• 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 ...

    If the business is not successful in Tesco the shareholders may intent top sell their shares further depressing while shareholders in Vectone Gnanam Telecom tries to find the solution and try to over come it. Tesco's core business activity is to sell food and drink but they sell clothes, household items, gifts, flowers, kids items, and food items.

  2. Introduction to incorporation.

    be made to contribute to the company's assets without limit to enable it to pay its debts.) (ii)Cannot be public companies. (iii)Can be set up with or without a share capital. (iv)Not subject to the same restrictions on alteration of capital as other types of company, and do not normally have to file annual accounts.

  1. Financial accounting

    Advertising 825 Travelling expenses 500 Sundry expenses 250 5,775 NET PROFIT 66,175 ADD Interest on drawings D Williams 500 P Storey 500 1,000 67,175 LESS Interest on capital: D Williams 4,500 P Storey 3,000 Salary:- D Williams 5,000 12,500 54,675 Share of Profit D Williams 32,805 P Storey 21,870 54,675

  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. Forms of Company

    to deposit money with the company for fixed periods or payable by call. A private company may be classified as an 'exempt private company' if its shares are not beneficially owned directly or indirectly by any corporation and it has not more than 20 members.

  2. The Legal Eagles

    * You can be made bankrupt. * There are sometimes tax advantages (particularly if you are in partnership with your spouse and sizeable profits are made. * You can be held responsible for your partners' commercial decisions. * No legal requirements. * 2.3 LIMITED COMPANIES A limited company is a legal entity in its own right, regardless of who its members are.

  1. Are dividends and share repurchases substitutes?

    The paper will thus break down the main question into the following four sub questions: 1. Are repurchases financed by funds that would otherwise be used for dividends? 2. Are the motives for paying dividends and repurchasing stock the same?

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

    If the students are not happy and satisfied with the teaching quality on the taster day and student decides to go to another college, this will help them identify that they have an issue which needs more consideration.

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