Business Finance Flashcards
What is equity finance?
Raising money by selling shares within the business.
What are the three ways to raise equity finance?
Allotment of shares
Buyback of shares
Share transfers
What are the three key questions to ask when considering allotment of shares?
- Are there any constitutional restrictions?
- Do the directors have authority?
- Are there any pre-emption rights?
Do limits exist for companies to allot shares?
Pre-October 2009, there is an upper limit in the memorandum and an ordinary resolution is required to remove it.
Post-October 2009, there is no limit but this may be overridden in the articles if amended.
When do directors require the permission of shareholders to allot shares?
Private companies with one class of shares have authority to allot shares without permission, but pre-Oct 2009 companies require an ordinary resolution to activate this.
Public companies/private companies with more than one class must pass an ordinary resolution which cannot be more than 5 years after the resolution has passed.
What are pre-emption rights?
First rights of shareholders to refusal over equity security shares being allotted.
What are equity security shares?
Ordinary shares or rights to subscribe for ordinary shares, which gives the shareholders the right to vote.
What terms must the company offer the shareholders pre-emption rights on?
Offer the same number of shares to allow the shareholder to preserve their % shareholding.
The offer must state a period of acceptance which cannot be less than 14 days.
The offer cannot be withdrawn in that period.
What shares do not have pre-emption rights?
Bonus shares
Where consideration is wholly or partly non-cash
Employee share schemes
Do pre-emption rights exist in the Model Articles?
No
If pre-emption rights exist, can they be disapplied?
Yes, by special resolution and a written report confirming the reason and amount must be circulated.
Do shares need to be fully paid under the Model Articles?
Yes, unless amends have been made by the company.
In respect of allotment of shares, what resolutions need to be sent to Companies House and by when?
Within 15 days….
All special resolutions.
Ordinary resolutions:
- Authorising share capital in a pre-CA company.
- Activity ability to allot one class of shares in a private company.
- Granting directors authority to allot.
In respect of allotment of shares, what forms should be sent to Companies House?
Return of allotment and statement of capital within one month of allotment
Form to notify changes of persons of significant control.
In respect of allotment of shares, what amends should be made the company register?
Register of members within 2 months
PSC register where necessary
