Chapter 7 Multiple choice questions

. What is a share's 'nominal value?'

The maximum value that the share can be sold for.

A fixed amount that represents the notional value of the share's worth.

The current market value of the share.

The maximum value that can be paid for a share.

. What is a company's 'issued share capital?'

The total nominal value of shares that have actually been issued.

The total nominal value of shares that may be issued by a company.

The total market value of shares that have actually been allotted.

The difference between the total nominal value of shares that have been allotted and the total nominal value of shares that can be allotted.

. Ethos plc commences business and issues one million shares with a nominal value of £3 each. The company allows its allottees to pay £1.25 on allotment and the remainder at a later date. All the allottees chose to do this and all the shares are sold. What is Ethos plc's paid-up share capital?

£500,000.

£1.25 million.

£1.75 million.

£3 million.

. The allotment of shares refers to the process whereby a person who has purchased shares has their name entered on the register of members. True or false?

True

False

. Regarding the company's power to allot shares, which ONE of the following statements is NOT true?

Where a private company only has one class of share, the power to allot shares is vested in the directors.

Any authorization given to allot shares can only last for a maximum of five years.

The directors of public and private companies that have more than one class of share can only allot shares if they are authorized to do so by the articles, or by a resolution of the company.

Any authorization given to allot shares must state the maximum number of shares that can be allotted under it.

As any authorization given to allot shares can effectively amount to an indirect changing of the articles, such authorization can only be revoked or varied by the passing of a special resolution.

. Which ONE of the following statements regarding pre-emption rights is NOT true?

Pre-emption rights to not apply to an allotment of bonus shares.

Generally, a new allotment of shares must be offered first to the existing shareholders in proportion with their existing shareholdings.

An allotment of shares that contravenes the pre-emption rights of existing shareholders will still be valid.

Any company can exclude pre-emption rights by placing a provision in its articles excluding any pre-emption rights.

Pre-emption rights do not apply to shares to be held under an employee's share scheme.

Pre-emption rights to do not apply where shares are to be paid up otherwise than in cash.

. In order to reduce capital, a public company must pass a special resolution and obtain court approval. True or false?

True

False

. There are limitations on the issuing and redemption of redeemable shares. Which ONE of the following is NOT an actual limitation?

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

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

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

Private companies can only issue redeemable shares if their articles so provide.

. Which ONE of the following statements is true?

No company is allowed to provide financial assistance to acquire its own shares.

Only public companies can provide financial assistance to acquire their own shares.

Only private companies can provide financial assistance to acquire their own shares.

Private companies are free to provide financial assistance to acquire their own shares. Generally public companies are prohibited from providing such assistance, but can do so in limited circumstances.

. Regarding the distribution of profits, which ONE of the following statements is NOT true?

A failure to pay a dividend can justify the winding up of a company.

If an unlawful dividend is made, the directors may be personally liable to repay the monies paid out.

If the shareholder disagrees with the dividend recommended by the directors, they can increase the dividend that is to be paid by passing an ordinary resolution.

Generally, the company can only declare a dividend be paid if the directors have recommended the payment of a dividend.

. There are several differences between fixed charges and floating charges. Bearing this in mind, which ONE of the following statements is NOT true?

A company's ability to deal with assets subject to a fixed charge, is highly limited, whereas the company is free to deal with assets subject to a floating charge.

A company can create a subsequent floating charge over the exact same class of assets as a prior floating charge.

Fixed charges provide stronger security as, upon winding up, fixed charges rank ahead of floating charges.

Fixed charges are taken over a specific, identifiable assets, whereas floating charges are usually taken over a class of assets.

A company can create a fixed charge over assets that are subject to a floating charge.

. Which is the effect of the failure to register a charge with the registrar of companies?

A criminal offence is committed.

The directors will be in breach of their duties.

The debt will no longer be owed to the creditor.

The charge will be void against any liquidator, administrator or creditor.

Quiz Content