Cash box placing

UK statutory pre-emption applies to shares allotted for cash. A cash box is built to fall outside that. The issuer allots its shares in exchange for redeemable preference shares in a newly formed subsidiary, typically a Jersey company, into which the placees' money has been paid through the bank, and the issuer then draws that cash up.

Economically it is an ordinary placing for cash. Legally the consideration is the subsidiary's preference shares, so the pre-emption provisions do not apply to the allotment. The issuer still needs authority to allot, but not the disapplication that a straightforward cash placing would require.

A second benefit survives even where pre-emption is not the binding constraint. Because the issue is for non cash consideration, merger relief applies, so the premium over nominal value does not go into a non distributable share premium account. That leaves the company with distributable reserves, which matters for a company that wants to pay dividends or absorb a write down.

The trap is stopping at the legal answer. Institutional investors treat a cash box as a placing and count it against the same authority limits, so the constraint that actually binds is commercial. A board using one to raise far more than shareholders had approved would face the consequence at the next annual meeting rather than in court.