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Flashcards in Share Capital Deck (12)
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Why statutory restrictions on reduction of share capital?

Trevor v Whitworth - creditors are entitled to assume that, at a minimum, the paid-up full nominal value of the company's share capital, plus any premiums, will be available for distribution


When can Ds allot shares?

1. Private Coy with only one class of shares - can allot without further approval
2. Coy with multiple classes of shares - (i) authorised by OR or AOA and (ii) authorisation states maximum number of shares that may be allotted + an expiry date for the authorisation within 5 years of incorporation (for authorisation in the AoA) or the resolution (for authorisation by OR)


When will holders of equity securities have statutory pre-emption rights for a new allotment? What is the effect of these pre-emption rights?

S.561 - Where entirely cash consideration is being paid; and the AoA does not exclude or disapply these (including implicitly by a bespoke pre-emption provision)

Coy must offer the allotment to all right-holders (i) in proportion to their shareholdings (ii) on terms at least as favourable as those intended to be offered to potential new shareholders (iii) with at least 14 days to reply


3 ways for Coy to reacquire its own share capital?

1. Redeem redeemable shares out of distributable profits or fresh allotment proceeds, if approved by OR (excluding vote of the selling shareholder) and less than the lower of £15,000 or 5% of share capital
2. Purchase the shares out of distributable profits or fresh allotment proceeds, if approved by OR (excluding vote of the selling shareholder) and less than the lower of £15,000 or 5% of share capital
3. Redeem or purchase using capital IF approved by SR with written statement of solvency


7 requirements for valid repurchase of own shares from capital?

(i) distributable profits and fresh allotment proceeds have been used up;
(ii) amount required is within the permissible capital payment;
(iii) written statement of solvency with auditor's report
(iv) approved by SR within 7 days of written statement,
(v) give written notice to creditors or in Gazette within 7 days of the SR
(vi) solvency statement, auditor report and SR exhibited at CH within 15 days of the SR
(vii) purchase is made between 5 and 7 weeks after the date of the SR


4 functions of capital reduction?

1. Return surplus capital
2. Assets so reduced that share capital not representative of true value
3. Create distributable reserves
4. Part of a scheme of arrangement


3 instances where reduction not permitted?

1. Reduction restricted by AoA
2. Reduction proposes to reduce share capital to ZERO
3. Consequence of reduction is that no NON-REDEEMABLE shares are left


2 ways to carry out a capital reduction?

1. (i) SR supported by statement of solvency no more than 15 days prior (effect is to treat capital reserve as realised profit); and (ii) register solvency statement and statement of capital with Registrar within 15 days of passing SR
2. Get an SR approved by the court


When will holders of equity securities have pre-emption rights for a share transfer? How to remove these rights?

ONLY if the AOA provides.
Can remove by obtaining waiver from right-holders or amending or disapplying the AOA via an SR.


Stamping fee for stock transfer form, and deadline? 2 exemptions?

Within 30 days of completion of form. Fee is 0.5%.

Exemption if (i) shares < 1,000 GBP and transferee signs exemption certificate; or (ii) gift of shares.


3 requirements for a valid refusal by D to register a share transfer? Effect?

1. AOA provides
2. D must give notice and reasons ASAP and provide such further info as is reasonably requested
3. D returns instrument of transfer and documents to the transferee

Transferor holds shares and all rights on a bare trust for transferee.


Remedy for transferee if the registration is refused?

Can apply to court for order that company rectifies register.