This website uses cookies to ensure you get the best experience on our website. Learn more

#17438 - Company Law Shares And Membership - Company Law I

Notice: PDF Preview
The following is a more accessible plain text extract of the PDF sample above, taken from our Company Law I Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting.
See Original
SHARES AND MEMBERSHIP Birch v CropperUnless the constitution provides otherwise, shares are presumed to be 'Pari Pass u' This means they are equal among each other, as in individually - obviously if one person has more shares than the other they don't possess an equal interest in the company. As we've seen however, there can be different classes of shares provided for in the constitution. Different classes of shares and their elements. • • • • ➢ One can tailor preferred shares to the types of investors that they wish to attract. You can create preferred shares for types of investors that you only want for a short period of time - you can create entitlements that best meet both of your needs. E.G: Lenders. They are entitled to their investment back regardless of whether the company increases of decreases w/ regards to profits. They are not shares. Just a loan. There is also such a thing as convertible stock Converting shares into stock/ stock into shares. Also, possible to forbid this. Redemption v Buying back Redeemable sharesContractual mechanism through which shares can be redeemed e.g taken back from the shareholder by the company Redeemable at the instance of the company OR the shareholder. This gives shareholder control and guarantee of some sort Sometimes they will buy back shares that are NOT issued as redeemable: Buying backDiscretion of the company Buys them at market price ➢ So nowadays redeemable shares will usually have a added preference as ordinary shares are technically redeemable anyway. DIVIDENDS- Members in a general meeting decide whether they will declare a dividend, not the directors. They decide by vote • This is why you would have preferred dividend shares as to voting > so the people with priority access to the dividend aren't just voting for their own benefit. • HOWEVER, Dividends are recommended by the directors and APPROVED by the members, Director's will decide on a maximum amount • • • This means the ultimate power is vested in the directors as they have total discretion for the max. amount Members can vote against it and decide if they want it to go back into the company. Once approved, all entitled to their pay of it (according to their holdings) General meetings: • • • • Held within 15 months of last AGM (annual general meeting) Usually will discuss financial statements, the director's report and the auditor's report Recommendation from directors to declare a dividend Electing new directors to replace stepping down directors Appointing and re-appointing an auditor and deciding their pay. DIVIDEND DECLAREDExpression of the will of the members to allow the directors to divide the profits amongst the holders DIVIDEND PAYABLE • • • • •Payable when the conditions are fulfilled In other words, the members may agree to declare a dividend, but then it must record a liability This indicates the company has a future cash pay out that will occur based on the agreement. A 'payable account' is: a liability that resides on the company's balance sheet, that will include an amount the company will pay as designated at the dividend declaration date. The members then must wait until that date to be able to sue the directors for non-payment of capital. They normally wait a while They have 12 yrs to sue SHARES PREFERRED AS TO DIVIDEND •If someone has shares preferred as to Dividend, they are paid ahead of the ordinary shareholders. Presumed to be cumulative. Meaning, if 5 years have passed and you have a 10% preference share worth 1 euro per annum, I will get 50c at the end of the five years as my shares have built up, and all ahead of ordinary shareholders. Whether they remain cumulative in the case of a winding up depends on the constitution and terms of issue BUT -Creditors still get priority despite whether or not the shares are cumulative s 665 (1)(e) Meaning if there isn't enough left to pay them cumulatively, hard luck.
Unlock the full document,
purchase it now!
Company Law I
Target a first in law with Oxbridge