Company Law: Share and Loan Capital Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

True or false, a company cannot simply return share capital to its shareholders?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

True or false, proceeds from share issues must be set aside and used to pay shareholders in the event of the company becoming insolvent?

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

True or false, dividends must only be paid from distributable profits available for the purpose?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

True or false, share capital may be returned to the shareholders following an approved reduction of capital scheme?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

True or false, what kind of resolution is required to approve a buy-back of company shares?

A

A special resolution for approving the payment of capital is required, with no special notice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How may an unlawful dividend be reclaimed?

A

Only by the company from members who knew them to be unlawful

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a fixed charge?

A

A charge over specific company property which prevents the company from dealing freely with the property in the ordinary course of business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is interest payments to debenture holders paid out of?

A

Pre-tax profit or loss for the period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

S.128 TGCA 1992 provides a rule for working out the cost of a shareholding where there has been a reorganisation of share capital and a person pays for their new holding of shares. Which type of reorganisation does this provision apply to?

A

A rights issue of shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a floating charge?

A

A charge over a class of company assets which enables the company to deal freely with the assets in the ordinary course of business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are dividend payments paid out of?

A

Distributable profits, post-tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

True or false, the paid-up share capital of a company is s much of the nominal value of shares that has been paid by shareholders in respect of the company’s issue share capital only?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

True or false, a company may not issue its shares for less than the nominal value?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

True or false, a company can never have allotted share capital higher than issued share capital?

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When a company reaches a certain predetermined target, what do convertible shares convert into?

A

Ordinary shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Saffy Ltd has total share capital of 3,000 shares. These are made up of 1,000 £1 ordinary shares and 2,000 5% preference shares (nominal value £1 each share).

1,000 of the preference shares were only issued this year.

Last year the Accounts showed a loss and as there were no accumulated distributable profits shareholders did not receive a dividend. This year has seen a turnaround by new management and distributable profits are now £100,000.

What dividend will be paid out to the preference shareholders this year, if the dividend is cumulative?

A

£150 - last year’s dividend of £50 is carried forward to this year and added to the £100 for this year

17
Q

True or false, a private company may grant a fixed charge but not a floating charge?

A

False

18
Q

True or false, a floating charge attaches to an asset when it crystallises?

A

True

19
Q

True or false, cessation of the company’s trade would crystallise any floating charges?

A

True

20
Q

What is the definition of distributable profits?

A

Accumulated realised profits less accumulated realised losses

21
Q

What is a dividend in specie?

A

A dividend that is not paid in cash

22
Q

If a company pays a dividend without having sufficient distributable profits, who may have to make good the unlawful distribution?

A

Both the directors and shareholders

23
Q

Kauf Ltd is planning to buy back some of its own shares using a permissible capital payment. The appropriate special resolution was passed today. What must happen?

A

A notice needs to appear in the London Gazette
The directors need to issue a statement

24
Q

True or false, if a plc gifts money to a person who has already purchased shares in it, this can never constitute financial assistance?

A

False

25
Q

True or false, loans made in the normal course of a company`s business cannot constitute financial assistance?

A

True

26
Q

Why is a company required to maintain a creditors’ buffer?

A

Because a company has an obligation to safeguard the interests of its creditors

27
Q

True or false, a debenture is a type of loan?

A

True

28
Q

True or false, a debenture holder will always have a charge over a company’s assets?

A

False

29
Q

What is a rights issue?

A

It is a type of reorganisation of share capital where shares are offered to existing shareholders and they purchase the additional shares