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Share Premium Account Reduction Accompanying Solvency Statement Template

Solvency Statement – Share Premium Reduction

CO.SPR.05

The Share Premium Account Reduction – Guidance Notes should be read in advance of this document.

This document has been created considering the Companies Act 2006 provisions which allow private companies, as an alternative to passing a special resolution and obtaining court approval, to reduce the amount of their share premium account by special resolution supported by a solvency statement made by the directors. The Companies Act 2006 procedure is the same as that used by private companies to reduce their share capital (s.610(4)).

To reduce the amount of share premium through the solvency statement route, private companies must submit to Companies House the following:

- the special resolution;

- the solvency statement;

- Form SH19 (notwithstanding that the number of issued shares will remain unchanged);

- a further statement of the directors under Section 644(5) of the Companies Act 2006 confirming that the special resolution authorising the reduction of the share premium account was passed within 15 days of the date on which the solvency statement was made; and

- the relevant fee (currently £10 for a standard service or £50 for a same day service, this should however always be checked with Companies House before payment is made).

The solvency statement route provides a simpler and cheaper means for a company to reduce its share premium account. The solvency statement must be made not more than 15 days before the date of the resolution and must be available to the members when they vote on the resolution.

This solvency statement is a statement that each of the directors is of the opinion that the company will be able to meet its obligations and discharge its debts over the next 12 month period, or in the event of its winding up.

In forming those opinions, the directors must consider all of the company's liabilities (including any contingent or prospective liabilities). If any director is unable or unwilling to make a solvency statement, the company will not be able to use the solvency statement route to effect a reduction of the share premium account unless the directors who are unable or unwilling to make the solvency statement resign. It would still be possible to proceed with court approval.

This solvency statement is governed by section 643 Companies Act 2006: it must be in writing, it must indicate that it is a solvency statement for the reduction of the share premium account, it must be signed by each of the directors and must state the date on which it is made and the name of each director of the company.

The directors commit an offence if they make a solvency statement without having reasonable grounds for the opinions expressed in it and the statement is delivered to the registrar.

If it is intended to start the winding up of the company within 12 months of the date of the solvency statement, then the words in the second pair of square brackets in section (b) of the Solvency Statement should be deleted.

If it is not intended to start the winding up of the company within 12 months of the date of the solvency statement, then the words in the first pair of square brackets in section (b) should be deleted.

This document is in open format. The document contains fields which must be completed. It also contains wording options in square brackets which must be adjusted to suit your purposes.

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