• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Fashion Designs Ltd - As an avowed expert on company law I am requested to advise the board of directors

Extracts from this document...

Introduction

Company Law Fashion Designs Ltd Coursework HND Business Studies Kelly Oehme 2204764 The Assessment: Fashion Designs Ltd As an avowed expert on company law I am requested to advise the board of directors on the following matters: (a) Realised Profit Test is related to the maintenance of capital in the distribution of profits and assets. A realised profits test takes place when a company wants to determine its profits which are available for distribution. Profits need to be distributed in a situation of a winding up of a company, for example bankruptcy. The Realised profit test provides that the profits available for distribution will be the company's accumulated realised profits, which is known as revenue and capital. The Net Assets Test is again related to the maintenance of capital in the distribution of profits and assets. A Public company must also use this test. A company has to make good its net unrealised losses before it can declare a dividend to its shareholders. Unrealised losses have to first be made clear before net assets are given. So this test helps to show this and it shows how much assets can be distributed. ...read more.

Middle

The Preference Shareholder: The rights attached to preference shares will normally be defined in the Articles of Association including the right to receive dividends at a fixed rate payable on specific dates. It is important to compare the cost to your company of dividends payable to any preference shareholder with the cost of other sums advanced to the business, e.g. a bank loan. For example, with a fall in interest rates, it may be that the dividend originally agreed on the preference shares becomes unduly high. In that event some reorganisation, possibly involving redemption or repurchase of your preference shares, may be advisable. If there is no profit available, either because none have been earned or because the directors decide to transfer all the profits to reserve, the preference shareholder cannot sue the company for his/her dividend. A dividend is not due unless it is declared. The articles may however provide that available profits must be applied to payment of preference shareholders if their dividends are not paid. If the company/directors fails to pay, i.e. 'passes', its preference dividend, the right to it as a priority claim is usually carried forward. ...read more.

Conclusion

Profits available for payments of dividends - A company may not make a distribution except out of profits available for the purpose: s.263. This rule primarily controls the dividends but distribution is defined to cover any distribution of assets other than: (a) the issue of shares as fully or partly paid bonus shares (b) payments on redemption or purchase of the company's shares (c) a reduction of share capital by extinguishing or reducing liability in respect of unpaid share capital or by repaying paid-up share capital (d) a distribution of assets to members in winding up The profits available for distribution are the accumulated, realised profits, so far as not previously utilized by distribution or capitalisation less accumulated realised losses so far as not previously written off by a reduction or reorganisation of capital made. This rule applies to all companies because the new formula on distribution profits is best illustrated by reference to the loopholes in the previous law which it closes. Both profits and losses must be accumulated i.e. the profit and loss account must be maintained as a continuous record of the company's financial results since incorporation. It is no longer possible to pay a dividend out of current profits without setting off against those profits and losses of previous periods. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. For my portfolio, I was asked to do an assignment on two businesses. I ...

    Location Tesco location is affected by nearness to customers, the cost of premises, Nearness to customers, Being near to rival firms, Transport link for suppliers and distribution Vectone Gnanam Telecom location is affected only by nearness to customers. Stakeholders Tesco is affected by stake holders such as customers, employees and

  2. Explain the purpose of keeping accurate financial records.

    To overcome this problem, the partnership may tale on sleeping partners where they provide investments into the business, but do not have any role of the operations of the business. The sleeping partners face unlimited liability for the debts of the business and it may also be considered like a sole trader where it is an unincorporated business.

  1. Introduction to incorporation.

    bankruptcy or insanity of a member will not result in its being wound up. 3. History 4. Types of Company A company can be formed in a number of ways: (a) By Royal Charter (Chartered Companies) Formed by grant of a charter by the Crown.

  2. Company law - Advise critically Alice Lau and Benson Cheung, with strategic proposal, how ...

    Right now the capital duty paid to the Government is HK$1 per HK$1,000. The directors and shareholders of a limited company need not be Hong Kong residents. Only persons who have attained the age of 18 can be appointed as directors.

  1. Financial accounting

    Bank 4750.00 6 Business rates A/C � � Mar 03 Bank 800.00 Mar 31 Profit &Loss 800.00 7 Electricity A/C � � Mar 5 Bank 269.00 Mar 31 Profit & Loss 269.00 8 Drawings A/C � � Mar 08 Bank 1500.00 Mar 31 Capital 5100.00 Mar 15 Cash 1400.00 Mar

  2. Are dividends and share repurchases substitutes?

    The article will be organized as follows. It will first clarify and contrast the theoretical base of both payment methods by analyzing in the simplified Miller-Modigliani (MM) world both before introducing real-world elements like taxation or transaction costs and after. This serves as a basis for understanding the following discussions of the differing views and theories concerning the four sub questions in the part three.

  1. The Legal Eagles

    for that company 's debts. Each member's liability will be limited to the amount that they invested into the company i.e. the value of their shareholding in the company. The ability to be able to limit liability is obviously of advantage to a businessman, (particularly for this client who wants to avoid personal liability for the contracts entered into on the company's behalf)

  2. Applied Business. Investigating a business Preston Manor High School

    Objectives are more specific than aims. They are broken down so that they are clearer and achievable. An objective is a sub goal. It is a short-term step within a period of time that is moving toward achieving a long-term goal.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work