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Capital and financing

Paying for shares – private companies

Private companies may issue shares for non-cash consideration. The
value of such consideration can be determined by the directors. The
court will interfere with the valuation only if there is fraud or the
consideration is ‘illusory, past or patently inadequate’.

Paying for shares – public companies

There are a number of additional rules relating to the issue of shares in public
companies contained in CA06:

s.584 Subscribers to the memorandum (the first shareholders in the company)
must pay cash for their subscription shares.

s.585 Payment for shares must not be in the form of work or services.

s.586 Shares cannot be allotted until at least one-quarter of their nominal value
and the whole of any premium have been paid up.

s.587 Non-cash consideration must be received within five years.

s.593 Non-cash consideration must be independently valued and reported on
by a person qualified to be the company’s auditor.

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