Ch 15- Share Capital

Question 1

The 3 elements of a share :

Answer 1

1. Interest In the company.
2. Limited liability.
3. Mutual covenants - members are bound together.

Question 2

Differentiate between called up and paid up capital ?

Answer 2

(A) Called up capital is the amount that is due and requested by the company in payment for the shares issued.
(B) Paid up capital is the amount of Money received by the company for the shares issued.

Question 3

What is reserve capital ?

Answer 3

Reserve capital is the capital that will be used upon liquidation of the company.

Question 4

What are the Payment rules when shares are partly paid for ? (Plc)

Answer 4

1. At least 25% of the nominal value must be received.
2. 100% of any share premium must be received.

Question 5

What are the 4 categories of shares ?

Answer 5

1. Ordinary shares.
2. Preference shares.
3. Redeemable shares.
4. Deffered shares.

Question 6

Characteristics of ordinary shares.

Answer 6

1. Variable dividends.
2. Voting rights.
3. May attend and vote in general meetings.
4. They Rank last upon liquidation and is entitled to the surplus share and capital.

Question 7

Characteristics of preference shares : ( 4 points )

Answer 7

1. Fixed dividends.
2. Restricted voting rights.
3. Restricted from general meetings.
4. They rank above ordinary shares and is entitled to the repayment of capital only.

Question 8

Which resolution must be passed for directors to issue new shares ?

Answer 8

An ordinary resolution. It is effective for 5 years

Question 9

When shares are issued wholly for cash _____________ rights are granted. When can it be excluded ?

Answer 9

—Pre- emption rights. ( same as rights issues. )
—They can be excluded by passing a special resolution and with court approval.

Question 10

Pre - emption rights :

Answer 10

1. Shares must be allotted to existing share holders.
2. Shareholders have been notified in writing.
3. The offer must be open for atleast 21 days.

Question 11

What is meant by scrip dividend ?

Answer 11

When a company has insufficient amount of cash to pay dividends, they offer shares. It is also known as bonus shares.

Question 12

What laws under CA 2006 make it possible for a company to alter the rights attaching to classes of shares ?

Answer 12

1. AOA must allow for variation
2. 75% of shareholders of that class must agree . ( special resolution )