Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

law > Chapter 9 - Companies: Finance > Flashcards

Chapter 9 - Companies: Finance Flashcards

You may prefer our related Brainscape-certified flashcards:
MPRE flashcards MBE flashcards
1
Q

What rights to ordinary shares give?

A

Auto right to have capital repaid

Participate in redistribution of profits when company is wound up

Statutory pre-emption rights

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What rights to preference shares give?

A

Capital repaid on winding up

Can have priority for return of capital

Prior right to a fixed dividend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What happens to preference shares upon liquidation?

A

Cease to be entitled to any unpaid preference dividends unless already declared or articles say otherwise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What voting rights to preference shares have?

A

Same as ordinary shares in absence of excess provision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Do preference shares have rights of pre-emption?

A

No unless articles specifically say so

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a redeemable share?

A

Issued on terms that it can be bought back by the company at the option of company/shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What do the articles state about redeemable shares for private/public companies?

A

Public - must give authority

Private - may specifically exclude/restrict

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are class rights?

A

Rights which attach to shares in a specific class and differ from rights enjoyed by all shareholders

Special resolution required to alter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the conditions to be able to apply to court for unfairly prejudicial?

A

Hold at least 15% of shares of class in question

Apply within 21 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are pre-emption rights?

A

Right to be offered new equity shares pro-rata to existing holding

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How must pre-emption rights be communicated?

A

Offer in writing/electronically

> 21 days period of acceptation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Can pre-emption rights apply in the case of exclusion, exceptions and disapplication?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Can shares be allotted at a discount?

A

No

Must never fall below nominal value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What happens if shares are allotted at a discount?

A

Allottee liable to pay the company discount + interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does a company do with premiums paid on shares?

A

Puts them in share premium account

Amount transferred may be used to write off expense of issuing shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the special rules regarding group reconstruction and merger relief?

A

Company cannot distribute part of its share premium account as a dividend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What does issuing shares at par mean?

A

Shares obtain consideration equal to nominal value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Can shares be issued at below market value?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the general rule regarding allotment?

A

Where an allotment is made in contravention of provisions, allottee liable to pay amount equal to nominal value of allotted shares + interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How are unlisted shares tramsferred?

A

Once agreement reached, the transferor holds the shares as trustee for the transferee until registration

Transferor remains member of the company with voting rights

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What form does the transferor have to complete?

A

Stock transfer form in favour of transferee

Given to transferee with certificate

Both sent to company for registration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What happens if a company refuses the transferee?

A

Must provide reasons for refusal within 2 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Can securities be transferred without written instrument?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What happens under the CREST system?

A

member appoints custodian broker to hold shares under customer agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is the capital principle?

A

Companies should only use share capital for business purposes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What upholds the capital principle?

A

Companies Act 2006

Various provisions limit capital reduction schemes and restrict freedom of a company to purchase its own shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the authorised min share capital requirement a public company must satisfy?

A

£50k

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is issued/allotted share capital?

A

Shares issued/allotted

Company doesn’t need to issue all of its share capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is called-up share capital?

A

So much of the share capital as equals the aggregate amount of the calls made on its shares + share capital paid up without being called

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is equity share capital?

A

Issued share capital that carries any right to participate beyond the specified amount

31
Q

What is loan capital?

A

Borrowed money of the company

32
Q

Why may a company wish to reduce share capital?

A

If share capital exceeds needs of the company

Net assets may have fallen to value below share capital

33
Q

How can a company reduce share capital?

A

Reducing liability of shareholders on partly paid shares

Cancel paid up share capital not represented by assets

Repay surplus share capital

34
Q

How do companies achieve reductions in share capital

A

Public - must go to court

Private - can choose to go to court

35
Q

How may a private/public company reduce capital?

A

By special resolution confirmed by court

Subject to right of creditors to object to the reduction

36
Q

What happens if a capital reduction is confirmed for a public company that results in the nominal value of the allotted share capital falling below authorised min?

A

Company must re-register as private

37
Q

How may a private company choose to reduce its share capital?

A

By special resolution supported by a solvency statement given by all directors within 15 days prior to resolution being passed

Statement must confirm company is able to pay debts over 12 months

Cheaper than court

38
Q

How are the share premium and capital reserve account treated?

A

As share capital

Can therefore be reduced

39
Q

How can a company increase share capital?

A

Allotting more shares

40
Q

What notice must be given to registrar when increasing share capital?

A

Notice + statement of capital within 1 month of the change

41
Q

How can a company subdivide/consolidate share capital?

A

Ordinary resolution

Proportion between amount paid and amount unpaid on original shares must remain the same

42
Q

what are the conditions for shares to be redeemed?

A

Fully paid

Redeemed out of distributable profits

Private limited companies can redeem shares out of capital

43
Q

How is the amount of permissable capital payment (PCP) determined?

A

Balance remaining once any available profits and proceeds from a fresh issue of shares have been used up

44
Q

When can the PCP be made?

A

Only where directors’ statement and auditor’s report support the payment and it’s approved by a special resolution

Payment made 5-7 weeks after resolution passed

45
Q

What are the limited circumstances in which companies can purchase their own shares?

A

Redemption/purchase of shares in accordance with companies act 2006

Acquisition of shares in a permitted reduction of capital

Comply with court order

46
Q

when must details be given to registrar once own shares have been purchased?

A

Within 28 days

47
Q

Can financial assistance be given for purchase of shares?

A

Private - yes

Public - subject to restrictions

48
Q

When is a public company prohibited from giving financial assistance?

A

At/before time of acquisition of shares in a public company

49
Q

What is the formula for profits available for distribution?

A

Accumulated realised profits - accumulated realised losses

50
Q

When is a dividend a debt?

A

Declared and due for payment

51
Q

When may a public company make a distribution?

A

Only if net assets are, at the time, not less than the aggregate of its called up share capital and undistributable reserves

52
Q

What are undistributable reserves?

A

share premium account, capital redemption reserve and revaluation reserve

53
Q

What is a debenture?

A

Written acknowledgement of a debt by a company, normally contains provisions as to repayment of capital and interest

Formal legal doc

54
Q

What is also a debenture in company law?

A

Doc relating to an unsecure loan

55
Q

Why is debenture stock preferable for an investor?

A

Offers greater security

Yields a fixed income

56
Q

What is a charge?

A

Encumbrance upon real/personal property granted by one party that gives the other party certain rights over that property

57
Q

What are the advantages of using a fixed charge?

A

Confers immediate rights over identified assets

Priority over a floating charge

58
Q

What are the advantages of using a floating charge?

A

Applicable to current and future assets

59
Q

What are the disadvantages of a floating charge?

A

Cannot be certain which form security takes until charge crystallises

Even when crystallised, chargee may find themselves postponed to the claim of other creditors

60
Q

What clause did the Enterprise act 2000 introduce into the Insolvency act 1986 state?

A

Prescribed part of the net property of the company will be available to unsecured creditors, regardless of any charges over that property

61
Q

What must a company keep available for inspection?

A

Copy of every instrument creating a charge which is required to be registered

Register of charges, fixed and floated, containing name, amount and description

62
Q

When must a charge be registered with the registrar?

A

Within 21 days from when charge is created

Failure to register punishable by fine and affects validity of charge

63
Q

Can ordinary or preference shares carry the right to demand payment of a dividend?

A

No

64
Q

is there an obligation from members to take on additional shares?

A

No

65
Q

When do statutory rights of pre-emption apply?

A

Allotment of equity securities for cash

66
Q

When do any shares subsequently allotted must be paid up at least as to one-quarter of the nominal value
together with the whole of any share premium payable in respect of them.

A

In a public company

67
Q

Can shares in a public company be paid for by performing work?

A

No

68
Q

Does the CREST transfer system operate in respect of all shares?

A

No

69
Q

Redeemable shares may only be issued where there are other shares issued that are not
redeemable.

A

Yes

70
Q

Do a company’s articles of association have to contain the relevant authority for redeemable shares to be issued?

A

No

Articles may, however, restrict or exclude the issue of redeemable shares.

71
Q

What is the specified time of a fixed charge to be avoided by a liquidator?

A

Created within 6 months before insolvency

72
Q

What is the specified time of a floating charge to be avoided by a liquidator?

A

Created within 12 months before insolvency

73
Q

Can shares be issued at a premium not only for cash but also for consideration other than cash?

A

Yes

74
Q

Does the debt of unpaid premium shares pass onto the next owner?

A

No, remains with the original owner

law (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions