8. Companies: Raising Finance Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

What are the two ways a company can raise finance?

A
  1. Equity
  2. Debt
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is equity finance?

A

Raising capital by selling shares in the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a company’s share capital?

A

Money received on account of the nominal or par value of shares, which is not returned to the shareholders and is theoretically always available to pay creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

For company incorporated after 2009, when will there not be any requirements on a director if they wish to allot more shares?

A

If the private company only has one class of shares, and there is no restriction removing the director’s power

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

In other situations, e.g. where there are multiple classes of shares, what is required to allot new shares?

A

Member’s ordinary resolution or provision in bespoke Articles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the amount paid for shares that exceeds the nominal or par value, and where does this go?

A

Share premium, into the share premium account, and forms part of the same share capital which is not returned to the shareholders and is theoretically always available to pay creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What must shares be offered for in order for existing shareholders to have a preemption right?

A

Cash. Shares issues for anything else, e.g. property, will not give rise to the preemption right

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Where a preemption right does arise, how long must the existing shareholders be given to decide whether to accept?

A

14 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Does preemption apply to preference shares?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How is a preemption right disapplied?

A

Through shareholder special resolution (on a case by case basis), or by amending the articles (to make it permanent)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Under the model articles, what is the director’s right regarding a transfer of shares?

A

They have the absolute power to refuse to allow a transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is debt finance?

A

Raising capital by borrowing it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Do the directors have the power to borrow money on behalf of the company?

A

Yes, unless excluded by the articles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a fixed charge granted over?

A

Assets the company will own for a substantial period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a floating charge granted over?

A

A group of assets that change regularly, and does not crystallise until default

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Within what time limit of the creation of a charge by a company must it be registered at Companies House?

A

21 days

17
Q

What is the impact of failing to register a charge at Companies House?

A

The charge is void against a liquidator or administrator of the company, and the company’s creditors

18
Q

How is the priority of fixed charges over the same asset determined?

A

Based on the date of their creation, as long as they were validly registered at Companies House

19
Q

How is the priority of floating charges over the same asset determined?

A

Based on the date of their creation, as long as they were validly registered at Companies House
(Note that floating charges are always counted after fixed charges regardless of creation date)

20
Q

What is the priority of a fixed charge and a floating charge in the same asset?

A

As long as it is properly registered, a fixed charge will take priority over a floating in the same asset, even if the floating charge was created and registered first