Module 15: Shares, Share Capital and Maintaining Capital Flashcards
(47 cards)
What is a company’s capital?
Funds available for use in the business, representing its assets
Two major long term sources or finance?
Share capital
Loan capital- debenture holders lend money
What are shares?
Transferrable form of property which carries rights and obligations and which measures the interest which a member of the company has in it
What does share capital refer to?
Issued and allotted share capital
Called up share capital- pay not in future on shares
Paid up share capital- actually paid
Uncalled share capital
How much paid upfront?
1/4 nominal value
Full amount of premium
What are ordinary shares?
Riskiest form of capital because if company wound up is last to be repaid
Rights of an ordinary shareholder?
Attend GM Vote Dividend Transfer surplus assets on wind up Transfer shares Membership rights
What are preference shares?
Rights in preference to other shares
Prior right to receive annual fixed dividend and over ordinary shareholders to return of capital on winding up
Cumulative right (carried forward if not paid)
No voting rights
Can be convertible, date and terms into ordinary share
Advantages of preference shares?
Greater security of income since dividend fixed
Greater security of capital , prior right on wind up
Disadvantages of preference shares?
Dividend stays the same even if the company makes bumper profits
What are redeemable shares?
Can be bought back by the company at future date
Strengthen the capital base without diluting the strength of its ordinary shareholders
Useful exit route
Can’t be all these
Can’t redeem if not fully paid
What are treasury shares?
Company’s own shares which it has brought back but not cancelled
Cancelled, sold for cash or transferred to an employee share scheme
No voting rights
Keep record in treasury share account
Other possible classes of shares?
Founders shares- rank after ordinary but have more voting rights
Management shares in large public companies which give additional voting rights to companies
What is a member of a company?
Agreed to be a member and whose name has been entered into the register
How may a person become a member of a company?
Subscribing to memorandum
Agreeing to become a member- shares
Transmission of shares by operation of law
How may membership cease?
Member transfers shares Member dies Shares of a bankrupt member reg in trustee Minor repudiates on majority Trustee disclaims his shares Accepts surrender of shares Company dissolved
Variation of class rights?
Restrictive approach when asked to determine whether rights have been varied Rights varied in accordance with companies articles OR 75% nominal value of shares of that class consent either in writing or by way of special resolution
What conditions must be met for shareholders to object to variation of class rights?
15% of that class
Not themselves consented or voted in favour of variation
Must apply to court within 21 days of consent being given or resolution passed
Court cant’ modify terms either ok or unfairly prejudicial
Must show they were seeking some advantage
Greenhalgh v Ardene Cinemas 1951
No variation of class rights as each 10p carried one vote as before Subdivision of one class under a power which has effect of increasing voting rights
White v Bristol Aeroplane 1953
Made bonus issue of ordinary and preference shares to existing ordinary shareholders
Pref argued it reduced their proportionate holding
Altered their voting power but not their RIGHTS
Same number
Did not need their approval
Re Bede Shipping Co Ltd 1917
Refuse to register a transfer
Grounds that are personal to the proposed transferee
Re Hackney Pavilion Ltd 1924
Two directors divided on weather transfer should proceed
Asked to write to solicitors and indicate not go ahead
Must go ahead since board was equally divided so couldn’t exercise right to decline
Refusal of registration must be exercised when?
Within 2 months after the date of transfer lodged
Curtis v JJ Curtis and Co Ltd 1986
First had to offer to existing shareholders rather than to outsider
Not done
Prevented him from transferring other than in accordance with articles
