19: Company law share and loan capital Flashcards
there are two types of ways a company can raise long term finance. this is by:
share capital
debt capital
both shareholders and debenture holders are investors who receive a return on their capital investment. shareholders receive a return by way of a _____ and debenture holders by a ____
dividend, interest
can a company issue share capital at a discount to its nominal value?
no.
can a company issue share capital at a discount to its market value?
yes, provided it is not lower than the nominal value
if the nominal value of a share is £1 and the company issue them for £1.25, what is the term for this £0.25?
share premium
Jacques set up Cloone Ltd two years ago, subscribing for a £1 share at its nominal value.
The company asked for 50p to be paid. This is called _ share capital.
Jacques actually paid 30p. This is _ share capital. Jacques still currently owes the company 20p per share. He is also under a duty to pay 50p per share in the future when the company calls for the _ share capital
fill in blanks
called up share capital
paid up share capital
uncalled share capital
what is the difference between unissued share capital and uncalled share capital?
unissued share capital is not issued to anyone and no liability has been created
uncalled share capital is a shareholder has not yet paid up for the share capital that they are obligated to pay and therefore creates a liability: it is a debt and if called upon, shareholder is obliged to pay,
is there only one class of share?
no
what are ordinary shares entitled to?
entitled to a dividend from the distributable profits
ordinary shares are entitled to a dividend from the distributable profits, but only once what…?
once the preferential share holders have been paid their dividends first
there may be class A ordinary shares and class B ordinary shares. what might the difference in these be?
perhaps a difference in voting rights
are preference shareholders entitled to dividends at a fixed or flexible rate?
fixed
what does it mean by cumulative and non cumulative preference shares?
if for any reason, a company cannot distribute dividend shares for that year, they will double your dividend rate in the next year. this is cumulative preference shares
if for any reason, a company cannot distribute dividend shares for that year, the right to the dividend lapses and you will not receive a dividend that year. this is non-cumulative preference shares
will a preference shareholder ever receive a dividend that is less than their fixed rate?
no, they will always receive their fixed rate or above. but never below.
what is a participating preference shareholder?
one that has receives dividends from their preference shares, but additionally receives dividends received from other classes of shares
what are deferred shares
shares that have a right attached to them that only begins conditional to a future date or event to occur.
example: shares that have no right to a dividend that will acquire voting rights when the company’s profits reach a defined amount
what are convertible shares?
shares that are, when issued, convertible into another share class.
example: convertible into ordinary shares
what are redeemable shares
shares that will be bought back by the company at a later date
do non-voting share have voting right?
no
do all companies need ordinary and preference shares?
no, not all companies have preference shares
what does the term “pari passu” mean?
it means that all share classes rank equally
does ordinary share capital include only all ordinary shares issued? for tax purposes
no.
it includes all shares issued, except preference shares (and it does include participating preference shares)