16. Shares, share capital, share register and debt capital

Question 1

What are supervisory boards?

Answer 1

PRA (Prudential Regulatory Authority), Bank of England, Treasury, FCA, Fin Policy Committee

Question 2

What activities are considered regulated activities under FSMA2000?

Answer 2

Fin promotion
Investment
Fin advice

Question 3

Who supervises crucial roles?

Answer 3

FCA

Question 4

What are controlled functions?

Answer 4

Customer functions and Significant influence function

Question 5

What is the process for amounts due on capital?

Answer 5

Directors meeting
Issue call notice - date payment is due - 14 days after the notice
Return share certificate for allotment
Register amended

If unpaid - subject to forfeiture

Question 6

What is equity capital?

Answer 6

Total ordinary shares non including those receiving dividends

Question 7

What is debt capital?

Answer 7

Loan notes, bonds, redeemable shares

Question 8

What is a debenture?

Answer 8

Document that acknowledges debt

Question 9

What is a pre-emption right?

Answer 9

A right of first refusal on newly issued shares

Question 10

How can a pre-emption right be waived?

Answer 10

By special resolution

Question 11

What shares are excluded from pre-emption rights?

Answer 11

Bonus issues
Shares acquired through employee share scheme
Taken by subscribers to the memorandum
Shares used for consideration

Question 12

Under what circumstances waiving of pre-emption right is allowed?

Answer 12

The Co can only issue 5% more shares
Shareholders can approve an issue of more than 5% PROVIDED it is for specified capital investment
Only applies until the next AGM.

Question 13

Changes to capital: when can a LIMITED co alter its share capital?

Answer 13

Allotment
Reduction
Redemption
Subdivision
Purchase of own shares
Cancel shares
Redenominate

Question 14

When authorisation to allot shares is not required? Who has authority to allot shares?

Answer 14

Directors can, on shareholder resolution or under Articles
Employee share scheme
Loan stock convestions

Question 15

What steps are taken in share allotment?

Answer 15

Application form
Approval of directors (at the meeting)
Issue share certificates
File SH01

Question 16

Particulars of non-cash consideration?

Answer 16

Valuer must be appointed, within 6 months of report on the value report
Exemtions: 
Takeover
Merger
Capitalisation

Question 17

When can a company buy back shares?

Answer 17

Generally cannot, unless:

• a gift
• valid reduction of capital
• by court order (remedy for unfair prejudice)
• redeemable shares
• if permitted by articles

Question 18

Fin assistance to buy shares

Answer 18

Plc CANNOT give fin assistance, ltd CAN
In ltd it can be given through:
dividends
winding up
bonus shares
redemption

In Plc, if:
net assets are not reduced
if lending money is part of business
employee share scheme

What is fin assistance:
gift
guarantee/security/indemnity/collateral

Question 19

What services are provided by Registrar?

Answer 19

RoM
AGM,GM
Paying shareholders
Liaising with shareholders

Question 20

Share transfers

Answer 20

Stock Transfer
Stamp duty on transfers over £1000 or more at the rate of 0.5% of the consideration paid for shares, rounded up to the nearest £5, to be paid within 30 days. If transfer submitted late, interest/penalties can be payable.
AIM listed are exempt
Share transfers require board approval, board also authorises the issue of share certificate

Question 21

Process for share transfer

Answer 21

Stock transfer form to be completed by the transferor
STF to be stamped by the HM Revenue and Customs (payable by the purchaser)
STF and Share certificate sent to the Registrar
Pre-emption rights are checked
Board approval
Board autorisation of share certificate issue
Entered into RoM

Question 22

What are the Distributions?

Answer 22

Distribution of co assets to members, in cash or otherwise.
Amount determined from:
Profit, loss, assets and liabilities
Share capital and reserves
Provisions under SCG

Question 23

What is a warrant?

Answer 23

The certificate that entitles the holder to subscribe to equity capital at some future date at the price determined at the time of issue. Usually issued in connection with takeover.

Question 24

Debenture, loan stock and corporate bonds

Answer 24

All essentially the same, company borrows money which may be secured, convertible or listed.

Question 25

Types of capital events

Answer 25

Share offer - to all
Rights issue - to existing members in proportion to holding
Consolidation/subdivision
Takeover
Scheme of arrangement

Question 26

Particulars of scheme of arrangement

Answer 26

Members are only required to vote
Members’ entitlement is calculated at the record date
Directors formally approve the issue of shares, new certificates issues, old ones cancelled.

Question 27

Benefits of employee share schemes

Answer 27

Aligns employee and shareholder interests
aids employee retention and recruitment
remunerates emp in a tax efficient way
raises working capital

Question 28

Disadvantages of ESC

Answer 28

Adverse effect on morale if share price falls
admin costs
dilution of share ownership
difficulties in selling shares post exercise, setting up EBT

Question 29

What are the most common schemes

Answer 29

EMI
CSOP
SAYE
SIP
Uapproved

Question 30

EMI

Answer 30

Small companies
Not more than 30mln assets, less than 250 emp
Max 250k per emp, option period - capped at 10 years
No min
no income tax, no NI

Question 31

CSOP

Answer 31

Max 30k per emp
3-10 years
no tax, NI

Question 32

SAYE

Answer 32

Max contributions - £500
discount up to 20%
No NI, tax

Question 33

SIP

Answer 33

Free shares
partership shares - opportunity to purchase 10%salary
matching shares#dividend shares
min 5 years
no NI, tax

Question 34

Unapproved share options

Answer 34

No tax/ NI benefit