Authorised share capital is the maximum amount of shares which a company can issue. Issued share capital is the number of shares issued (or allotted) directly from the company to shareholders. Allotted shares refer to those that are being issued for the first time rather than being transferred from one party to another. In Ireland, directors need to be given the power to allot shares.

Directors’ Authority To Allot Shares

Directors can be granted the authority to allot shares in two ways. Firstly, the Constitution of the Company can vest authority in directors to allot shares. Secondly, and more commonly, a decision is made at a general meeting. The power to allot shares may be authorised either specifically or pursuant to a general authority. Section 69 (3) of the Companies Act 2014, clarifies that if the authorisation to allot shares stipulates a period during which the allotment may occur, then allotments occurring outside that period are not authorised.

Company Requirements

Unless the company is an LTD type company without an authorised share capital, it must have enough unissued authorised share capital to make up the new allotment. Otherwise, a special resolution of the member’s will be required to increase the authorised share capital or to set up a new share class.

The Constitution and any shareholder agreements should be reviewed for regulations on pre-emption rights, unissued share capital, and other provisions that may affect the allotment of shares. Shares may be allotted for cash consideration, non-cash consideration and may be allotted at a premium.

In terms of pre-emption rights, Section 69 (6) of the Companies Act 2014 obliges companies to give an existing shareholder a right of first refusal in respect of new shares issued for cash consideration. The number of shares an existing shareholder has a right of refusal over is calculated in proportion to his/her existing holding. Section 69 (6) can be quite cumbersome and is often omitted from the Constitution of private companies.

The new shareholders must apply for shares to be allotted to them; the directors must approve the allotment of shares, write up the Register of Allotments and Register of Members and file the form B5 with the Companies Registration Office. New share certificates should be issued to the new shareholders.

Practical Matters

We have seen that directors of Irish companies can be given authority to allot shares by the shareholders, either in the Constitution or in a general meeting. Even where the directors and the shareholders are the same people, the procedures for allotting shares must be followed.
This blog is intended to act as an introduction to Irish company share allotments only, if you have queries or require specific information, please contact us for professional advice.

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