Question 1
a) What are the differences between 8% $2 cumulative redeemable preference shares and ordinary shares?
b) Explain three differences between the redemption of redeemable preference shares and the buy-back of ordinary shares.
c) Equality Ltd has issued 5 million ordinary shares with 10 votes per share and 1 million preference shares with 1 vote per share. The company has no constitution. At a general meeting, all members vote and by a majority of 50 million votes to 1 million votes, a resolution that the dividend rate for preference shares be reduced from 10% to 8% is passed. Rupert owns some preference shares and seeks your advice.
Question 2
(a) "The Doctrine of Capital Maintenance is dead" - do you agree?
(b) Briefly outline the company processes necessary to undertake the following:
Rich Pty Ltd wishes to buy-back 9% of the shares held by each member.
The members of Poor Ltd are spread across Australia. The company plans to offer to buy-back 2,000 shares from each member resident in Western Australia.
Massive Ltd is listed on the Australian Stock Exchange and has decided to buy-back 14% of its issued shares through the stock exchange.
Cashedup Ltd issued shares for $1.00 but only called them up to 70 cents. The company no longer believes it will require all the uncalled capital of 30 cents per share and wishes to reduce it to 10 cents, by writing off 20 cents.