Companies Act 2014 section 1154

Directors' explanatory report

Section 1154 requires the directors of each company involved in a division to prepare a written explanatory report setting out the terms, rationale, and implications of the division, subject to certain exemptions.

• Directors of each company in the division must prepare a separate written explanatory report covering the draft terms, legal and economic grounds, share exchange ratio methodology, and any valuation difficulties
• Where a successor company that is a PLC proposes to allot shares for non-cash consideration, the report must state whether an expert's report under section 1028 has been prepared and filed with the Registrar
• The report must be signed by two directors of each company involved (or by a sole director where applicable) and must bear the date of signing
• The requirement to prepare the report is waived where all voting shareholders of every company involved agree, or where the division involves forming new companies and shares are allocated to the transferor company's shareholders in proportion to their existing capital rights