Share Capital
The statement of capital requirement in the Companies Act 2006 is intended to provide a snapshot of a company’s capital structure. A statement of capital is required each year in the annual return, and whenever a company changes its capital.
We are aware that one of the details required to be included in the statement of capital can cause problems for certain companies that have a complex history of allotting shares and managing their capital structure. In particular, we understand that in certain circumstances it may not be possible or meaningful for a company to identify the amount of premium paid up on each share.
We are working with the Institute of Chartered Secretaries and Administrators (ICSA), who first drew this to our attention, and with other stakeholders to seek a resolution of this problem.
In the meantime, we hope that companies with complex capital histories will do what they can to provide numbers in their statements of capital that provide a pragmatic allocation of their share premium reserve between shares or classes of shares. ICSA has published guidance on this (read the guidance (external link)), explaining the problem and outlining a recommended approach.
When completing a statement of capital, in the annual return form or elsewhere, it is important that a company does not leave blank the field for the amount paid up on each share, or the form will be rejected by Companies House’s system.
The solvency statement route provides a simpler and cheaper means for a private company to reduce its share capital.
In making the solvency statement company directors have to form the opinion that at the date of the statement there are no grounds on which the company could then be found to be unable to pay or otherwise discharge its debts; that in the event of any winding-up in the following twelve months the company will be able to pay its debts in full within twelve months of the commencement of the winding up, and that in any other case the company will be able to pay (or otherwise discharge) its debts as they fall due during the twelve months following the date of the statement.
The law will require the directors to take account of all the company’s liabilities. As directors are the stewards of their companies it is anticipated that they will have full knowledge of their company’s financial and trading status. If uncertainties exist the directors would seek professional advice
If company directors make a solvency statement without having reasonable grounds for the opinions expressed in it, and the statement is delivered to the registrar, an offence is committed by every director who is in default. The offence is punishable by a fine or by a maximum period of imprisonment of two years or both.
The content of the solvency statement is dictated by section 643 of the 2006 Act and its form by Regulations. The Registrar of Companies also has powers to impose, via Companies House rules, requirements relating to the form, manner of delivery and authentication of the copy of the solvency statement which will need to be registered at Companies House.
