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

Orion Ltd is a private company with a single class of shares. Its directors have authority to allot, and the articles do not exclude pre-emption. A shareholder wishes to prevent the directors from offering new cash shares to an outsider without first offering them to members. Which statement best reflects the position?

Pre-emption rights apply unless validly disapplied, so offering cash shares to an outsider first would breach members' rights. Having authority to allot is separate from pre-emption, and it does not remove the duty to offer shares to existing shareholders first.

  1. AMembers' pre-emption rights apply unless validly disapplied, so the outsider offer would breach themCorrect
  2. BDirectors may always offer shares to outsiders first
  3. CPre-emption applies only to preference shares
  4. DPre-emption rights cease once the directors have authority to allot

Explanation

Authority to allot and pre-emption are separate. Even with authority, equity shares issued for cash must first be offered to existing holders unless the right is validly disapplied. The other options misstate this.

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