1948article company & 1985CA

1948article company & 1985CA

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A company incorporated under the 48 Act appears to have a wide article that allows the directors to allot and otherwise dispose shares as they think fit (including any new shares created on an increase in capital). No mention of any pre-emption provisions within articles.

Companies Act 1985 section 80 permits authority to allot shares for a 5 year period apart from subscribers shares and under an employers share scheme.

Does the CA85 section override the clause in the 48CA company articles so that an authority to allot shares would need to be drafted to allow an allotment following an increase in the authorised share capital.

Also as the articles are silent as regards pre-emption is shareholder approval required re waiver of pre-emption rights as required by section 89(1).

Thanks
Paul

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By steveoneill
06th Dec 2006 14:57

Companies Act 2006
We are all going to face these problems very shortly and so often when the effects of the new Act come into play.

In the 2006 Act the authorised share capital for all new incorporations is abolished, which means the directors have the right to allot as many shares as they like, when they like, in the share classes that are in the Articles. The only way to stop them is to put a clause in the Artices to restrict them as to the number and circumstance. This is called simplification!

We have not had all the transition rules yet for existing companies under the 48, 85,89 and 02 Acts, but it seems to be the same as in 1985 where they are respecting the Articles as 'contracts' entered into by the company, therefore those articles will stand and the new provisions of the 2006 will not apply until the company adopts new articles under the 2006 act. Therefore in your case the Articles of 1948 stand!

The down side of this is that no existing company can enjoy what is supposed to be the savings and benefits for small companies until they adopt and file a new set of Articles under the 2006 Act (and of course that will cost!). E.g. abolition of authorised share capital, no company secretary, no AGM or laying of accounts etc.

So we are all have to get used to this type of scenario for a number of years of trying to advise companies, some of which will be operating under different legislation.

Steve O'Neill
Business Tax Centre
Company Registration agents

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By User deleted
06th Dec 2006 17:51

does s675 CA85 come into play?
s675 refers to companies formed under former CAs - in my case 1948CA.

675(1) says that the application of CA85 to existing companies is...as if the company had been formed and registered under Part 1 of this Act (i.e 1985CA).

so does my company apply CA85 except where the articles explictly state otherwise - (not in my case but for instance if articles stated audit required then audit could only be avoided by amending articles).

In my case there is just a general clause for the directors to dispose of shares on such terms as they think fit - no authority to allot shares within a specified period eg 5yrs from incorporation and totally silent over preemption. As articles are silent on these issues does 675(1) mean that the relevant statutory provisions of CA85 apply as they are not explicitly overriden in the articles (obviously at time of drafting the articles future legislation not foreseen).

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