Share Premium Account Reduction Templates

Overview

Share premium is the difference between the nominal value of shares and the price paid for them. In accounting terms, this amount must be credited to a separate share premium account. Although share premium is not directly distributable, there may be circumstances where a private company may reduce the share premium account to increase its reserves, so enabling a dividend to be paid while not affecting the number of shares in issue. However, note that capital maintenance rules are very strict under the Companies Act 2006, therefore, the templates below concern the process of reducing a company's share premium account ONLY. No opinion is given as to their subsequent use as distributable reserves for which specialist accounting, legal and tax advice MUST be sought.

Reduction in Share Premium Account

Section 610 of the Companies Act 2006 provides that the provisions of the Companies Act 2006 relating to the reduction of a company's share capital apply as if the share premium account were part of its paid up share capital. Consequently, the process for reducing a company's share premium account is exactly the same as reducing its share capital. This means that the requirements in section 644 of the Companies Act 2006 relating to the compliance statement and statement of capital (which is made on Form SH19) apply to a reduction of the share premium account. 

As with a share capital reduction, the solvency statement route offers a simpler and cheaper route for a private company to reduce its share premium account rather than applying to court. A private limited company (not a public company) can reduce its share premium account by passing a special resolution supported by a solvency statement made by the directors.

This section brings together the core templates for a share premium account reduction using the solvency statement route, including board approvals, shareholder approvals, the solvency and section 644 statements, and the Companies House filing.

When to Use These Templates

Best for:

• Private limited companies wishing to reduce or cancel share premium using the solvency statement route
• Restructuring the company’s equity and balance sheet where appropriate professional advice supports that approach
• Aligning the share premium position with the company’s current capital and funding structure

Each template in this section is drafted to be compliant with the relevant Companies Act 2006 requirements for this procedure.

Note: these templates deal with the legal process for reducing or cancelling share premium only. They cover neither their potential subsequent treatment as distributable reserves, nor their accounting treatment. Specialist accounting and tax advice MUST be taken where needed.

What this section covers

• Guidance on the legal procedure for reducing a share premium account
• Board resolutions to approve the use of the solvency statement route and recommend the reduction
• A written resolution and general meeting minutes to pass the special resolution
• The directors’ solvency statement and section 644 statement
• The Companies House filing (form SH19) and a covering letter

🔀 Document Toolkit: Typical Sequence (may vary)

Step 1 - Understand the procedure and conditions

• Start with Share Premium Account Reduction – Guidance Notes.
• These explain how the solvency statement route works for reducing share premium, when it can be used and the key steps and filings involved.

Step 2 - Board approval and directors’ statements

• Use Board Resolutions – Share Premium Reduction to record the directors’ decision to recommend and implement a share premium reduction using the solvency statement route.
• Prepare and approve the directors’ statements using:
• Solvency Statement – Share Premium Reduction; and
• Section 644 Statement by Directors – Share Premium Account Reduction.

Step 3 - Shareholder approval

Obtain member approval for the reduction by passing a special resolution using either:

• Written Resolution – Share Premium Reduction (for a written resolution procedure); or
• General Meeting Minutes – Share Premium Reduction (where the resolution is passed at a general meeting).

Step 4 - Filing at Companies House

File the required documents at Companies House, typically including:

• Companies House Form SH19;
• Section 644 Statement by Directors – Share Premium Account Reduction; and
• Solvency Statement – Share Premium Reduction, as required.
• Use Letter to Companies House – Share Premium Account Reduction as the covering letter for the filing.

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