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NLS CORPORATE CAMA 2020 > CORPORATE SECURITIES-SHARES/DEBENTURES > Flashcards

CORPORATE SECURITIES-SHARES/DEBENTURES Flashcards

1
Q

What are the Types of Corporate Securities?

A
  1. Shares-INTERNAL
  2. Stock-INTERNAL
  3. Bonds-EXTERNAL
  4. Debentures-EXTERNAL
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2
Q

How is a company’s capital divided?

A
  1. EQUITY CAPITAL-Raised within the company from members/shareholders

2.LOAN CAPITAL-Raised outside the company-through the issuance of debentures

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3
Q

What are the types of shares?

A
  1. Minimum issued share capital
  2. Issued Shares-25% must be paid up.
  3. Unissued shares
  4. Paid up shares
  5. Unpaid up shares
  6. Called up shares
  7. Uncalled shares
    SEC 140, general section on shares
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4
Q

What are the classes of shares?

A
  1. Ordinary Shares
  2. Preference shares
    -Cumulative Preference Shares
    -Non cumulative preference shares-They are not entitled to dividend in arrears.
    -Convertible preference shares-The shares can be converted to ordinary shares.
    -Participatory preference shares-They are entitled to surplus profit.
    -Redeemable Preference shares-Can be redeemed by the company.
  3. Founders/Deferred Shares
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5
Q

PROHIBITION OF NON-VOTING AND WEIGHTED SHARES?

A

-Non Voting shares do not carry voting rights & they are prohibited.
-Weighted shares are shares that carry more than two voting rights and they are also prohibited.
EXCEPTIONS
-Preference shareholders are entitled to more than 1 vote S140(3)

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6
Q

What are the instances where preference Shareholders can have more than one vote?

A
  1. The company hasn’t paid the preferential dividend owed to these shareholders, and The dividend has been overdue for a certain period (up to 12 months or a shorter period
  2. Upon any resolution to vary the rights attached to being a preference shareholder
  3. Upon any resolution for removal of the auditor
  4. Upon any resolution for winding up

NOTE THAT THE ARTICLES MUST PROVIDE FOR IT
SEC 168 cama

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7
Q

What will you recommend to a person that wants to take shares in a company and wants assurances of guaranteed return on his investments?

A

CUMULATIVE PREFERENCE SHARES
This is due to the fact that even when dividends are not declared, they will be entitled to the arrears payable on dividends not declared.

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8
Q

What is share premium account?

A

It is the profit derived from the difference between the nominal value and the market value of the company.

i.e NOMINAL VALUE IS N1 & the MARKET VALUE IS N10

The share premium will be N9

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9
Q

What is the share premium used for?

A

SECTION 145(4)

  1. It is used to pay up unissued shares of the company to be issued as fully paid up shares.
  2. To pay up preliminary expenses
  3. To pay up expenses of the commission
  4. For recapitalization of the company
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10
Q

Can a company issuance assistance for the persons to purchase its shares?

A

NO!
EXCEPTIONS
1. Where it is in the company’s ordinary course of business.
2.Where it is provided for another to law.
3. Where it is pursuant to a scheme of arrangement, or merger, and sanctioned by the court
4. Where it is to persons, other than directors, for the purpose of holding those shares by way of beneficial ownership
5. Where it is in pursuant to any scheme of the company for the benefits of its employees,

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11
Q

How can a company acquire its own shares?

A

-Acquire shares by special resolution-Must be provided in the articles
2. Only fully paid-up shares of a company may be purchased by the company
3. Within 7 days of the passing of the special resolution, the company shall publish the proposed purchase to be published in 2 national newspapers.
4. Then, within 15 days after publication, the directors of the company will make and file a STATUTORY DECLARATION OF SOLVENCY.

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12
Q

What are the Modes of Offering Shares?

A
  1. Transmission-
  2. Allotment-S149
  3. Transfer- S 139
  4. Subscription-S 27(2)
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13
Q

What is the first procedure for ALLOTMENT?

A
  1. Prospectus for public company/File an application for private company.
  2. A meeting will be convened to pass an ORDINARY RESOLUTION for the allotment of the shares.
  3. Notice of the letter of approval of the allotment or letter of regret must be communicated within 42 DAYS
  4. The contract takes effect from the day the contract is communicated to the applicant.
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14
Q

What is the second procedure for the Allotment of shares?

A

RETURN OF ALLOTMENT
SEC 154 CAMA
1. The company must within 15 DAYS submit certain documents to the commission.
-A copy of the Ordinary resolution approving the allocation of the shares.
-CAC FORM 5-Return of Allotment
(it contains the names & addresses of the proposed shareholders, the description of the shares too)
-Annual Returns
-Evidence of Payment of filing & stamp fees.
2. The share certificate must be prepared WITHIN 2 MONTHS
3. Enter the allotee’s names in the register of names.

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15
Q

EFFECT OF ENDORSING THE WORDS “CERTIFICATE LODGED” ON THE INSTRUMENT OF TRANSFER?

A

• By section 181(2) CAMA, the endorsement of “certificate lodged” on the Instrument of Transfer means that the company has recognised the transfer

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16
Q

Procedure for Commencing Action by Personal Rep. for Name to Be Registered?

A

Originating Motion supported by Affidavit filed at the Federal High Court. Documents to be Attached
1. Letters of Administration from the Probate Registry.
2. Notice in writing to the company stating their election to become members of the company.
3. Evidence of payment of prescribed processing fee.
4. Share Certificate.

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17
Q

what is perpetual debentures?

A

This is provided for in Section 196
These are debentures, which are made irredeemable or redeemable only on the happening of a contingency however remote, or on the expiration of a period however long. It may even be upon the winding of the compan

18
Q

What is convertible debentures?

A

These are debentures which are issued upon the terms that in lieu of redemption or repayment, they may at the option of the holders or the company, be converted into ordinary shares in the company
SEC 197

19
Q

what is secured & naked debentures?

A

This debenture is secured by a charge on the company’s fixed or floating assets.
SEC 198
Naked is unsecured.

20
Q

What is redeemable debentures?

A

These are debentures which are, or at the option of the company
are, liable to be redeemed at the option of the company. The company can pay for it from its profits or from its sinking funds
SEC 199

21
Q

what is registered debentures?

A

They are those registered in the register of debenture holders, and are payable to only those whose name are registered in the register of debenture holder

22
Q

What are bearer debentures?

A

They are those payable to only those holding the instrument. It is payable only to the bearer. This do not require the company to maintain a register of debenture holders. The person’s name does not have to be in the register of debenture holders.

23
Q

What is a floating charge?

A

A floating charge on the other hand is an equitable charge over the whole or specified part of the undertaking or assets of the company including cash and uncalled capital both present and future.

A floating charge is typically granted over a company’s changing/fluctuating assets(like inventory or accounts receivable), allowing the company to manage and trade these assets in the ordinary course of business

S 203

24
Q

When does a floating charge crystallize?

A
  1. Upon an appointment of a receiver or manager by the court
  2. Where the court goes into liquidation
  3. Upon an application by the creditor
  4. Default on repaying the loan.
    SEC 203
25
Q

Advantages of floating charge over fixed charge?

A
  1. The company is not estopped from using the properties secured by a floating charge.
  2. The lender’s or creditor’s consent is not needed to access the assets secured by a floating charge.
  3. It encourages flexibility.There is no restrictions on the usage of the assets.
    The company is allowed to use the property in its ordinary course of business.
  4. Floating charges can cover a broad range of assets, including current and future assets like inventory, cash, and accounts receivable.

In essence, a floating charge provides a balanced approach, offering companies the operational freedom to use their assets while giving lenders a security interest that can convert to a fixed charge if needed

26
Q

Does fixed charge rank in priority over floating charge?

A

YES! because it is tied to identifiable pool of assets.
SEC 204

27
Q

what is debenture stock?

A

Where the loan is gotten from a large number of people, debenture stock is used.
A debenture trust deed will be prepared.

28
Q

effect of failure to register a charge?

A

Failure to register a charge as required will render it void against the liquidator and any creditor of the company. Section 222(1)).
• The obligation to pay the debt is, however, not discharged.
Capital Finance Co. Ltd v Stokes
• Thus, once it is void, the debt immediately becomes due and payable.

29
Q

who are capital market operators?

A
  1. Security dealers-– This is a person or firm who buys and sell securities on his own account.
  2. Rating agencies
  3. Trustee
  4. Stockbrokers
  5. Issuing houses
  6. Underwriters
30
Q

who are capital market consultants?

A
  1. solicitors
  2. Accountants
  3. engineers
  4. valuers
  5. Property managers
  6. Estate valuers
  7. investment advisers
31
Q

what is money market and capital market?

A

Money market• It is used to access short term funds i.e from commercial banks
• Collaterals are usually required.
Capital market-long term loans and no collaterals needed
Companies and governments may raise funds from the general public by trading securities on the Stock Exchange.

32
Q

methods of offering securities to the public?

A
  1. Offer by Introduction
  2. Initial public offer-invites members of the public for the very first time(done thru prospectus)
  3. Direct offer to the public (offer for subscription)-the company is the underwriter and bears the risk, an issuing house is used.
  4. Offer for sale-the issuing house is the underwriter and bears the risk
    PLACING-• This is a private arrangement where a company sells its shares to an issuing house which offers (or places) the shares not to the public at large but to clients.
  5. Private placement by public companies and other entities (private company)-offered to the public & it’s not advertised
  6. Rights issue
  7. Bonus Issue
  8. Debt equity conversion
  9. Debenture/loan stock
  10. Sukuk
  11. Bonds
  12. Offer by Tender
33
Q

forms of prospectus?

A
  1. Full prospectus;
  2. Abridged Prospectus;
  3. Deemed Prospectus; and
  4. Statement in Lieu of Prospectus
34
Q

when can abridged prospectus be used?

A

This is a summarized version of the prospectus containing the key requirements of a prospectus.
when you are offering shares to existing shareholders

35
Q

what is deemed prospectus?

A

This is any document, though not titled prospectus, for all intents and purposes contains the basic requirements of a prospectus used in offer for sale to the public of companies’ securities.

36
Q

who can issue government bonds?

A
  1. The Federal Government
  2. Federal Government Agencies
  3. State Government and their agencies
  4. The Federal Capital Territory and its agencies
  5. Local Governments and
  6. Any company which is wholly owned by the Federal, State, FCT and Local Government
37
Q

conditions for issuing government bonds?

A
  1. There must be a law passed by the NA, SHA or LHA Government authorizing the issuance of bonds.
  2. The amount to be raised or outstanding loan should not be more than 50% of the capital revenue of the state in the preceding year;
  3. The Bond must be registered with the SEC;
  4. The date of redemption of the bond shall not exceed 25 YEARS from the date of the issuance of the bond;
  5. A separate sinking fund shall be established for each loan
  6. A rating report by an accredited rating agency
  7. The bond instrument must bear crest of the relevant regulatory body
38
Q

what is the difference between a shareholder and a unit holder?

A
  1. Members of a company are called shareholders while the participants in CIS are called unit holders.
  2. Shareholders have and exercise membership rights while unit holders do not take decisions in the running of the company.
  3. The Board of Directors manage a company while the CIS is managed by the Fund managers, trustees.
  4. Shareholders are entitled to dividends whereas unit holders are entitled to profit pro rata.
  5. Unit holder has participating interest in the scheme he invested in while a shareholder is a member of the company;
  6. A shareholder invests in an identifiable company while a unit holder may have investment in more than one company;
  7. Memorandum and articles of association bind shareholders while trust deed or custodial agreement binds unit holders
39
Q

types of CIS?

A
  1. Unit Trust Scheme;
  2. Real Estate Investment Scheme or Trust;
  3. Investment Trust Scheme;
  4. Community Savings Scheme
  5. Open-ended investment scheme;
  6. Foreign Collective Investment Schemes
40
Q

organs involved in collective investment scheme?

A
  1. Manager
  2. Holder
  3. Trustee
  4. Issuer
  5. Custodian
41
Q

solicitor to the issue(the public) duties?

A
  1. To ensure that the company has capacity to issue shares to the public
  2. To review the memart & point out lapses
  3. To ensure that the company has the required minimum issued share capital to issue shares to the public
  4. To prepare prospectus
  5. To review contractual documents
42
Q

can a private company offer their shares publicly?

A

BFA has removed the distinction between public and private companies regarding offering shares of companies to public, private companies may now offer their securities to the public, so that is no longer a distinction. S. 43 BFA

NLS CORPORATE CAMA 2020 (12 decks)

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