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CGI (all) > CCA - Part 1-4 > Flashcards

CCA - Part 1-4 Flashcards

1
Q

Requirements of a public limited company?

A

A plc must have atleast 2 directors (s.154 CA 2006)

The directors need to consider if the cosec of a plc is suitably qualified as per the criteria set out (s.273 CA 2006)

A plc must have issued atleast £50k of share capital and atleast 25% must be paid

All companies annual accounts must be audited unless the company qualifies for an exemption (s.475 CA 2006)

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2
Q

Which companies would qualify for an audit exemption?

A

Small companies

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3
Q

List some of the listing rules

A

Minimum amount of shares for a listed company must be a free float (shares readily available in public hands for dealing in the market)

25% minimum free float for each class of shares

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4
Q

Different types of director

A

Executive
Non-executive
De Jure
De Facto
Alternate director
Shadow director
Nominee director

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5
Q

Which reports should quoted companies submit?

A

Strategic report

Directors report

Directors remuneration report

Auditors report

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6
Q

Which resolutions are not permitted to be passed by written resolution?

A

Removal of a director
Removal of auditor before the end of their term

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7
Q

Different types of meetings?

A

Directors meetings

General meetings

Annual general meeting

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8
Q

Who are the key advisers required of a company decides to apply for a listing regulated market on the LSE?

A

Sponsor/ corporate broker

Lawyers

Reporting accountant

Financial public relations consultants

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9
Q

What is a listed company?

A

A company that has class of its securities listed on the Official List maintained by the FCA

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10
Q

What is a quoted company?

A

A company whose share capital
(i) has been included on the official list
(ii) officially listed in an EEA state or
(iii) is admitted to dealing on the NYSE or NASDAQ

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11
Q

What is a traded company?

A

Company with any shares that
(i) carry rights to vote at general meetings and
(iii) are admitted to trading on a regulated market in an EEA state by or with the consent of the company

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12
Q

What is a public company?

A

A company limited by shares, or guarantee

Company whose ownership is divided into shares that can be traded by the general public

having a share capital, the certificate of incorporation of which states that it is a public company

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13
Q

Explain the statutory filings and statutory updates required upon a cosec resignation of a private company

A

Resignation must be entered in the companys register of directors and secretaries

Notify registrar with relevant form (TM02) within 14 days

(If company has opted to maintain a central register at CH, the notification will also update the register)

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14
Q

Allotment of shares - how can companies disapply pre-emption rights?

A

Excluding rights in Articles (requires variation to articles)

Excluded for a specific duration by special resolution of members

Listed companies request annual waiver at AGM for 10% of issued share capital

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15
Q

Listed company - how often must a company undertake a tender for the external auditor

Confirm the maximum period of engagement for the external auditor

A

Listed company = at least every 10 years

Maximum period of engagement = longer of:
10 years from when auditor was appointed

20 years (provided tender has been held in the last 10 years)

another period not exceeding 20 years from when auditor was appointed - ending on the last day of the relevant 10 year period

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16
Q

Other than business of meeting, list six types of info considered good practice to include in the minutes of a Board meeting

A

Company name and number

Place, date and time of meeting

Directors and other attendees

Confirmation of meetings chair

Confirmation quorum was present

Declaration of any conflicts of interest

Time meeting closed

Signature block for the chair to sign the minutes

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17
Q

Directors address
What info must be provided to the Registrar of Companies?

What info is visible by the public?

A

Director must provide residential address to Registrar in case they need to contact them at their home address

To protect against fraud and harassment usual to also provide service address to Registrar

Only the service address is visible to the public

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18
Q

Following an amendment to the Articles of Association, what documents must be filed at the Registrar of Companies and what is the applicable timescale?

A

The following must be filed within 15 days of passing a special resolution:

  • A signed copy of the special resolution
  • The amended Articles of Association
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19
Q

Why and how often must a listed company seek approval for its Remuneration Policy

A

LC may only pay directors remuneration in accordance with Remuneration policy

Remuneration policy must be put to the vote at a general meeting atleast once every three years/ anytime change to policy is proposed

Vote is binding upon the company

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20
Q

Who has the authority to convene a Board meeting?

A

Any one director

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21
Q

When are shareholders required to approve a directors service contract?

A

Notice period greater than two years

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22
Q

Explain the purpose of a schedule of matters reserved to the Board

A

In larger businesses, Board controls/ is responsible for business although everyday decisions are delegated to executive management

To work effectively - clear set out matters that the execs can approve and those that require board approval

SOM reserved for the Board shows those matters and decisions why only the Board (or a duly constituted Board committee) may approve

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23
Q

Why might a listed company establish a Disclosure Committee

A

Listing regime requires listed companies establish and maintain procedures for the identification, control and release of inside information

Listed companies should also ensure there is adequate training of relevant employees on the handling of inside information

Disclosure Committee is not mandatory

But may help to ensure procedures and decisions regarding the identification, control and release of inside information are managed properly by those with sufficient understanding of companys obligations

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24
Q

In a meeting of members, explain the use and impact of abstaining on a resolution

A

An abstention is neither a vote in support or against a resolution, but a decision to withhold a vote

Listed companies are required to include the option to abstain from a vote as part of the proxy form sent to shareholders

In law, an abstention is not a vote and it is not included in calculation of votes to determine if the resolution is passed

LC - the number of abstentions must be calculated and included in the publication of results of the resolutions

Abstaining from a vote is often used by institutional shareholders to express their opposition to various aspects of a listed company’s corporate governance performance

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25
Q

Share premium definition

A

Shares are often allotted for more than their nominal value - the excess is known as the share premium

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26
Q

What is a premium listed company?

A

The UK Listing Authority requirements differ

Sponsor required

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27
Q

What is a standard listing company?

A

A standard listing allows companies to have their shares traded on the London Stock Exchanges Main Market

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28
Q

How can all listed companies be described?

A

All listed companies can be described as quoted companies but not all UK quoted companies are listed.

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29
Q

7 directors duties

A

Act within their powers

Promote the success of the company

Exercise independent judgement

Exercise reasonable care, skill and diligence

Avoid conflicts of interest

Not accept benefits from third parties

Declare interests in transactions or arrangements

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30
Q

Proposals that can be passed by ordinary resolution

A

Reappointment of the director

Increase in authorised capital

Authorisation of directors to allot shares

Reappointment of auditors
Capitalisation of profits

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31
Q

Proposals that must be passed by special resolution

A

Alteration of Articles

Change of name

Company status re-registration

Reduction of capital

Purchase of own shares

Dis application of pre-emption rights

Wind up voluntarily

32
Q

Explain the difference between a members voluntary winding up and a creditors voluntary winding up

A

Members voluntary winding up
A solvent winding up
Directors are able to make a statutory declaration that the company will be able to pay its debts in full within 12 months from commencement of the winding up

Creditors voluntary winding up
Directors unable to make a statutory declaration of solvency

Meeting of the creditors must be called and held within 14 days

After meeting of the members at which a resolution to wind up is passed (s.98 IA 1986)

33
Q

What is the primary market?

A

Raise new and replace existing funds

Securities created

34
Q

What is secondary market?

A

Where shares may be freely traded

Securities traded

35
Q

What is a SCRIP dividend?

A

Under scrip dividend scheme:
Members may elect to receive dividends by the issue of fully paid shares in lieu of cash dividends

Authority must be contained in company’s Articles

Or passed by members resolution

36
Q

What is a DRIP?
Dividend Re-Investment Plan

A

Member elects to receive dividends by purchasing existing shares

No authority by members required

Member will have to pay stamp duty when shares are purchased

37
Q

Meeting of directors - explain required quorum and the action that must be taken if the number of directors fall below the quorum

A

Quorum for Board meetings is set out in a companies Articles
MA plc reg 10
MA ltd reg 11

Is 2 directors unless directors decide otherwise

If directors fall below quorum, director may appoint another director

No other business may be passed apart from appointment of additional director until the meeting is quorate

This may be done by director or by a general meeting of the members to approve the appointments

38
Q

Explain the best practice to deal with entering a minor as a member of a company where shares are party paid

A

Becoming a member may involve the assumption of liabilities in respect of the shares held

Not considered good practice to accept minors as members of a company in their own name

Because their responsibilities would be voidable during their minority

Where shares are partly paid, this would impose an obligation to pay any calls that may be made by the directors

The obligation to pay is voidable by a minor, sanctions for non-payment are unenforceable

Company should request that the shareholding be held in the name of a suitable adult

39
Q

Under the Market Abuse Regulation - explain why a closed period is needed and what the length of a closed period is

A

A closed period forms part of the framework for the MAR and controlling inside information, which directors of a listed company are obliged to maintain

Inside information is deemed to exist during a closed period

An insider (someone on the insider list) must not deal in the securities of the company during a closed period

A closed period is the period of 30 days prior to an announcement of the company’s full year or half year financial report

40
Q

Differences in treatment for a share transfer valued at £500 and £5000

A

Transfer of shares should be supported by stock transfer form

Stamp duty payable on transfers with a value of more than £1000 at a rate of 0.5%

Transfer valued at £500 exempt
Transfer valued at £5,500 is liable

Prior to registration by the company, necessary for the stock transfer form valued at £5,000 to be stamped by HMRC

Not required for stock transfer valued at £500, appropriate declarations should be completed on reverse of stock transfer form

41
Q

Different ways statutory returns may be filed at Companies House?
Which method has the most advantages

A

Returns may be filed at Companies House
Hard Copy
Electronically via WebFiling facility
Via an approved software filing service

Paper based simple, filing via electronic has several advantages:
. Cheaper and quicker, with automatic confirmation of fiing

. Reduces likelihood of error due to inbuilt checks and pre-population of data

. Rejection rates are lower

. Environmentally friendly alternative

. Higher level of security via the PROOF system (PROtected Online Filing)

42
Q

Explain why Boards should carry out a Board evaluation. How often should Boards of listed companies conduct an evaluation and where should such evaluations be publicly disclosed?

A

Effective Board is key to long-term success

To maximise Board effectiveness, should be reviewed regularly

The evaluation can assess the skills, knowledge and working practices of the Board

Consider areas that might need improvement

The UK Corporate Governance Code recommends listed companies undertake an annual, formal and rigorous evaluation

Of its performance, committees and individual directors

The code recommends that for the Boards of FTSE350 companies, this review should be conducted by an external facilitator at least once every 3 years

Details of how the evaluation was undertaken should be included in the company’s annual report (corporate governance section)

Together with a summary of any issues found and steps being taken to address them

43
Q

What is a non voting share?

A

Carry no rights to vote and usually no right to attend general meetings

44
Q

Characteristics of a limited company

A

Used if profit is expected to be made

The liability of members is limited

Annual financial information must be published and available to the public (via Companies House)

Profits will be assessed for tax on the company

Shares can only be offered to a restricted membership and cannot be offered to the public in excess of 100 persons

45
Q

Characteristics of an unlimited company

A

Used if profit is expected to be made

The liability of its members is unlimited

Annual financial information may be kept confidential

Profits will be assessed for tax on the company

Shares can only be offered to a restricted membership and cannot be offered to the public in excess of 100 persons

46
Q

Does a share certificate provide definitive proof of membership?

A

Definitive proof of membership can only be obtained by examination of the register of members

A share certificate provides prima facie evidence of title s.768 CA 2006

47
Q

What actions should a company take if a shareholder requests a replacement certificate for one that has been lost?

A

Share certificate provides prima facie evidence, also a risk of a lost certificate being used fraudulently to support a transfer of shares

Company should seek protection by asking shareholder to provide an indemnity to the company against the liability which may arise on a fraudulent transfer

Indemnity should be joined in by bank, insurance or trust company

On receipt of completed indemnity, a replacement marked ‘duplicate’ should be issued

The register of members should be annotated to note the original was lost and a duplicate issued

48
Q

Explain why a listed company should have a share dealing policy (or code) in respect of its obligations under the Market Abuse Regulation (MAR)

A

Under the MAR, it is not obligatory for a listed company to prepare a share dealing policy

The primary obligation of companies under MAR relates to:
the control and disclosure of inside information and dealing by PDMR’s

responsibilities for compliance mainly fall upon the PDMR’s and anyone else on an insider dealing list

Listed companies believe it is helpful to have a share dealing policy to provide clarity and reduce chances of breach

49
Q

Issued share capital?

A

Total value of shares that have been issued

50
Q

What is authorised capital?

A

Maximum amount of share capital that a company is allowed to issue to its shareholders as per its constitutional documents.

51
Q

Alloted share capital?

A

Total nominal value of shares a company has alloted

Person acquires right to be included in register of members

52
Q

Paid up share capital?

A

Combined total of the nominal value of shares that has actually been paid

53
Q

Called up share capital?

A

Paid up share capital plus the amount called for/ installment amount due

54
Q

Equity capital?

A

Ordinary voting capital

55
Q

What is debt capital?

A

Capital that a business raises by taking out a loan.

56
Q

Nominal value

A

Fixed value attached to all the shares in a limited company

Nominal value represents the minimum value a share can be allotted for

57
Q

Purpose of nominal value

A

Minimum value a share can be allotted for

Helps determine how much a shareholder will be required to contribute upon the company’s liquidation

If the shareholder has paid the nominal value, they will not be required to contribute any more

58
Q

Who has the power to appoint a director?

A

First directors appointed upon the companies incorporation

It is then a matter for the articles

If articles are silent, model articles apply (ltd reg 17)

Ordinary resolution (if articles are excluded) or decision of directors

59
Q

Rules for the removal of a director under s.168 of the Companies Act (2006)

A
  1. Resolution to take place at a meeting - written resolution procedure cannot be used (CA 2006, s. 288(2)(a)).
  2. Special notice of a s.168 resolution is required - namely 28 days.
  3. A copy of the resolution must be send to directors whose resignation is sought.
  4. The director whose removal is sought has the right to protest against his removal and, to that end, may address the meeting (s. 169(2)) and circulate written representations to the meeting (s. 169(3)-(5)).
  5. While s. 168 allows a company to remove a director, it will not deprive the director that has been removed of any compensation payable as a result of the removal (s. 168(5)(a)).
60
Q

Different types of capital events

A
  1. Share offer
  2. Scale back
  3. Rights issue
  4. Consolidation
  5. Takeover
  6. Scheme of arrangement
61
Q

Different types of shares

A

Ordinary
Non-voting
Preference
Deferred
Cumulative
Redeemable

62
Q

Statutory registers for members

A

Register of Members
Only individuals or legal entities should be registered

English partnerships, trusts/ share investment clubs must not be entered

63
Q

Statutory registers for Directors

A

Register of Directors (name, service address, country of residency, nationality, occupation, DOB, date of appointment, date of termination)
Directors residential addresses
Directors service contracts
Directors indemnities
Books of director meetings, resolutions

64
Q

Statutory registers for Shares & Equity

A

Interest in voting shares

65
Q

Statutory registers for the Company

A
66
Q

Who may inspect the register of members, and explain the procedure which must be
followed when an inspection request is made.

A

Any member of the company may inspect the register free of charge (1) and
anyone else may inspect it on payment of a fee (1).

Inspection requests should state the reason for the inspection. If this is not
included it should be sought by the company (1).

The company must either comply with the request or seek permission from
the Court to refuse it (1).

Permission to refuse inspection will only be given where the request is not made for a proper purpose (1).

If the Court agrees the request is not for a proper purpose it will make an order directing the company to refuse it (1)

67
Q

Location of records and registers

A

Registered office

SAIL (Single Alternative Inspection Location)

Central register (for small, private companies)

68
Q

Circumstances requiring special notice

A

Removal of director before expiration date

Fill causal vacancy of auditor

Reappoint retiring auditor appointed to fill casual vacancy

Remove auditor before expiration of term

69
Q

4 types of resolutions

A

Ordinary

Special

Ordinary resolutions requiring special notice

Extraordinary

70
Q

Extraordinary resolutions

A

Pre 2006

Occur in class meetings

71
Q

Difference between allotting and issuing shares

A

Shares are allotted when person acquires right to be included on the register of members s.558 CA (2006)

Shares are issued with a persons name is actually entered onto the register of members

72
Q

Characteristics of an ordinary share

A

Rights for owner to share in profits of the company

Vote at general meetings

May be split into different types of rights
(Voting rights, dividend rights, capital rights, redemption rights)

73
Q

Characteristics of preference shares

A

Priority over other share classes

Unless PS holders receive dividend, no dividends payable to other share class

No further right to further dividends

Common to restrict voting rights to specific situations

74
Q

Are all listed companies public companies?

A

Yes but not all public companies are listed. Public companies can be listed or unlisted on the stock exchanges

75
Q

Difference between listed, traded and quoted companies?

A

A stock that is described as ‘listed’ is a stock that meets the requirements of the top tier exchange/market.

Other stocks that are bought and sold on a second- or third-tier market are not described as listed, but often simply referred to as being ‘traded’ or ‘quoted’ on that exchange.

76
Q

Which company types is it not possible to change?

A

To or from that of a company limited by guarantee

From being a CIC company

77
Q

Order for traded, listed, quoted companies (TLQ)

A

Order:
Traded - has shares

Listed - from that company can be listed on UK official list

Quoted - listed company quoted as being on one of the official listed dealing houses

CGI (all) (6 decks)

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