shares issuance reduction increase types and dividend

1/29/2015 Shares Issuance Reduction Increase Types and Dividend

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BREAK UP OF SHARES

AUTHORIZED = ISSUED AND INISSUED

ISSUED = SUBSCRIBED UNSUBSCRIBED

ISSUED = CALLED AND UNCALLED

CALLED = PAID UP AND UNPAID UP

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Shares Issuance Reduction Increase Types and Dividend

7 hrs · Edited ·

PREMIUM ACCOUNT

APPLICATION OF SHARE PREMIUM ACCOUNT

RUB DUP

REDEMPTION OF PREFERENCE SHARES

UNDERWRITING COMMISSION

BONUS SHARES

DISCOUNT ON SHARES

UNISSUED CAPITAL

PRELIMINARY EXPENSES


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January 26 at 10:12am · Edited ·

Q.. IF PREFERENCE SHARES ARE 300,000 AND EQUITY SHARES ARE 900,000. WHAT IS THE CAPITAL?

ANS. 1,200,000

Q.. REFERENCE SHARES ARE 200,000 AND EQUITY SHARES ARE 400,000. THE TOTAL CAPITAL IS 600,000. IF WE PAY DIRECTLY

PREFERENCE SHARES HOLDERS WITHOUT CREATING CAPITAL RESERVE THEN WHAT HAPPENS?

ANS. CAPITAL WILL BE REDUCED WHICH IS NOT ALLOWED AS CREDITORS CREATE PROBLEMS.

Q..IS CAPITAL RESERVE EQUAL TO CAPITAL?

ANS. YES. IN FUTURE BONUS ARE ISSUED FROM FROM IT.



January 25 at 11:01pm ·

Q.. Laws says once Preference Shares are issued the capital is assumed to be increased so we cant write them off by paying to preference shares

holder. We pay them and create Capital Reserve.

Q.. What is the use of Capital Reserve?

Ans. In Future we issue right Shares from it.



January 25 at 10:58pm · Edited ·

Q.. Why create Capital Reserve just pay Preference Shares?

Ans. No. If we pay Preference shares then the capital of the company is reduced.

Q.. Preference Share becomes the part of the Capital?







































Ans. Yes.

Q.. But Preference Shares Holder are not Owner?

Ans. Yes.

Q. Why Preference Share capital is called capital,.It must be liability?

Ans. Yes. It is is liability




IF PREFERENCE SHARES ARE 200,000 BUT PAYMENT IS MADE TO THEM 300,000. HOW THIS 100,000 ADDITIONAL WILL BE MADE?

ANS.

RETAINED EARNING 200,000 DEBIT

CAPITAL RESERVE 200,000 CREDIT

SHARE PREMIUM 100,000 DEBIT

PREFERENCE SHARE 200,000 DEBIT

BANK 300,000 CREDIT




Q.. EQUITY SHARES ARE 400,000

PREFERENCE SHARES ARE 200,000

RETAINED EARNING IS NEGATIVE

SUPPOSE PREFERENCE SHARES ARE ISSUED FOR 15 YEARS. THEY ARE PAID IN 5TH YEAR. WILL CAPITAL OF THE COMPANY REDUCE TO

400,000 INSTEAD OF 600,000?

ANS. CRR CAN NOT BE CREATED AS RETAINED EARNING IS IN LOSS.

WE ISSUE FRESH RIGHT SHARES

BANK DEBIT 200,000

SHARES CAPITAL 200,000

PREFERENCE SHARES ARE DEBIT 200,000

BANK IS CREDIT 200,000

CAPITAL IS 400,000 + 200,000 = 600,000






RETAINED EARNING IS 300,000

SUPPOSE PREFERENCE SHARES ARE ISSUED FOR 15 YEARS. THEY ARE PAID IN 5TH YEAR. WILL CAPITAL OF THE COMPANY REDUCE TO

400,000 INSTEAD OF 600,000?

ANS. CRR (CAPITAL RESERVE) IS CREATED WHICH IS EQUAL TO CAPITAL.

DEBIT RETAINED EARNING 200,000

CREDIT CAPITAL RESERVE 200,000

DEBIT PREFERENCE SHARE CAPITAL 200,000

CREDIT BANK 200,000

NOW CAPITAL IS EQUITY SHARES 400,000 + CAPITAL RESERVE 200,000. REMAINS 600,000






PROFIT IS 300,000

HOW LONG THE LIFE LIFE OF EQUITY SHARE AND PREFERENCE SHARES?

ANS. EQUITY SHARES TILL THE COMPANY EXISTENCE

PREFERENCE SHARES FOR 20 YEARS MAXIMUM












































PROFIT IS 300,000

WHAT IS THE TOTAL CAPITAL OF THE COMPANY?

(A) 400,000

(B) 200,000

(C) 600,000

ANSWER --C

PLEASE TELL PREFERENCE SHARE HOLDERS TAKE INTEREST?

ANS. No. SHARE IN PROFIT SO THEY TAKE DIVIDEND.






PROFIT IS 300,000

PLEASE TELL EQUITY SHARES TAKE INTEREST ON SHARE IN PROFIT?

ANS. SHARE IN PROFIT SO THEY TAKE DIVIDEND.






PROFIT IS 300,000

PLEASE TEL WHO IS FIRST ENTITLED ON DIVIDEND?

ANS. PREFERENCE SHARES HOLDERS THEN EQUITY SHARES HOLDERS




Explain the provisions relating to redemption of preference shares as contained in the Companies Ordinance, 1984. (05 marks)




QUESTION 4 Khan Pipes Limited had obtained a credit facility of Rs. 500 million in 2005 which is payable in five years. In order to improve its debt

equity ratio, the directors have requested the bank to accept Khan Pipes Limited’s shares of Rs. 75 million, against the saidc redit. Comment on the

legality of the above transaction from the company’s point of view, under the Companies Ordinance,1984. (06)




QUESTION 3 Golf Limited is in the process of offering right shares to the existing shareholders. They have been informed by their Corporate Advisor

that offer of right shares shall be accompanied by a circular. You are required to explain the company about the requirements of the circular which

will be annexed with the offer. (07)




QUESTION 2 (B) Identify what other modes of redemption of preference shares are available to Silver Limited. (04 marks)





























































2015



QUESTION 2 The Directors of Silver Limited, a listed company, plan to redeem 10% preference shares of the company. In view of the provisions of

the Companies Ordinance, 1984 you are required to: Explain the conditions that Silver Limited needs to comply with, if it intends to redeem

preference shares out of the proceeds of afresh issue of shares. (02 marks)



January 25 at 8:09am ·

Khush Bakth Shujat MNA, Media Personality, and Educationalist appprasing Syed Ali Abbas Abidi

https://www.youtube.com/watch?v=WKOFGCDtlxM

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Interview with Madam Khusbakht Shujaat at KASBITInterview with Madam Khusbakht Shujaat at KASBIT

YOUTUBE.COM | BY THEKASBIT




HIGHLIGHTS

Shares Issuance Reduction

Increase Types and Dividend


Q..How many shares can be issued against loan?

Ans: 20% shares, if loan term is more than 3 years.

Q..Who are effected by issuing shares against loan to Financial Institution?

Ans. Members, as it dilutes their holding




Q6. Jahangir Limited a public listed company have incurred losses during the past two years, as a result of which, 17% of their equity has been wiped

out. The Board of directors want to issue share worth Rs.100 million, being 25% of the present share capital at a discount of 20%. You are required

to advise them on the matter which the SECP may consider before granting approval for issue of shares?

Ans. The company should have passed at least one year after its commencement of business. It should have passed special resolution and rate of

discount should not be more than prescribe rate.






































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Q: How does a company raise its capital for the first time?

Ans: A public company has two choices to raise its capital:

a. By issuing prospectus or

b. By SILOP submission




Q2) Is irregular allotment possible in a private company ?

Ans : No ! The cases of irregular allotment arises only in public companies

Case One : Subscription received but the directors failed to file SILOP to ROC

Case Two : Subscription received but the Prospectus had not been approved by ROC

Case Three : Prospectus approved by ROC, Subscription was not fully received but the directors issued Shares


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