Can shares in a limited company that have not been paid-up at all be cancelled?

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Produced in partnership with Julian Henwood of Gowling WLG

Published on: 08 May 2017

A Limited company having a share capital may not alter that share capital, except in the ways listed in section 617 of the Companies Act 2006 (CA 2006). Shares in a Company cannot simply be cancelled without following an appropriate procedure as permitted by that statutory provision. If a cancellation of shares is proposed using one of those procedures, the company must check for (and observe) any provisions of its articles of association prohibiting or restricting the use of the relevant procedure.

The permitted procedures for a cancellation of shares under CA 2006, s 617 are:

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a buyback of those shares (followed by their cancellation) in accordance with the procedure in CA 2006, Pt 18: nil-paid shares and partly-paid shares in the capital of a company cannot be bought back (or be accepted by a company as a gift in accordance

Jurisdiction(s):

United Kingdom

Key definition:

Shares definition

What does Shares mean?

The CA 2006 merely provides that a share is a share in the company's share capital. A company's share capital comprises the number of shares issued by it to investors either on or after incorporation. Those investors then become the shareholders in the company. A shareholder’s shares are their personal property. By contrast, the assets of a company are owned by the company itself. Owning shares does not entitle a shareholder to any property rights in the company's assets.

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