equity finance Flashcards
Issued share capital
made up of subscriber share + further shares issues
allotedshares
When a person acquires the unconditional right to be included the company’s register of members in respect of those shares
issued shares
shares only forms part of companies once the member has been registered in the company’s register, and their title is complete.
full legal title= when persons name is entered in the register of members
paid up share capital
called up share capital
paid up share capital= amount paid for share
called up share capital= outstanding, can be called any time
Treasury shares
will pre- emption rights apply?
share that are bought back by the company
NOTE: although such a sale of shares is a transfer, not an issue, of shares, s 561 CA 2006 pre-emption rights and s 573 CA 2006 disapplication of pre-emption rights will apply.
The company can choose to cancel treasury shares at any time or transfer them to an employee share scheme.
Treasury shares
will pre- emption rights apply?
share that are bought back by the company
NOTE: although such a sale of shares is a transfer, not an issue, of shares, s 561 CA 2006 pre-emption rights and s 573 CA 2006 disapplication of pre-emption rights will apply.
The company can choose to cancel treasury shares at any time or transfer them to an employee share scheme.
ordinary shares
- voting right
- unrestricted dividend
- portion of surplus on winding up
Prefence share
priority for dividends or capital when winding up
normally:
- no vote
- no surplus
Cumulative preference share
- if dividend is not declared for a particular year, the right to the preferred amount is carried forward and will be paid together with other dividends due , when there are available profits
Prefence share
priority for dividends or capital when winding up
normally:
- no vote
- no surplus
assume cumulative unless stated otherwise
Participating preference shares
Participating’ preference shareholders may participate, together with the holders of ordinary shares in:
(1) in surplus profits available for distribution after they have received their own fixed preferred dividend; and/or
(2) in surplus assets of the company on a winding up.
Participating preference shares can be ‘fixed rate participating cumulative preference shares’
Disadvantage if non-participating: if the value of the company increases, the preference shareholder will not have the benefit of receiving more dividends as the rate is fixed by the price pai
Deferred shares
Carry no voting rights and no ordinary dividend but are sometimes entitled to a share of surplus profits after other dividends have been paid (presuming there is a surplus); more usually ‘deferred’ shares carry no rights at all and are used in specific circumstances where ‘worthless’ shares are required
Redeemable shares
Convertible shares
Convertible shares
Redeemable shares
- company will/ may buy back or cancel in future
Convertible shares
carry option to convert into difference class of share according to stipulated criteria
Deferred shares
- no voting rights and - no ordinary dividend
sometimes entitled to a share of surplus profits after other dividends have been paid (presuming there is a surplus);
usually ‘deferred’ shares carry no rights at all and are used in specific circumstances where ‘worthless’ shares are required
Preference share
priority for dividends or capital when winding up. Higher priority than ordinary shares
- The amount of preferred dividend is expressed as a percentage of the par (nominal) value of the share. Example: 5% £1 preference shares give an entitlement to 5% of £1 per share (which equates to 5p per share) of dividend each year provided a dividend is declared. Note this can also be a fixed percentage of the entire subscription price with the premium.
normally:
- no vote
- no surplus
assume cumulative unless stated otherwise
Procure for varying class of rights
- involves amending articles
- check os articles contain provisions for altering
if not variation can be done by:
- written consent of 75% of SH in that class
- By SR passed at a GM of holders of that class
BASICALLY SR WRITTEN OR AT GM BY THAT CLASS
Procedure to cancel variation
- shareholders holding 15% of relevant shares apply to court within 21 days of resolution. These SH could not have voted in favour of resolution
- variation cannot take effect until confirmed by court
- court cannot confirm the variation if it feels that the variation unfairly prejudices the
When is dividend paid?
only payable if there are sufficient distributable profits s830 (1) CA 2006
‘Distributable profits’ means the company’s accumulated realised profits minus its accumulated realised losses
What are two types of dividend
- final dividends
- interim dividends
Final dividends
- Directors give the recommendation to the shareholders
-shareholders can reject or approve the recommendation
- If they approve, an ordinary resolution is needed to declare the final dividend
-Shareholders cannot declare a dividend higher than what the board recommended (but can be lower)
- Dividends can only be declared from realised distributable profits
- and it is then approved by an ordinary resolution of the shareholders following the financial year end.
Interim dividends
The articles of a company normally give the directors the power to decide to pay interim dividends if the company has sufficient distributable profits (MA 30 allows this).
Interim dividends can be paid without the need for an ordinary resolution of the shareholders. Interim dividends are often paid where the company has realised an investment.
allotment
company issues new shares , in return for the purchaser paying the subscription price
transer
existing shares transferred between shareholder and the purchaser
restriction on private companies offering shares to public, what does public mean
A PL by shares is prohibited from offering shares to public, can only offer to targeted investors.
Public does not include: existing SH, employees, certain family members of those persons, shares under employees share scheme
Financial promotions
Any invitation or inducement
financial promotions are prohibited unless certain FSMA are fulfilled - s21 FSMA
what are two common restrictions on the transfer of shares
- Directors refusal
- right of first refusal- shareholder wishing to sell shares must offer them to an existing shareholder first
procure of transfer
stock transfer from, signed by transferor and submitted with share certificate to new shareholder
beneficial ownership- passes on execution of stock transfer from
legal title- transfers on registration of member
new certificate sent within 2 months of registration
Deferred shares
- no voting rights and - no ordinary dividend
sometimes entitled to a share of surplus profits after other dividends have been paid (presuming there is a surplus);
usually ‘deferred’ shares carry no rights at all and are used in specific circumstances where ‘worthless’ shares are required
Convertible shares
carry option to convert into difference class of share according to stipulated criteria
procedure for allotting new shares
- check share cap
1985- OR 2006- SR - check authority
PL- can allot same without OR
Other companies need OR
- pre-emption rights Are the shares equity securities? If both dividend and pay-out are capped, the share is not an equity security and therefore pre-emption rights are not relevant. If the shares are equity securities, consider whether the company needs to disapply pre-emption rights
- new class of shares? AOA
- Board will resolve to allot
ordinary shares
- voting right
- unrestricted dividend
- portion of surplus on winding up
Procure for varying class of rights
- involves amending articles
- check os articles contain provisions for altering
if not variation can be done by:
- written consent of 75% of SH in that class
- By SR passed at a GM of holders of that class
BASICALLY SR WRITTEN OR AT GM BY THAT CLASS
Participating preference shares
Participating’ preference shareholders may participate, together with the holders of ordinary shares in:
(1) in surplus profits available for distribution after they have received their own fixed preferred dividend; and/or
(2) in surplus assets of the company on a winding up.
Participating preference shares can be ‘fixed rate participating cumulative preference shares’
Disadvantage if non-participating: if the value of the company increases, the preference shareholder will not have the benefit of receiving more dividends as the rate is fixed by the price pai
Cumulative preference share
- if dividend is not declared for a particular year, the right to the preferred amount is carried forward and will be paid together with other dividends due , when there are available profits
Preference share
priority for dividends or capital when winding up. Higher priority than ordinary shares
- The amount of preferred dividend is expressed as a percentage of the par (nominal) value of the share. Example: 5% £1 preference shares give an entitlement to 5% of £1 per share (which equates to 5p per share) of dividend each year provided a dividend is declared. Note this can also be a fixed percentage of the entire subscription price with the premium.
normally:
- no vote
- no surplus
assume cumulative unless stated otherwise
Redeemable shares
- company will/ may buy back or cancel in future
