ICAEW Company sharers and equity share capital Questions and Verified Answers 2023/2024

ICAEW Company sharers and equity share capital Questions and Verified Answers 2023/2024 Share - correct answer A member’s stake in a company's share capital Name the two most common types of shares - correct answer Preference shares and ordinary shares Describe a share - correct answer A transferable form of personal property, carrying rights and obligations, by which the interest of a member of a company limited by shares is measured. Shareholder - correct answer A member of a company who holds one or more shares Define redeemable share - correct answer Share issued on terms that it can be bought back by the company at the option of the company or the shareholder. Can be ordinary or preference share. Where are the prescribed particulars of the rights attached to each type of the company's shares - correct answer on the statement of capital submitted on formation and details are probably in articles. Define preemption rights - correct answer The rights of existing company shareholders to be offered new equity shares issued by the company pro rata to their existing share holding of that class of shares. Ordinary share - correct answer A share which gives the holder the right to participate in the company's surplus profit and capital. The dividend is payable only when preference dividends, including arrears, have been paid Name some other features of ordinary shares - correct answer right to have capital repaid and to participate in profit distribution when the company is wound up (if company has assets once creditors are satisfied). Paid when declared by directors. Not cumulative. Offered rights and bonus issue. Shareholders have statutory preemption rights. Preference share - correct answer Company shares which entitle the holder to a fixed rate of dividend and priority of repayment ahead of ordinary shareholders Name some features of preference shares - correct answer Right to capital repayment on winding up unless articles provide otherwise. Do not have preemption rights unless the are specifically conferred by the company's articles of association or terms of issue of the shares. Describe the rights of preference shares to a fixed dividend - correct answer Right to receive dividend at specified rate before any other dividend is paid or declared. No right to force payment of dividend. Right is deemed to be cumulative (unless contrary is stated). No entitlement to participate in additional dividend over and above their specified rate unless expressly provided. On liquidation are preference shareholders entitled to unpaid preference dividends - correct answer No unless a dividend has been declared though not get paid when liquidation commences and the articles expressly provide that in liquidation arrears are to be paid in priority to return of capital to members. Do preference shares carry right to vote - correct answer Usually expressed not to have right only in specified circumstances like failure to pay preference dividend, variation of their rights or a resolution to wind up. If there is not an express provision they carry same voting rights as ordinary shares. If surplus after capital repayment what happens - correct answer ordinary and preference shareholder will share equally.