A private partner has purchased a certain amount of shares in me2everyone. Me2everyone is permitting this private partner to redistribute those shares to the members who were given an allocation on the website. Let's decipher that dubiosity:
Every Private Limited Company has a set of rules defined in what is called Company Articles. By default, these articles include a section called pre-emption rights. Basically, pre-emption rights are a set of rules that keep shares "within the family".
The Company Articles can disapply these pre-emption rights over a certain share allotment, but only according to a very specificy regulations set forth by the Companies Act. Alternatively, the pre-emption rights over a certain share allotment can be excluded alltogether. This allows the possibility for shareholders to sell their shares "outside the family".
But the clincher is that whichever allotment the Company Articles permits to be sold without any, or disapplied pre-emption rights, those shares still fall under the same regulation that prevents a Private Limited Company to sell shares to the public, effectively restricting the shareholders as well.
Pay particular attention to sub-paragraph (b) of section 755 of the Companies Act 2006
"(1) A private company limited by shares or limited by guarantee and having a share capital must not—Not only is a Private Limited Company prevented from offering its shares to the public (directly by the company itself), it cannot permit any of its allotted shares to be offered to the public (by its shareholders). It's redundant, but for a reason.
(a) offer to the public any securities of the company, or
(b) allot or agree to allot any securities of the company with a view to their being offered to the public."
So while the shares may be sold "outside the family", they cannot be "outside the extended family". In other words, the entity being sold the shares must have a "domestic relation" to the company.
Other than this, I'm wondering what the Office of Fair Trading has to say about this due to the involvement of shares.
Edit: Apparently me2everyone Limited is in the process of changing to a Public Limited Company, done by Furley Page Solicitors, at least according to a number of forum posts such as this one. I think there's been a realisation of the "public private shares" issue. Let's see!
Note: Again -- You are to draw your own conclusions! I could be horribly wrong and missing out on something big. On the other hand, I'm a sceptical and will let everyone know what my thoughts are.
What if the "shares" are renamed as "virtual money", as the ones used in SecondLife? In that way, m2e gives out "startup capital" for new and active members. These rewards for active members are not a new thing. I know that Ecademy also offers improved profile status for those who bring new friends. They offer Orange star status, which people can also purchase. So in a way, Ecademy too is "giving out value" but they don't call it "shares" Anyways, I think that m2e may have said stuff they were not supposed to say, and as time passes, they learned that they cant really give out shares but they can still reward the active members non the less. All in all, m2e aims at being a cool social network site, and they're using rewards in order to stimulate membership. Personally, I dont think there's gonna be a problem. And I hope I'm right, for my sake :)
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