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14 Cards in this Set
- Front
- Back
Capital maintenance is...
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Prevents the members withdrawing their capital without restriction through the maintenance of the 'creditors' buffer'
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what is the creditors' buffer
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a collection of un-distributable reserves maintained by the company, restricting the ability of a company to return capital to its members via dividends & share repurchases
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Capital reduction is
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as per CA 2006.. 3 ways are: a. Removing liability for unpaid calls on issued share capital. b. paying back excess capital to SHs, on fully paid shares, c. cancelling paid up share capital that has been lost |
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how can PVT co reduce capital |
.. as per CA 2206, without court approval by special resolution, a stat.of solvency produced within 15 days of the resolution & a copy of stat. of capital and solvency statement sent to the Registrar within 15 days of the resolution
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how can plc reduce capital...
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req. court approval & allows any member or creditor to object
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how can a PVT co repurchase own shares...
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as per CA 2006; by a market purchase (stock exchg) by ordinary resolution & off-market purchase: any other method, by special resolution
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can pls repurchase shares out of caplital? (creditors' buffer)
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no, it is forbidden
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can PVT co repurchase shares out of capital (creditors' buffer)
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yes.. through PCP's Permissible Capital Payments |
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Rules of PCPs
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a. Dirs to produce statutory declaration of solvency. b. such declaration is audited. c. co to pass 1 special resolution within 1 week of declaration. d. within 1 week of resolution co must advertise the PCP (Gazette)
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The courts are very keen to protect the interests of affected parties during PCPs, therefore any member who opposed the special resolution, or any creditor, can object in court,
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applications being made within five weeks of the resolution. The courts will do as they see fit
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In a plc the maximum value of a repurchase above would be |
limited to the value of retained earnings, as a PCP is not permissible.
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Where acompany attempts to issue shares at a discount to the nominal value the CA 2006 extends criminal liability to...
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both the company and any officers of the company responsible for the breach
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Dividends
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The payment of dividends in a private company are limited in effect to its retained earnings. Public companies have to further restrict this amount by any unrealised accumulated losses they have suffered. Unlawful dividends will have to repaid by the directors, and possibly shareholders. |
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Financial assistance
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Public companies are generally forbidden from providing financial assistance to anyone wishing to purchase shares in the company. However, a number of statutory exceptions exist to the general rule of prohibition including employee Sharesave schemes and banks. Failure to comply with the law is a criminal offence. |