Jost no Soa der sup- d work. routine support ‘oning pany is at of the more ricts the he 2006 original mitted yn reso= \GM to. ps, this that the ly clear ers hold. I large- inciples context Pre-emptive Rights 845 fa specific project, where the need for non-pre-emptive finance can be demonstrated and justified.” THE TERMS OF ISSUE Asnoted in the previous Chapter,* the rights attached to the shares to Be issued are likely to be set out in the company’s constitution. What Bill not be set out there is the price or other consideration to be asked linexchange for the shares. Here the directors have a free hand, subject othe rules on capital maintenance discussed in Chapter 11.” As far as IMivate companies are concerned, these rules are not demanding, eonsisting mainly of the rules on commissions and requiring shares not Hobe issued at a discount to their nominal value (not to be confused With a discount to the market price, against which the pre-emption Tight, as we have just seen, aims to provide protection). With regard to public companies, the rules, implementing the Second Directive, are More constraining, though they have recently been relaxed somewhat. ALLOTMENT The process by which the company finds someone who is willing to become a shareholder of the company is not something about which ihe law says very much if there is no offer to the public of the com- any’s shares—although, as we shall see in the next Chapter, this is fact now a very heavily regulated area, if there is a public offer. What the Act does assume is that the process of becoming a share- Bolder is a two-step one, involving first a contract of allotment and then registration of the member. As Lord Templeman said in 1995: “The Act of 1985 preserves the distinction in English law between an enforceable contract for the issue of shares (which contract is constituted by an allotment) and the issue of shares which is completed by registration. Allotment confers a right to be registered. Registration confers [legal] title.” ® Principles, para. 17 Sor above, para.23-6 ® Sex above, paras 11-10 2 The genral common la rule on fraud, misrepresentation and negligence wll provide some protection to investors: see paras 25-35, below. % National Westminster Bank, Ple » IRC [1995] 1 A.C. ILL at 126, HL. From this, Lord Templeman reasoned that shares were not “issued” (The Companies Act doesnot define the ter) forthe purposes ofa taxing statute until the applicants for the shares were repstered as members ofthe company.846 Share Issues: General Rules This is consistent with the Act which defines the point at Wk mr this latter requires shares are allotted as the time when a person acquires the UuneOn Jiablestg tional right to be included in the register of members, but does il ny Deognem require actual entry in the register to meet the definition. In the eotment is. void of a private company the processes of agreement and registration! Be pent (even ifthe be achieved with little formality and without the issue of allot prio knowin letters. If someone wants to become a shareholder and the ¢0 Bgeobibition jana wants him to, he will be entered on the register and issued Wil ieee the comin share certificate without more ado. Beenthcse feactan However, the advantage of constituting the agreement to Bech Bpractice, fontm member in a formal letter of allotment is that it facilitates the pra eo tment. will.png ‘we described above in relation to pre-emption rights” of “renoun BeePsditions: fil the entitlement to be registered as a member in favour of someor ieee on. allotment though the technique is not confined to rights issues. Printed 6 Eercauires onlyit back of the letter there will be forms enabling, for the duration! ion to the take-up short specified period, the allottee to renounce the right to be regi public, failure to é asa member and the person to whom they are ultimately renown p not only for confirm that he or she accepts the renunciation and agrees eeeee will arrange entered on the register. Normally the original allottee will not Beenormally thy name of the person to whom they are to be renounced and the which are not b then to produce something similar to a short-term share-wamtal the shares:ha bearer. It is not a negotiable instrument but once the renunek Biof allotment to) siened by the original allottee, the rights can be assigned by m s Chapter, delivery of the allotment letter without a formal transfer. stated period ends, however, it will be necessary for the name ultimate holder to be inserted, a signature obtained, and the allo letter lodged with the company or its Registrars, Implementing Article 28 of the Second Directive, the: down a default rule for public companies that no allotment of shall be made pursuant to an offer to subscribe” for shares (Wh the offer is to the public or not) unless the shares on offer are in full This rule is designed to prevent an investor holding shares in a company which is less fully capitalised fl expected when the offer was accepted. Ifa full take-up of the not achieved within 40 days of making the offer, the money" from the offerees becomes repayable in full, though without in I or ce and must actually be repaid within a further eight days. The s lien 42). This meas the y's estate, But ony subject fo 41803 rd Templeman i of the compa o give the allo that a perso and whose n Stic neh te consist whi arses Gwe ara??? teow) The a ~ Soi 1 Thee thas dos ot py fs or sof shares oe part 251 : 'S7H(1). In fact, however, the rule has a much longer pedigree: CA1948, 847. a Bebo, part ‘Tact cs murs ac whe he conser or the fe Bokeenbeny pk sa