ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Orion Ltd issues shares to Pavel as consideration for him transferring land to the company, not for cash. Orion's shareholders have not disapplied pre-emption rights. Which statement is correct under the usual rule?
Pre-emption rights do not apply because the shares are issued for land rather than cash. The rule protects existing shareholders only on cash allotments of equity shares, so Orion may allot to Pavel without first offering the shares to its members.
- APre-emption rights apply, because every allotment of equity shares must be offered to existing holders
- BPre-emption rights do not apply, because they relate to allotments for cash, not for non-cash considerationCorrect
- CPre-emption rights apply only if Pavel is already a shareholder
Explanation
The statutory-style pre-emption right covers equity shares allotted for cash. An allotment for non-cash consideration such as land falls outside it, so existing holders have no right to be offered those shares. Pavel's current status is irrelevant.
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