WorksheetsLW - Ch-14 , Capital Maintenance & Dividends Laws
Total questions: 14
Worksheet time: 34mins
What is the principle of capital maintenance?
Companies should not make payments out of capital to the detriment of creditors
Companies should seek to maintain or increase their capital at all times
Companies should maintain the ratio of their debt and equity capital
Which of the following statements regarding reduction of capital is correct?
A limited company requires a court order to cancel unissued shares
A limited company requires a special resolution of its members to cancel unissued shares
A limited company is permitted without restriction to cancel its unissued shares
Which of the following is required to permit a private company to reduce its share capital without application to a court?
A special resolution only
A special resolution and a solvency statement from the directors
Authority in the articles and an ordinary resolution
Which of the following is required to permit a public company to reduce its share capital?
A special resolution and a solvency statement from the directors
A special resolution and court approval
Authority in the articles and a special resolution
Which type of dividend is paid by the issue of additional shares?
Scrip dividends
Capital dividends
Equity dividends
At which point before its payment does a dividend become a debt of the company?
When it is declared by the company in general meeting
When it is recorded in the financial statements
When the company's bank receives the instruction to make the payment
Which of the following is an undistributable reserve for the payment of a dividend?
Accumulated realised profits
Retained earnings
Capital redemption reserve
The rules of capital maintenance exist to primarily protect which of the following parties?
A company's members
A company's creditors
A company's customers
The government
Which of the following is NOT a valid method that a company may use to reduce its share capital according to the Companies Act 2006?
Pay off part of paid-up share capital out of surplus profits
Extinguish liability on partly paid shares
Buy back fully paid up share capital from shareholders using cash not surplus profit
Cancel paid-up share capital that is no longer represented by assets
Which TWO of the following are true concerning the issuing of a solvency statement by private companies in connection with a reduction of the company's share capital?
1. A solvency statement must be made 15 days in advance of the meeting where the special resolution concerning the reduction will be voted on
2. Only the Chairman and Finance Director of the company must be named on the statement
3. The statement must declare that there are no grounds to suspect the company will be unable to pay its debts for the next six months
4. It is an offence to make a solvency statement without reasonable grounds for the opinion expressed in it
1 & 2
1 & 4
3 & 4
1 & 3
Which of the following statements concerning public companies reducing their share capital is correct?
A public company can reduce its share capital to below £50,000 and remain a public company without restriction
A public company that wishes to reduce its share capital to below £50,000 must re-register as a private company
A public company that wishes to reduce its share capital to below £50,000 must obtain permission from the stock market
A public company that wishes to reduce its share capital to below £50,000 must pass a written resolution of the members
What is the name given to dividends that are paid part of the way through a company's financial year?
Semi-dividends
Part paid dividends
Interim dividends
Preference dividends
In relation to the payment of dividends, which of the following will be included in the profit available for distribution in a company's current financial year?
An increase in the asset value of a head office building that occurred during the current financial year
Profit on the sale of an asset sold after the end of the current financial year
A depreciation charge made in the current financial year
A premium received on the nominal value of shares issued in the current financial year
Which of the following statements is true concerning the payment of dividends by a public company?
A public company may make a distribution as long as its net assets are not less than its share capital
A public company may make a distribution as long as its net assets are not less than its undistributable reserves
A public company may make a distribution as long as its net assets are not less than its share capital less its undistributable reserves
A public company may make a distribution as long as its net assets are not less than its share capital plus its undistributable reserves
