Shares

Question 1

What is the name of the process through which the FCA supervises the employment of financial services professionals?

Answer 1

Controlled functions e.g. CF 1 Director function

Question 2

What is a company’s equity share capital?

Answer 2

These are the ordinary voting share capital

Question 3

Can shares be issued at a discount?

Answer 3

Yes up to 10%

Question 4

If a call on shares is not paid, what is the ultimate sanction available to the directors?

Answer 4

Forfeiture

Question 5

What are pre-emption rights?

Answer 5

First-refusal on shares

Question 6

What is a share premium?

Answer 6

This is the amount of the issue price of a share in excess of its nominal value.

Also remember that the amount of any share premium must be credited to a special capital reserve - the share premium account

Question 7

What services does a Share Registrar usually offer?

Answer 7

• Issuance and transfer of shares
• Record keeping
• Paying agent
• Shareholder liaison
• Meeting management

Question 8

When is stamp duty due?

Answer 8

If the consideration is £1000 or more
The rate of stamp duty is 0.5% of the consideration paid, rounded up to the nearest £5
Therefore if a share transfer is £1000 - £5 stamp duty is due

Question 9

What is the process as company secretary if a share certificate goes missing?

Answer 9

• Tell the shareholder to do another thorough check
• Shareholder must sign an indemnity (to protect against the original share certificate being used fraudulently)
• A certificate should be reissued with the word DUPLICATE clearly labelled
• Register of Members must be updated

Question 10

What is a dividend mandate?

Answer 10

Authority from a member to pay dividends to a specified branch of a bank

Question 11

What is the difference between a SCRIP and DRIP dividend?

Answer 11

SCRIP - member elects to receive shares in lieu of dividend (usually new shares)
DRIP - also known as dividend reinvestment scheme - member elects to be paid for shares already on the market

Question 12

What happens if a dividend has not been claimed within two consecutive periods?

Answer 12

Dividend is withheld

Question 13

What are the requirements of an Enterprise Management Incentive (EMI) Scheme?

Answer 13

The employer must have:
• assets of not more than £30 million
• not more than 250 employees
• be carrying out a qualifying trade, at the date of issue, to qualify to issue EMI options.

Question 14

What is the difference between an EMI and a Company Share Option Plan (CSOP)?

Answer 14

CSOPs can be offered by any company regardless of size - both CSOPs and EMIs offer tax incentives - no income tax or NI contributions are charged on these share schemes

Question 15

What is a Save As You Earn (SAYE) share scheme?

Answer 15

Must be made available to all employees although this may be subject to an initial period of employment. Under a SAYE, employees can buy shares at a discount of up to 20% of the market value

Question 16

What is a Share Incentive Plan (SIP)?

Answer 16

There are four types of SIPs that a company can offer to its employees either alone or in combination. These are:

1. free shares;
2. partnership shares;
3. matching shares; and
4. dividend shares

SIP schemes issue shares and not options over shares.
The company is entitled to provide each employee with free shares up to a value of £3,600 per year with no income tax or NI consequences. Free shares can be rewarded by reference to an employee’s pay grade, performance, length of service or hours worked.
SIP shares must be held for a minimum of 5 years

Question 17

What is an unapproved share option plan?

Answer 17

Options under an unapproved share plan do not benefit from tax incentives. The employee will be subject to income tax via PAYE tax.