Issuing shares for consideration other than cash

A company can issue shares for consideration other than cash. Common examples include issuing shares in return for property, assets the company needs or (e.g. in a takeover) shares in another company. CA 2006, sec582(1)provides that shares allotted by a company, and any premium on them, may be paid up in money or money's worth (including goodwill and know-how). If shares are issued for non-cash consideration, this must be stated on the return of allotments sent to Companies House (Form SH01) and details of the consideration must be supplied.

The only restriction on a private company in this connection is that the directors should act in good faith and be satisfied that the assets are worth the value put on them for the purposes of the allotment: Re Wragg Ltd. [1897] 1 Ch 796.

Public companies are subject to much greater restrictions but this area is beyond the scope of this database.

For advice and assistance in issuing shares for non cash consideration please visit the Company Law Solutions web page.

 

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