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  • Series: Corporations, Globalisation and the Law series x
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David Milman

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David Milman

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David Milman

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David Milman

This chapter introduces the idea of the company share and its role in corporate finance, society and culture at large. The legal nature of a share is explained. It describes patterns of UK share ownership and notes the burgeoning presence of overseas shareholders in UK listed companies. The public policy reasons for regulating shares are identified. The differences between shareholders in limited companies and participators in other organisations are mapped out. Shareholders and other stakeholders are distinguished. The chapter concludes by noting the technical distinction between shareholders and members. The use of the company share as a device to facilitate fraud is noted.

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David Milman

The historical antecedents of the modern company share are explained in this chapter. The period of evolution from the Bubble Act 1720 up to the ‘Big Bang’ in 1986 and beyond is covered. A major part of this chapter is devoted to explaining the different types of share that exist today and that have existed in the past. The diversity of share types is impressive, with more than a dozen categories identified, and that pattern is continually evolving. The important concept of a ‘class’ of shares is analysed. The differences between shares and debentures are highlighted.

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David Milman

This chapter details the circumstances under which an investor becomes a. These circumstances may vary considerably. The position with regard to the public issue of shares is explained. The rules relating to prospectuses and the Listing Rules are noted. The chapter highlights the applicable legal principles where shares in a private company are acquired through a share purchase agreement. The concepts of a rights issue and a scrip (or bonus) issue are distinguished. The position where the acquisition of shares may be tainted (for example where unlawful financial assistance has come into play) is described. Public policy issues relating to the acquisition of shares are considered. This chapter also includes a section on the motivation behind share acquisition.

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David Milman

The chapter commences by introducing shares as property objects. It then considers the protection of shares under fundamental rights law. The position in connection with forfeiture and expropriation is analysed. A substantial section is devoted to the crucial issues of both valuation and transfer of shares. The circumstances in which shares may be acquired on a compulsory basis are detailed. The loss of share ownership on nationalisation is investigated. The position with regard to privatisation processes is noted, together with the phenomenon of the golden share. Also considered are the implications arising from the fact that multiple interests in shares may exist. Beneficial share ownership and indirect shareholding is touched upon. The issue of the creation of security over shares and the concept of financial collateral is noted. The chapter concludes with an explanation of the position with regard to the situs of shares for conflicts of law purposes.

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David Milman

The origin of shareholder rights is covered at the start of this chapter, with particular emphasis given to the different sources of shareholder rights (under the constitution of the company, under the common law and through legislation). The prevalence of shareholder agreements in practice is mentioned. Moving to substantive rights, the focus is on dividend expectations and voting rights. The issue of cumulative voting is noted. The circumstances under which a return of capital is permitted are explained. The new statutory right of pre-emption where new share issues occur is examined. By way of counterbalance this chapter clarifies those situations where shareholders lack rights; for example there is no automatic exit right in private companies. The enforcement of shareholder rights by pursuit of litigation is then considered.