Reduction or Cancellation (section 610(4) Companies Act 2006)

The share premium is the difference between the nominal value of shares issued and the subscription price paid for them. Whilst the share premium account is not distributable, it can be reduced or cancelled in the same way as share capital.

This month a package of new templates has been produced, to enable a private company to reduce or cancel its share premium account by special resolution supported by a solvency statement. This route is only available to private companies. Companies not using the solvency statement route will need court approval.

The package of new templates includes:

• A guidance note;
• Board resolutions;
• Written resolution to pass the relevant special resolution;
• General meeting minutes to record the passing of the special resolution;
• Solvency statement;
• S.644 directors’ statement of compliance;
• Cover letter to Companies House; and
• Form SH19.

These templates only relate to private limited companies, and they relate only to the process to be followed. They do not consider any other aspects of the share premium account and the relative merits of reducing or cancelling it, or the accounting and tax implications. Specialist accounting/tax advice should be sought in relation to this.