Company Financing and Insolvency

Question 1

What kind of share has pre-emption rights

Answer 1

ordinary

Question 2

When can company alter rights attached to a class of shares

Answer 2

articles must allow for variation AND
Agreement of 75% of that class of shareholder is usually required

Question 3

When may variations in rights of class of shares be challenged by minority interest

Answer 3

within 21 days of the vote by at least 15% of the class of members that voted against the alternation
court may confirm / cancel

Question 4

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)

Answer 4

equity share capital

Question 5

when are shares allotted

Answer 5

when a person acquires the right to be listed on the Register of members

Question 6

when are shares issued

Answer 6

once the allotteee receives a letter of allotment or share certificate as evidence of title

Question 7

How long is pre-emption right open

Answer 7

21 days

Question 8

Y/N
Can a company amend it’s articles of association to incorporate a provision excluding the statutory rights of pre emption

Answer 8

No

Question 9

What may private companies accept as payment for share

Answer 9

money
goods
services

Question 10

What may public companies accept as payment for shares

Answer 10

money
goods

Question 11

Public companies - money requirements

Answer 11

25% of nominal value + whole of any premium payable must be paid
original subscribers must pay in cash

Question 12

Public company - goods requirements

Answer 12

independently valued six months before allotment and received within 5 years of allotment

Question 13

Shares cannot be issued at a discount to their

Answer 13

nominal value - where this happens the SH is liable to the company for the unpaid amount + interest

Question 14

Where shares are issued at a discount, what are shareholders liable to the company for

Answer 14

unpaid amount + interest

Question 15

Can share premium be used
to pay up new shares allotted as fully paid bonus shares

Answer 15

Yes

Question 16

Can share premium be used
To write off expenses incurred on the issue of those shares and any commission paid on those shares

Answer 16

Yes

Question 17

Can share premium be used
To allow the repurchase of debentures at a premium

Answer 17

Yes

Question 18

Can share premium be used
To facilitate a permissible capital payment payment in private companies

Answer 18

Yes

Question 19

Can share premium be used
as a dividend

Answer 19

No

Question 20

Can share premium be used
to write off expenses incurred in connection with the formation of the company

Answer 20

No

Question 21

Can share premium be used
To write off expenses incurred in connection with an issue of debentures

Answer 21

No

Question 22

T/F a public company can issue shares at a discount

Answer 22

False

Question 23

T/F A public company’s shares can never be partly paid up

Answer 23

False

Question 24

T/f A public company can issue shares in return for an undertaking to do work or perform services

Answer 24

False

Question 25

T/F A public company must obtain an independent valuation for non-cash consideration for its shares from its auditor

Answer 25

true

Question 26

steps for reducing share capital for any limited company

Answer 26

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

Question 27

steps for reducing the company for private company

Answer 27

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

Question 28

What must be satisfied for a private company to purchase shares out of capital

Answer 28

The directors produce statutory declaration of solvency Declaration is audited Special resolution is passed Company advertises resolution Creditors are given opportunity to reject

Question 29

Private company max dividend

Answer 29

accumulated realised profit - accumulated realised loss

Question 30

Public company maximum dividend

Answer 30

accumulated realised profit - accumulated realised loss - accumulated unrealised losses

Question 31

When can a public company make a distribution if its net assets are

Answer 31

at the time not less than the aggregate of its called up share capital and undistributable reserves (share premium, capital redemption Reserve, revaluation reserve)

Question 32

How may companies alter share capital

Answer 32

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

Question 33

Can debentures be issued at a discount

Answer 33

Yes

Question 34

Can shares be issued at a discount

Answer 34

No

Question 35

within how many days of their creation must charges be registered with the Registrar

Answer 35

21 or they become void

Question 36

When are charges effective from

Answer 36

date of creation not registration

Question 37

T/F Fixed charge holders can apply to put a company into administration

Answer 37

False

Question 38

T/F only fixed charge holders can put the company into liquidation once it is in administration

Answer 38

False

Question 39

T/F the administrator is able to make any staff redundant they wish

Answer 39

True

Question 40

T/F the directors are automatically dismissed once the administrator is appointed

Answer 40

False

Question 41

T/F Floating charge holders can apply to put the company into administration out of court

Answer 41

True

Question 42

Three ways a company's life can be bought to an end

Answer 42

members voluntary liquidation creditors voluntary liquidation compulsory liquidation

Question 43

what kind of liquidation initiated by directors of a company when in their opinion the company is solvent. To wind the company up

Answer 43

Members' voluntary liquidation

Question 44

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.

Answer 44

3 14 7

Question 45

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

Answer 45

Compulsory liquidation - company cannot pay debt

Question 46

Is the following a consequence of compulsory liquidation Seizure of assets after liquidation is void

Answer 46

Yes

Question 47

Is the following a consequence of compulsory liquidation Business may continue

Answer 47

Yes

Question 48

Is the following a consequence of compulsory liquidation Floating charge crystallise

Answer 48

Yes

Question 49

Is the following a consequence of compulsory liquidation Employees automatically dismissed

Answer 49

Yes

Question 50

Is the following a consequence of compulsory liquidation Legal proceedings are halted and non can commence unless court consents

Answer 50

Yes

Question 51

Is the following a consequence of compulsory liquidation disposition/seizure of company property is void

Answer 51

Yes

Question 52

What charges/debts entered into a by a company may be invalidated on compulsory liquidation

Answer 52

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)

Question 53

Conditions to benefit from the plan under CIGA

Answer 53

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

Question 54

Creditors can petition for bankruptcy if owed debt, or share of debt exceeding £5000, a petition requires the creditor to demonstrate what?

Answer 54

erved statutory demand (21 days notice) on debtor not paid Attempted to enforce judgment order which has not been satisfied

Question 55

what restrictions are placed on a person after bankruptcy order placed

Answer 55

cannot act as director/insolvency practitioner cannot borrow more than £500 without disclosing bankruptcy under rules of ICAEW - can't be chartered accountant

Question 56

is the following included in the bankrupts estate tools of their trade and other items necessary for use personally in employment

Answer 56

No

Question 57

is the following included in the bankrupts estate Clothing and household items necessary for basic domestic needs of the bankrupt and their family

Answer 57

No

Question 58

is the following included in the bankrupts estate Property held by the bankrupt on trust for another

Answer 58

No

Question 59

is the following included in the bankrupts estate Certain tenancies protected under legislation

Answer 59

No

Question 60

How long after bankruptcy order will the bankrupt be discharged

Answer 60

1 year, but can be subject to restrictions for 2 - 15 years

Question 61

Advantages of IVA for sole trader

Answer 61

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