Companies Act 1985

103 Non-cash consideration to be valued before allotment. E+W+S

(1) A public company shall not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash unless—

(a) the consideration for the allotment has been independently valued under section 108; and

(b) a report with respect to its value has been made to the company by a person appointed by the company (in accordance with that section) during the 6 months immediately preceding the allotment of the shares; and

(c) a copy of the report has been sent to the proposed allottee.

(2) Where an amount standing to the credit of any of a company’s reserve accounts, or of its profit and loss account, is applied in paying up (to any extent) any shares allotted to members of the company or any premiums on shares so allotted, the amount applied does not count as consideration for the allotment, and accordingly subsection (1) does not apply in that case.

(3) Subsection (1) does not apply to the allotment of shares by a company in connection with an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company (or the cancellation) of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company).

(4) But subsection (3) does not exclude the application of subsection (1) unless under the arrangement it is open to all the holders of the shares in the other company in question [F1 (“the relevant company”)] (or, where the arrangement applies only to shares of a particular class, to all the holders of shares in [F2 the relevant company], being holders of shares of that class) to take part in the arrangement.[F3 In determining whether that is the case, the following shall be disregarded—

(a) shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement (“the allotting company”);

(b) shares held by or by a nominee of a company which is—

(i) the holding company, or a subsidiary, of the allotting company, or

(ii) a subsidiary of that holding company; and

(c) shares held as treasury shares by the relevant company.]

(5) Subsection (1) also does not apply to the allotment of shares by a company in connection with its proposed merger with another company; that is, where one of the companies proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities of that one to shareholders of the other, with or without any cash payment to shareholders.

(6) If a company allots shares in contravention of subsection (1) and either—

(a) the allottee has not received the valuer’s report required by that subsection to be sent to him; or

(b) there has been some other contravention of this section or section 108 which the allottee knew or ought to have known amounted to a contravention,

the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.

(7) In this section—

(a) “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with [F4 section 899 of the Companies Act 2006] (company compromise with creditors and members) or [F5 section 110 of the Insolvency Act] (liquidator in winding up accepting shares as consideration for sale of company property)), and

(b) any reference to a company, except where it is or is to be construed as a reference to a public company, includes any body corporate F6 . . .

Textual Amendments

F1 Words in s. 103(4) inserted (1.12.2003) by The Companies (Acquisition of Own Shares)(Treasury Shares) Regulations 2003 (S.I. 2003/1116), reg. 4, {Sch. para. 7(a)(i)}

F2 Words in s. 103(4) substituted (1.12.2003) by The Companies (Acquisition of Own Shares)(Treasury Shares) Regulations 2003 (S.I. 2003/1116), reg. 4, {Sch. para.7(a)(ii)}

F3 Words in s. 103(4) substituted (1.12.2003) by The Companies (Acquisition of Own Shares)(Treasury Shares) Regulations 2003 (S.I. 2003/1116), reg. 4, {Sch. para. 7(b)}

F4 Words in s. 103(7)(a) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments etc) Order 2008 (S.I. 2009/948), arts. 2(2), 3(1), Sch. 1 para. 63 (with arts. 6, 11, 12)

F5 Words substituted (E.W.S.) by Insolvency Act 1986 (c. 45, SIF 66), s. 439(1), Sch. 13 Pt. I

F6 Words in s. 103(7)(b) repealed (22.7.2004) by Statute Law (Repeals) Act 2004 (c. 14), s. 1(1), {Sch. 1 Pt. 17 Group 5}

Modifications etc. (not altering text)

C1 Ss. 99, 101–103 extended by Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), s. 9(1)

C2 Ss. 99, 101–103 restricted by Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), s. 9(2)