ERSM140040 - Reporting requirements - Form 42

Events that do not need to be reported on Form 42

You do not need to report any of the following transactions on Form 42.

Companies incorporated in the year ended 5 April 2006

Where a limited company is incorporated in the UK and initial subscriber shares (also called founder shares) are acquired

• directly on incorporation, or
• on transfer from a company formation agent, or
• from another person forming the company, for example a solicitor or accountant;

a report is not required if all of the following conditions are met:

• all the initial subscriber shares are acquired at nominal value, and
• no form of security other than shares is acquired, and
• the shares are not acquired by reason of or in connection with another employment (whether that is the only employment or one of a number of employments), and
• the shares are acquired by a person who is a director or prospective director of the company, or someone who has a personal family relationship with the director and the right or opportunity is made available in the normal course of the domestic, family or personal relationship of that person.

Companies incorporated in the year ended 5 April 2006 - allotment of further shares

Where a limited company has been incorporated in the UK and further shares are allotted prior to the commencement of trading or transfer of assets to the company and all of the following conditions are met:

• the additional shares are acquired by a person to whom some of the initial subscriber shares have been transferred or the person is a director or prospective director of the company, and
• the shares are acquired at nominal value, and
• the shares are not acquired by reason of or in connection with another employment (whether that is the only employment or one of a number of employments).

If such shares are allotted following the incorporation of the company it will not be reportable even if the initial subscriber shares were acquired before 5 April and the allotment of further shares is made after the 5 April.

The majority of newly incorporated companies should meet the above conditions and will not have to complete Form 42 in respect of the founder shares.

Example 1

XYZ Ltd is the company formation agent and two initial subscriber shares in ABC Ltd are issued to it in April 2005. XYZ Ltd then transferred the two subscriber shares in ABC Ltd to 2 directors of ABC Ltd in May 2005. ABC Ltd has not commenced trading and has no assets and/or liabilities. A report is not required.

Example 2

The facts are as in Example 1 above. ABC Ltd allotted further shares in ABC Ltd to the two directors in June 2005. A report on Form 42 is not required.

Where a company incorporated in the year ended 5 April 2006 has any other transactions in its shares or securities in addition to the acquisition of shares described above a report of those additional transactions still has to be made on Form 42.

Example 3

The facts are as in Example 1 above but the company commenced trading in July 2005. ABC Ltd issued further shares in ABC Ltd to the two directors in August 2005. A report on Form 42 is required but only for the shares issued in August 2005.