Larchmont Ltd plans to issue new ordinary shares to Ingrid in exchange for a piece of land she owns. An existing shareholder claims the shares must first be offered to existing members. Is he right?

Correct answer: A) No, because statutory pre-emption rights apply only to allotments of equity securities wholly for cash

Explanation

Under s561 Companies Act 2006, a company allotting equity securities must first offer them to existing ordinary shareholders pro rata. However, s565 disapplies this where the shares are to be paid for wholly or partly otherwise than in cash, as here, where the consideration is land. Pre-emption rights apply to private companies as well as public ones.