Chapter 6Companiesstatutory declaration, taking into account any distribu-
tions (e.g. dividends) which may have been made be-
tween the accounts and the statutory declaration.
A report by the auditors must be attached to the stat-
utory declaration stating that the PCP has been properly
calculated and that the directors’ opinion as to solvency
is reasonable in terms of the facts of which the auditors
are aware.
A special (or written) resolution of the members is
also required and the statutory declaration and auditors’
report must be available for inspection at the meeting.
The position regarding voting and circularisation of
documents in the case of a unanimous written resolu-
tion has already been described. In spite of the audit
exemption provisions, the requirement for an auditors’
report when purchasing shares from capital is retained.
This means that very small companies can exempt
themselves from the requirement to appoint an auditor
unless and until it becomes necessary for some purpose
other than the audit of annual financial statements. If it
becomes necessary, an auditor will have to be appointed
unless the relevant regulations say otherwise. This is
indicated as required throughout this chapter.
The resolution must be passed within one week of the
date of the statutory declaration. It is invalid if passed
with the votes of the shares of the person whose shares
are being bought. Such persons may vote other shares
on a poll but not on a show of hands. (The position
in regard to written resolutions has already been
explained.)
The capital payment must be made not earlier than
five weeks (to allow for objections) and not later than
seven weeks from the resolution. If an indefinite period
was allowed for the capital payment the statutory declara-
tion would be getting outdated, so seven weeks is the
maximum time.
Publicity must be given in order to protect creditors.
A notice in writing may be given to all the company’s
creditors stating the fact and the date of the special
(or written) resolution, the amount of the PCP, that the
statutory declaration and auditors’ report can be in-
spected at the registered office and that any creditor
may seek to restrain the payment by applying to the
court to cancel the special resolution during the period
of five weeks from the special resolution. The statutory
declaration and auditors’ report must be kept at the
registered office for inspection by any member or cred-
itor until the end of the fifth week following the special
resolution.
Alternatively, an advertisement may be put in The
London Gazette and one national newspaper giving the
same information as listed above.
At the date of the notice or advertisement copies of
the statutory declaration and auditors’ report must have
been sent to the Registrar so that they are available for
inspection by a company search.
Dissentient shareholders or creditors may also apply
to the court, within five weeks of the resolution, to
cancel it, for example if available profits have not been
utilised. The court may order the purchase of the dis-
sentient shares or the payment of creditors. This provi-
sion is obviously inapplicable, so far as members are
concerned, where there is a written resolution.
If the company goes into insolvent winding-up within
12 months of a payment from capital, then the seller of
the shares and the directors giving the statutory declara-
tion are each liable to repay the money in full with a
right of contribution against the others involved.Transfer of purchased shares
A transfer form is not required on completion of the
purchase. The seller merely hands over his share cer-
tificate to the company for cancellation.
Where shares are to be held in treasury, they are
transferred to the company so that it may hold them in
treasury.Loan capital
Trading companies have an implied power to borrow
and charge their assets as security for a loan, i.e. to give
the lender a right to appoint, for example, a receiver
to sell the company’s assets in order to repay the loan
if the company does not otherwise repay it, or, where
practicable, to run the business for a while in order to
sell it as a going concern (see below).
Even so, the memorandum usually gives an express
power to borrow and details of the extent to which the
company can charge its assets as security.
Section 761 puts restrictions on borrowing by newly
formed PLCs. Such companies cannot commence business
or borrow until they have received a certificate allowing
them to do this from the Registrar of Companies.
The certificate will not be issued until at least £50,000-
worth of the company’s capital has been allotted (sold)
and at least one-quarter of the nominal value of each
share and the whole of any premium has been received
by the company.165