Regulations have been made to correct errors in two areas of the allotment and pre-emption provisions of the Companies Act 2006 with effect from 1 October 2009.
Rights to acquire securities
Under the Companies Act 1985, pre-emption rights applied on the allotment of securities giving a right to acquire shares (e.g. a convertible bond) but not to the subsequent allotment of shares pursuant to those rights. It was intended that the same rules would apply under the Companies Act 2006 but the drafting of the relevant provisions was defective, such that pre-emption rights would have applied both on the issue of the right to acquire shares and on the subsequent issue of shares. This defect has now been corrected so that pre-emption rights will not apply on the issue of shares pursuant to an existing right.
Employee share schemes
Shares allotted pursuant to an employee share scheme are exempt from the need for allotment authority. A drafting error meant that the exemption in CA 2006 was narrower than under the 1985 Act and would not apply where, for example, employees held shares in their own names pursuant to such a scheme. This defect has also been corrected and the exemption will now apply where employees hold shares themselves pursuant to an employee share scheme.
The Companies Act 2006 (Allotment of Shares and Right of Pre-emption) (Amendment) Regulations 2009 (SI 2009/2561) are available at http://www.opsi.gov.uk/si/si2009/pdf/uksi_20092561_en.pdf and an accompanying explanatory memorandum is available at http://www.opsi.gov.uk/si/si2009/em/uksiem_20092561_en.pdf.
