Mole Ltd issues new ordinary shares for cash. Existing shareholders have not disapplied their statutory rights. What must the company do first?
Answer and explanation
Correct answer: D. Offer the new shares to existing shareholders in proportion to their holdings
- Step 1: Section 561 gives pre-emption rights to existing holders of ordinary shares on an allotment for cash.
- Step 2: The offer must be pro rata, in writing, and open for at least 14 days.
Answer
Offer the new shares to existing shareholders in proportion to their holdings.
Why not the others: Directors and creditors have no pre-emption right; a public prospectus is not what s561 requires.
Practise more Company finance, charges and share capital.
Free questions with an explanation for every one, and full timed SQE1 (Solicitors Qualifying Examination) mock tests.
More Company finance, charges and share capital questions
- A company grants a charge over its factory to a bank on 3 March. By which date must the charge be delivered to Companies House for registrat…
- Which feature most clearly indicates that a charge over stock and receivables is a floating charge?
- A company with floating charge assets goes into liquidation. After preferential creditors, which sum is set aside before the floating charge…
- Directors of Larch Ltd place the company into administration. What is the principal effect on its creditors?
- Eighteen months before it entered administration, an insolvent company sold a van worth £15,000 to its director's brother for £1,000. The co…
- Nine months before going into liquidation, an insolvent company repaid in full an unsecured loan from an unconnected supplier, hoping to pre…