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 in line with the articles of association of the company.
How is the call made?
- 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.
- A notice is sent 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.
- 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of the call, it also requests that shareholders return their current share certificates, the details on which will be out of date after payment.
- 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.
- 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.
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.
- 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.
- The Companies Registry is updated with the updates to the company’s share capital position in the next company return (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 annual return early. This will mean that anyone retrieving information from the Company Registry 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.
COMPILED BY;
Irene Rebecca Nassuuna
