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Ash, Solicitor
Category: Law
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Experience:  Solicitor with 5+ years experience
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I have a UK registered company and wish to dilute certain shareholders

Customer Question

I have a UK registered company and wish to dilute certain shareholders as I wish to rewrd management with more shares. Who can this be done
Submitted: 4 years ago.
Category: Law
Expert:  Ash replied 4 years ago.

Alex Watts : Hello my name is Alex and I will help with this.
Alex Watts : Do the Articles and Memorandum
Alex Watts : allw
JACUSTOMER-hkcgt4h7- : Yes
JACUSTOMER-hkcgt4h7- : I think so
Alex Watts :

Can you check please?

JACUSTOMER-hkcgt4h7- : Ok will do and will get back tomorrow
Alex Watts :


JACUSTOMER-hkcgt4h7- :

Hi Alex,

JACUSTOMER-hkcgt4h7- :

below is an excert of our M and A's. sorry for the delay. I await your advises soonest.

JACUSTOMER-hkcgt4h7- :



All shares to be fully paid up

21.—(1) No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue.

(2) This does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum.

Powers to issue different classes of share

22.—(1) Subject to the articles, but without prejudice to the rights attached to any existing share, the company may issue shares with such rights or restrictions as may be determined by ordinary resolution.

(2) The company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares.

Company not bound by less than absolute interests

23. Except as required by law, no person is to be recognised by the company as holding any share upon any trust, and except as otherwise required by law or the articles, the company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it.

Share certificates

24.—(1) The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that shareholder holds.

(2) Every certificate must specify—

(a) in respect of how many shares, of what class, it is issued;

(b) the nominal value of those shares;

(c) that the shares are fully paid; and

(d) any distinguishing numbers assigned to them.

(3) No certificate may be issued in respect of shares of more than one class.

(4) If more than one person holds a share, only one certificate may be issued in respect of it.

(5) Certificates must—

(a) have affixed to them the company’s common seal, or

(b) be otherwise executed in accordance with the Companies Acts.

Replacement share certificates

25.—(1) If a certificate issued in respect of a shareholder’s shares is—

(a) damaged or defaced, or

(b) said to be lost, stolen or destroyed, that shareholder is entitled to be issued with a replacement certificate in respect of the same shares.

(2) A shareholder exercising the right to be issued with such a replacement certificate—

(a) may at the same time exercise the right to be issued with a single certificate or separate certificates;

(b) must return the certificate which is to be replaced to the company if it is damaged or defaced; and

(c) must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.

Share transfers

26.—(1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor.

(2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share.

(3) The company may retain any instrument of transfer which is registered.

(4) The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it.

(5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Transmission of shares

27.—(1) If title to a share passes to a transmittee, the company may only recognise the transmittee as having any title to that share.

(2) A transmittee who produces such evidence of entitlement to shares as the directors may properly require—

(a) may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person, and

(b) subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had.

(3) But transmittees do not have the right to attend or vote at a general meeting, or agree to a proposed written resolution, in respect of shares to which they are entitled, by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares.

Exercise of transmittees’ rights

28.—(1) Transmittees who wish to become the holders of shares to which they have become entitled must notify the company in writing of that wish.

(2) If the transmittee wishes to have a share transferred to another person, the transmittee must execute an instrument of transfer in respect of it.

(3) Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.

Transmittees bound by prior notices

29. If a notice is given to a shareholder in respect of shares and a transmittee is entitled to those

shares, the transmittee is bound by the notice if it was given to the shareholder before the

transmittee’s name has been entered in the register of members.

Alex Watts :

Yes you can issue new shares but they must be available to everyone. If others do not want to invest then you can. But you can not just issue shares to yourself, you have to offer them to everyone at the same price. Then if you want to buy more shares you have to buy for that price. But yes you can.

Alex Watts :

Also you can issue shares to management as a reward.

Alex Watts :

If this answers your question, please take a moment before you leave and rate my service, which I hope has been excellent, it only takes a second and is an important part of the process. Otherwise if you need more information or help then please click reply. Alex

JACUSTOMER-hkcgt4h7- : Ok Alex, in issuing shares to management can I dilute some not all of the other shareholders , sam
JACUSTOMER-hkcgt4h7- : Ok Alex , in issuing shares to management can I dilute certain existing shareholders.
Alex Watts :

No, you have to dilute everyone shares unless there is a clause in the articles that says you can be specific. Alex

JACUSTOMER-hkcgt4h7- :

A creditor is threatening a winding up petition against the company. The creditor represents a tiny percentage of the liabs. This creditor has been been spiking potential clients and suppliers to the business , this is detrimental to the companies performance as well as the other creditors.

In these circumstances what action should we take.

Many thanks,