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Consideration for shares in public companies (Zavarco v Sidhu)

Published on: 23 June 2021
Published by: LexisPSL
  • Consideration for shares in public companies (Zavarco v Sidhu)
  • What are the practical implications of this case?
  • What was the background?
  • What did the court decide?
  • Case details

Article summary

Corporate analysis: This case concerns the provisions of the Companies Act 2006 (CA 2006) that deal with consideration for shares in a public company. CA 2006, s 593 prohibits the allotment of shares by public companies otherwise than in cash, unless the consideration for the allotment has been independently valued in accordance with the relevant provisions in CA 2006. CA 2006, s 594 creates an exception to the independent valuation requirements of CA 2006, s 593, where the consideration for the share allotment consists of an arrangement for the transfer of shares in another company. In Zavarco v Sidhu, the defendant (RSS) alleged that he had obtained shares in the claimant (Z), a public company, pursuant to an arrangement for the exchange of shares in another company (ZB). It was common ground that the shares in ZB had not been independently valued. The court held that there was no arrangement in place at the time that RSS obtained shares in Z within the definition of CA 2006, s 594, and that RSS was therefore liable to pay for the shares obtained in Z in cash. Written by Peter Morcos, barrister at 4 New Square, who together with Patrick Lawrence QC was instructed on behalf of the claimant in this case. or take a trial to read the full analysis.

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