Q&As

Validity of unpaid share allotment to employee benefit trust

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Published on: 20 January 2016

If a share has been allotted to an employee benefit trust for no payment, is the allotment invalid and will the shares need to be paid for on a future date?

Although a share may be transferred without payment from the recipient in certain circumstances, an allotment of a share cannot. This is because s 580(1) of the Companies Act 2006 (CA 2006) provides that 'a company's shares must not be allotted at a discount'. 

Nevertheless, if shares have been issued to the trustees of an employee benefit trust (EBT) for no payment, this does not make the allotment of the shares invalid, but the trustees – or any future holder of the share – may be liable to pay at least nominal value for the shares, and

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Jurisdiction(s):
United Kingdom
Key definition:
Allotment definition
What does Allotment mean?

shares in a company are taken to be allotted when a person acquires the unconditional right to be included in the company’s register of members in respect of the shares (Companies Act 2006, s 558). Allotment is followed by the issue of the shares.

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