Chapter 5 Share Capital Flashcards
Sources of Finance
1) Share Capital
2) Debentures
3) Loans
What is Share Capital?
Total amount invested by the owner in the company.
Types of Share Capital?
1) Authorized/Nominal Share Capital
2) Issued/Allotted Share Capital
3) Paid-Up Share Capital
What is Authorized Share Capital?
The maximum amount of share which can be issued to people.
What is Issued Share Capital?
is part of authorized share capital that has been issued to shareholders.
What is paid-up share capital?
is part of the share capital that has been paid by the public.
In which alteration of Capital is made?
In Memorandum of Company.
What is the procedure to alter the authorized share capital?
1) Company having share capital can alter its share capital if authorized by its article.
2) By passing Special Resolution in General Meeting.
3) Company shall file the resolution and altered copy of the memorandum to the Registrar within 15 days of passing the resolution.
Ways in which authorized share capital can be altered?
1) increase the amount of authorized share capital, or
2) cancel the shares which have not been taken up by any person.
3) subdivide shares into amounts smaller than existing shares.
4) consolidation
5) subdivide into Ordinary Shares and Preference shares.
Which company can buy back its own shares?
only a listed company.
In which Variation in the Rights of Shareholders is made?
in Article of Company.
What variations are possible in the rights of shareholders?
1) voting rights
2) rights for entitlement of dividends, right shares, and bonus shares.
3) right to receive notice and attend general meetings.
4) rights for redemption or conversion of shares.
How to vary the rights of shareholders?
1) can be varied by alteration of articles of association by passing a special resolution.
2) 3/4th majority of the affected class.
3) copy of altered articles shall be filed with the registrar within 30 days from the date of passing of the resolution.
Who can appeal in court against the resolution?
10% or more of the affected class can apply to the court for cancellation of resolution within 30 days of resolution.
The court shall pass the order if proven that;
1) some material facts were withheld by the company to get a resolution.
2) Variation in rights would unfairly prejudice the shareholders of the affected class.
The decision of the court shall be final and an appeal cannot be filed against such decision.
The company shall forward a copy of the order of the court to Registrar within 15 days of receipt of the order.
