ExpertMedium2 marksMultiple Choice
ACCA · Question 14 · Syllabus E: Capital and the financing of companies
A public limited company wishes to issue new shares to raise capital. Under the Companies Act 2006, what is the general rule regarding the allotment of shares at a discount to their nominal value?
A public limited company wishes to issue new shares to raise capital. Under the Companies Act 2006, what is the general rule regarding the allotment of shares at a discount to their nominal value?
Answer options:
A.
It is permitted if authorized by an ordinary resolution.
B.
It is permitted if authorized by a special resolution.
C.
It is strictly prohibited.
D.
It is permitted only for preference shares.
How to approach this question
Recall the statutory rule regarding the nominal value of shares and capital maintenance.
Full Answer
C.It is strictly prohibited.✓ Correct
To protect creditors and maintain the company's share capital, s.580 of the Companies Act 2006 states that a company's shares must not be allotted at a discount to their nominal value. If they are, the allottee is liable to pay the company an amount equal to the discount, plus interest.
Common mistakes
Confusing issuing shares at a discount (prohibited) with issuing shares at a premium (permitted).
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