Equity Finance - Intro to Shares Flashcards
(23 cards)
What is a share?
A ‘bundle of rights’, often including voting rights, the right to dividends, and the right to capital on winding up
What is the nominal value of a share?
The minimum subscription price of a share. It is fixed and often expressed as 1p, 5p or £1 per share
Can shares be issued below nominal value?
No
What is a share premium?
The amount paid for a share in excess of its nominal value. It reflects market value above the base value
What is ‘issued share capital’?
The total number of shares issued by the company and recorded on its balance sheet. It includes subscriber and post-incorporation shares
What is ‘allotment’?
Allotment occurs when a person obtains the unconditional right to be entered into the company’s register of members
When is share considered ‘issued’?
When the shareholder is registered in the company’s register of members
Difference between called up and paid up share capital?
- Called-up - amount the company has requested to be paid
- Paid-up capital: amount that has actually been paid
What are treasury shares?
- Previously issued shares that have been bought back by the company and held in its own name for potential resale or cancellation
Are pre-emption rights relevant to treasury shares?
Yes - meaning pre-emption rights must be respected unless disapplied
Where are the class of shares defined?
In the company’s Articles of Association
Ordinary shares?
they carry full voting rights, and participate in dividends and capital without restriction
Preference Shares?
Carry a priority to dividends and/or capital before ordinary shares. They usually have a fixed dividend rate.
Are preference shares usually voting shares?
No, they are typically non-voting, but the articles may specify otherwise
Cumulative Preference Shares?
Shares where unpaid dividends accrue and must be paid later when profits allow. Cumulativeness is presumed unless stated otherwise
Participating Preference Shares?
Preference shares that allow holders to participate in further dividends or capital alongside ordinary shareholders after their fixed dividend is paid
Deferred Shares?
shares with limited or no rights to dividends or capital. Often used when ‘worthless’ shares are required when restructuring
Redeemable shares?
Issued with the expectation that the company may buy them back and cancel them at a future date
Convertible shares?
Carry a right to convert into another class of shares, based on pre-defined criteria
How can class rights be varied?
- In accordance with the Articles, or
- With consent of at least 75% of the holders of that class, or
- By special resolution of that class
What rights do minority shareholders have if class rights are varied?
Shareholders holding 15% or more of the class may apply to the court to cancel the variation within 21 days
When may a company distribute dividends?
Only when the company has sufficient distributable profits defined as accumulated realised profits minus accumulated realised losses
Final and interim dividends?
Final - recommended by directors and approved by shareholders via ordinary resolution
Interim - declared by directors alone if authorised by the Articles.
