CCA - Part 1-4 Flashcards
Requirements of a public limited company?
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)
Which companies would qualify for an audit exemption?
Small companies
List some of the listing rules
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
Different types of director
Executive
Non-executive
De Jure
De Facto
Alternate director
Shadow director
Nominee director
Which reports should quoted companies submit?
Strategic report
Directors report
Directors remuneration report
Auditors report
Which resolutions are not permitted to be passed by written resolution?
Removal of a director
Removal of auditor before the end of their term
Different types of meetings?
Directors meetings
General meetings
Annual general meeting
Who are the key advisers required of a company decides to apply for a listing regulated market on the LSE?
Sponsor/ corporate broker
Lawyers
Reporting accountant
Financial public relations consultants
What is a listed company?
A company that has class of its securities listed on the Official List maintained by the FCA
What is a quoted company?
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
What is a traded company?
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
What is a public company?
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
Explain the statutory filings and statutory updates required upon a cosec resignation of a private company
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)
Allotment of shares - how can companies disapply pre-emption rights?
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
Listed company - how often must a company undertake a tender for the external auditor
Confirm the maximum period of engagement for the external auditor
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
Other than business of meeting, list six types of info considered good practice to include in the minutes of a Board meeting
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
Directors address
What info must be provided to the Registrar of Companies?
What info is visible by the public?
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
Following an amendment to the Articles of Association, what documents must be filed at the Registrar of Companies and what is the applicable timescale?
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
Why and how often must a listed company seek approval for its Remuneration Policy
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
Who has the authority to convene a Board meeting?
Any one director
When are shareholders required to approve a directors service contract?
Notice period greater than two years
Explain the purpose of a schedule of matters reserved to the Board
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
Why might a listed company establish a Disclosure Committee
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
In a meeting of members, explain the use and impact of abstaining on a resolution
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
Share premium definition
Shares are often allotted for more than their nominal value - the excess is known as the share premium
What is a premium listed company?
The UK Listing Authority requirements differ
Sponsor required
What is a standard listing company?
A standard listing allows companies to have their shares traded on the London Stock Exchanges Main Market
How can all listed companies be described?
All listed companies can be described as quoted companies but not all UK quoted companies are listed.
7 directors duties
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
Proposals that can be passed by ordinary resolution
Reappointment of the director
Increase in authorised capital
Authorisation of directors to allot shares
Reappointment of auditors
Capitalisation of profits
Proposals that must be passed by special resolution
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
Explain the difference between a members voluntary winding up and a creditors voluntary winding up
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)
What is the primary market?
Raise new and replace existing funds
Securities created
What is secondary market?
Where shares may be freely traded
Securities traded
What is a SCRIP dividend?
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
What is a DRIP?
Dividend Re-Investment Plan
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
Meeting of directors - explain required quorum and the action that must be taken if the number of directors fall below the quorum
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
Explain the best practice to deal with entering a minor as a member of a company where shares are party paid
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
Under the Market Abuse Regulation - explain why a closed period is needed and what the length of a closed period is
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
Differences in treatment for a share transfer valued at £500 and £5000
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
Different ways statutory returns may be filed at Companies House?
Which method has the most advantages
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)
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?
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
What is a non voting share?
Carry no rights to vote and usually no right to attend general meetings
Characteristics of a limited company
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
Characteristics of an unlimited company
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
Does a share certificate provide definitive proof of membership?
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
What actions should a company take if a shareholder requests a replacement certificate for one that has been lost?
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
Explain why a listed company should have a share dealing policy (or code) in respect of its obligations under the Market Abuse Regulation (MAR)
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
Issued share capital?
Total value of shares that have been issued
What is authorised capital?
Maximum amount of share capital that a company is allowed to issue to its shareholders as per its constitutional documents.
Alloted share capital?
Total nominal value of shares a company has alloted
Person acquires right to be included in register of members
Paid up share capital?
Combined total of the nominal value of shares that has actually been paid
Called up share capital?
Paid up share capital plus the amount called for/ installment amount due
Equity capital?
Ordinary voting capital
What is debt capital?
Capital that a business raises by taking out a loan.
Nominal value
Fixed value attached to all the shares in a limited company
Nominal value represents the minimum value a share can be allotted for
Purpose of nominal value
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
Who has the power to appoint a director?
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
Rules for the removal of a director under s.168 of the Companies Act (2006)
- Resolution to take place at a meeting - written resolution procedure cannot be used (CA 2006, s. 288(2)(a)).
- Special notice of a s.168 resolution is required - namely 28 days.
- A copy of the resolution must be send to directors whose resignation is sought.
- 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)).
- 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)).
Different types of capital events
- Share offer
- Scale back
- Rights issue
- Consolidation
- Takeover
- Scheme of arrangement
Different types of shares
Ordinary
Non-voting
Preference
Deferred
Cumulative
Redeemable
Statutory registers for members
Register of Members
Only individuals or legal entities should be registered
English partnerships, trusts/ share investment clubs must not be entered
Statutory registers for Directors
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
Statutory registers for Shares & Equity
Interest in voting shares
Statutory registers for the Company
Who may inspect the register of members, and explain the procedure which must be
followed when an inspection request is made.
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)
Location of records and registers
Registered office
SAIL (Single Alternative Inspection Location)
Central register (for small, private companies)
Circumstances requiring special notice
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
4 types of resolutions
Ordinary
Special
Ordinary resolutions requiring special notice
Extraordinary
Extraordinary resolutions
Pre 2006
Occur in class meetings
Difference between allotting and issuing shares
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
Characteristics of an ordinary share
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)
Characteristics of preference shares
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
Are all listed companies public companies?
Yes but not all public companies are listed. Public companies can be listed or unlisted on the stock exchanges
Difference between listed, traded and quoted companies?
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.
Which company types is it not possible to change?
To or from that of a company limited by guarantee
From being a CIC company
Order for traded, listed, quoted companies (TLQ)
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
