Sub-division of shares or share capital meaning

This checklist functions as a reference, highlighting considerations for buyer’s solicitors when drafting a share purchase agreement (also referred to as an SPA or share sale agreement) that records the sale and purchase of the entire issued share capital of a private limited company, where the transaction features split exchange as well as completion...

STOP PRESS: A major overhaul of the UK listing framework took effect on 29 July 2024, removing the premium and standard segments and introducing a single listing category for equity shares in commercial companies. The commercial companies category is strongly disclosure-led, with an emphasis on transparency, and sits alongside other listing categories, such as shell companies, secondary listing and closed-ended investment fund categories. A new UK Listing Rules sourcebook came into force to deliver and implement the reforms, and the previous Listing Rules sourcebook was revoked in full. For further details, see Practice Note: Reform of the UK listing regime—fundamentals. This Checklist reflects the regime as it stood before 29 July 2024. The allotment and issue of shares are governed by statutory rules, which vary according to the type of company proposing the allotment (private or public, listed or unlisted) and whether that company has a single class or multiple classes of shares. This checklist sets out the procedure for a listed company to allot shares and to...

Parties Who are the parties involved? In particular, specify: the investor(s) the managers the investee company (newco) Conditions Are there any conditions to completing the investment? What are each party’s obligations to meet those conditions, and by what deadline? Share subscription What will the investee company’s capital structure be? Which class and how many shares will each shareholder (the investor, the managers and any other shareholders) subscribe for? Warranties Who will give the warranties? Is it limited to the managers? Will they be provided jointly, jointly and severally, or on a several basis? How wide will the warranties be? It is usual for investment agreement warranties to centre on the business plan and the managers, as the acquisition agreement generally affords the investor sufficient protection regarding the company. What restrictions will apply to warranty claims? These may include: periods within which claims must be notified caps on each warrantor’s liability and on...

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This Flowchart This flowchart sets out the steps to be followed by any limited company with a share capital—whether public or private—when implementing a reduction of its capital using the court procedure, in accordance with the requirements of the Companies Act 2006. View or print a full-size PDF version:...

Flowchart This diagram explains the necessary steps that are to be taken by a private company limited by shares to implement a reduction of capital via the solvency statement process, in accordance with the Companies Act 2006. View or print a full-size PDF version:...

In this issue: Tax Economic Crime and Corporate Transparency Environmental, social and governance Partnerships Financial services regulation Daily and weekly news alerts Dates for your diary Trackers Useful information Tax HMRC confirms availability of capital-raising exemption from 1.5% stamp duty and SDRT charge. HMRC has updated its Stamp Taxes on Shares Manual (STSM053100) to state that the relief from the 1.5% stamp duty and SDRT for capital-raising covers share issues made for non-cash consideration, with no consideration, or where consideration is paid directly to a different party. See: LNB News 10/04/2024 25. Economic Crime and Corporate Transparency Registrar of Companies and Register of Overseas Entities (Fees) (Amendment) Regulations 2024, SI 2024/454. These Regulations revise the dates on which transitional provisions for changes to Registrar of Companies’ fees apply, correct typographical errors, and remove obsolete references to regulations within the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022, SI 2022/870. They...

In this issue: Corporate governance Q&As New and revised content Key dates for your diary Weekly highlights across other practice areas Corporate governance ISS Governance has released its 2025 Proxy Voting Guidelines for the UK and Ireland, following the publication of its updated benchmark policies on 17 December 2024 (see: Share Incentives weekly highlights—19 December 2024—Corporate governance), and these will apply to shareholder meetings held on or after 1 February 2025. The revised guidelines mirror the changes announced in December, many of which incorporated amendments made by the Investment Association (IA) to its Principles of Remuneration issued in October 2024. Nonetheless, departing from the new IA Principles, ISS Governance considers a 5 per cent dilution limit to remain widely viewed as best practice by many investors—and therefore expects that authorisations to issue new shares under discretionary share schemes should not exceed 5 per cent of the issued ordinary share capital over any rolling ten-year period; where this is breached, an...

HMRC v Vermilion Holdings Ltd [2023] UKSC 37 Background This appeal revolved around the construction of ITEPA 2003, s 471. That provision identifies when an option to obtain securities (including company shares) is given ‘by reason of employment’ and so chargeable to income tax rather than capital gains tax. In 2006, Vermilion Holdings Ltd (Vermilion) granted Quest Advantage Ltd (Quest) an option to acquire shares in Vermilion (the 2006 Option). By late 2006, Vermilion’s performance had deteriorated. As part of a rescue funding arrangement, Vermilion and Quest agreed to vary the 2006 Option. In July 2007, they executed a fresh option agreement (the 2007 Option), under which Quest subscribed for a new class of Vermilion shares and the 2006 Option lapsed. In 2016, Quest assigned the 2007 Option to Mr Noble. Quest sought HMRC’s confirmation that the assignment fell within capital gains tax. HMRC refused, stating it was within income tax because it had been conferred on Mr Noble due to his role as a director of Quest. Quest...

The company establishing a SIP The company setting up a share incentive plan (SIP) does not need to be the same entity whose shares are allocated. However, both: the shares to be granted, and the connection between the SIP-establishing entity and the company whose shares are issued must satisfy the relevant legislative conditions. A SIP can be created either: solely for employees of the company that establishes it; or for those employees and for employees of other companies it controls (a group plan)—see Constituent companies below. In a group where the parent company’s shares are to be awarded, there are two options: the parent company may establish the SIP and extend it to the appropriate subsidiaries; or each subsidiary may establish its own SIP, provided the other statutory requirements concerning the shares under award are met—see Requirements for the shares. The advantage of each subsidiary operating its...

STOP PRESS: A major overhaul of the UK listings regime took effect on 29 July 2024, scrapping both the premium and the standard listing segments and replacing them with a single category for equity shares in commercial companies. That commercial companies category is heavily disclosure-led and sits alongside other listing categories, including the shell companies category, the secondary listing category and the closed ended investment fund category, among others. A new UK Listing Rules sourcebook came into force to deliver these changes, and the previous Listing Rules sourcebook was revoked. For further information and detail, see Practice Note: Reform of the UK listing regime—fundamentals. This Practice Note reflects the regime as it existed prior to 29 July 2024. A limited company may buy back shares in itself, provided conditions set out in the Companies Act 2006 (CA 2006) are satisfied, where applicable. This is known as a share buyback or a purchase of own shares. In addition to CA 2006, there are other rules and guidelines that are relevant...

This Practice Note looks at the principal considerations and steps when establishing a company limited by shares or by guarantee. What is a company? A company is a business vehicle that exists as a separate legal entity, distinct from its members. It is owned by its members and run by its directors. It is governed by the Companies Act 2006 (CA 2006). Companies are widely used; more than 5 million are on the UK public register maintained by Companies House. Under the CA 2006, the following company types are available: Public or private companies limited by shares — see Practice Notes: Private companies limited by shares and Public companies limited by shares Private companies limited by guarantee (primarily used by charities and other not-for-profit organisations — see Practice Note: Companies limited by guarantee) Unlimited companies (comparatively uncommon — see Practice Note: Unlimited companies) For details on other business vehicles, see Practice Note: Forms of business vehicle — fundamentals....

Archived: The ability to offer tax-favoured employee shareholder shares or ESS (commonly used in private equity company arrangements) has now been removed In the Autumn Statement 2016, the government confirmed that certain ESS-related tax reliefs would be withdrawn. The changes remove: The income tax and NICs relief applying to the first £2,000 of employee shareholder shares an individual receives The capital gains tax exemption in respect of all, or a portion, of ESS shares The provision ensuring that, when a company purchases employee shareholder shares from an employee shareholder, the consideration is not treated as a distribution in the shareholder’s hands The withdrawal of these reliefs applies to any employer shareholder agreements entered into on or after 1 December 2016. However, an individual who had obtained independent advice about entering an employer shareholder agreement before 23 November 2016 could still complete the agreement before 1 December 2016 and retain the beneficial income and CGT tax advantages...

[ insert date of letter ] [ insert name of employee ] [ insert address of employee ] Dear [ insert name of employee ] [ insert name of Company ] (the Company ) I am pleased to inform you that the directors of the Company have authorised the award of an enterprise management incentives (EMI) option ( Option ) to you. Enclosed is a copy of the option agreement, which must be signed by you and the Company for the grant of the Option to become effective. The Option gives you the right to purchase [ insert maximum number and class of shares which can be exercised pursuant to the Option agreement ] shares in the Company ( Shares ) at a price of [ insert exercise price of shares ] per Share [ upon an ‘Exit’ event of the Company (which broadly means a takeover of the Company [ , an asset sale or a listing of its shares ] [ , a...

Board minutes—private M&A—share purchase—exchange—buyer Company no: [insert company number]. [insert company name] [Limited OR plc]. Board meeting at [insert place] on [insert date] at [insert time]. [insert name] chaired, confirmed due notice and quorum. Business: to consider and, if appropriate, approve documents and matters for the Company’s proposed purchase of the entire issued share capital of [insert target name] Limited from [insert seller name] [Limited OR PLC], subject to conditions, including any required shareholders’ approval. Directors declared interests per CA 2006 and the Articles; quorum and voting confirmed. Key documents tabled included the draft sale and purchase agreement, any loan note instrument, disclosure letter, stock transfer form(s), voting power of attorney, circular and proxy (if relevant), verification notes and responsibility documents, consents, irrevocable undertakings, announcement and ancillary papers. The board noted conditions precedent and long‑stop; consideration (cash, loan notes and/or consideration shares); warranties/indemnities with time limits, caps and thresholds, subject to disclosures; post‑completion non‑compete/non‑solicit; and key loan note terms (interest, redemption, guarantee/security, convertibility). RESOLVED...

This Q&A assumes that the trust corporation is a company incorporated and registered in the UK under the Companies Act 2006 (CA 2006) CA 2006 sets the framework for how a company formed under that Act allots and issues its shares. The exact process varies by the nature of the company proposing the allotment and factors such as whether it has a single share class or several classes already in issue. For further detail, see the sub-topic: Allotment, issue and pre-emption—overview, with particular reference to the Practice Note: Allotment and issue of shares—introductory points. For guidance on the consequences of breaching the CA 2006 provisions on allotting and issuing shares, consult Practice Note: Allotment and issue of shares—penalties...

This Q&A considers whether This Q&A explores whether, when a company is planning multiple share buybacks, it must put in place distinct share buyback contracts, each addressing a single intended buyback, or whether a single, overarching share buyback contract may instead cover all the intended buybacks, with each completing on a separate date. It proceeds on the basis that the company concerned is a private company limited by shares proposing to buy back shares off-market and that the contemplated buyback is neither for the purposes of, nor pursuant to, an employees’ share scheme within the meaning of section 1166 of the Companies Act 2006 (CA 2006)...