SGS 18 Flashcards
What are redeemable shares?
Shares issued with rights that entitle the company to redeem them at the option of the company (or SH) according to a pre-determined formula or price.
Procedure for redemption and rights set out in AA.
What must one always check for both redemption and purchase of shares?
Articles of association for any restrictions.
What is the de minimis procedure and its relevance?
s.692(1ZA)
PURCHASE only and PRIVATE company.
Use capital without the need for compliance with Chapter 5.
Can private companies always use the de minimis procedure?
NO: their articles must allow it and if silent, a SR must be passed to rely on the procedure.
What is a distributable profit?
What figure should you use when examining a balance sheet?
The company’s accumulated, realised profits less its accumulated realised losses (ss.736 and 830(2)).
Retained earnings
Why does the CA require an onerous procedure for the buyback or redemption of shares using capital?
Doctrine of maintenance of share capital - permanent fund available to creditors.
What figure is relevant for the Capital Redemption Reserve?
The reduction in share capital after purchase.
What commercial consideration is relevant when buying back shares out of undistributed profits?
Less likely a dividend will be paid that year.
What are Treasury Shares and what necessary preconditions are there?
Private companies can purchase own shares then hold them indefinitely, later sell for cash, cancel at any time or transfer for the purpose of an employer’s share scheme.
Must be purchased out of distributed profits.
Agenda for the GM for the purchase of shares using distributable profits and capital?
Pass OR to approve terms of contract
Pass SR to approve payment out of capital
Ensure GM is held within one week of the date of the DS and AR (ss.716(2) and 714(2) and (6)).
What is significant about the GM voting as respects the selling shareholder?
On show of hands: can vote provided vote does not carry the resolution
Poll: can only vote in respect of shares which are not proposed to be purchased (ss. 695(3) and 717(3)).
When can BM2 take place for the purchase of shares using capital?
Immediately after GM
Purchase contract signed giving directors conditional authority to carry out the purchase in the two week period starting five weeks from the date of the SR (s.723(2)), provided there is no objection from creditors.
What are the four distinct PMM groupings for the buyback of shares using capital?
Creditor notifications
CH filings
Company Books
Minutes
CH filings for buyback of shares?
File copy of SR (only if using capital)
Send return (SH03) Notice of cancellation Statement of capital (SH06)
File PSC01 within 14 days.
Company Books for buyback of shares using capital?
Update register of members (s.112 and 113)
Update PSC Register (s.790M)
