BLAW211: Capital
Equity Captial Shareholder
- rights in the company
- right to profit share if divided declared
- right to attend meetings/vote
- bound by Act n Constitution
- owner of Company Shares
- Residual claim on Company assets
Debt Capital Creditor
- rights against company
- right to interest only
- no meeting rights
- bound by contract of loan
- is a lender only
- priority on insolvency
Share or Equity Capital
- funds received from members
- liability to repay members
Loan or Debt Capital
- funds received by company from outsiders/creditors and investors holding debentures
- liability to repay creditors
Assets
assets of the company in which funds are invested
Purchase by a Company of its Own Shares
- 1955: Not Permitted
- 1993: Unanimous Assent s107
Distributions
- transfer of money or property by company to SH or;
- the company incurring a debt to or for benefit of SH in relation to shares held by that shareholder
- Directors can only distribute if satisfied that afterwards, company would satisfy the solvency test
Solvency Test
Liquidity Test: company must be able to pay its debts as they become due in the normal course of business
Balance Sheet Test: value of assets is greater than liabilties, including contingent liabilities
Recovery of Distributions
- SH will not have to repay distributions when the company fails the solvency test IF:
- SH received distribution in good faith and w/o knowledge of the fail. AND the SH has altered their position in reliance on the validity of distribution AND it would be unfair to require repayment in full, or at all
Issuing Shares After Incorporation
- s42: at any time to any person & any number it thinks fit.
- s45: preemptive rights
- Directors in favour must sign certificate stating: consideration for/term of the issue, w/ sufficient detail, that its fair and reasonable for everyone, & the present cash value of any non-cash consideration is not less than the amount to be credited for the issue of shares