ExpertMedium2 marksMultiple Choice
ACCA · Question 14 · Capital and the financing of companies
Section A
In a private limited company with only one class of shares, the directors wish to allot new shares to raise capital. There are no restrictions in the company's articles of association. Do the directors need the prior authorization of the shareholders to allot these shares?
Section A
In a private limited company with only one class of shares, the directors wish to allot new shares to raise capital. There are no restrictions in the company's articles of association. Do the directors need the prior authorization of the shareholders to allot these shares?
Answer options:
A.
Yes, they must obtain an ordinary resolution from the shareholders.
B.
Yes, they must obtain a special resolution from the shareholders.
C.
No, directors of a private company with one class of shares have automatic authority to allot shares unless the articles state otherwise.
D.
No, directors always have unlimited power to allot shares in any company.
How to approach this question
Recall the specific exemption in the Companies Act 2006 for private companies with a single class of shares regarding the allotment of shares.
Full Answer
C.No, directors of a private company with one class of shares have automatic authority to allot shares unless the articles state otherwise.✓ Correct
Section 550 of the Companies Act 2006 provides a specific relaxation for private companies with only one class of shares. The directors can allot shares of that same class without needing authorization from the shareholders, provided the articles of association do not restrict this power.
Common mistakes
Confusing the rules for private companies with one class of shares with the rules for public companies (which always need shareholder authority to allot).
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