ACCA LW · Chapter 9 · Question 4 of 11
Under s561 Companies Act 2006, when a company proposes to allot new ordinary shares for cash, what right do existing ordinary shareholders normally have?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) A right of pre-emption, meaning the shares must first be offered to them in proportion to their existing holdings
Explanation
Pre-emption rights require new equity securities allotted for cash to be offered first to existing ordinary shareholders pro rata, protecting them against dilution. The rights do not apply to allotments for non-cash consideration and may be disapplied, for example by special resolution. Shares can never be allotted at a discount to nominal value (s580).
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