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Flashcards in Week 4 Deck (35)
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1
Q

Ordinary Shares

A

Nominal Value
Paper Based - Voting Rights
Crest / Electronic - No voting rights

2
Q

Bonus Shares

A

same as ordinary but issued as loyalty to employees / shareholders.
Company pays for them
No pre-emption condition

3
Q

Preference Shares

A

Medium term equity financing
Rights include a garunteed dividend.
May be voting or non voting
Designed to be redeemed.

4
Q

Who can buy shares

A

PRivate limited - shareholders, connected persons and creditors of company.

PLC - Anyone

5
Q

Rights issue

A

Raise capital in exchange for assets, or bring someone new into business.

6
Q

Impropper Alotment

A

Director under duty to act within their powers when alloting shares (manipulation of voting not allowed) Can be annulled by court if unlawful alotment.

7
Q

CA 2006 S.560-577

A

Director can’t manipulate voting power

Existing shareholders have right to pre emption

8
Q

CA 2006 S.580

A

No allotment at discount

Alottee liable to pay an amount equal to interest + discount

9
Q

CA 2006 S.581

A

Part paid shares allowed but can be called up

Dividends paid pro rata.

10
Q

Shares sold at premium

A

Excess into Share premium account
Not distributable
Can be used for expenses of issuing shares and to fund bonus shares

11
Q

CA 2006 S.610

A

Share premium account can be used to allot bonus shares.

12
Q

Bonus Shares

A

Form of loyalty Payment
Paid fully by company
funded from share premium or undistributed profits.
Directors propose decision and approval needed by ordinary resoloution of members.

13
Q

Altering rights of shareholders

A

Cannot unilaterally alter rights
Can be altered in line with articles or special reosloution.
Minority has 21 days to apply to have variation cancelled, but must satisfy it is Unfair prejudice.

14
Q

Capital Maintence

A

Protect Creditors
Shareholder last principle in winding up
unfairness if shareholders could recover investment

15
Q

Insolvency Act 1986 S.74

A

Limited liability garunteed for shareholders

16
Q

Reduction in capital

A

can make no payment or return of capital to shareholders except for Authorised reduction in capital or payment to divide profits.

17
Q

S.617 and S.641-649

A

Reduction of capital as authorised in law

18
Q

S.830-831

A

Distribution to members as dividends (only from profits)

19
Q

Share Buy Back

A

Purchasing shares out of capital prohibited due to no capital maintence

20
Q

The rule in Trevor v Whitworth

A

Shareholder agreed to sel shared to company in 2 installments, then sued for 2nd installment.

House of Lords held companies are not allowed to buy back shares.

21
Q

Exceptions to Rule in Trevor v Whitworth

A

Public companies can purchase their own shares with:
proceeds of new issue of shares
using distributable profits (put sum into capital redemption reserve)
Private companies can purchase own shares out of capital provided statutory process followed.

22
Q

Reasons for reducing capital

A

Excess capital due to scaling down
INcrease dividend per share
Improve finances of company (get rid of expensive share capital and replace with cheaper debt financing (tax reasons too)
To buy out founding shareholder who no longer participates .

23
Q

Reduction of share capital requirement for PVT LTD

A

Private Company - special resoloution followed by solvency statement

24
Q

Reduction of share capital requirement for PLC

A

Court order confirming Special resoloution
Court writes too all creditors who can object
Problematic creditors paid off first.

25
Q

CA 2006 S.641

A

Not possible to reduce capital if only redeemable shares left.

26
Q

CA 2006 S.829

A

Distribution means every asset of thing of value as well as cash given to the members of a company. INcluding Dividends, Annual and Interim

27
Q

LEgal right to dividend

A

None unless preference share

28
Q

CA 2006 S.830 for PVT LTD

A

Distribution out of profits for purpose

Companies accumulated realised profits less accumulates realised losses (PVT LTD)

29
Q

CA 2006 S,831 for PLC

A

Net asset restriction on distributions to public companies which must write off unrealised losses as well as realised losses from realised profit. More stringent due to higher impact.

30
Q

Undisributable reserves

A

Share premium account, Capital redemption reseve

31
Q

CA 2006 S.847

A

Those receiving unlawful distributions must repay it

32
Q

Its a wrap v Gula

A

Director paying himself as dividends for tax reasons, these were unlawful, so he had to pay back.

33
Q

Banking Flintcrofts case

A

Directors made unlawful distrbutions which weren’t recoverable, director liable to compnay, so they must pay themselves.

34
Q

Approving dividends

A

Amount available for distribution determined from accounts. Directors propse dividend and annual accounts circulated to members.
Members approve dividend

35
Q

CA 2006 S.393

A

When making dividend proposal, account and balance must give a true and fair view.