Hypothetical scenario; If non-UK resident would like to form a UK based corporation (Ltd.) with 1 shareholder who is also acting as the company's director and initially issue i.e. 10.000 shares with the nominal value of £0.01, is he required to deposit £100 (on company's bank account) immediately when shares are issued, or can the company issue so-called unpaid shares?
Can unpaid shares status last infinitely long? I assume that the owner is liable to pay the nominal summarized shares value of i.e. £100, in the event that the business runs into financial trouble, or it is dissolved – am I correct?
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If the company's articles permit it, it is possible to do exactly as you say, and the share capital need never be paid.
Any amounts outstanding on the shares would need to be contributed in the event of insolvent liquidation. That is the limit on the shareholders' liability implicit in the term limited [liability] company.
I assume s455 would apply on the unpaid amount together with BIK on such loan if appropriate.
Then you assume incorrectly.
Is this on the basis that the company has not actually asked for the payment and therefore it is not a debt/lent money?
If they had asked for payment and it was unpaid still would this change analysis?
It has been decided that there is no "debt" where shares are issued unpaid, and the unpaid amounts have not been called by the company.
Or the shares could be issued in exchange for cash (which the company could keep in a drawer somewhere!).
RM
The idea is that you issue the shares as fully paid and then show £100 of cash on the balance sheet that doesn't actually exist. Nobody's going to know.
He means that a bank account is not the only place where the proceeds of issuing shares can be paid into. If payment is made in cash it can be kept in a drawer until needed to be deployed to further the success of the company. Some of us in fact would find the use of a drawer for this purpose rather vulgar and amateurish. A more professional repository for cash would be a petty cash tin kept in a locked safe.
Obviously, that's likely to be an imaginary petty cash tin in an imaginary safe, behind the fake Rembrandt.
Incidentally John, I think it should simply be "amateur" (a noun, an adjective and an adverb), rather than "amateurish" (an amateur attempt at making an adverb/adjective out of the noun).
But surely when you have purchased said petty cash tin and had a safe installed you wouldn't have any money left!
There is no requirement for the bank account to be located in the UK, nor for the shares to be denominated in sterling.
If there is to be only one shareholder then remember to satisfy CA2006 s123(1).
If you want to have nil/part-paid shares you will not be able to use the Model Articles of CA2006 as these require all shares to be issued fully paid. You will require Articles to be drawn up by a solicitor or company formation agent.
There is no need to make shares fully paid before selling them. UK company law allows shares to be transferred that are nil/part-paid. This is why there are two types of stock transfer form J10 (for nil/part-paid) and J30 (fully paid).
A snag with nil/part-paid shares is the company neglects to ever issue a call for payment and a future liquidator is then able to claw back dividends paid on those nil/part-paid shares. Declared dividends are payable in proportion to the extent that the shares are paid-up.
If the company runs into trouble and there are unpaid creditors the liquidator can require the shareholders to contribute sufficient funds to make their shares fully paid.
A snag with nil/part-paid shares is the company neglects to ever issue a call for payment and a future liquidator is then able to claw back dividends paid on those nil/part-paid shares.
No they can't. They can demand that the share capital is paid up in order to pay the company's creditors and they can demand repayment of any unlawful dividends received by anybody that knew or should have known that they were unlawful.
Declared dividends are payable in proportion to the extent that the shares are paid-up.
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No, they're not. A company is permitted by CA 2006, s 581 (note the important word MAY), if the articles allow, to pay dividends in proportion to the amounts paid up on the shares. It is not obliged to. This is actually an advantage of partly paid shares.