Board Minutes and Shareholder Resolution for a Share for Share Exchange

Guide to the Jonathan Lea Network’s Board Minutes and Shareholder Resolution to use in a Share for Share Exchange

This guide aims to set out how to correctly fill-out the target company and the holding company board minutes templates as well as the shareholder resolution template to disapply pre-emption rights to be used in a share for share exchange.

These products are intended to be used as templates only and must be adapted to the particular circumstances of your case.

Your input is required at the parts highlighted in yellow and the wording inside the square brackets which we have included explains clearly the information that should be inserted. You are advised to fill in the wording in square brackets in lower case unless directed otherwise. Any figures should be entered in numerical form. The brackets should be removed after the amendments are made. In addition, paragraph numbers may need to be amended.

Please note that these templates are based on:

1. the company’s having no restrictions in place (whether that be through a shareholders agreement or the articles of association);
2. both having in force the model articles of association (without amendment);
3. there being more than one transferor transferring their shares to the holding company;
4. there being only one proposed subsidiary/target company;
5. the company’s only having two directors and no secretary; and
6. there being more than one shareholder.

These templates may require amending where either one of your company’s do not have in force the model articles of association (without amendment) and/or has a shareholders agreement in place.

Paragraph breakdown for the Holding Company’s Board Minutes

Paragraph 1 (Chairperson)

This wording may not always be necessary but is often included for clarity.

Paragraph 3 (Declaration of interest) 

Paragraph 3.1 contains two alternatives in square brackets and you will need to choose one and delete the other depending on the circumstances of the company/transaction.

Paragraph 3.2 should be used where the directors are also the shareholders of the company who will be exchanging their shares for consideration shares in the holding company. This paragraph may also be used where the directors are otherwise aware of their fellow directors conflict of interest.

Paragraph 3.3 is optional depending on the circumstances. Section 184(5) (a) of the CA 2006 provides that a declaration made by written notice under section 184 is deemed to form part of the proceedings at the next meeting of the directors after the notice is given. However, it is good practice to draw the notice to the attention of the directors present at the meeting so as to ensure that they are all aware of the relevant director’s interests.

Therefore, where any of the directors are making a declaration of interest in writing in accordance with section 184 of the CA 2006, paragraph 3.3(a) should be included in the board minutes.  Paragraph 3.3(b) should be included where general notice of a declaration of interest is made by
one of the directors in accordance with section 185 of the CA 2006.

Paragraph 4 (Business of the meeting) 

Please note that the disapplication of statutory pre-emption rights via a shareholder resolution may not strictly be required as the current shareholders of the holding company may be receiving shares allotted to them that are pro rata to their current shareholdings, however it is always best practice to disapply pre-emption rights for specific allotments to prevent any potential, albeit unlikely, dispute in the future.

Paragraph 5 (Documents produced to the meeting)

The aggregate nominal amount to be inserted are the number of shares being allotted multiplied by the nominal amount of those shares.

Paragraph 6 (Consideration of documents) 

You may need to amend the information contained within the square brackets depending on where in the SPA the information relating to the number of consideration shares being allotted to the transferors is located.

Paragraph 7 (Approval and circulation of written resolution)

This paragraph is drafted on the assumption that the written resolution will be proposed and circulated by the directors in accordance with section 291 of the CA 2006. Please note that you must send a copy of the resolution disapplying pre-emption rights to each eligible member/shareholder.

Paragraph 7.2 has been included on the basis that the resolution can be circulated and executed to all of the relevant eligible members at the board meeting (this is often an efficient way of dealing with things where the directors are also the shareholders).

Paragraph 8 (Resolutions)

As this template is based on the company having no secretary, for simplicity we have worded the minutes so that the chairperson would prepare share certificates and deliver them to the transferors as well as update the company’s statutory books. Please note that these share certificates must
be delivered to the transferors within two months of the allotment date.

Paragraph 9 (Filing and administration) 

This paragraph provides the chairperson with a wide authority with which to carry out the necessary filings upon entering into the SPA.

Within 15 days of the passing of the resolution disapplying pre-emption rights, the company will need to post the signed/executed version to Companies House. Although the timelines to file a Form SH01 are longer, with companies having one month with which to submit the filing at
Companies House, for simplicity we have provided the same timeframes for all relevant postcompletion filings for the company to work towards.

Please also note that the company’s statutory books will need to be updated including the company’s register of members.

Execution

Please make sure the chairperson signs and dates the board minutes along the dotted lines at the end.

Paragraph breakdown for the Target Company’s Board Minutes

Paragraph 1 (Chairperson)

This wording may not always be necessary but is often included for clarity.

Paragraph 3 (Declaration of interest)

Paragraph 3.1 contains two alternatives and you will need to choose one and delete the otherdepending on the circumstances of the company/transaction.

Paragraph 3.2 should be used where the directors are also the shareholders of the company who will be exchanging their shares for consideration shares in the holding company. This paragraph may also be used where the directors are otherwise aware of their fellow directors conflict of interest.

Paragraph 3.3 is optional depending on the circumstances. Section 184(5) (a) of the CA 2006 provides that a declaration made by written notice under section 184 is deemed to form part of the proceedings at the next meeting of the directors after the notice is given. However, it is good practice to draw the notice to the attention of the directors present at the meeting so as to ensure that they are all aware of the relevant director’s interests.

Therefore, where any of the directors are making a declaration of interest in writing in accordance with section 184 of the CA 2006, paragraph 3.3(a) should be included in the board minutes. Paragraph 3.3(b) should be included where general notice of a declaration of interest is made by
one of the directors in accordance with section 185 of the CA 2006.

Paragraph 7 (Filing)

This paragraph provides the chairperson with a wide authority with which to carry out the necessary filings upon entering into the SPA.

Within 28 days of completion of the share for share exchange, the company will likely need to file a Form PSC02 at Companies House to notify Companies House that the holding company is now the relevant legal entity that has significant control of the company, as well as filing any other
relevant PSC forms such as a Form PSC02 where an individual transferring their shares will no longer be a person of significant control.

Please also note that the company’s statutory books will need to be updated including the company’s register of members and register of persons with significant control.

Execution

Please make sure the chairperson signs and dates the board minutes along the dotted lines at the
end.

Resolution breakdown

The resolution must state the maximum amount of shares that may be allotted under the authority. It is usual practice to specify the maximum nominal value of the shares to be allotted rather than the total number of shares which, in this case, would be the aggregate nominal amount. The
aggregate nominal amount is calculated by the total number of shares intending to be allotted multiplied by the nominal value of those shares.

The resolution must specify a date on which the authority to allot will expire. This date must not be more than 5 years from the date on which the resolution is passed hence wording is used at 1b) whereby the power shall expire five years from the date of passing this resolution.

Execution

Being a special resolution and before you file the resolution at Companies House, please make sure that you receive the signatures from those shareholders who together hold 75% or more of the company’s share class to which the pre-emption rights relate to.

Notes
The circulation date is the date on which the written resolution is first sent to a member (as per section 290 of the CA 2006). The lapse date will be the end of 28 days beginning with the circulation date unless a different lapse date is specified in the company’s articles (as per section 297 of the
CA 2006).