory pre-emption rights.

If the provisions in

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