Special Resolution Clause – disapply pre-emption rights

What is a special resolution clause to disapply pre-emption rights and when should you use it?

Under Section 69(6) of the Companies Act 2014, existing shareholders have the right to be offered shares pro rata to their existing shareholdings before any new shares are allotted.

This is called a pre-emption right.

The directors of a company may be given the power to allot shares as if the pre-emption rights did not apply by the shareholders passing a special resolution in a general meeting or by written resolution.

A copy of the special resolution is required under section 198 Companies Act 2014 to be submitted to the CRO within 15 days of the passing.

Form G1 should be used for his purpose.

For a list of resolutions that must be submitted to the CRO check here

This Shareholders’ Special Resolution – Disapplication of Section 69(6) Pre-emption On Share Issue contains the wording required to give directors a general power to allot shares as if the pre-emption rights did not apply.

You can also restrict the directors power to a specific allotment e.g. 3,000 shares to be issued to Joe Bloggs.

It is to be used in conjunction with Shareholders’ Ordinary Resolution – Authority to Allot New Shares and it will expire when that general authority to allot expires.

However, the power to disapply pre-emption rights can be renewed at the same time the authority to allot shares is renewed.

Shareholders’ Special Resolutions require the votes of 75% of members present in person or by proxy, who are entitled to vote and do vote at the meeting.

The meeting at which the resolution is proposed must have had at least 21 days notice, unless a shorter period was agreed by all the members entitled to vote.

Alternatively, the written resolution procedure can be used, and the resolution will be passed if approved by shareholders representing 75% of the total voting rights of the shareholders entitled to vote on the written resolution on the day it is circulated.

This document sets out the required wording of the special resolution.

If it is to be passed at a general meeting, it should be used in conjunction with Shareholders’ resolutions – General Meeting Format.

If it is to be passed as a written resolution, it should be used in conjunction with Shareholders’ Written Special Resolution.