• 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 ...

    Local community Local community influences business like Tesco by striking against them and making complaints. They also an important person influences the business by spoiling the reputation and sometimes making customers to do not purchase product from them. E) Conflicts of interest of Stakeholders in Tesco The customers in Tesco

  2. Explain the purpose of keeping accurate financial records.

    given to the Inland Revenue for justifying how many people work at the company, and their wage rate must be included. Further as mentioned earliaer a quartile report must be submitted to custom's and excise for VAT purposes, but where as if a business is small, it will have to produce only a yearly report.

  1. Financial accounting

    22 Bank 1200.00 Mar 29 Cash 1000.00 5100.00 5100.00 9 Sales A/C � � Mar 31 Trading 2713.00 Mar 09 Cash book 950.00 Mar 16 Cash book 423.00 Mar 31 Total credit sales 1340.00 2713.00 2713.00 10 Insurance A/C � Mar 14 Bank 316.00 Mar 31 Profit & Loss 316.00

  2. Introduction to incorporation.

    companies must file accounts which are available for public inspection. (l) A company can create a security over its assets called a floating charge, which permits it to raise funds without impeding its ability to deal with its assets. A partnership cannot create a floating charge.

  1. 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.

  2. Interpretation of Financial Statements.

    This looks rather strange at first glance. It is possible to calculate ratios linking any two items, but you will not always (or even often!) get meaningful results. But calculating the ratios is only the first step in the interpretation of results. It is necessary to use them to make sensible comparisons with, for instance: * past periods (to establish trends)

  1. Are dividends and share repurchases substitutes?

    How do stock markets react to both ways of paying shareholders? 4. What is the relevance of the choice of payout method for managers? These sub-aspects will then allow a more structured approach to the main problem statement. The article will be organized as follows.

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

    However, some objectives may not be achievable as much as they are supposed to be. For example, ?Develop the use of information and communication technology to support learning and school effectiveness?. This objective is to improve the use of technology and by purchasing more modern technology for improvements means they can attract more students and provide high standard facilities.

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