Shareholders (Procedure to incorporate)- FS Flashcards
(16 cards)
What is meant by a company’s capital in the context of corporate structure?
A company’s capital refers to the money invested by shareholders in exchange for shares, which represent ownership units in the company.
What is a share, and what does it grant to the holder within a company?
A share is a unit of ownership in a company that typically grants the holder rights such as voting on key decisions and receiving dividends, depending on the class of share.
Who are subscribing shareholders and how are they distinguished from other shareholders?
Subscribing shareholders are the initial investors who receive their shares at the time of the company’s incorporation. They are distinct from later investors, who are simply referred to as shareholders.
Is there a limit to how many shares a company can issue after incorporation?
No, there is no cap on the number of shares a company can issue post-incorporation. It can continue to issue shares to new investors at any time.
What are the general rights associated with holding a share in a company?
Shares typically confer the right to vote on company decisions at general meetings and to receive a portion of company profits through dividends, if declared.
What defines a class of share, and how can classes of shares differ from each other?
A class of share defines a group of shares with specific rights. These can differ in terms of voting power, dividend entitlement, and share price.
How do ordinary shares and preference shares differ in terms of rights?
Ordinary shares usually carry voting rights and dividend rights (if declared), whereas preference shares typically lack voting rights but have priority in receiving dividends before ordinary shares.
What distinguishes participating preference shares from other types of shares?
Participating preference shares offer both voting rights and priority in dividend payments ahead of ordinary shares, combining features of both ordinary and preference shares.
What is meant by the nominal value of a share in company law?
The nominal value of a share is the original issue price at which the company first offers the share to shareholders. It reflects the minimum price at which shares can be issued and does not change with the company’s financial success.
How is the premium value of a share defined, and what does it represent?
The premium value is the amount a share is worth above its nominal value due to the company’s growth and profitability. It reflects the market value increase of the share after issue.
What is the legal significance of the Statement of Capital in company formation?
The Statement of Capital is a required document submitted to Companies House that details the company’s share structure, including share classes, total nominal value, and shareholders’ details.
What are prescribed particulars required in the IN01 form when registering a company?
Prescribed particulars include rights attached to shares such as voting rights, dividend entitlements, capital distribution upon winding up, and redemption rights of the shares.
What is a dividend in the context of shareholding?
A dividend is a portion of a company’s profits distributed to shareholders, usually on a regular basis, as a return on their investment.
What is the purpose of a shareholders’ agreement, and is it mandatory?
A shareholders’ agreement is a private contract between shareholders regulating their relationship and specific operational matters of the company. It is not mandatory but recommended for governance clarity.
Are directors automatically parties to a shareholders’ agreement?
o, directors are not parties to a shareholders’ agreement unless they hold shares. In that case, they are parties in their capacity as shareholders, not as directors.
Why must new shareholders sign a shareholders’ agreement separately?
New shareholders are not automatically bound by an existing shareholders’ agreement. To be subject to its terms, they must expressly sign and agree to it.
