Chapter 9: Companies- Finance Flashcards
What is the difference between a person who invests in shares and debentures
Share= owner
Debenture= creditor
Debenture takes priority
what are the 2 types of shares
Preference= limited or 0 voting rights and paid fixed dividends (prioritised)
Ordinary= Full voting right and paid after preference (not fixed)
What are the 2 special issues of shares
Bonus= more shares introduced to existing owners, does not raise funds
Rights= new shares for existing shareholders at discounted rate
Can shares be issued at discount of NV
No, if occurs then still valid however shareholder liable to pay company discount AND interest
What is a pre-emption right
give existing shareholders the first opportunity to buy new shares issued by a company. must accept within 21 days
exemptions to breach of pre-emption right
employee share schemes
non-cash considerations
modifications allowed by company articles or special resolutions.
How can a company acquire its own shares (4)
gift, capital reduction, court orders, forfeiture
What is market/off-market purchase and what type of resolution required?
Market- purchase on stock exchange. Ordinary resolution required: states max number of shares and min/max prices
Off-market- purchase from shareholder. Special resolution required: contract of sale needs to be avl for inspection for 15 days before meeting
What is required for a variation in class rights
Special resolution or written consent of 75% of nominal value
What is required to allot shares
Ordinary resolution
Who can issue shares for non-cash consideration
Private
What is required for reduction on share allotment for public and private company
Public: special resolution. Court req all affected creditors agree or are protected
Private: Pass a special resolution supported by a solvency statement.
The solvency statement is a statement by each of the directors that the
company will be able to meet its debts within the following year.
What are the payment requirements for shares taken by original subscribers and for any allotted shares in a public company?
Shares taken by original subscribers must be paid for in cash.
All allotted shares must be paid up to one-quarter of their nominal value, along with the full amount of any share premium.
What are class rights? How can they be changed?
Dividend rights, distribution of capital on a winding up and
voting. Special Resolution needed
How do you alter share capital?
Can be subdivided or consolidated by ordinary resolution
