Regulations on Minimum Subscription for Allotment of Shares at the time of Company Registration UK and Return on Shares Allotment as mentioned in Companies Act


While in the process to open new company UK the members are the essential part of the formation of company. When the minimum required number of members are gathered, the company will get registered by the companies registration office UK. In return for the membership taken by the members, they get shares in that company.

Shares in a Company

A company’s shares may be allotted to different subscribers of the memorandum at the time of company’s business registration UK. After registration of business and formation of the company, shares can be sold or allotted to different people.

Power of Shares

The power of member depends upon the number of shares allotted to that member. The votes are allotted according to the number of shares. These votes then decide about the passage of any resolution. Members are given different authorities that they can implement via the passage of ordinary or special resolution. One of them is the removal of directors. Hence, the more number of shares a member holds the more powerful he is.

Corporate Decision Making

According to subsections 281(3) and 282 of Companies Act 2006, usually the corporate decisions can be made by the passage of an ordinary resolution when the majority is not any less than 50%. For each share the member is allotted one vote as long as the articles do not specify a different allotment scheme, as mentioned in Section 284 of Companies Act 2006.

Some special decisions that may have a risky impact on the members or the company, can be made only via the passage of special resolutions, for which a majority of 75% may be required as specified by Section 283 of Companies Act 2006. These authorities may include amendment of articles of a company as specified in Section 21(1), to prevent the application of pre-emption rights of a member at the time of issuance of shares as mentioned in subsection 569-571, and the share capital’s reduction as stated by Section 641(1) of Companies Act 2006 etc.

Hence it can be seen that important decisions depend upon the members or indirectly have a dependency upon how the shares have been allotted. Companies Act 1985, in its Part 4 states the different rulings on the allotment of the shares. The latest version of Companies Act is the 2006 version. It either replaces or restates most of the provisions of former versions of the Act. However, here the provisions of a former version of the Act are being mentioned. These are as follows:

Companies Act 1985 and the Allotment of Shares

Part 4 of Companies Act 1985 discusses about the authority that may be required for a company to make allotments, the election of private companies for the period of authority, limitations of making offers publically by the private company, and application for allotting shares and debentures etc. in Sections 80, 80A, 81, 82 respectively.

Requirement of Minimum Subscription for the Allotment of Shares

Section 83 of Companies Act 1985 states that:

  • No share capital of the corporate body that has been presented to the public for subscription should be allotted as long as the following does not take place:
  • The subscription of an amount specified in the prospectus, has been done under the directors’ view, as the least amount gained by the issuing the share capital for fulfilling the requirement of matters mentioned in 2nd paragraph of 3rd schedule.
  • And the company has been paid and received the amount that is required for the application for the mentioned amount.
  • In relation to the amount that has to be paid for the application, as stated above, the amount will be considered as paid to the company and received by it as well, if that amount’s cheque has been given to the company in good faith and no reason can be found by the directors to question that the payment will be made or not.
  • The values mentioned in the prospectus, has to be calculated by excluding any amount that has to be paid, otherwise in the form of cash and is recognized as “the minimum subscription”.
  • In case the above stated conditions are not fulfilled within the first 40 days since the day of first issuance of prospectus, the applicants will have to be repaid the amount that they have paid for the shares and no interest will be included in it.
  • In case the money is not returned to the applicants within the 48 days since first issuance of the prospectus, the company’s directors have to severally and collectively make a payment inclusive of interest. The rate should be 5% per annum since the expiry of 48th day. However, an exception is that when the director proves that the payment was delayed not because of his ignorance and misconduct, he will not be liable to pay the amount.
  • If any person applying for shares is required by a condition to remove the restriction of following any provision of this section, the condition will be considered void.
  • This section is inapplicable on any shares’ allotment after initially allotting shares that were publically made available for subscription.

Allotting Shares without Full Subscription

The Section 84 of Companies Act 1985 states that:

  • Any company’s share capital that has been made available for subscription publically, cannot be allotted unless:
  • The capital is fully subscribed.
  • Or it is allowed by the offer that in case there is a partial subscription to the capital, the allotment of the sum of the subscribed capital can be made at any event or when the conditions, as stated in the offer that is being complied with, fulfil.
  • Moreover, when the conditions have been specified, no share capital can be allotted under the above mentioned provision unless the conditions are fulfilled.
  • If no shares are allotted under the first clause of this section and the first 40 days since the issue of the prospectus have passed, then the persons applying for shares will have to be returned their money without any interest included.
  • If 48 days have passed since the first issue of the prospectus and no money is repaid, the directors will be liable and make a repayment with the inclusion of interest following a rate of 5% per annum since the 48th day’s expiry. If a director shows that the default was not because of his negligence, he will not have to pay any amount.
  • This section is applicable on shares offered that can be paid for either completely or some amount can be paid for them otherwise than in the form of cash, in the same manner as it is applicable on the shares that have been made available for subscription. For subscription the context relates to the first clause of this section.
  • As mentioned in the 2nd and 3rd clause of this section, the amount that can be partly or fully paid on the offered shares otherwise than in the form of cash, the repayment of money to the persons applying for shares refers to the following money:
  • Any consideration received should be returned to the applicant. It may include the applicant’s release from any undertaking if it is required by the case.
  • If any consideration cannot be returned practically, an amount equal to the worth that it had at the time of receipt should be paid to the applicant
  • The interests will be referred accordingly.
  • If any term or condition demands to waive off the person applying for shares from the restrictions of this section, it will be considered void.

Allotting Shares Irregularly and its Effect

Section 85 of Companies Act 1985 states that:

  • If any person who has applied for the shares is allotted shares by the company in a way that contravenes either the 83rd Section or the 84th Section, it will be considered as void within one month since the allotment had been made to the applicant and not after one month and the allotment will remain void regardless of the fact that the company is in the process of liquidation.
  • If any allotment contravening the 83rd or 84th Section have been authorised deliberately by the director, he will have to compensate for any loss that has been caused by that contravention to the allotter or the company.
  • No proceedings should begin for the recovery of the loss caused by the contravention unless 2 years have passed since the date of allotment.

Return on Share Allotment

Section 88 of the Companies Act 1985 states that:

  • This section will be found applicable on any establish company or open new company UK that is limited either by shares or by guarantee and also holds a share capital.
  • Within one month since the day of allotment of any share, the company has to submit the following documents to the registrar:
  • The allotments’ return in the form as prescribed, and the information that should be stated in the return should include the nominal amount and number of shares that have been allotted, the addresses and the names of the persons who have been allotted shares and any amount that is left to be paid or has been paid on every share being allotted either by the nominal value or via premium.
  • And when the shares are either fully paid or partly paid.
  • A written contract that constitutes the entitlement of the allotter to the allotment, along with any sale’s agreement or other considerations or services for which the shares were allotted. The contracts should be stamped timely.
  • A return should be submitted that mentions the nominal value and the number of shares that are being allotted, and the expanse up to which the shares will be considered as paid. Also, it should state the consideration for which the allotment is done.
  • If any such contract as mentioned in the previous clause is not prepared in the written form, the company should submit the particulars of the contract that are prescribed, within one month of the allotment, the particulars should have the stamp duty that is same as the written contract would have had on it.
  • Under the context of Stamp Act 1891, the particulars may be termed as instrument and the registrar is allowed to ask for the duty payable on the particulars be adjudicated in accordance with the 12th Section of Stamp Act 1891. He may enforce it as a condition or term for filing the particulars.
  • In case of a default made while following this section, each of the officer who is defaulter, will have to pay a fine. If the contravention is continuous, a fine will have to be paid on daily basis.
  • If there is a default in delivering any required document under this section to the registrar within the first month of the allotment, the company or any officer that has to pay the fine may seek relief from the court by applying for it. The court will then upon its satisfaction that the default in delivery was accidental or happened inadvertently or it is fair to give release from the fine, give an order to extend the time for delivering the documents. The time may be decided by the court.

Shares are bought by different members of a company at the time of business registration UK. These shares then later play a key role in determining the authority of any member in the company. Hence, their correct allotment is equally important, both at the time of company registration UK and after the formation of the company when it starts running.

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