Business 5 (incomplete) Flashcards
(13 cards)
Preference shares
They only provide a fixed return on investment - not ideal for someone wanting to fully share the income profits and net asset growth of the business.
A special resolution will be required to change the articles if using unamended articles and issuing preference shares for the first time - this is because the preference share class rights will need to be incorporated into the articles.
Non-executive director
Not an employee of the company.
Gearing
The ratio of a company’s relationship with debt and equity. If debt increases, the company’s gearing increases.
Negative pledge clause
When creditor requires consent for anything within their security to be used as security for another loan.
A lack of consent does not make it void, however fixed charges do not take priority over floating charges if registered after.
Authorised share capital
The maximum amount of shares that can be issued.
For companies using the unamended articles, they will not require an ordinary resolution to issue more shares as no ASC clause exists if they were incorporated after Oct 2009.
If incorporated before Oct 2009, an ordinary resolution would be required to get shareholder approval to issue more shares.
S550 Companies Act 2006
Directors have authority to allot when the company is a private company with one class of shares.
Losses that can be claimed for breach of contract
All losses that flow naturally from the breach or were within the reasonable contemplation of the parties at the time of contract.
Distributions. What can dividends be paid out of?
Only out of distributable reserves. Accumulated, realised profits - ie the profit and loss reserve.
Cannot pay dividends that would exceed the amount in distributable reserves.
Pre-emption rights
Shares to first be offered to shareholders in their current proportions.
Special resolution required to disapply them.
Do not need to be disapplied when dealing with only preference shares (as they are not equity securities) or ordinary shares are being offered in the current shareholder’s current proportions.
Director loans
Shareholder approval is not required when company receiving a loan from a director. Only when the company is loaning money to a director.
Documents to be filed with Companies House when buying back shares
Forms for return of purchase of own shares (SH03) and notice of cancellation of shares (SH06).
If use of capital required to buy back the shares - special resolution required, statement of solvency and auditor’s report (all 3 to be filed too).
Can directors refuse to transfer shares?
Yes, they have discretion to refuse to register any transfer of shares.
