Module 3 Share and Loan Capital Flashcards
1
Q
Three types of debentures
A
- Single debentures
- Debentures issued in a series
- Debenture stock
2
Q
Single debenture
A
Company obtains a secured loan or overdraft from a bank
3
Q
Debentures issued in a series
A
- Lenders should rank equally (pari passu) in their right to repayment and in secuirty the company gives them
4
Q
Debenture stock
A
- Only public company can issue debnture stock to public
- Offered by way of prospectus
- Debenture stock can be traded
- Company must register and certificate no later than 2 months after allotment
5
Q
Remedies for an unsecured debenture holder
A
- Sue the company for the debt and obtain court order.
- Right to seize property if remains unpaid
- Wind the company up
- Be owed more than £750
- Asked for payment in writing
- Failed to pay in 21 days
- Administration order
6
Q
Remidies for secured debenture holder
A
- Same rights as unsecured plus:
- Fixed charge - take possessions and or sell the asset that form the security
- Floating charge - appoint out of court administrator
7
Q
Fixed charge
A
- Attaches to specific asset as soon as charge is created
- Any business can grant fixed charge
- Best suited to long term assets (land/buildings)
- Ranks first in event of liquidation
8
Q
3 options for fixed charge asset disposal
A
- Repay the secured debt out of proceeds of sale
- Pass the fixed charge to the purchaser along with the asset
- Transfer the fixed charge to alternative asset
9
Q
Floating charge
A
- Charged on a class of assets
- Assets subject to the floating charge may change day to day
- Cannot be identified until crystillisation
- At crystilisation date assets subject to floating charge become avalible to the holder as repayment of debt
10
Q
When must a charge be registerd and by who?
A
- 21 days of creation at companies house to be enforceable
- Likely the creditor will undertake this as they have particular intrest in charge being registered
11
Q
What charges take priority
A
- Fixed charge
- Subsequent fixed charge
- Floating charge
- Subject to negative pledge clause
12
Q
Share definition
A
- Transferable form of property which carries rights and obligation and which measures the intrest which a member of the company has in the company
13
Q
6 Rights of ordinary shareholder
A
- Right to attened general meetings
- Right to vote and general meetings
- Rights to dividends
- Rights to surplus assets on a winding up of company
- Right to transfer the shares
- Rights of membership attached to the shares
14
Q
Rights of preference shareholders
A
- Right to receive annual fixed dividend
- Right to captial before ordiany shareholders during winding up
- Dividends cummulated to futures years if compant cannot pay
- No ownership and no voting rights
15
Q
Redeemable shares
A
- Shares bought back by the company at option of shareholder or company
- Does not dilute ordinary shareholders
- Useful exit option for investors
- Cannot have all reedeemable shares
16
Q
Treasury shares
A
- Companys own shares bought back but not cancelled
- Cannot exercise voting rights or reeive dividends
- Can be cancelled sold or transfered to an employee share scheme
- Can only be sold for cash
17
Q
Types of share capital
A
- Issued and alloted share capital - Actual number of shares that has been issued
- Called up share capital - Amount which is yet to be paid
- Paid up share capital - Amount actualy paid
- Uncalled share capital - Company has not requested payment yet
18
Q
3 ways a person can become a shareholder
A
- Subscribing to the memorandum
- Agreeing to become a memeber at a subsequent date
- Transmission of shares
19
Q
4 ways membership cease
A
- Transfer all shares to another person
- Death
- Minior refuses to accept their shares
- Company dissolved
20
Q
Shareholders may object variation of rights
A
- Objectors must hold at least 15% of issues share class
- Must not have consented or voted in favour of variation
- Apply to court within 21 days of consent
21
Q
Share premium money may be used?
A
- To pay up fully paid bonus shares
- To pay off the compans preliminary expense
22
Q
Statutory pre-emption rights
A
- First offer those share to existing holders
- To ensure that issue of further ordianry shares to others does not dilute the rights of existing ordinary shareholders
23
Q
Rights issue
A
- Approach exsiting ordianary shareholders and offer them new issue pro rate to their existing holding
- Shares not taken u within offer period (usually 21 days) then offered to outsiders
- Shareholders can disapply their pre-emption rights
24
Q
Bonus issue
A
- Issue of new free shares to exsiting shareholders
- Throught the capitalisation of compant reserves
- Usually restricted to ordinary shareholders
- No dilution occurs
