Workshop 5: Equity Finance Flashcards
What is capital?
Funds available to run business of a company
What is the definition of ‘share capital’?
Money raised by the issue of shares, which is contributed towards by investors in company and represented as ‘shares’, which are issues to these investors
What is ‘working capital’?
Funds needed to keep the business going
What can ‘share capital’ also be known as?
Equity finance
What does a shareholder have by way of investing into the company and becoming a part owner?
Voting rights
What does s 542(1) and (2) postage regarding the validity of shares?
(1) shares in a limited company having a share capital must have a fixed nominal value
(2) allotment of share that does not have a fixed nominal value is void
What is meant by the term ‘premium’?
The excess over nominal value of a share
TRUE OR FALSE
Nominal value represents a unit ownership rather than the value of the share
True
What are the common nominal values for ordinary shares?
1p, 5p or £1
What is the ‘issues share capital’?
Where can this be found?
The amounts of shares in issue at any time, shown in the vompany’s balance sheet in its accounts
What two components make up a company’s ISC?
- Subscriber shares
- Shares issues after the company has been incorporated to new or existing shareholders
What are ‘subscriber shares’?
Shares purchased by the first members of the company
What are ‘allotted shares’?
S 558 CA 2006 defined shares to be allotted when one acquires the unconditional right to be included in the company’s register of members regarding those shares
What is the ‘paid up share capital’?
The amount of nominal capital paid
TRUE OR FALSE
The amounts of share capital outstanding can be demanded only 5 years after having the shares
False, it can be demanded by the company at any time
What does a payment being ‘called’ mean?
When a company demands the payment of share capital
What is the definition of ‘called up share’?
Combined numbers of calls made on a company’s shares and existing paid-up share capital - rarely used as shares are rarely not fully paid up [on issue]
What are ‘treasury shares’?
Shares that have been brought back by the company and held ‘in treasury’
What is special about treasury shares in the sale of them?
They are ‘transferred’, not issued shares
Can shares in treasury be sold?
Yes
What are the names of the eight classes of shares?
- Ordinary shares
- Redeemable shares
- Preference shares
- Non-voting shares
- Employees shares
- Cumulative shares
- Convertible shares
- Deferred share
What is the main underlying reason as to why there are different classes of shares?
Each class of shares have different entitlements of
- Voting
- Dividends
- Return of capital when wound up
Where can you find the rights of the share class you’ve invested in?
In the company’s Model Articles
What is the most commonly allotted shares?
Ordinary shares