A question for accountants etc about authorised share cap
Discussion
Say a company has authorised share cap 400m shares and has issued 375m
but, in the background, has earn outs on previous acquisitions and potential LTIP obligations to staff that could cost up to 30m shares - i.e. 5m more than the authorised share cap
What are the options open to deal with the 5m shares needed over and above the authorised cap?
but, in the background, has earn outs on previous acquisitions and potential LTIP obligations to staff that could cost up to 30m shares - i.e. 5m more than the authorised share cap
What are the options open to deal with the 5m shares needed over and above the authorised cap?
A company is allowed to increase its authorised share capital if it needs to. To do this, it must change the authorised limit as set out in its Memorandum and Articles of Association.
To make this change, the company has to pass a Special Resolution, which requires the agreement of the majority of the existing shareholders. To do this, an Extraordinary General Meeting usually needs to be called (unless the vote can by taken at the Annual General Meeting).
Interestingly, under the changes brought about by the 2006 Companies Act, the concept of Authorised Share Capital has been abolished for all companies set up since the new act came into force.
Unfortunately, companies set up under the auspices of the Companies Act 1985 or older Companies Acts still have the upper limits of the Authorised Share Capital to connsider and still have to go through the procedures mentioned above if they want to issue shares beyond the current authorised amounts.
To make this change, the company has to pass a Special Resolution, which requires the agreement of the majority of the existing shareholders. To do this, an Extraordinary General Meeting usually needs to be called (unless the vote can by taken at the Annual General Meeting).
Interestingly, under the changes brought about by the 2006 Companies Act, the concept of Authorised Share Capital has been abolished for all companies set up since the new act came into force.
Unfortunately, companies set up under the auspices of the Companies Act 1985 or older Companies Acts still have the upper limits of the Authorised Share Capital to connsider and still have to go through the procedures mentioned above if they want to issue shares beyond the current authorised amounts.
Edited by Eric Mc on Thursday 6th January 10:43
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