Commentary Part 17: a Company’s Share Capital Chapter 4: Public Companies: Allotment Where Issue Not Fully Subscribed Section 583: Meaning of payment in cash
879.This section replaces section 738(2) to (4) of the 1985 Act. It provides a definition of “payment in cash” for the purposes of the Companies Acts and is relevant to a number of provisions (for example section 593 requires public companies to obtain an independent valuation of any non-cash consideration where it allots shares otherwise than for cash).
880.Subsection (3) provides a definition of “cash consideration” which lists the items currently contained in section 738(2) of the 1985 Act. It is generally accepted that certain forms of payment, in addition to those listed in subsection (3), constitute “payment in cash” where shares in a company are deemed to be paid up or allotted for cash, for example an assured payment obligation under the CREST assured payment system, but this matter is not beyond doubt. (An assured payment obligation is the creation of an obligation to make payment to or for the account of the company in accordance with the rules and practices of the operator of a relevant system as defined by regulation 2(1) of the Uncertificated Securities Regulations 2001). The power contained in subsection (4)will enable the Secretary of State to make provision for other forms of payment to be regarded as falling within the definition of “payment in cash”. This will eradicate the uncertainty which currently surrounds certain forms of payment and will also “future proof” the current definition should other settlement systems be developed in the future (or should other settlement systems within the EU be identified).