Guidance Notes - how & why redesignate shares?

Guidance Notes: Reclassification of shares and class consents

CO.RECLASS.01
A company may wish to convert or reclassify its shares following a sale or reorganisation and wish to grant differing share rights to the holders of the newly reclassified shares. This Guidance Note is designed to take the reader through the processes involved in reclassifying its shares from one class into another, as well as varying the class rights attached to those shares.

When and how a company may want or need to reclassify its shares, for example from ordinary shares into A & B shares, as well as grant those shares new rights, is a procedurally complicated area of the law. This guidance note uses a practical worked example of how and when a SME company might wish to reclassify its shares, to guide the reader through the legal requirements involved as well as the procedural mechanics to be considered. This includes the amendments that will be required to be made to the company’s articles of association, whether the reclassification amounts to an alteration of the company’s share capital under section 617 of the Companies Act 2006 as well as what filings will need to be made at Companies House and whether a statement of capital is required following the re-classification.

This guidance note takes the reader through the Simply Docs template reclassification package, including board minutes, shareholder resolutions, articles of association, written class consents and Companies House forms as well as commenting on the internal company books that will require updating.

Note that this guidance note does not consider the potential tax implications which may be relevant and independent tax advice should be sought if necessary. It is also strongly recommended that as this is a complex area of the law, independent legal advice more generally is considered.

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