113.—(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 Article 118; 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 Article) 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 paragraph (1) does not apply in that case.
(3) Paragraph (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 paragraph (3) does not exclude the application of paragraph (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[F1 the relevant company], being holders of shares of that class) to take part in the arrangement.
[F1In determining whether that is the case, the following shall be disregarded—
shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement ( “the allotting company”);
shares held by or by a nominee of a company which is—
the holding company or a subsidiary of the allotting company, or
a subsidiary of that holding company; and
shares held as treasury shares by the relevant company.]
(5) Paragraph (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 in that one to shareholders of the other, with or without any cash payment to those shareholders.
(6) If a company allots shares in contravention of paragraph (1) and either—
(a)the allottee has not received the valuer's report required by that paragraph to be sent to him; or
(b)there has been some other contravention of this Article or Article 118 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 Article—
(a)“arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with Article 418 (company compromise with creditors and members) or[F2 Article 96 of the Insolvency Order] (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 and any body to which letters patent have been issued under the [1837 c.73] Chartered Companies Act 1837.
F1SR 2004/275
F3Order repealed (prosp.) by Companies Act 2006 (c. 46), ss. 1284(2), 1295, 1300(2), Sch. 16 and the repeal being partly in force, as to which see individual Articles (with savings (with adaptations) by Companies Act 2006 (Commencement No. 6, Saving and Commencement Nos. 3 and 5 (Amendment)) Order 2008 (S.I. 2008/674), arts. 2(3), {4}, Sch. 2) and subject to amendments (6.4.2008) by Companies Act 2006 (Consequential Amendments etc) Order 2008 (S.I. 2008/948), arts. 2(2), 3(1)(b)(2), Sch. 1 paras. 135, 147, 148 {Sch. 2 Note 1} (with arts. 6, 11, 12) and subject to amendments (6.4.2008) by S.R. 2008/133, {regs. 2, 3}