Chapter 16 Self-test questions

Maintenance of finance and capital
Where a company limited by shares transfers these at a higher value than the nominal value, what must happen to this income?

A company having a share capital is considered under the Companies Act 2006 to possess a power under its constitution to issue shares. These shares are required to have a nominal value which is the amount that the company and the purchaser have agreed as the purchase price for the share and this value may not be lowered.

A _____ is a bundle of rights and duties that the holder possesses in relation to the company and the other members.

The amount of the nominal share capital that has been paid for by the company members is called?

Issued share capital refers to the amount of the authorized share capital that has been issued (a company does not have to issue all of its shares in the authorized share capital).

Dividends may only be paid from the company's ________ and hence there is no guarantee to a payment being declared.

Where a private company wishes to reduce its share capital, and is not restricted or prohibited from so doing in its articles, to be effective it must:
i) Pass an ordinary resolution to that effect.
ii) Pass a written resolution to that effect.
iii) Pass a special resolution to that effect.
iv) Have the resolution supported by a solvency statement.

Where a private company has only one class of share, the director(s) is empowered to allot new shares in the company unless the articles prevent this. Where a company has more than one class of share, or is a public limited company, there must be authority for such action, provided by the company's articles or through a resolution of the company.

Where the company is listed on the stock exchange, Listing Rules insist that only _ per cent of the company's securities can be issued to persons other than existing shareholders in any year.

Which of the following is NOT a type of share of a company?

A private company is not permitted to reduce its share capital as a protection to its members and prevent fraudulent activities / unfair prejudice.

A private company may achieve a reduction in the share capital by a _______ resolution supported by a solvency statement.

When a charge is applied to a company's asset, within which time period must this charge be registered with the Registrar of Companies?

A share certificate is issued as evidence of the holder's intention to purchase shares in the company. The certificate itself, however, has no legal rights / obligations attached to it.

A company must issue ______ __________ on allotment of shares within two months unless the issue provides otherwise; the allotment is to a financial institution; or if, following the allotment, the company has issued a share warrant in respect of the shares.

Unless provision is made expressly to the contrary, and assuming the charges listed have been correctly registered, which of the following ranks highest in priority when a company is wound-up?

A preference shareholder's main benefit over ordinary shares is in the right to a fixed dividend ahead of any dividend payment made to any other class of shares.

These are the most common form of shares, and unless different classes of shares exist, all shares will be _________ shares.

A company may issue redeemable shares as its only class of shares. This provides the company with an ability to purchase and retain power when it chooses.

___________ preference shares provide the right for a fixed dividend, but if there are insufficient profits in the given year then there is no payment made. However, the dividend will carry over to the next year and is added to the dividend that is applicable to that year.

Where new shares are being issued under Companies Act 2006 s.549, in both public and private companies, the company is obliged to offer ordinary and preference shares to the existing members on a proportionate basis to their existing number of shares held (known as a right of pre-emption).

Where shares are being issued under the Companies Act 2006 s.549, in both public and private companies, and hence the members have provided their authority for this action, the company is obliged to offer ordinary shares (not necessarily preference shares) to the existing members on a proportionate basis to their existing number of shares held. This right is known as a right of ____________.

The company's directors recommend a dividend and the amount is contained in the directors' report. It is declared at a general meeting (for a public company). Only public companies have to hold a meeting to declare a dividend.

Public companies may remove pre-emption rights through a special resolution that can apply to a particular allotment or a general provision although, as with private companies, this must be renewed every _ years.

A debenture is a document whereby the lender is promised a return of the loan under a guarantee, but it remains an unsecured creditor.

A ___________ is a document produced in the form of a deed that secures a loan through granting the lender (such as a bank) the right to take control over assets and the business.

Back to top