c9 general Flashcards
(59 cards)
if a co’s constitution does not specify any distinction between its shares, it is assumed that they are ordinary shares
true
preference vs ordinary : dividends
preference - a preferential right to a dividend but no right to compel the payment of a dividend, cumulative, may be participating (may participate in profits of Co)
ordinary - yes - discretionary dividends
preference shares - undeclared dividends - are they entitled?
undeclared dividends cease to be payable on winding up UNLESS the dividend has been declared but not yet paid when liquidation commences
preference vs ordinary : voting rights
ordinary - yes
preference - yes BUT commonly disapplied in the articles
preference vs ordinary : preemption rights
preference - no
ordinary - yes
preference vs ordinary : right to share in capital/share surplus profits on winding up
preference - a right to be repaid capital and share in surplus profits (articles usually say: right to capital in priority to ordinary SHs but no right to share surplus profits)
ordinary - a right to be repaid capital and share in surplus profits
preference vs ordinary : right to participate in a rights issue
preference - no
ordinary - yes
In the absence of any express provision in the company’s articles of association, how are class rights varied?
special resolution of the relevant class (75%)
redeemable shares - ltd vs plc - when can they be issued?
plc = to list them, must be authority to do so in the articles of association
ltd = may specifically exclude or restrict their issue
can only be issued when there are other share classes in issue
what are class rights?
rights attached to each class of shares. a notice outlining any variation must be given to registrar within 1 month of variation
how can you vary class rights?
special resolution
class rights - minority protection
the holders of at least 15% of the shares in variation can apply to the court < 21 days to have the variation cancelled - must be about shares which change has happened!!!
court can either: confirm variation or cancel on basis of ‘unfairly prejudicial against minority SHs’
court cannot: vary the terms of the change
if the rights change for other classes as a result (but no direct change to their rights) - cannot go to court!!!
allotment of shares : ltd, 1 class
directors may allot shares unless articles prohibit him from doing so
allotment of shares: ltd w/ >1 share class, plc
-ordinary resolution or authority given in the articles
-max no of shares to be alloted, expiry date (not more than 5 years) - this can be given/varied by ordinary authorisation
rights issue
additional shares offered to ordinary SHs (not preference) in ratio to existing shares. members can either: accept or sell their rights
maintain their SH %
bonus issue
free shares given to existing shareholders in proportion to their SHings. capitalisation of reserves (cr share cap dr share prem)
define : rights of preemption
ordinary vs preference
the right of first refusal for existing shareholders before a Co may proceed with a share issue. must offer equity shares to existing SHs on a pro rata basis - they have at least 21 days to accept. unaccepted shares can then be offered on the same or less favourable (NOT MORE FAVOURABLE TERMS) terms to non-members
ordinary - yes
preference - no
exceptions to pre emptions rights :
bonus shares
shares issued for non cash consideration
employee share schemes
exclusions in the articles (PRIVATE ONLY) or by special resolution
shares at a discount
shares sold < NV = PROHIBITED
NOT THE SAME AS PARTLY PAID SHARES
shares at a premium
shares sold > NV
excess: Cr share prem
ALLOWED
stat rights of pre emption - what is the time period during which the offer of shares may be accepted?
21 days
The directors of a private company with one class of shares may be authorised by a special resolution of the company’s members to allot shares as if the statutory rights of pre-emption did not apply
T or F
true - exception to pre emption rules:
-bonus shares
-employee share schemes
-shares issued for non cash consideration
-ltd only = exclusions in the Articles
-ltd + plc = special resolution : can allot shares as if the stat rights of pre emption did not apply
share prem - what can and cant it be used for?
CANNOT
-dividend
-write off expenses re formation of Co
-write off expenses re issue of debentures
CAN
- write off expenses made in making those shares it has just issued
-allotted to members as a fully paid bonus share (cr share cap dr share prem)
-application of special rules re group reconstruction relief + merger relief
payment for shares - does it have to be sufficient?
YES! because : cannot issue shares at a discount
