Equity finance

Question 1

how to alter existing class rights?

Answer 1

special resolution required.

Question 2

what is the 5 step process for allotment of shares?

Answer 2

1. Any cap of the number of shares that can be issued?
   - companies under CA 2006= no cap.
   - if cap, removed by ordinary resolution.
   - if adopted model articles= no cap.
2. Do the company directors need authority to allot?
   - for private companies with only one class of share= automatic authority.
   - for all other companies, need authority by ordinary resolution.
3. Must pre-emption right be disapplied?
   - Disapply them through special resolution.
   - if equity securities- capped as to dividend and capital- do NOT NEED TO DISAPPLY PREEMPTION.
4. Must a new class of rights be created by the shares?
   - special res to alter articles.
5. board resolution to allot the shares.

Question 3

when must the copies of the shareholder resolution be sent to companies house?

Answer 3

15 days.

Question 4

what are the three ways in which a company can purchase its own shares from an existing shareholder?

Answer 4

1. distributable profits.
2. proceeds of a fresh issue of shares.
3. capital- only for PRIVATE.

Question 5

buyback of shares out of profits procedure?

Answer 5

contract must be approved by ordinary resolution.

available for inspection 15 days before the general meeting

Question 6

buyback of shares out of capital procedure and timeframe?

Answer 6

ordinary resolution for contract.
special resolution to approve payment out of contract.

• special resolution must be passed within one week after the directors sign the statement of solvency.
• within 7 days of the passing of the special resolution, company must give notice to its creditors by publishing a notice in the gazette.
• file special resolution at companies house within 15 days.
• The share purchase can take place no earlier than five weeks, and no later than seven weeks, after the date of the special resolution

Question 7

if the target is a public company, prohibition on giving financial assistance applies to…..

Answer 7

1. target company itself.
2. any subsidiary, private or public.

Question 8

if the target is a private company, the prohibition of giving financial assistance applies to..

Answer 8

any public subsidiary of the target company.

Question 9

when must a company notifty its creditors after passing a special resolution for the buyback of capital?

Answer 9

within 7 days, must public a notice in the gazette.

Question 10

Can shareholders cancel the variation of shares?

Answer 10

yes, must hold 15% of the relevant shares and apply to court within 21 days of the resolution to have a variation cancelled.

Question 11

what are the administration requirements for when new shares have been allotted?

Answer 11

• Return of allotment (form SH01) and statement of capital.
• If persons with significant control have changed as a result, the relevant forms (PSC01)
• IF company has amended its articles, must file these at companies house.
• update register of members within 2 months.
• update PSC register.
• update company register.

Question 12

what are the consequences of a company giving unlawful financial assistance?

Answer 12

• penalties in the form of a fine.
• officers of a company can be fined or imprisoned.
• transaction will be void (loan) and wider transaction (acquisition) may be void too.

Question 13

when don’t pre emption rights need to be disapplied?

Answer 13

equity securities- capped as to dividend and and capital