Introduction to Shares Flashcards
What is capital?
Funds available to run the business
What is share capital?
Money raised by the issue of shares
What is working capital?
Funds needed to keep the business going
What are different ways to raise finance?
1) Equity finance
2) Debt finance
What are the incentives of investing into a company for shares?
1) Receipt of income (dividends)
2) Capital gain of shares
What must a share have for its allotment not to be void?
A fixed nominal value
What is a fixed nominal value?
The minimum subscription price for that share
What is a par value?
Another saying for nominal value
Does the nominal value represent the actual value?
No, it just represents the unit of shares
What are some common nominal values?
1p, 5p, or £1
What is a premium?
When a share is allotted at higher than its nominal value
What is an issued share capital?
The amount of shares in issue at any time
What are subscriber shares?
The shares purchased by the first members of the company
When can new shares be issued?
At any time after incorporation
What is allotment?
When a person acquires the unconditional right to be included in company’s register of members in respect of those shares
What is the issue of shares?
Once allotted, this will be once they are registered onto the register of members
When is full legal title to shares achieved?
Once a person’s name is entered in the company’s register of members
What is paid-up share capital?
The amount of nominal that has been paid so far
What is called up share capital?
When a company calls for the shares to be paid off by shareholders
Can shares be issued even if not paid up in full?
Yes
What are treasury shares?
Shares that the company buys back and is just holding on to
Can treasury shares be issued?
No, even though they are transferred to the Company
What can the company do with treasury shares?
Cancel them, transfer them to employee share scheme, or to someone else
What are different classes of shares?
Different shares with different rights
Is the definition of different classes of shares in CA 2006? What is the effect?
No, it is not. So the label has no meaning, but the Article is what determines what the shares mean.
What are the different types of shares? (8)
1) Ordinary shares
2) Redeemable shares
3) Preference shares
4) Non-voting shares
5) Employees’ shares
6) Cumulative shares
7) Convertible shares
8) Deferred shares
What is the default class of shares?
Ordinary shares
What happens if shares are issued without differentiation on class?
They will just be ordinary shares
What are preference shares?
Payments to preference shareholders will hold priority over ordinary shareholders
Can preference shareholders vote?
Typically non-voting, but important to check the Article’s as can be issued with voting rights
What happens if a dividend is not paid in a particular year for a preference share?
Unless Article’s state otherwise, this will carry on to the next time they get dividends, and they are eligible for it when its available
What are cumulative preference shares?
Default position for preference shares – if a dividend is not paid for a particular year, that right will be carried forward and paid together with other dividends
What are participating preference shares?
Holders can participate (with ordinary shareholders) in surplus of profits available after distribution, after their own fixed preferred dividend, and/or surplus of assets on winding up
What are deferred shares?
No voting rights and no ordinary dividend – but sometimes entitled to surplus of profits once other dividends paid
Basically no rights
What are redeemable shares?
Shares issued with intention that company will, buy them back when they want to
What are convertible shares?
Shares that carry an option to convert into a different class according to stipulated criteria
Are there any formal universal definitions of different types of share?
No, everything is in the Article’s
What voting right is needed to vary a class of share?
If no amendments, at least 75%
Who can apply to the court to have a variation of a class of share cancelled?
Shareholders holding 15% of the relevant shares
How long does a shareholder have to apply to the court regarding a variation of a class of share?
Within 21 days of the resolution
When are dividends payable?
If the company has sufficient distributable profits
What are the two types of dividends?
1) Final dividends
2) Interim dividends
What are final dividends? How are they declared?
Declared by the company by ordinary resolution following financial year end
What are interim dividends? Is a resolution needed?
Default Articles allow for directors to pay interim dividends without the need for ordinary resolution
