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

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?

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

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