CHAPTER 8 COMPANY FINANCE

Zipper Ltd has 100 shares, each with a nominal value of £30 and £3 unpaid. Following an alteration of Zipper Ltd's share capital, the company now has 10,000 shares, each with a nominal value of 30 pence, with 27 pence paid up.

Requirement

Which of the following describes the alteration in share capital?

• Consolidation

• Subdivision

• Redenomination

• Increase in share capital

According to the rules on redemption of shares, are the following statements true or false?

1. 1. In order for a private limited company to issue redeemable shares, the company's articles of association must contain the relevant authority.

2. Redeemable shares may only be issued where there are other shares issued that are not redeemable.

• false; true

• true; false

• false; false

• true; true

Are the following statements true or false?

1. 1. When shares in a limited company are redeemed, they are treated as cancelled, and the amount of the company's issued share capital is diminished by the amount of the redemption payment.

2. 2. A company must file notice of redemption and a statement of capital with the Registrar of Companies within one month following a redemption of shares.

• true; true

• true; false

• false; true

In which of the following situations may a public limited company lawfully offer financial assistance for the purchase of its shares (provided its net assets are not thereby reduced)?

1. 1. Where the company lends money as part of its ordinary business

2. 2. Where the company lends money to a director without a service contract in good faith to enable them to acquire fully paid shares in the company

3. 3. Where the company gives assistance in the interests of the company for the purposes of an employee's share scheme.

• 1. (1) and (2) only

• 1. (1) and (3) only

• 1. (2) and (3) only

• 1. All of the above

Which of the following best defines a debenture?

• A charge over a company's goodwill

• The registration document used to register a fixed or floating charge

• A document that records the terms of any loan

• A document that records the terms of any secured loan

A charge may be avoided by a liquidator as a preference where it is created within a specified time before a company becoming insolvent.

Requirements

What is the specified time for a fixed charge?

What is the specified time for a floating charge?

• 6 months

  1 month

• 6 months

  9 months

• 6 months

  12 months

• 1 month

  3 months

Are the following statements true or false?

1. 1. A floating charge created over the 'undertaking and assets' of a company applies only to current assets at the time of the charge.

2. A floating charge is converted into a fixed charge upon crystallisation. True C False

• true; true

• false; false

• true; false

• false; true

Mila is the company secretary of Swansong Ltd and seeks your advice. She has failed to register a 25 charge entered into by Swansong Ltd within the prescribed period laid down by the Companies Act 2006 and wants to know whether the charge is still valid.

Requirement

What is your advice?

• The charge is void against any liquidator or administrator but not the chargee or any other creditor.

• The charge remains valid but Swansong Ltd is liable to a fine.

• The charge remains valid but the chargeholder has the option of demanding immediate repayment.

• The charge is void against any liquidator, administrator or creditor.

A characteristic of a floating charge is that:

1. 1. Requirements It is a charge over a class of assets present and future.

2. 2. It is a charge over a class of assets, which, in the ordinary course of the business of the company, will change.

• yes; yes

• no; no

• yes; no

Rules in relation to the issue of shares at premium include:

1. 1. Requirements A company may not, without the authority of its articles, issue its shares at a premium.

2. 2. Shares can be issued at a premium not only for cash but also for consideration other than cash.

• no; no

• no; yes

• yes; no

• yes; yes