A capital statement
Date: 16 October 2009
Authors: Jane Mayfield
Issue: Vol 159, Issue 7389
Categories: Features, Profession
Under the Companies Act 2006 (CA 2006), from 1 October 2009 a statement of capital (either as a stand alone form, eg on a reduction of capital, or incorporated into a larger form such as the annual return) must be filed with the Registrar of Companies at certain times during a company’s life including:
as part of the application to incorporate (CA 2006, s 10);
as part of any annual return made up to any date on or after 1 October 2009 (CA 2006, s 856 (1) and (2));
or
following an allotment of shares or other capital changes, eg the consolidation or sub-division of shares, the re-conversion of stock into shares, the redemption of redeemable shares or a reduction of share capital etc.
A company must also provide a current statement of capital to a member if such member requests one.
Contents of a statement of capital
The statement of capital must state:
the total number of shares of the company;
the aggregate nominal value of those shares;
for each class of shares:
prescribed particulars of the rights attached to the shares, eg voting rights, rights in relation to capital and dividends and who has the right to redeem the shares, ie either the company or the shareholder;
the total number of shares of that class; and
the aggregate nominal value of shares of that class; and
the amount paid up and the amount (if any) unpaid on each share (whether the amount is in respect of the nominal value of the share or by way of premium).
The problem
In September 2009, the Institute of Chartered Secretaries and Administrators (ICSA) identified a problem involving the completion of the statement of capital, in that it may be impossible for a company to attribute a specific amount of share premium to each share in issue either because:
the necessary records do not exist, eg a company may not have, and may not have kept, share premium records for each share since its issue; or
of a previous corporate action, eg a reduction of share capital where there is no requirement to attribute any share premium account used to any specific share or shares.
This problem is more likely to affect older companies or companies with complex share capital histories.
Guidance from ICSA
The Department for Business, Innovation & Skills (BIS) has acknowledged that the problem exists and has indicated that they will, in the long term, review the position with ICSA and other interested parties.
In the interim, BIS suggest that a company “do what they can” to provide numbers in any of its statements of capital by providing a pragmatic allocation of its share premium reserve between shares or classes of shares.
ICSA have issued a briefing the key point of which is that: the statement of capital must be completed in as much detail as possible; and no section of the statement should be left blank. Companies House will automatically reject any form where the field for the amount paid up on each share is blank.
The briefing also provides guidance on how a company can complete the statement of capital:
(i) Companies that have the information can, where possible, group shares (of the same class) by each unique paid up (or unpaid) amount (including share premium) and disclose the aggregate values on a line by line basis. This may result in several entries with different paid up amounts for one class of shares.
(ii) Where it is not possible for a company to disclose the details for all of its shares on the basis above the company may choose to take the aggregate amount of the share premium account at the date the statement of capital is completed and divide such amount by the number of shares in issue.
(iii) If a company has more than one class of shares the share premium account must be allocated between those classes.
(iv) If there is a more appropriate method that a company can use to allocate the share premium account between all its shares/share classes then the company should use such method.
Jane Mayfield is a LexisPSL solicitor
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