Monetary Union - Share re-issues set for 1999
Hundreds of UK companies could be queuing up to re-issue shares in euros following the currency?s start-up next January, according to a study by the English ICA.
But the government will need to amend the Companies Act before businesses are in a position to ask shareholders to back the move, the study says.
The institute sent its findings to the Department of Trade & Industry and urged ministers to draft legislation telling companies how they should redenominate share capital and deal with issues such as rounding and conversion rates.
Malcolm Woodford, chairman of the institute?s company law committee and a Price Waterhouse technical partner, said: ?What is needed is a clear, certain and simple procedure to enable companies to express their capital in euros if they want to do so from 1 January 1999.?
The study says companies with extensive European interests may want to switch to the euro to align themselves closely with suppliers on the continent.
However, the consultative document sent to the DTI points out several obstacles. Shareholders would need to give their backing at a general meeting, which would be costly to stage. Worse, it says, confirmation would be needed from a court because issued capital would be temporarily reduced.
The Scots ICA said calculating the par value of shares is irrelevant to most companies. ?Rather than tinkering with the rules to facilitate euro-denominated shares, we would encourage allowing the use of no-par value share capital as soon as practicable,? said Ken McHattie, convenor of the institute?s business law committee.