30 Questions
What is the primary purpose of a capital raise for a company?
Avoiding dissolution when equity decreases
How can companies raise capital by issuing new shares?
Obtaining shareholder approval
In the given example, what happens to the company's share capital when 1,000 new shares of €100 each are issued?
It increases to €600,000
What may happen to existing shareholders when a company integrates new shareholders through a capital raise?
Their voting power decreases
When can new shareholders be subject to approval by existing shareholders?
When articles of association require it
What could be a consequence for a company if its equity falls below half of the share capital?
Possibility of dissolution
What is the consequence of making a capital increase without considering the pre-emptive rights of shareholders?
The capital increase is not valid
Who is responsible for appointing the contribution auditor for contributions in kind?
President of the commercial court
What happens if there is no valuation by a contributions’ auditor for contributions in kind?
Shareholders have joint and several liability for 5 years
What is the time limit for depositing funds paid as a contribution in cash?
8 days
Which reserves can be utilized when incorporating reserves in a capital raise?
Undistributed earnings allocated to reserves
What happens if shareholders are not obliged to subscribe to the new shares in a capital raise?
Their entitlement to new shares is retained
What is the main responsibility of a corporation's board of directors?
Making major business and policy decisions
Who appoints officers in a corporation?
Board of Directors (BOD)
What is the role of an officer in a corporation?
Carrying out the board's policies and day-to-day decisions
In a corporation, who manages the corporation's business and affairs?
Board of Directors
What distinguishes a director from an officer in a corporation?
Being elected by shareholders
Where do officers in a corporation receive their powers from?
Board of Directors (BOD)
What type of resolution is required for deciding on a capital raising according to the text?
Special resolution
In a general meeting of shareholders, what majority is usually required for a special resolution on capital raising?
75%
What is required when increasing the nominal value of shares in terms of decision making?
Unanimous decision
What key information must be included in the special resolution for a capital increase according to the text?
Number of newly issued shares
Before a capital increase in cash, what condition must be met regarding the initial share capital?
Must be fully paid up
Which step is necessary after passing the special resolution for capital raising?
Publishing a legal announcement
What are the 3 standards applied to directors/officers to determine compliance with the Business Judgment Rule?
Informed decision, Duty to monitor, Conscious decision to refrain from acting
In the case of Smith v. Van Gorkom, why was the director found to be grossly negligent?
He rapidly approved the merger without substantial inquiry
What are some limitations on the powers of directors mentioned in the text?
They must act within the corporation's articles of incorporation
What is the significance of the 'Business Judgment Rule' for directors and officers?
It shields directors from liability for informed decisions made in good faith
Why is it important for directors not to engage in self-dealing or conflicts of interest?
To comply with legal requirements and standards of care
What is the primary duty of care expected from directors and officers in a corporation?
Exercising reasonably good judgement and informed decisions
Test your knowledge on the formalities involved in capital raising for companies without the contribution of funds. This quiz covers topics such as special resolutions and extraordinary general meetings.
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