Commentary Part 17: a Company’s Share Capital Chapter 2: Allotment of Shares: General Provisions
840.Generally speaking, the directors of a company may currently only allot shares (or grant rights to subscribe for shares or to convert any security into shares) if they are authorised to do so by ordinary resolution of the company’s members or by the articles.
841.Such an authority may be general or specific (that is, it may, for example, be restricted to a specified allotment, an allotment of shares up to a specified value, or an allotment of shares of a particular class). In either case, the authority must state the “maximum amount of relevant securities that may be allotted under it” and the date when the authority will expire, (which must not be more than five years from the date on which the authority is given). The authority may be renewed for further periods not exceeding five years.
842.There is a relaxation for private companies from the requirement to state the date on which the authority will expire and so such companies may, by elective resolution under section 379A of the 1985 Act, give such authority either for an indefinite period or a fixed period of the company’s choice.
843.The Act removes for private companies the requirement for prior authorisation in certain circumstances (described in section 550). It also abolishes the concept of authorised share capital (see note on section 542) and a company’s constitution will therefore no longer have to contain a ceiling on the number of shares that the directors are authorised to allot.