CG51746 - Reorganisations of share capital: bonus and rights issues

TCGA92/S126(2)(a) includes what are probably the most common types of share reorganisation: bonus issues and rights issues. In both cases shares or debentures are allotted to existing shareholders or to the holders of a particular class of share in proportion to their existing shareholding. In a bonus issue the new shares and debentures are issued free. In a rights issue the shareholders have to pay for the new shares or debentures. The usual procedure in a rights issue is for the shareholders to be given a provisional letter of allotment which entitles them to subscribe for further shares in the company. For further detail on rights issues and letters of allotment see CG50292+.

From 1 December 2003 it is possible for listed companies incorporated in the United Kingdom to repurchase their own shares and hold them in treasury (CG50209). (For this purpose ‘listed’ includes shares dealt in on the Alternative Investment Market (AIM) of the London Stock Exchange.) There are special rules for bonus and rights issues where shares are held in treasury (see CG51750).