Chapter 17 Self-test Questions

. The Companies Act 2006 provided for three methods to reduce a company's capital. Which one of the following is not such a method?

A company can reduce its capital in order to readjust the nominal value of newly-denominated shares

A limited company can reduce its capital by passing a special resolution followed by court confirmation

A private company can reduce its capital by passing a special resolution supported by a solvency statement

A company can reduce its capital if the articles permit a reduction and a special resolution is passed

. If the net assets of a public company fall to half or less of its called-up share capital, then what action must the directors take?

The directors must increase the company's share capital by allotting new shares

The directors must make a call for payment on any shares that are not fully paid up

The directors must call a general meeting to consider whether any steps should be taken to deal with the situation

The directors must voluntarily wind up the company

. A company is never permitted to acquire its own shares

True

False

. Which one of the following statements regarding redeemable shares is not true?

Redeemable shares cannot be issued if the only shares that the company has are redeemable shares

Redeemable shares can only be redeemed if they are fully paid up

When redeeming shares, the company must fully pay for them at the time of redemption, unless the terms of redemption provide for a later date

Companies may only issue redeemable shares if their articles so provide

. If a company acquires its own shares, then those shares must be cancelled.

True

False

. A private company can redeem or purchase shares out of capital if stringent requirements are complied with. Which one of the following is not a requirement?

The directors must issue a statement specifying the permissible capital payment

The company's articles must authorise payment or redemption out of capital

The payment our of capital must be approved by a special resolution

The auditor must provide a report on the payment or redemption

. The prohibition on providing financial assistance to acquire shares applies to which type of company?

Public and private companies

Private companies

Public companies

Traded companies

Large companies

. Which one of the following is not a consequence of providing unlawful financial assistance to acquire shares?

A criminal offence is committed

The agreement to provide unlawful assistance will usually be unenforceable

Directors who cause a company to provide financial assistance can be disqualified

A recipient of financial assistance will be required to account for the sum received

The directors who cause a company to provide financial assistance can become liable for the debts of the company

Directors who are party to a transaction that provides financial assistance may be found in breach of duty

. Regarding final and interim dividends, which one of the following statements is untrue?

The directors are usually empowered to pay out an interim dividend without member approval

An interim dividend is regarded as a debt of the company owed to the members

The directors can rescind, or vary the amount of, an interim dividend

Type option here

. The model articles set out a three-stage process for the payment of a final dividend. Which one of the following is not part of this process?

The auditor provides authorisation for the amount of profit to be distributed by way of dividend

The members declare a divided by passing an ordinary resolution

The dividend is paid out based on the rights of the members

The directors recommend an amount of profit to be distributed by way of a dividend

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