Business Practice (Public Companies)

Question 1

What name must a public company end with?

Answer 1

PLC (Public Limited Compnay)
or
CCC (Cwmni Cyfyngedig Cyhoeddus)

Question 2

When incorporating a company what form is used and how can you specify you wish it to be public?

Answer 2

INO1 and include a statement that the company should be publi.

Question 3

What is the minimum requirment of the nominal value of a public company’s issued share capital?

Answer 3

Authorised Minimum is £50,000

Question 4

Must a public company ensure shares issued are paid on allotment?

Answer 4

It is under an obligation to ensure at least 25% of the nominal value is paid on allotment + the whole premium

For example, nominal value of £1 at a price of £5….

The investor must pay £4.25 on allotments: £4 (premium) + £0.25 (25% of £1).

Question 5

What are the member and officer requirments for a public company?

Answer 5

Public companies must appoint at least…

• 2 directors
• Qualified secretary
• One Member

Question 6

What is the principal advantage of a public company?

Answer 6

It is able to raise capital by offering shares or debentures to the public for cash or consideration. Note, to do so, a prospectus must be published, approved by the FCA

Private companies are prohibited.

Question 7

What must a public company obtain from the Registrar before trading?

Answer 7

A trading certificate which is issued when the Registrar is satisfied the company’s share capital is adequate (£50,000 etc…)

Question 8

What is the efffect of a public company trading without a trading certificate

Answer 8

If the company fails to meet its obligations with a transaction entered into without a trading certificate,

• The direcotrs are jointly and severally liable to indemnify other parties
• Officers can be fined
• If the company fails to obtain a certificate within 1 year, the court can wind the company up.

Question 9

Can public companies exclude pre-emption rights?

Answer 9

Unlike private companies, there cannot be a general exclusion of the pre-emption rights by a provision in its articles.

However, pre-emption rights may be excluded for specified allotments by passing a special resolution; or may also be excluded through a provision in the public company’s articles which excludes members’ pre-emption rights for this allotment. correct

Question 10

When must directors of a public company convene a general meeting in relation to loss of capital?

Answer 10

If the net assets are 50% or less of its called-up share capital.

Question 11

Can public companies buy back shares>

Answer 11

Public companies (like private companies) can buy back their own shares and issue redeemable shares.

However, they CANNOT use capital ro purchase or redeem shares.

Question 12

Can public companies take decisions by written resolution?

Answer 12

No. Unlike private companies, members of public companies cann pass written resolutions.

Question 13

When must a public company hold a regular general meeting?

Answer 13

Public companies must hold annual general meetings

Often used to fulfil statutory obligations to lay audited accounts and re-appoint auditors annually.

Question 14

How can a private company re-register as a public company?

Answer 14

The company must

• Satisfy the share capital requirments;
• Pass a special resolution stating that the company should be re-registered as a public company; and alters the articles to meet the public company rules (e.g. removing restrictions on transferability).
• Submit the application to Registrar of Companies along with the required documents (e.g. copy of special resolution) and a fee of £71.

Once atisfied, a certificare will be issued confirming the company has been re-registered and changes to articles/name take effect.

Question 15

How can a public company re-register as a private company?

Answer 15

Pass a special resolution to resolve to re-register as a private company; remove the words plc from the name and replace with ltd; and make alterations to the articles.

Submit to Registrar with fee of £71. A certificate will be issued and the changes will take effect.

Question 16

What can minority shareholders do if a public company re-registeres as a private company?

Answer 16

They can apply to court within 28 days of the special resolution being passed to have the resolution cancelled.

It can only be made by shareholders holding no less than 5% of the nominal value of issued share capital; or no less than 50 of the company members.

Question 17

When is a publci company prohibuited from making a distribution?

Answer 17

If its total net assets are less than the aggregate of its called-up share capital and undistributable reserves.
For example, imagine called-up share capital and undistributable reserves amount to £300,000 and net assets amount to £160,000.

The company’s total net assets (£160,000) are less than the ‘total aggregate of its called-up share capital and undistributable reserves (£300,000 > the distribution cannot be made.

However, the distribution could be made if the company was to reduce its share capital such that the aggregate is then less than its net assets.

Question 18

Can a public company accept an undertaking to do work or provide services as consideration for the allotment of shares?

For exampl, a marketing consultant offering to provide a stipulated period of consultancy to the company following the allotment in return for a specified number of new shares.

Answer 18

No.

A public company is prohibited by the Companies Act 2006 from accepting an undertaking to do work or provide services as consideration for the allotment of shares.