7. Returning Value to Ms Flashcards
What must be checked about company shares if own purchase
RS or treasury will still be in issue after purchase
Where are the terms of redemption set out
In AoA or determined before allotment by BR
What must the state of share capital of company be for redemption of RS
Non RSs must also be in issue
Why do you need GM for own purchase + capital
Off-market C (OR) + approve capital (SR)
What must shares have been issued as for redemption
RS
Relevant specified investment for FSMA (Article)
Article 76
What must be checked before own purchase out of profits/fresh issue
AoA permits, shares fully paid and verify distributable profits
Report to CH on what for redemption of shares
Within 1 month of redemption w/ SoC
What kind of company can purchase own shares or redeem shares out of profits/fresh issue
Priv and Pub
Will two Part II RAO exclusions ever be applicable
No
Voting of owner of shares when own purchase + off-market C
Cannot carry res at GM and excluded in WR
Why do you need GM for redemption + capital
To pass SR to use capital
684 - 689 covers what
Redemption
Two sources to comply w/ for stage 4 of FSMA Q
327 FSMA and SRA Scope Rule 4
What usually happens after own purchase to the shares
Cancelled
What are two kinds of dividends
Final and interim
BM after GM approving off-market C does what
Enters into C + authorises signatory
Conclusion for FSMA Q
Firm must be authorised by FCA + comply w/ FCA Handbook
When can money paid to M for buy back be considered capital
If shares in unquoted trading C for at least 5 years + other hurdles
Who supervises Ss under FSMA
SRA
For how long must DS and AR be available for inspection for capital financing
5 weeks
When can buy back take place for capital financing
Between 5 and 7 weeks after SR
What part of CA enshrines doctrine of maintenance of share capital
658
Within/on 7 days of what docs does the GM have to be for redemption + capital
director’s solvency statement and auditors report
What are dividends based on as a general rule (in terms of splitting between Ms)
Based on NV of each share of Ms on reg at time of OR
What kind of shares can be kept as treasury shares - financing how?
From profits
When can Ms receive part of capital of company
If wound up, or if M sells shares
Why might a fresh issue be used to fund buy back
To maintain gearing, or if lending arrangements require share capital to stay the same
Why will PrivC always be off market
Bc not listed
What is the simplest buy back procedure
Profits/fresh issue for redemption
Two PMMs after GM for capital financing
Deliver 714 docs to CH by day of 719 notice + SR within 15 days
What is the effect of carrying out RA w/o authorisation or exemption
Criminal offence
When do unclaimed dividends reabsorb back into company
After 12 years
When does capital redemption reserve increase and by what on Balance Sheet
If own purchase + cancellation + by profits, increases by reduction in share capital
Article 53 RAO applies to what
Specified activity of advice on investment
What dividend only requires BR
Interim
What is necessary to be able to use De Minimis procedure
AoA authorises or SR will be needed
Report to CH on what for own purchase of shares
Return w/ SoC within 28 days of purchase
When is it not necessary to use profits first or fresh issue before capital for own purchase
De minimis procedure applies
What happens once shares are redeemed
they are cancelled
Can you ratify unlawful dividend? Explain
No bc illegal, so not permitted under 239
What reduces by purchase cost if own purchase + by profits
Distributable profits and net assets
Is interest payable on dividends?
No
Why is court order for reduction of capital also disadvantageous
Time-consuming and expensive
What must you check to use capital to redeem (x4)
AoA permits, profits used first, accounts less than 3 months old and accountants verify decision
What kind of company can purchase own shares or redeem shares out of capital
Only Priv
Stage 3 in FSMA Q
Part II RAO excludes some activities
Two ways for PrivC to reduce capital
SR + solvency statement, or SR + court order
By when must 714 docs be delivered to CH for capital financing
By day of 719 notice
Shareholder res required to approve off-market C for own purchase
OR
Two exclusions for stage 3 in FSMA Q
Article 33 and Article 67
What rights apply to treasury shares
561 pre-emption rights
What is the doctrine called that means share capital cannot be distributed to Ms unless winding up
Doctrine of maintenance of share capital
690 - 708 aplies to what
Own share purchase
When can M agree to defer payment for buy back (kind of buy back)
Redemption
When is no SR required despite financing out of capital
Own purchase + subject to de minimise procedure
How do you know if RA arises out of or is complimentary to professional service for FSMA
Arises out of same fee quote? Does it naturally arise?
Parts of CA on own share purchase
690 - 708
Article 67 RAO exclusion says what
Excluded if necessary part of other transaction
What must you check in order to pay for redemption or own purchase out of profits
Check distributable profits for it
Why is short notice unlikely for own purchase + off-market
Bc need to disclose C, so only reduced by 1 day
What are the consequences of unlawful payment of dividend
M w/ RG for believing unlawful must repay, and potentially breach of Ds duties by Ds
When does Article 53 as a specified activity not apply
If only giving generic advice on rights arising from different share classes
When consider Article 67 RAO as exclusion
Article 67 (overarching)
19(1) FSMA = what
General prohibition against carrying out regulated activity unless authorised/exempt
Stage 1 on FSMA Q
19(1) FSMA
When can M not defer payment for buy back
Own share purchase
When will FSMA apply
If client seeks advise on investment of money in shares of company
How are dividends justified
By ref to latest accounts
658 enshrines what
Doctrine of maintenance of share capital
Why is it unlikely 190 is triggered for buy back
192(a) excludes if purchasing from D in capacity as M
What is the reserve arising from reduction of capital treated as
Capital, unless court orders otherwise
When can BM2 be held for own share purchase + off-market + capital
Immediately after GM, to sign C + give conditional authority
Why is 177 important if it applies
Triggers MA 14
What does the D statement of solvency state
Company is solvent and will continue to be solvent for 12 months
What kind of buy back requires C
own share purchase off market
Disclosure on off-market own purchase
Disclose C 15 days prior to GM and at GM, or sent w/ WR
When is the share premium account used
Only for FI + share originally issued at premium + being bought back at premium too
When consider Article 33 RAO as exclusion
If Article 25 SA
What kind of shareholder res to approve final dividend
OR
What can Ms ONLY be paid out of per 830
Distributable profits
To check for own purchase out of capital
AoA permits, profits first, accounts less than 3 months old and accountants verify decision
Stage 4 in FSMA Q
S must be directly authorised or supervised
In-house matters for both redemption and own share purchase
Update M reg, check PSC, cancel/reissue share certificates and update minutes
How long do creditors have to object to use of capital for buy back
5 weeks
Do MA permit issue of RS?
Yes
Where to find specified activities for FSMA
Part II RAO
What kind of dividend requires shareholder approval
Final
When must there be notice to creditors after SR approves use capital for buy back
Within 1 week
Part of CA on redemption
684 - 689
How does 22(1) FSMA define RA
Specified activity and specified investment
Who can issue RSs
All LimCs, if AoA does not prohibit
What D duty is particularly important when deciding to declare dividend
172
Article 76 RAO applies to what
Shares as specified investment
Two sections on SR for capital financing needs to be delivered to CH
29(1)(a) and 30(1)
What is the long-term effect of a scrip dividend
Dilutes shareholding for those who do not take up the scrip issue
When is payment for buy back treated as income dividend
If exceeds amount paid on allotment
what part of MA governs payment of dividends
MA 30 - 36
What happens to equity if buy back funded by FI
Equity increases by FI and reduces by buyback
What authority is not needed to sell treasury shares
551 authority
What is a scrip dividend
Offer additional shares instead of paying out a dividend
641 applies to what
Reduction of capital
Stage 2 on FSMA Q
22(1) defines RA as specified activity and specified investment
Article 25 RAO applies to what
Specified activity of arranging deals
What additional PMM in-house matters take place for own share purchase
Keep copy of off-market C for 10 years from purchase
How many days prior to GM must off-market C be disclosed
15 days
Two procedure matters to consider for buy back - kind of contract + D duties
If 190 triggered, and if 177 declaration triggered
Two relevant specified activities under Part II RAO for FSMA
Article 25 arranging deals + 53 advice on investment
Must both RSs and shares to be purchased by company be fully paid up?
Yes
Voting change for capital financing
Owner of shares cannot carry res at GM, and excluded in WR
Article 33 RAO exclusion says what
Excluded if intro to authorised person
When does the De Minimis procedure apply
Own purchase out of capital from the lower of £25k or 5% of share capital
Why do Ms benefit from buy-backs in the long-term
Increase earnings per share
Disclosure of DSS and AR
Sent w/ WR or available at GM
Why is reduction of capital used
To represent true value of assets that have substantially reduced in value
What do Ds do in final dividend
Recommend amount of dividend
Part of A on reduction of capital
641
How old must accounts be for financing out of capital
Less than 3 months old
Where to fine specified investments for FSMA
Part III RAO
4 things to comply w/ for stage 4 of FSMA Q
Member of profession supervised by professional body, no payment from other than client, provide services incidentally to professional service and arises out of or is complementary to professional service
What manner of reduction of capital is more favourable bc no ability to challenge
Court order
When might SR be required to approve off-market C for own purchase
If AoA so requires
