Shareholder Resolutions – Authority to Allot Redeemable Shares

These Shareholder Resolutions – Authority to Allot Redeemable Shares give the directors the authority to allot redeemable shares as well as dis-apply any pre-emption rights in conjunction with the allotment.

Redeemable shares and statutory authority to issue (s.684)

Redeemable shares constitute a separate class of share capital.

The authority for a limited company to issue redeemable shares is set out in section 684 Companies Act 2006.

Checks before issuing redeemable shares

• Redeemable shares can only be issued by a company if it has at least one non-redeemable share in issue, this will usually be an ordinary share.
• In addition shares which are to be redeemed must be issued as redeemable shares at the outset.
• You should check a company’s articles of association to make sure that the issue of redeemable shares is not prohibited or limited.

Authority to allot and pre-emption rights (s.551)

Authority to allot redeemable shares can be given either by ordinary resolution or by the articles.

If authority is sought by way of ordinary resolution, it must be carried out in accordance with section 551 Companies Act 2006.

Pre-emption rights will also need to be considered before allotment of redeemable shares.

What these resolutions include

• an ordinary resolution to approve the allotment of redeemable shares;
• a special resolution to dis-apply pre-emption rights; and
• the ability to include the terms on which the redeemable shares will be issued (in the ordinary resolution).

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