Share capital Flashcards
How can a company raise money?
By issuing shares or borrowing
Russell v Northern Bank Development Corp Ltd 1992
A company may not fetter its right to exercise its statutory power to increase its share capital
A share
An interest in the company measured by a sum of money
Nominal value of the share
The measurement of the shareholder’s rights against the other shareholder
The holder of a non-voting share is not precluded from…
Attending and voting at a separate general meeting of the holders of the particular class of which he is a holder
How is a dividend usually paid?
In proportion to the amount paid up on the nominal value of the share
A right to receive a dividend in priority to other classes of share is normally called a…
Preference dividend
Usually, he right to participate in surplus assets on winding up will be in proportion to…
The amount paid up on the nominal value of the share
Where are the rights attaching to shares found?
In the articles or sometimes in the resolution creating the shares
Ordinary shares
Normally, they carry no special rights except for the right to participate in a dividend, to attend and vote at general meetings and to participate in the surplus assets on winding up
Preference shares
They will have special rights attached to them, e.g. entitlement to a fixed dividend or no right to vote at GMs
Equity shares
Ordinary shares provided they are defined as shares upon which there is no limitation on their rights to participate in dividends or return of capital
Bonus shares
Shares of any class allotted to existing members and paid for out of certain accounts of the company which CA permits a company to utilise in paying up bonus shares
If the company has one class of share, the rights are usually contained in…
The articles and can be altered by special resolution
White v Bristol Aeroplane Co Ltd 1953
A further issue of shares of the same class diluting the rights of the existing members of that class is not a variation
Does the agreement to become a shareholder need to take a specific form?
No, unless required by the articles
Whose decision it is to allot shares?
The directors’
Three issues to consider before allotting shares
- does the company have sufficient unissued shares to allot?
- do the directors have authority to allot?
- do the shares have to be offered to existing shareholders first?
Companies incorporated after October 2009 will be deemed to have…
Available share capital for allotment unless the articles expressly limit such availability
In the case of private companies with one class of share, do the directors have authority to allot?
Yes, they may do so except to the extent they are prohibited by the articles
What does the right of preemption mean?
That existing shareholders are able to preserve their same percentage holding in the company after the issue, provided that they have sufficient funds available to subscribe for the new allotment
If a share is partly paid, the balance outstanding becomes payable when…
A call is made for payment of the whole or part or if called for in the liquidation of the company
Can shares be issued at a discount?
No, if they are, the allotee is liable to pay the amount of the discount and interest
Can shares be issued at a premium?
Yes, the premium is treated as part of the capital of the company
Is a company obliged to recognise any interest in the share other than that of the registered member?
No
Two stages of a transfer of a share
- the transfer between the transferor and transferee
- the registration of the transferee on the register of members so that he becomes the legal owner of the share
When a transfer of shares of a company has been lodged with the company, the company must either…
Register the transfer or give notice (with reasons) of the refusal
Does the share transfer instrument of a fully paid share need to be witnessed?
No, just executed by the transferor
As regards share transfer instruments, it is necessary to ensure that… (3)
- only one share transfer is used for each class of share
- the form contains the names and addresses of the parties and the consideration for the transfer
- the form is signed by the transferor and handed to the transferee together with the relevant share certificates
What happens after the completion of stage 1 of share transfer?
The beneficial ownership passed to the transferee but the transferor holds the legal interest as trustee for the transferee pending registration of the transferee as the holder of shares
Can the directors refuse registration?
Yes, under MA
Re Smith and Fawcett 1942
The court will not interfere with the power of directors to refuse the entering of the transferee on the register of members unless it’s not bona fide in the interests of the company as a whole
Popely v Planarrive Ltd 1997
A notification of refusal out of time does not invalidate a valid exercise of discretion to refuse registration made within a reasonable time
On registration of the transfer and the entry of the name of the transferee in the register of members…
A new share certificate will be issued in favour of the transferee
