Deck 10: Financing a Company Via Equity or Debt

Question 1

The sale of shares from one shareholder to another shareholder is known as a secondary issue.

Answer 1

False

Question 2

Holders of preference shares do NOT have the right to vote or share in surplus assets on winding up of the company.

Answer 2

True

Question 3

The disclosure obligations for equity crowdfunding are more onerous than those for a traditional share issue by a public company.

Answer 3

False

Question 4

A non-circulating security is held over non-current assets, while a circulating security interest attaches to current assets.

Question 5

Banana Pty Ltd ("Banana") is a company which operates a large theme park on the Gold Coast. Banana has issued Class A shares and Class B shares. Class A shareholders are entitled to two votes per share. Banana has a constitution which provides for the following:
•Banana can issue multiple classes of shares;
•Class A shares are entitled to two votes per share;
•The rights pertaining to Class A shares may be altered, modified or varied by an ordinary resolution of the company;
•Directors can refuse to transfer any Class B shares at their discretion;
•The constitution cannot be amended unless Class A shareholders pass a special resolution agreeing to the proposed amendment.
The directors of Banana want to alter the rights relating to Class A shares by giving them only one vote per share. Pursuant to section 246B of the Corporations Act (Cth) 2001, in order for these rights to be altered as proposed:

A) Banana needs to pass a special resolution.
B) A special resolution needs to be passed at a meeting of the Class A shareholders.
C) Class A shareholders with at least 75% of the votes in the class need to provide written consent.
D) A, B and C are all required.
E) A and either B or C are required.
F) None of the above.

Question 6

Article 8 of the constitution of Mad, Ltd provides:
"Any rights associated with Class B shares issued by Mad, Ltd can only be varied or cancelled by a special resolution of the company."
The Class B shares are entitled to two votes per share. The directors of Mad, Ltd want to reduce the Class B vote to one vote per share. Pursuant to section 246B of the Corporations Act, in order for these rights to be varied as proposed:

A) The company needs to pass a special resolution.
B) A special resolution needs to be passed at a meeting of the Class B shareholders.
C) Class B shareholders with at least 75% of the votes in the class need to provide written consent.
D) A, B and C are all required.
E) A and either B or C are required.

Question 7

Which of the following is NOT a type of preference share?

A) Ordinary
B) Convertible
C) Redeemable
D) Cumulative
E) Non-cumulative

Question 8

Who determines whether new shares are to be issued by a company? What needs to be considered?

Question 9

Who determines whether the company need to borrow funds from investors or a financial institution? What needs to be considered?

Question 10

Summarise the default priority rules for security interests under the Personal Property Securities Act 2009 (Cth).

Question 11

Why are the disclosure requirements for equity crowdfunding less onerous than those for traditional equity fundraising?.

Question 12

Explain the distinction between a circulating and non-circulating security interest.