Ch 17- Capital Maintenance And Dividend Law Flashcards
How can a company reduce its a capital according to CA 2006 ?
- Removing liability for unpaid capital for issued share capital.
- Paying back excess capital to shareholders on fully paid shares.
- Cancelling paid up capital that has been lost.
How can private companies reduce their capital without court approval ?
- Special resolution is passed.
- Statement Of solvency is produced within 15 days of the resolution.
- A copy of the solvency statement and statement of capital are sent to the registrar within 15 days of the resolution.
List the 2 methods by which a company can acquire their own shares. (They are cancelled once bought.)
- Market purchase : via stock exchange, requires an ordinary resolution.
- Off- market purchase : any other method of purchase, requires a special resolution.
Public companies are forbidden from purchasing shares out of creditot’s buffer. True / false ?
True.
Private companies are allowed to purchase out of capital. This is known as ____________ . What are the laws that are to be followed ?
Permissible capital payments (PCP). It will only be considered lawful if the following rules are followed :
1. Directors should produce a statutory declaration of solvency.
2. The declaration is audited.
3. Company passes special resolution within a week of the declaration.
4. Within a week of resolution the company advertises the PCP.
Any affected parties during the PCP can express their objection within _____ weeks of the special resolution.
5 weeks.
What is meant by treasury shares ? How can they be held as an investment ?
Treasury shares : when a listed company buys shares in itself but does not cancel them.
They are held as Investments by adhering to the following limitations :
1. Dividend and pre- emption rights aren’t received.
2. No voting rights.
3. No participation during the distribution of company assets upon liquidation.
