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ACCA Applied Skills · Corporate and Business Law (Global) · Share capital

Delta Ltd's directors wish to allot shares for cash to a new investor without first offering them to existing shareholders. Assuming the law permits disapplication and the articles do not exclude it, what is the usual route?

Shareholders disapply pre-emption rights by passing a special resolution. Directors cannot do it by themselves because the right protects shareholders against dilution through the directors' own allotment powers, and no regulator approval is ordinarily needed.

  1. AThe directors may disapply by board resolution alone, since they manage the company
  2. BThe shareholders pass a special resolution to disapply pre-emption rights for the allotmentCorrect
  3. CThe company must obtain the consent of the registrar or regulator

Explanation

Because pre-emption rights belong to shareholders, only they can waive them, typically by special resolution (75% majority). Directors cannot remove a protection designed to guard against their own power to allot. A regulator's consent is not the usual mechanism.

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