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LPC Law Notes Business Law and Practice Notes

Shares Notes

Updated Shares Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

A collection of the best LPC BLP notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

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The following is a more accessible plain text extract of the PDF sample above, taken from our Business Law and Practice Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Company Law – Private Limited Companies

Shares

  • Share Capital

  • Class Rights

  • Variation of class rights

  • Protecting Minority interests

Shares and Share Capital

Shares [general info]:

  • S.540(1) Shares = shares in the company’s share capital

  • S.541: shares are personal property

  • S.542(1): shares in limited company having a share capital must each have fixed nominal value.

  • Model Article 21: all shares must be FULLY paid up (exception for subscriber shares)

Is it legal:

  • S.755: a private company is prohibited from offering to sell shares to the public (for cash or otherwise).

  • S.756: meaning of “public offers” – an offer to any section of the public, however selected.

  • It is not a criminal offence however.

Filing requirements [shareholdings]

  • On Statutory books only (i.e. no requirement to file at CH)

  • However, Annual Returns contain details of membership.

  • S.113: Sets out what information needs to be recorded

  • S.123: applies if company has only ONE member – statement to that effect must be filed.

  • S.126: only record legal title (i.e. no notice of trust)

  • S.114: register to be kept at office (but note S.1136 – can be held elsewhere so long as CH is notified)

  • S.116-119: rights to inspect and require copies of the register – this is LIMITED right however. To an extent the information is private.

Shareholders

CA 2006 – one of the main themes of the 2006 Act = enhance shareholder involvement in controlling company!

  • S.112: shareholders are the ‘members of the company’

  • Shares can be issued (allotment) / transferred / by transmission (i.e. bankruptcy)

Rights of Shareholders

  • Granted by law / by constitution of company

Voting rights Dividends Rights to assets / capital on winding up
1 share = 1 vote (usually)

Payable in interim / final

ONLY out of distributed profit

Model Art 30 – 35

S.847(2): consequence of unlawful distribution

Shareholders are at the bottom of the priority list / set order list (i.e. after creditors etc)

Birch v Cropper: in absence of agreement SH rank equally (consider class rights)

Class rights

  • The rights attached to a particular class of shareholders

  • Set out in the Company Articles

  • S.629(1): “shares are in one class if the rights attached to them are in all respects uniform”.

  • Birch v cropper – If the Articles of Association contain no agreement about class rights, then all classes treated equally.

1

Ordinary: carry voting rights

Good to hold 25+% (1 vote per share) so SH can block a special resolution.
2

Preference: a share conferring preference as to income or capital (or both) over the ordinary share capital of a company.

Priority as to dividends.

  1. Non voting (most usual);or

  2. Voting

  3. non participating

  4. Participating: allows SH to maximize chances of recovering the money it has put in. SH get priority to dividend and capital BUT ALSO “rights of participation”.

  • On payment of dividend: receive fixed preference dividend + chunk of whatever the ordinary SHs, those who are next in line, are entitled to.

  • On winding up: receive arrears of dividend + repayment of capital before ordinary SH receive anything PLUS a slice of the surplus.

  1. Convertible

  2. Cumulative: note that SH has no absolute right to dividend until it is declared. Dividend can’t be declared unless company has sufficient distributable profits.

  3. Redeemable (i.e. repayable) =provides exit route for SH! Company simply takes shares back and repays SH.

  • S.684: a company, if authorised by articles, may issue shares which are redeemable at the option of the company or the SH. (Model Article 22(2)).

Variation of class rights

  • Distinction:

Variation of class rights: No Variation of the class rights:

Variation of the right itself .V. Variation of the enjoyment of the right

e.g. remove right to vote e.g. dividend becomes smaller

White v Bristol Aeroplane Co Ltd.

  • If it amounts to a variation of class rights – follow procedure: S.630- 633 CA 2006

  • Procedure:

630

  • ...

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