CTP.L Regulatory News (CTP)

Castleton Technology plc (AIM: CTP), the software and managed services provider to the public and not-for-profit sectors, announces that the Company will later today post a circular (the "Circular") to shareholders of the Company (the "Shareholders") detailing:

- a proposed cancellation of the Company's share premium account (the "Reduction of Capital");

- a proposed disapplication of pre-emption rights in the Company; and

- a general meeting of the Company (the "General Meeting"), the purpose of which is to enable Shareholders to approve the Resolutions.

A copy of the Circular will shortly be available on the Company's website at www.castletonplc.com/investors/.

Below are extracts from the Circular which should be read in conjunction with the full text. Defined terms used in this announcement have the meaning ascribed to them in the Circular.

Background to and reasons for the Reduction of Capital

The Companies Act 2006 (the "Act") only permits a company to make distributions to its Shareholders out of its profits available for that purpose. In addition, a public company may fund a purchase of its own shares out of distributable profits. Such profits are, broadly, a company's accumulated realised profits so far as not previously utilised by distribution or capitalisation, less its accumulated realised losses.

As at 31 March 2018, the Company had an accumulated deficit on its profit and loss account of £9,775,000. Accordingly, as matters currently stand, the Company does not have distributable profits and is therefore unable to make any distributions to its Shareholders or fund a purchase of its own Ordinary Shares out of distributable profits. However, at the same time, there was £17,006,000 standing to the credit of the Company's share premium account.

Since 31 March 2018, the Company has allotted 1,432,706 Ordinary Shares at a price of £0.8275 per Ordinary Share, 738,896 Ordinary Shares at a price of £0.856 per Ordinary Share and 271,000 Ordinary Shares at a price of £0.22 per Ordinary Share. As at the date of the Circular, there is £18,835,000 standing to the credit of the Company's share premium account.

The Directors therefore feel it is appropriate to seek Shareholder approval to effect the Reduction of Capital and, subject to the approval of the Shareholders and of the Court, to cancel the Company's share premium account.

The Directors then propose to apply the reserve arising on the Reduction of Capital to eliminate the Company's accumulated deficit on its profit and loss account and, as to the balance, to create distributable profits on the balance sheet of the Company. The Directors believe that, subject to the future performance of the Company, this should give the Company the ability to make distributions to Shareholders and/or buy back its own Ordinary Shares in the future if and when the Directors may consider that it is appropriate to do so. However, the Directors cannot give any guarantee either that the Company will make any distributions or purchases of its own Ordinary Shares or as to the size of any distributions or purchases of its own Ordinary Shares which may be made.

The cancellation of the Company's share premium account will only become effective if (in the following order):

(i) Resolution 1 as set out in the Notice of General Meeting is approved by Shareholders at the General Meeting;

(ii) confirmation is given by the Court; and

(iii) the Court order and a statement of capital are delivered to and registered by Companies House.

As noted above, the cancellation of the Company's share premium account should enable the Directors to eliminate the current deficit on the Company's profit and loss account and create distributable profits.

Effect of the Reduction of Capital

Subject to approval by the Shareholders and obtaining the Court's consent, the amounts resulting from the cancellation of the Company's share premium account will be credited to the Company's profit and loss account to create (subject to the Court's confirmation) distributable profits that the Company will be able to use when making any future distributions to Shareholders or purchases of its own Ordinary Shares.

The Reduction of Capital does not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company.

Authority to Disapply Pre-Emption Rights

As stated in the announcement made by the Company on 24 July 2018, resolution 9 as set out in the notice of annual general meeting dated 29 June 2018 (being the resolution to approve a general disapplication of pre-emption rights in respect of the issue of up to 15 per cent. of the Company's issued ordinary share capital on an unrestricted basis) was withdrawn prior to the start of the annual general meeting and not put to Shareholders. The Directors are therefore proposing at the forthcoming General Meeting a general disapplication of pre-emption rights resolution in respect of the issue of up to 5 per cent. of the Company's issued ordinary share capital on an unrestricted basis and a specific disapplication of pre-emption rights resolution in respect of the issue of up to an additional 5 per cent. of the Company's issued ordinary share capital in connection with an acquisition or specified capital investment. Having consulted with Shareholders of the Company, the Board believes this smaller authority is more appropriate given the future plans of the Company.

General Meeting

A notice convening a General Meeting of the Company, to be held at the offices of DAC Beachcroft LLP at 100 Fetter Lane, London EC4A 1BN on 24 September 2018 at 11.00 a.m. and at which the Resolutions will be proposed, is set out at the end of the Circular.

Resolution 1 to approve the Reduction of Capital and Resolutions 2 and 3 to approve the disapplication of pre-emption rights will be proposed as special Resolutions requiring a majority of not less than 75 per cent. of the votes cast.

Directors' recommendation

The Directors consider that the Resolutions are in the best interests of the Company and would promote the success of the Company for the benefit of its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they and their immediate families and connected persons (within the meaning of section 252 of the Act) intend to do in respect of their aggregate holdings of 390,399 Ordinary Shares representing approximately 0.48 per cent. of the existing share capital of the Company.

Expected Timetable of Principal Events

The dates and times given in the Circular are based on the Company's current expectations and may be subject to change. If any of the details contained in the timetable above should change, the revised times and dates will be notified to Shareholders by means of an announcement through a Regulatory Information Service. All references to time and dates in the Circular are to time and dates in London.

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