Company Financing and Insolvency Flashcards
What kind of share has pre-emption rights
ordinary
When can company alter rights attached to a class of shares
articles must allow for variation AND
Agreement of 75% of that class of shareholder is usually required
When may variations in rights of class of shares be challenged by minority interest
within 21 days of the vote by at least 15% of the class of members that voted against the alternation
court may confirm / cancel
What is defined
he issued share capital excluding any part that carries any right to participate beyond a specified amount in a distribution (dividend or capital)
equity share capital
when are shares allotted
when a person acquires the right to be listed on the Register of members
when are shares issued
once the allotteee receives a letter of allotment or share certificate as evidence of title
How long is pre-emption right open
21 days
Y/N
Can a company amend it’s articles of association to incorporate a provision excluding the statutory rights of pre emption
No
What may private companies accept as payment for share
money
goods
services
What may public companies accept as payment for shares
money
goods
Public companies - money requirements
25% of nominal value + whole of any premium payable must be paid
original subscribers must pay in cash
Public company - goods requirements
independently valued six months before allotment and received within 5 years of allotment
Shares cannot be issued at a discount to their
nominal value - where this happens the SH is liable to the company for the unpaid amount + interest
Where shares are issued at a discount, what are shareholders liable to the company for
unpaid amount + interest
Can share premium be used
to pay up new shares allotted as fully paid bonus shares
Yes
Can share premium be used
To write off expenses incurred on the issue of those shares and any commission paid on those shares
Yes
Can share premium be used
To allow the repurchase of debentures at a premium
Yes
Can share premium be used
To facilitate a permissible capital payment payment in private companies
Yes
Can share premium be used
as a dividend
No
Can share premium be used
to write off expenses incurred in connection with the formation of the company
No
Can share premium be used
To write off expenses incurred in connection with an issue of debentures
No
T/F a public company can issue shares at a discount
False
T/F A public company’s shares can never be partly paid up
False
T/f A public company can issue shares in return for an undertaking to do work or perform services
False
T/F A public company must obtain an independent valuation for non-cash consideration for its shares from its auditor
true
steps for reducing share capital for any limited company
special resolution
Confirmed by court
Creditors are entitled to objected
Plc must re-register as ltd if the reduction results in the nominal value of allotted share capital falling below the authorised minimum
steps for reducing the company for private company
special resolution
solvency statement within 15 days of resolution
one member with non-redeemable shares must remain
copy of resolution, statement of capital and copy of solvency statement / court order filed with registrar
What must be satisfied for a private company to purchase shares out of capital
The directors produce statutory declaration of solvency
Declaration is audited
Special resolution is passed
Company advertises resolution
Creditors are given opportunity to reject
Private company max dividend
accumulated realised profit - accumulated realised loss
Public company maximum dividend
accumulated realised profit - accumulated realised loss - accumulated unrealised losses
When can a public company make a distribution
if its net assets are
at the time not less than the aggregate of its called up share capital and undistributable reserves (share premium, capital redemption Reserve, revaluation reserve)
How may companies alter share capital
increasing allowed shares
Subdividing shares into shares of smaller nominal amount than existing shares
By consolidating and dividing share capital into shares of larger nominal amount than its existing shares
Can debentures be issued at a discount
Yes
Can shares be issued at a discount
No
within how many days of their creation must charges be registered with the Registrar
21 or they become void
When are charges effective from
date of creation not registration
T/F
Fixed charge holders can apply to put a company into administration
False
T/F
only fixed charge holders can put the company into liquidation once it is in administration
False
T/F
the administrator is able to make any staff redundant they wish
True
T/F
the directors are automatically dismissed once the administrator is appointed
False
T/F
Floating charge holders can apply to put the company into administration out of court
True
Three ways a company’s life can be bought to an end
members voluntary liquidation
creditors voluntary liquidation
compulsory liquidation
what kind of liquidation
initiated by directors of a company when in their opinion the company is solvent. To wind the company up
Members’ voluntary liquidation
CVL
Once notice of liquidation received the creditors must reply within ? working days, the process of agreeing/dissenting to the choice of liquidator must be complete within ? days of resolution to wind up the company. Creditors must be sent a statement of the affairs of the company within ? working days of the decision to wind up the company.
3
14
7
What kind of liquidation
Any creditor that demands payment of a debt of at least £750 that is not paid within 21 days will be able to petition the courts for a compulsory winding up
Compulsory liquidation - company cannot pay debt
Is the following a consequence of compulsory liquidation
Seizure of assets after liquidation is void
Yes
Is the following a consequence of compulsory liquidation
Business may continue
Yes
Is the following a consequence of compulsory liquidation
Floating charge crystallise
Yes
Is the following a consequence of compulsory liquidation
Employees automatically dismissed
Yes
Is the following a consequence of compulsory liquidation
Legal proceedings are halted and non can commence unless court consents
Yes
Is the following a consequence of compulsory liquidation
disposition/seizure of company property is void
Yes
What charges/debts entered into a by a company may be invalidated on compulsory liquidation
Charges not registered within 21 days
transactions at undervalue (2 years prior)
preferences given 6 months before
floating charges 12 months winding up (2y connected)
Conditions to benefit from the plan under CIGA
encountered/likely to encounter financial difficulties which affect its ability to carry on as gc
Compromise / arrangement proposed between company and creditors/members and purpose is to eliminate reduce prevent or mitigate effect of those difficulties
Creditors can petition for bankruptcy if owed debt, or share of debt exceeding £5000, a petition requires the creditor to demonstrate what?
erved statutory demand (21 days notice) on debtor not paid
Attempted to enforce judgment order which has not been satisfied
what restrictions are placed on a person after bankruptcy order placed
cannot act as director/insolvency practitioner
cannot borrow more than £500 without disclosing bankruptcy
under rules of ICAEW - can’t be chartered accountant
is the following included in the bankrupts estate
tools of their trade and other items necessary for use personally in employment
No
is the following included in the bankrupts estate
Clothing and household items necessary for basic domestic needs of the bankrupt and their family
No
is the following included in the bankrupts estate
Property held by the bankrupt on trust for another
No
is the following included in the bankrupts estate
Certain tenancies protected under legislation
No
How long after bankruptcy order will the bankrupt be discharged
1 year, but can be subject to restrictions for 2 - 15 years
Advantages of IVA for sole trader
sole trader / partner can continue to trade and operate a normal bank account
Flexible proposals can be created
Some restrictions on bankruptcy don’t apply (can retain directorship)
Details are not published in press unlike bankruptcy
