Unit F

Which of the following is an incorrect statement about the relationship between a company's ordinary shares and its debentures?

• A debenture holder takes priority over a member in liquidation

• The company's duty is to pay interest on debentures, and to pay dividends on                              ordinary shares

• Debentures do not confer voting rights, while ordinary shares do

• Debenture holder have no right to check financial statement, shareholders have the right to receive it

ABC Bhd has issued shares on terms that they will be bought back by the company five years after the date of issue. What are the shares called?

• Ordinary shares

• Preference shares

• Redeemable shares

• Pre-exemption shares

The directors must make a declaration of solvency when

I           a compulsory winding up is taking place

II          the company is reducing its share capital by cancelling shares not represented by available assets

III         the company wishes to voluntarily wind up the company

IV        the court ordered a statutory scheme of arrangement

• II and III                                                                                                                       

• II and IV

• III only

• I and IV

What is the effect of a negative pledge clause in an instrument of a floating charge?

• The clause will have an effect to crystallize a charge upon signing of the instrument

• The clause will not affect the priority of charges which were created before it

• It will have an effect only on floating charges that has notice of the negative pledge clause

• Subsequent fixed charges which are registered shall not be affected even if they had notice of the negative pledge clause

Crystalization of a floating charge occurs when

• The receiver or a receiver and manager is appointed

• A company settled its debts with all creditors

• A de facto director is removed

• A new floating charge is created without the consent of the existing chargee 

Which of the following statements is incorrect?

• A company cannot create two charges over the same assets

• In the event that section 352(1) is not complied with, the chargee may apply to the court to extend the time for registration

• A trading company has implied power to borrow money under the Companies Act 2016

• Debentures are usually secured by charges on the company‟s property or assets

Which of the following is NOT a requirement if a company wishes to cancel its shares?

• There must be authority given in the company’s constitution

• A special resolution must be passed

• Confirmation from the court must be obtained

• Fulfill the solvency test

The floating charge is considered as a weak form of security to a lender as it suffers from a number of disadvantages in comparison with the fixed charge. Which are the disadvantages?

(1) The value of the security is uncertain as the company is free to use the assets in the ordinary course of business.

(2) It ranks lower in priority in comparison with a fixed charge over the same assets.

(3) Assets subject to a floating charge may be used by a supplier to cover its losses if payments for the goods are not settled.

(4) Prior to crystallization, the assets may be seized and sold by the landlord who has taken distress proceedings for overdue rent.

• 1 and 2

• 1, 2 and 3

• 1, 2 and 4

• All the above mentioned

What is true about „capital maintenance‟ under the company law ?

I- The capital of a company may not be returned to members except under procedures which safeguard interests of creditors

II- Unlimited companies may make payments out of capital because liability of members is unlimited.

III- Limited companies should not be allowed to make payments out of capital to the detriment of company‟s creditors.

IV- All companies are prohibited from share buyback because it will be against the doctrine of capital maintenance

• II and IV

• I, II and III

• I and III

• All of the above

Which of the following is one of the procedures to vary a class rights as stated in the Companies Act 2016?

• By the consent in writing of the holders of 75% of the issued shares of that class

• By a resolution passed by the Board of Directors

• By a special resolution passed by a general meeting of all the members

• By the application to the court by any member of the class concerned