Companies Act 2014 section 1027

Payment of non-cash consideration

Section 1027 deals with the rules governing the allotment of shares by a PLC in exchange for non-cash consideration, particularly where that consideration involves an undertaking to be performed over time.

• A PLC must not allot shares as fully or partly paid up where the non-cash consideration includes an undertaking to be performed more than 5 years after the date of allotment
• If shares are allotted in breach of this rule, the allotment is not void, but the allottee becomes liable to pay the company the full nominal value of the shares plus any premium, together with interest at the appropriate rate
• Where an undertaking is required to be performed within 5 years but the allottee fails to do so within the agreed contract period, the allottee must pay the company the amount that would have been treated as paid up by the unperformed undertaking, plus interest
• Any subsequent holder of the shares who knew at the time of purchase that the shares were improperly allotted, or that the undertaking was not performed, is jointly and severally liable alongside any other person liable to the company