Commentary Part 17: a Company’s Share Capital Chapter 8: Alteration of Share Capital Section 620: Re-conversion of stock into shares
899.Stock cannot be issued directly by a company but arises from a conversion of fully paid up shares into stock under section 121(2)(c) of the 1985 Act. This ability to convert shares into stock has not been retained. A company that currently has stock may, however, wish to re-convert this stock back into fully paid shares, and this is permitted by the following section.
900.Section 620 replaces section 121(2)(c) of the 1985 Act. It retains the ability to re-convert stock back into fully paid shares but removes the requirement for prior authorisation in the articles (currently a company may only re-convert stock back into shares if provision for this is made in its articles).
901.A re-conversion of stock into shares will require an ordinary resolution of the company’s members. Such a resolution may give the directors power to convert stock into fully paid shares on more than one occasion; at a specified time; or only if certain conditions are met (see subsection (3)). The flexibility to pass a conditional resolution (that is, a resolution that will only take effect if certain conditions are met) is necessary as a re-conversion of stock into shares may form part of a wider re-organisation of a company’s share capital.