LW - Ch-13 , Loan Capital

Which of the following is true regarding the borrowing powers of companies?

• All companies registered under the Companies Act 2006 have an implied power to borrow

• The members of public companies registered under the Companies Act 2006 must authorise the company to borrow

• The Companies Act 2006 sets a maximum limit on the amount each type of company may borrow

In relation to debentures issued as a series, which of the following describes the term pari passu?

• All debentures rank equally

• Older debentures rank above newer debentures

• Higher value debentures rank above lower value debentures

Which of the following differences between share capital and debentures is correct?

• Dividend payments on shares is tax-deductible, interest payments on debentures is not tax-deductible

• Interest payments on debentures is mandatory, dividend payments on shares is discretionary

• In the event of liquidation, shareholders are paid their investment back before the debentureholders

Which of the following charges on the same asset, all of which have been properly registered, has the highest priority?

Assume all charge holders are unaware of the other charges.

• A floating charge with a value of $5,000 registered on 1 January 20X1

• A fixed charge with a value of $2,000 registered on 1 February 20X1

• A floating charge with a value of $7,000 registered on 1 March 20X1

Which of the following events will cause a floating charge to crystallise?

• Resignation of the finance director

• The chargee appointing a receiver

• Sale of the assets subject to the charge

How many days after creation must a charge be registered in order for it to be valid and enforceable?

• 7

• 14

• 21

Which of the following is true concerning late registration of a company charge?

• A charge may not be registered late

• A charge may be registered late, but only if the permission of the Registrar of Companies is obtained

• A charge may be registered late if it does not prejudice the creditors or shareholders of the company

Which of the following statements regarding directors' borrowing powers is correct?

• Where directors borrow for a non-business purpose, the loan contract is unenforceable by the lender

• Where directors borrow a greater amount than they have the power to, the loan contract is unenforceable by the lender

• Where directors exceed their borrowing powers, the company may ratify the loan contract if it is within the capacity of the company

• Where directors borrow for a business purpose, the loan contract is unenforceable unless it is supported by a company charge

Which of the following MUST be created using a debenture trust deed?

• A single debenture

• Debenture stock

• Series debentures

• Register of debentureholders

Which TWO of the following are advantages of using a debenture trust deed?

1. The deed creates a charge or charges over the company's assets which creates security

2. A single trustee of the debentureholders is appointed so the company only has to deal with one person

3. Debentures covered by a debenture trust deed have a higher priority of repayment on liquidation than debentures not covered by a deed

4. The process of selling a debenture covered by a debenture trust deed is substantially faster than the process of selling a debenture not covered by a debenture trust deed

• 1 & 2

• 2 & 4

• 1 & 3

• 1 & 4