Equity and debt finance

Question 1

When are shares issued?

Answer 1

When the shareholder’s name is entered on the register of members

Question 2

When do directors have the authority to allot shares?

Answer 2

If it’s a private company with 1 class of shares before and after allotment
If the company was incorporated after October 2009, an ordinary resolution is needed to activate this

Question 3

Generally, what authorisation is needed to allot shares?

Answer 3

Ordinary resolution (unless private company with 1 class of shares)

Question 4

What are preemption rights?

Answer 4

The right of first refusal over shares being alloted

Question 5

When do preemption rights NOT apply?

Answer 5

• allotment of bonus shares
• wholly/partly non-cash consideration,
• if shares allotted under employee share scheme

Question 6

Are there preemption rights in the model articles?

Answer 6

No

Question 7

How can preemption rights generally be disapplied?

Answer 7

By special resolution

Question 8

What’s needed to disapply preemption rights if directors were authorised related to a specific allotment?

Answer 8

Special resolution + directors’ written statement recommending the special resolution

Question 9

Deadline for issuing share certificates

Answer 9

2 months from allotment

Question 10

Resolutions to sent to CH within 15 days of allotment

Answer 10

• any special resolutions
• ordinary resolutions giving directors the authority to allot

Question 11

Can the board refuse to register a transfer of shares?

Answer 11

Yes

Question 12

What is the rate of stamp duty on the transfer of shares?

Answer 12

If value is over 1,000, it’s 0.5%, rounded up to nearest 5 Pounds

Question 13

Deadline for entering the new shareholder on the register of members

Answer 13

2 months

Question 14

What are the exceptions to maintenance of capital?

Answer 14

• share buyback,
• share buyback under s.994 unfair prejudice,
• returning capital on winding up

Question 15

What resolution is needed to authorise a share buyback, and a share buyback out of capital?

Answer 15

Buyback: ordinary resolution
Buyback out of capital: ordinary and special resolution

Question 16

When must the return of buyback and notice of cancellation of shares be filed?

Answer 16

Within 28 days of completion

Question 17

When must the directors make a statement of solvency for a share buyback out of capital?

Answer 17

Maximum 7 days before the GM/written resolutions authorising the buyback

Question 18

How and when must a share buyback out of capital be advertised?

Answer 18

Notice in London Gazette and appropriate national newspaper/notify all creditors
Do this within 7 days of the special resolution

Question 19

Process for paying a dividend

Answer 19

Directors recommend the dividend and its size, and shareholders “declare it” via ordinary resolution

Question 20

What is a debenture?

Answer 20

Written loan agreement registered at CH, giving the lender security over the borrower’s assets

Question 21

Who can grant floating charges?

Answer 21

Companies and LLPs

Question 22

What is the effect of a mortgage (except in land)?

Answer 22

It grants the lender legal ownership of the asset- its transferred back to the borrower on repayment

Question 23

When must a charge be registered?

Answer 23

Within 21 days of creation

Question 24

What is the consequence of failure to register a charge?

Answer 24

It’s void- the debt is still repayable, but the security can’t be enforced

Question 25

What is the priority order of charges?

Answer 25

1. fixed charge
2. floating charge
   If 2/more same charges, priority depends on date of creation, not registration!

Question 26

What is a negative pledge?

Answer 26

A prohibition on creating later charges with priority without the lender’s permission (used in floating charges)

Question 27

How can a company execute a deed?

Answer 27

• 2 authorised signatories, or
• 1 authorised signatory in presence of witness who attests it

Question 28

What do the final accounts consist of?

Answer 28

• profit and loss account
• balance sheet

Question 29

Which reports does the CA require companies to make?

Answer 29

• strategic report (except small companies)
• director’s report
• auditor’s report?