• Additional Rules For Public Companies

    • 541. Public Companies: Shares Taken By Initial Shareholders

      Shares taken by an initial shareholder of a public company in pursuance of an undertaking of his in the memorandum must be paid up in cash.

    • 542. Public Companies: Must Not Accept Undertaking To Do Work Or Perform Services

      (1) A public company must not accept at any time, in payment up of its shares, an undertaking given by any person that he or another should do work or perform services for the company or any other person.
      (2) If a public company accepts such an undertaking in payment up of its shares, the holder of the shares when they are treated as paid up (in whole or in part) by the undertaking is liable-
      (a) to pay the company in respect of those shares an amount equal to their aggregate issue price, or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking, and
      (b) to pay interest at the appropriate rate on the amount payable under subsection (2)(a).
      (3) The reference in subsection (2) to the holder of shares includes a person who has an unconditional right-
      (a) to be included in the company’s register of members in respect of those shares, or
      (b) to have an instrument of transfer of them executed in his favour.

    • 543. Public Companies: Shares must Be At Least One-Quarter Paid Up

      (1) A public company must not allot a share except as paid up at least as to one-quarter of its issue price.
      (2) This does not apply to shares allotted in pursuance of an employees’ share scheme.
      (3) If a company allots a share in contravention of this section-
      (a) the share is to be treated as if one-quarter of its issue price had been received, and
      (b) the allottee is liable to pay the company the minimum amount which should have been received in respect of the share under subsection (1) (less the value of any consideration actually applied in payment up, to any extent, of the share), with interest at the appropriate rate.
      (4) Subsection (3) does not apply to the allotment of bonus shares, unless the allottee knew or ought to have known the shares were allotted in contravention of this section.

    • 544. Public Companies: Payment By Long-Term Undertaking

      (1) A public company must not allot shares as fully or partly paid up otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be, or may be, performed more than five years after the date of the allotment.
      (2) If a company allots shares in contravention of subsection (1), the allottee is liable to pay the company an amount equal to the aggregate issue price of the shares so allotted (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.
      (3) Where a contract for the allotment of shares does not contravene subsection (1), any variation of the contract that has the effect that the contract would have contravened the subsection, if the terms of the contract as varied had been its original terms, is void.
      This applies also to the variation by a public company of the terms of a contract entered into before the company was re-registered as a public company.
      (4) Where-
      (a) a public company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking that is to be performed within five years of the allotment, and
      (b) the undertaking is not performed within the period allowed by the contract for the allotment of the shares,
      the allottee is liable to pay the company, at the end of the period so allowed, an amount equal to the aggregate issue price of the shares (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.
      (5) References in this section to a contract for the allotment of shares include an ancillary contract relating to payment in respect of them.