Chapter 15 Share capital Flashcards
What is a share?
Share is a transferable form of property,carrying rights and obligations(shows interest of shareholder in a company)
From where information about special rights attached to shares is obtainable?
1)The articles
2)Resolution and agreement relating to new class of shares
3)Statement of capital
What is called up share capital?
The amount which the company has required shareholders to pay now or in future on the shares issued
Called capital which is not yet paid is termed as?
Partly paid shares
Debt on share is transferable to new shareholder or not?
Yes,if the share is transfered
What are preference shares?
Those shares which take priority over ordinary shares in case of dividend payment and liquidation
What is a class of shares?
Group of shares carrying identical rights
Do ordinary shares have voting rights or not?
May or may not have
Do preference shares have voting rights?
Usually they don’t have but we can create a class of preference shares with voting rights attached
When a company goes into liquidation how unpaid cumulative dividends will be treated?
Preference shareholders cease to be entitled to the arrears unless:
1)A dividend has been declared
2)Articles expressly provide that in liquidation arrears to be paid
Do preference shareholders are entitled to share in surplus assets when ordinary share capital is paid?
No
What are the advantages of preference shares?
Greater security of income and capital
What are redeemable shares?
Shares issued on terms that they may be bought back by the company either at a future specific date or at the shareholder’s or company’s option
Are usual formalities required on reissue of treasury shares?
No
Can voting rights of treasury shares be exercised?
No
How do we can make variations in class rights?
With the consent of all shareholders in the class or with a majority specified in the articles
What is the standard procedure for variation of class rights?
A special resolution shall be passed by a three quarters majority
Increase in voting strength of a class as an incidental effect of its subdivision is variation of class rights.
False
Creation of a new class of preference shares which take priority over existing class of ordinary shares constitute a variation of class rights of later class.
No
When do minorities can appeal to the court for unfair prejudice regarding variation of class rights?
The objectors together must:
1)hold not less than 15% issued shares of the class
2)Not consented or voted in favour of the variation
3)Apply within 21 days of the consent given by the class
What will be the court action when minority appeals for unfair prejudice in variation of class rights?
The court will either reject or accept the variation.It cannot change the terms of the variation
Do directors of private company have power to allot shares?
Directors of private companies with one class of shares have power to allot shares unless restricted by the articles
Directors of public companies can allot shares or not?
Directors of public companies,or private companies with more than one class of shares may not allot shares without authority from members
What will happen if directors allot shares without authority?
It is a criminal offence and the directors may be fined(the allotment remains valid)
Is it obligatory for a company that when it proposes to issue shares first offer to existing shareholders?
Yes,it has a statutory obligation
Is it necessary for a right issue to be in writing?
Yes it must be
What is the period of time for which the offer of right issue will remain valid?
21 days,the offer may be accepted but may not be withdrawn
What is the period of time within which members can claim against the company for not offering right issue?
Within 2 years the members can recover compensation for their loss
Can pre-emption rights be excluded?
A private company may by its articles permanently exclude these rules
What are bonus shares?
These shares are fully paid up with no cash called for from the shareholders
Can a company issue shares at premium or discounts?
It can issue at premium but not at discount
What are the consequences when a company allotted shares at discount?
The allottee must pay full nominal value with interest at the appropriate rate
What are the uses of a share premium account?
1)Bonus issue
2)Issue expenses and commission on new share issue
Who can do valuation of a non cash consideration in a private and public company?
In private companies directors can do valuation however in public companies independent valuer will do valuation
An undertaking to perform services in future as consideration is acceptable or not?
No
If a company accepts future services as consideration what are the consequences for the shareholder?
The shareholder must pay the company in cash their nominal value plus any premium and interest of 5% on any such amount
Within how many years of receiving trading certificate a company may not accept the transfer of non cash asset from a subscriber?
Within 2 years of receiving trading certificate
What are the conditions under which a company can accept transfer of non cash asset within two years of receiving trading certificate?
This is unless its value is less than 10% of the issued share capital and it has been independently valued and agreed by an ordinary resolution
