Introduction to Shares Flashcards

1
Q

What is capital?

A

Funds available to run the business

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2
Q

What is share capital?

A

Money raised by the issue of shares

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3
Q

What is working capital?

A

Funds needed to keep the business going

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4
Q

What are different ways to raise finance?

A

1) Equity finance
2) Debt finance

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5
Q

What are the incentives of investing into a company for shares?

A

1) Receipt of income (dividends)
2) Capital gain of shares

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6
Q

What must a share have for its allotment not to be void?

A

A fixed nominal value

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7
Q

What is a fixed nominal value?

A

The minimum subscription price for that share

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8
Q

What is a par value?

A

Another saying for nominal value

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9
Q

Does the nominal value represent the actual value?

A

No, it just represents the unit of shares

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10
Q

What are some common nominal values?

A

1p, 5p, or £1

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11
Q

What is a premium?

A

When a share is allotted at higher than its nominal value

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12
Q

What is an issued share capital?

A

The amount of shares in issue at any time

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13
Q

What are subscriber shares?

A

The shares purchased by the first members of the company

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14
Q

When can new shares be issued?

A

At any time after incorporation

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15
Q

What is allotment?

A

When a person acquires the unconditional right to be included in company’s register of members in respect of those shares

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16
Q

What is the issue of shares?

A

Once allotted, this will be once they are registered onto the register of members

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17
Q

When is full legal title to shares achieved?

A

Once a person’s name is entered in the company’s register of members

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18
Q

What is paid-up share capital?

A

The amount of nominal that has been paid so far

19
Q

What is called up share capital?

A

When a company calls for the shares to be paid off by shareholders

20
Q

Can shares be issued even if not paid up in full?

21
Q

What are treasury shares?

A

Shares that the company buys back and is just holding on to

22
Q

Can treasury shares be issued?

A

No, even though they are transferred to the Company

23
Q

What can the company do with treasury shares?

A

Cancel them, transfer them to employee share scheme, or to someone else

24
Q

What are different classes of shares?

A

Different shares with different rights

25
Q

Is the definition of different classes of shares in CA 2006? What is the effect?

A

No, it is not. So the label has no meaning, but the Article is what determines what the shares mean.

26
Q

What are the different types of shares? (8)

A

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

27
Q

What is the default class of shares?

A

Ordinary shares

28
Q

What happens if shares are issued without differentiation on class?

A

They will just be ordinary shares

29
Q

What are preference shares?

A

Payments to preference shareholders will hold priority over ordinary shareholders

30
Q

Can preference shareholders vote?

A

Typically non-voting, but important to check the Article’s as can be issued with voting rights

31
Q

What happens if a dividend is not paid in a particular year for a preference share?

A

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

32
Q

What are cumulative preference shares?

A

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

33
Q

What are participating preference shares?

A

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

34
Q

What are deferred shares?

A

No voting rights and no ordinary dividend – but sometimes entitled to surplus of profits once other dividends paid

Basically no rights

35
Q

What are redeemable shares?

A

Shares issued with intention that company will, buy them back when they want to

36
Q

What are convertible shares?

A

Shares that carry an option to convert into a different class according to stipulated criteria

37
Q

Are there any formal universal definitions of different types of share?

A

No, everything is in the Article’s

38
Q

What voting right is needed to vary a class of share?

A

If no amendments, at least 75%

39
Q

Who can apply to the court to have a variation of a class of share cancelled?

A

Shareholders holding 15% of the relevant shares

40
Q

How long does a shareholder have to apply to the court regarding a variation of a class of share?

A

Within 21 days of the resolution

41
Q

When are dividends payable?

A

If the company has sufficient distributable profits

42
Q

What are the two types of dividends?

A

1) Final dividends
2) Interim dividends

43
Q

What are final dividends?

A

Declared by the company by ordinary resolution following financial year end

44
Q

What are interim dividends?

A

Default Articles allow for directors to pay interim dividends without the need for ordinary resolution