When unpaid or partly paid shares are issued, the company retains the right to collect the unpaid amount. To do so, the directors can send a call notice to holders of partly paid shares requiring them to pay the unpaid amount to the company. Here we look at the general procedure to follow, although you should check your company’s articles of association, which may specify an alternative process.
This article also focuses on the procedure to make a call on shares for private limited companies: there will be further requirements for public limited companies to take into account.
1 Pass a resolution at a directors’ meeting authorising the call
The directors should pass a resolution at a directors’ meeting making the call on partly paid shares. Any specific requirements for the resolution will be specified in the company’s articles of association, but the directors’ resolution will typically include details of:
- The monetary amount of the call; and
- The final due date for payment.
We’ve created a template directors resolution to call unpaid amount which you can use a basis for your own resolution.
2 Send out call notices to those shareholders with the partly paid shares
You’ll then need to send out a notice to those shareholders you’re asking to pay a call. This will usually be to those people to whom the shares were originally issued, but if the shares have since been transferred the new holder would usually assume the obligation to pay any calls.
We’ve created a template call notice which you can adapt to send out. The call notice specifies the amount that is due together with the date by which it must be paid. As well as payment of the call, it also requests that shareholders return their current share certificates, the details on which will be out of date after payment.
Our template assumes that interest may be charged if payment of the call is made late. However, whether the company is able to charge interest will be covered in the articles of association or the terms of the share issue.
3 Send out reminder letters
Once the due date arrives, check off the payments received against those expected. You’ll hopefully have received all the payments due, but should now send reminders to anyone who has not yet paid.
A reminder letter should reiterate that:
- Immediate payment must be made;
- If applicable, interest will be charged on the outstanding balance; and
- The shareholder may forfeit the shares if they do not now make payment of the call.
We’ve produced an example call reminder letter for calls on unpaid shares, but the exact contents will vary depending on the situation, the terms of the share issue and the company’s articles of association.
It’s at least good practice to send a further reminder letter if payment is still not received in a reasonable timescale – a week or two would be fairly typical. This should draw further attention to the possibility of forfeiture of the shares in according with the company’s articles of association.
Elsewhere, we deal with share forfeiture itself – for now we’ll assume that you (eventually!) receive payment of the call (along with any interest due) from all shareholders.
4 Amend the register of members and issue new share certificates
Once payments have been received, the company needs to update its register of members to show the fact that the call has been paid. If this call is one of a series of payments, there may also be additional payments schedule to update.
You’ll also need to update share certificates, including:
- Cancelling the old share certificates;
- Issuing new share certificates showing the amount now paid on the shares
- Updating the company’s log of active share certificates accordingly.
To help, we’ve produced a simple checklist describing what should be included on a share certificate.
5 Include the updated details in the company’s next confirmation statement
Companies House are updated with the updates to the company’s share capital position in the next confirmation statement (unless another event like a further allotment of shares causes the company to file a statement of capital).
Following a call on shares, some companies will choose to file the next confirmation statement (which replaced the annual return from 30 June 2016) early. This will mean that anyone retrieving information from Companies House would see the updated share capital position. Although this can make the conclusion of the call process appear more “official”, there’s no particular legal reason to do so.
Inform Direct makes it quick and easy to maintain statutory registers, manage company records and submit filings to Companies House at the touch of a button.