23.This section deals with the initial allotment of shares provided for by the Secretary of State in the order made by him under section 1(3). At present CDC is a statutory corporation without a share capital and without shareholders. This section, together with the Secretary of State’s order under section 1(3), provides the mechanism whereby CDC acquires its initial share capital as a plc and its first shareholders. Subsection (1) makes clear that the effect of the Secretary of State’s order under section 1(3) is to give those persons he nominates as allottees the unconditional right to be included in CDC’s register of members, i.e. to acquire the same rights as if those shares had been allotted in accordance with the provisions of the Companies Act 1985. Paragraph 7 of Part II of Schedule 2 then provides that those persons nominated by the Secretary of State are entered in CDC’s register of members on registration, thereby becoming the first members of CDC plc.
24.Subsection (2) specifies how the shares are to be treated. The intention is that the shares should be paid up from CDC’s existing reserves, rather than by a cash payment. Paragraphs (a) and (b) ensure that the Companies Act 1985 consequences applying to shares which are not fully paid up in cash of an amount equal to the shares’ nominal value do not ensue. Paragraph (a) puts beyond doubt the question whether the shares are fully paid up by reason of the movement of funds mentioned above. If a share is not fully paid up, the member of the company concerned is liable to pay the unpaid portion of the shares if a call is made on those shares (section 1 Companies Act 1985). Further, a public limited company cannot have shares paid up as to less than 25% (section 101(1) Companies Act 1985). Paragraph (b) puts beyond doubt the question whether two provisions of the Companies Act 1985 apply to the payment. These provisions are: (1) section 103 which stipulates that certain conditions must be fulfilled where shares in a public company are paid for in non cash consideration; and (2) section 130 which provides that if shares are issued at a premium, i.e. for more than their nominal (or face) value, a company is obliged to open a share premium account to which special rules apply. Paragraph (c) specifies the tax consequences of this initial issue of shares.
25.Subsection (3) disapplies (in relation to the initial allotment of shares only) section 88 of the Companies Act 1985 which places an obligation on a company to deliver details of an allotment of shares to the registrar in the form prescribed by that section. This is unnecessary in the case of CDC’s initial allotment of shares since details of the allotments are contained in the Secretary of State’s order made under section 1(3)(b) which is delivered to the registrar.
Commentary on Sections Registration under the Companies Act 1985 Section 6: Initial Allotment of Shares