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Flashcards in Companies: Finance Deck (24):
1

What are the 2 classes of shares?

- ordinary
- preference

2

Describe ordinary shares

- equity shares
- full voting rights
- dividend declared by directors
- last repaid but share surplus of assets

3

Describe preference shares

- cumulative dividends paid first
- fixed rate dividend
- usually issued with priority rights which allow capital to be repaid before ordinary shareholders

4

Key thing to remember on classes of shares?

Both classes have same rights without intervention of articles, check wording of question

5

Do companies need to issue their entire share capital?

No

6

What are redeemable shares?

- Include a term for company to buy back at a fixed rate
- can only be issued when non-redeemable shares are in circulation

7

What are class rights?

Special rights attached to each class of shares

8

Can class rights be changed?

- need special resolution
- courts may cancel change if unfairly prejudicial and 15% of shareholders appeal (does it change their rights or just their money)

9

What authority do directors require to allot shares?

- articles, or
- ordinary resolution

10

Describe pre-emption rights

- shareholders must be offered new shares first
- statutory right if equity shares are issued
- articles can dis-apply rights

11

Can shares be issued at a premium and/or a discount?

- premium yes
- discount no

12

Can private companies accept cash alternative payments for shares?

Yes, determined by directors

13

What are the share payment rules for public companies?

- must pay cash
- cannot pay by way of work or services
- nominal value 25% paid up + all share premium
- non-cash consideration independently valued and received within 5 years

14

How are shares transferred?

- can be transferred freely in line with articles
- CREST for listed shares only
- transfers due to bankruptcy do not require new certificate

15

What is the procedure for reduction of share capital for a public company?

- special resolution
- court confirmation
- if nominal value below £50k, re-register as private
- new statement of capital
- resolution, confirmation and statement of capital to be filed

16

What is the procedure for reduction of share capital for a private company?

- special resolution
- solvency statement
- new statement of capital
- resolution, solvency statement and statement of capital to be filed

17

Why might a company be allowed to acquire its own shares?

- lawful reduction of capital
- court order
- forfeiture of shares

18

What does a company need to do to redeem its shares?

- must cancel them
- must be non-redeemable in circulation
- must be funded by non-distributable profits

19

When can financial assistance for purchase for own shares be given?

- if it is a permitted transaction (e.g. money lending company in course of business, employee share scheme, loan to employee in good faith)
- main purpose of transaction is not to fund the purchase of shares

20

What must dividends be paid out of and how is it calculated?

Must be paid out of distributable profits:

Accumulated realised profits less accumulated realised losses

21

Debenture...

- document acknowledging any loan
- creates a creditor
- contractual right to interest

22

What are the two types of security charges given with debenture debt?

- fixed
- floating

23

Describe a fixed charge

- relates to specific asset
- company has no freedom to sell
- higher priority than floating charges

24

Describe a floating charge

- on a class of assets present and future
- company has freedom to sell
- attaches to assets on crystallisation