A company has £1 nominal value shares. The directors propose to issue new shares at 90p each. What is the legal position?
Answer and explanation
Correct answer: D. This is unlawful because shares cannot be issued at a discount
- Step 1: Section 580 of the Companies Act 2006 prohibits issuing shares at a discount to nominal value.
- Step 2: Issuing at a premium is permitted, and the premium goes to the share premium account.
Answer
This is unlawful because shares cannot be issued at a discount.
Why not the others: Unanimous approval cannot make an unlawful issue lawful. Recording the discount in the share premium account does not make it lawful. The prohibition applies to both private and public companies.
Practise more Company and insolvency law.
Free questions with an explanation for every one, and full timed ICAEW ACA Certificate Level mock tests.
More Company and insolvency law questions
- What was the principal decision in Salomon v A Salomon & Co Ltd?
- In which circumstance is a court most likely to lift the veil of incorporation?
- Which of the following must be delivered to the Registrar of Companies to register a private company limited by shares?
- What is the effect of a company's articles of association under section 33 of the Companies Act 2006?
- A promoter signs a contract in the name of 'ABC Ltd', which has not yet been incorporated. After incorporation, ABC Ltd does not adopt the c…
- How does a limited liability partnership (LLP) differ from a general partnership?