Maintenance, redemption and reduction of capital

Question 1

Once capital has been contributed by the members…

Answer 1

It cannot be returned to them except in specified circumstances

Question 2

A distribution cannot be made out of…

Answer 2

Capital

Question 3

The concept of limited liability requires that…

Answer 3

The capital contributed by the members be protected since they cannot be required to contribute further to the company funds once they have paid in full for their shares

Question 4

Redeemable shares

Answer 4

Shares which have been issued on the basis that they may later be redeemed by the company

Question 5

A company that wishes to purchase its own shares off market can only do so

Answer 5

Pursuant to a contract approved in advance by an ordinary resolution

Question 6

A company may purchase its shares out of…

Answer 6

• distributable profits of the company

- the proceeds of a fresh issue of shares made for the purpose of raising the consideration for the buy back

Question 7

Trevor v Whitworth 1997

Answer 7

The reduction of share capital is unlawful unless authorised by statute

Question 8

British and American Trustee and Finance Corporation v Couper 1894

Answer 8

In considering the proposed reduction, the court seeks fair treatment of all classes of member, the interests of creditors and to ensure that persons who deal with the company are not misled