Shares Flashcards
What is membership of a company based on?
On contributing (or undertaking to contribute) capital for use in the business in return for the issue of shares.
In what ways may a person become a shareholder of a company with share capital?
- by taking shares from the company in exchange for a contribution of capital
- through an employee’ share scheme
- by taking a transfer of shares (on a sale or gift as a trustee) from an existing member
- by operation of law under which the shares of an existing member devolve on (or are vested in, the person (“transmission of shares”) e.g. PRs following death, TT in bankruptcy
What is a share?
A unit of account for:
- measuring a member’s interest in a company
2.
measuring a member’s liability to contribute capital to the company
Subject to the articles, how is share premium divided amongst members on a solvent winding up?
Divisible among all members, even if it was contributed by only some of them.
What are the three main benefits that membership in a company confers?
- Right to influence the way the company’s affairs are conducted, by voting.
2.
Right to a return of contributed capital when the company is wound up (if any property available after paying creditors).
- Right to participate when the company makes a distribution of its profits to its members.
What is an ordinary or equity share?
A share upon which there is no prior limit on the amount which the holder of the share may receive in a distribution.
What is a preference share?
A share which entitles the holder to an annual dividend, of a fixed amount per share, paid in priority to any dividend payments to other members.
Unless otherwise stated, the right to receive a preference dividend is cumulative. What does this mean?
If the dividend is not paid for one period, then double payment is due the next period, and so on.
Share rights on a particular matter are presumed to be exhaustive. What does that mean?
It means that, for example, shares which carry a right to a fixed preference dividend cannot also receive the dividend paid on ordinary shares.
What is a deferred share?
A share bearing the restriction that no dividend can be paid to the shareholder for a financial year unless ordinary shareholders are paid a certain amount for that year.
What is a redeemable share?
A share that offers temporary membership of a company with the repayment of the nominal value of the shares (and in some cases, a redemption premium) at the end of the period of membership.
When are shares allotted?
When a person acquires the unconditional right to be entered in the register of members in respect of that share (CA 558).
What is a balance sheet?
A statement of a company’s financial position on a particular date, called the balance sheet date.
In a balance sheet, what does the profit and loss account record?
The amount of profit that the company has retained instead of distributing to its members.
What does the balance sheet equation mean?
That the sum of the liabilities section and the capital and reserves section should equal the total of the assets section.
