Debt and Equity Finance (SGSs 8,9)

Question 1

Shares in a limited company having a share capital must each have a fixed nominal value.

Answer 1

s.542(1) CA 2006

Question 2

Shares in a company are taken to be allotted when a person acquires the unconditional right to be included in the company’s register of members

Answer 2

s.558 CA 2006

Question 3

Full legal title to shares only achieved when person’s name is in company register

Answer 3

s.112(2) CA 2006

Question 4

Treasury shares

Answer 4

Shares brought back by company and held ‘in treasury’ – can then be sold out of treasury

Question 5

4 questions to be asked when allotting new shares

Answer 5

1. Is there are cap/ceiling on the number of shares that can be issued (in the Articles)?
2. Do directors need authority to allot?
3. Must pre-emption rights be disapplied on allotment?
4. Must new class rights be created for shares?

Question 6

Since CA 2006, share capital increases automatically when shares are issued

Answer 6

s.617(2)(a) CA 2006

Question 7

Companies incorporated under CA85 have authorised share capital (ASC) as their ceiling

Answer 7

CA85 company must remove ceiling by removing from Articles (can be done by OR)

Question 8

Directors must not exercise the power of the company to allot shares unless in accordance with s.550 or s.551

Answer 8

s.549(1) CA 2006

Question 9

Where a private company has only one class of shares, the directors may exercise any power of the company to allot new shares

Answer 9

s.550(a) CA 2006

Question 10

The directors of a company may exercise a power of the company to allot new shares if they are authorised to do so by the company articles or by resolution of the Company

Answer 10

s.551(1) CA 2006

Question 11

Authority to allot shares can be done by OR, unless Articles state a higher majority is required

Answer 11

s.281(3) CA 2006

Question 12

Authorisation to allot shares under s.551(1) must state maximum amount of shares that may be allotted and specify the date in which it will expire (which must be less than 5 years from incorporation/resolution)

Answer 12

s.551(3) CA 2006

Question 13

Pre-emption rights

Answer 13

Right of first refusal. New shares are offered to existing shareholders first.

Question 14

Equity Securities are

Answer 14

Shares where there is no capped specified right to dividends or capital

Question 15

Due to the fact that new shares dilute ownership, voting rights and dividends, equity securities cannot be allotted without first being offered to existing ordinary shareholders

Answer 15

s.561(1) CA 2006

Question 16

General disapplication of pre-emption rights where SH authorise allotment of shares

Answer 16

s.570 CA 2006

Question 17

Specific disapplication of pre-emption rights by SR

Answer 17

s.571 CA 2006

Question 18

Private companies can exclude pre-emption rights from their articles (although this is unlikely as it removes protection)

Answer 18

s.567 CA 2006

Question 19

Disapplication of pre-emption rights for private companies with only one class of shares

Answer 19

s.569 CA 2006

Question 20

Company can create new class of shares and insert the rights associated to that class in the Articles

Answer 20

s.21(1) CA 2006

Question 21

Shareholders are free to transfer shares, subject to provisions in the articles

Answer 21

s.554(1) CA 2006

Question 22

PMM for removing share issue cap

Answer 22

1. File new articles – s.26(1)
2. File resolution SR – s.29(1)(a) and s.30(1)
3. For CA85 file OR to remove camp

Question 23

PMM for granting authority to allot under s.551

Answer 23

1. File OR granting directors authority to allot shares at CH within 15 days – s.551(a), s.29(1)(e), s.30(1)

Question 24

PMM for disapplying pre-emption rights

Answer 24

1. File SR disapplying pre-emption rights at CH within 15 days – s.29(1)(a), s.30(1)
2. File amended Articles within 15 days – s.26(1)

Question 25

PMM for creating new class of shares

Answer 25

1. File SR amending Articles within 15 days – s.30(1) | 2. File amended articles within 15 days – s.26(1)

Question 26

PMM for allotment of shares by BR

Answer 26

1. File NM01 at CH within 1 month of allotment – s.555(2) 2. File statement of capital – s.555(3)(b) 3. Update register of members – s.112 and s.113 – within 2 months – s.554 4. Sends share certificate to new members – s.769

Question 27

Private companies are limited from offering shares to the public

Answer 27

s.775 CA 2006

Question 28

Share premiums must be shown in a separate share premium account in a balance sheet

Answer 28

s.610(1) CA 2006

Question 29

A charge/security needs to be registered within 21 days

Answer 29

s.859(2) CA 2006