Company Finance

Question 1

What is allotment of shares ?

Answer 1

Creates shares and gives them out

Question 2

What is transfer of shares ?

Answer 2

Existing shares sold to another shareholder

Question 3

What is buyback of shares ?

Answer 3

Buys its own shares back from shareholders

Question 4

Three questions to consider with allotment of shares ?

Answer 4

• are there constitutional restrictions ?
• do directors have authority to allot shares ?
• are there any pre-emotive rights ?

Question 5

What happens in allotment of shares if model articles haven’t been updated since 2009 ?

Answer 5

They will need to pass an ordinary resolution to remove Authorised allotment of share capital

Question 6

Under allotment of shares do directors have authority to allot ?

Answer 6

If it is one class of shares then they can

If it will create multiple must obtain ordinary resolution from shareholders

Question 7

What if pre-emotive rights apply in allotment of shares ?

Answer 7

Then they can remove these via a special resolution

Question 8

What are requirements for regular buyback ?

Answer 8

• Articles mustn’t forbid it
• shares must be fully paid
• ordinary try resolution

Question 9

What are requirements for buybacks out of capital ?

Answer 9

• statement of solvency
• statement of auditors confirming reasonable
• special resolution

Question 10

What are dividends paid out of ?

Answer 10

Paid out of profits of that year or previous but not out of capital

Question 11

What is the order in priority of charges ?

Answer 11

1) Mortgages
2) fixed charge
3) floating charge

Question 12

What is a mortgage ?

Answer 12

Highest form of security involves legal transfer of ownership to mortgagee

Question 13

What is a fixed charge ?

Answer 13

Fixed charge on part or whole of an asset. First fixed charge registered takes priority

Question 14

What is a floating charge ?

Answer 14

Equitable charge over the whole or a class of the company - assets constantly changing

Question 15

What is a negative pledge ?

Answer 15

Prohibits company from creating a later charge that takes priority over floating charge

Question 16

What does it mean if the charge is not registered ?

Answer 16

That charge is void against the liquidator or administrator of the company

Question 17

What is the procedure for registering charge ?

Answer 17

Within 21 days of charge must be filed at companies house (court can extend this position)

Question 18

What date are the charges judged from when determining priority ?

Answer 18

Date the charge was created if correct registering formalities are followed

Question 19

What is a revolving credit facility ?

Answer 19

Allows company to draw and repay funds flexibly

Question 20

When is a term loan from a bank useful ?

Answer 20

Loan is repayable according to agreed repayment schedule,

Question 21

What is a debenture ?

Answer 21

Loan agreement between borrower and lender - gives security over borrowers assets, only LLPs and companies can enter these

Question 22

When would pre-emptive rights need to be changed ?

Answer 22

If standard rights in s 561 companies act have not been disapplied

Question 23

How to calculate dividend payout ?

Answer 23

6% - 6% of £1 shares x number of shares