Maintenance of Capital and Share Buy-Backs Quiz

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10 Questions

The doctrine of maintenance of capital developed to protect ______

creditors

The share capital cannot be returned to the shareholder prior to a ______

winding up

The creditor gives credit to the company on the faith representation that the capital shall be applied only for the purpose of the ______

business

The Doctrine (MoC) prohibits: 1. Purchasing own shares- share buy back 2. Giving financial assistance to purchase own shares or shares in its ______ company

holding

Paying dividend out of ______

capital

The company's constitution authorized purchasing its own shares Held: a company had no power to purchase its own shares even if its articles permitted such ______

acquisition

Section 123(1) of the Companies Act prohibits the purchase by the company of its own shares or any direct or indirect ______ by it for the purchase of its own shares

financial assistance

Section 127(2)(a) of the Companies Act - COMPANY IS ______

SOLVENT

Solvency Test - Sign by majority of directors Stating that the company satisfies the solvency test and that they had made inquiries into the affairs of the company and taking into account liabilities of the company Directors declare that it is necessary to share ______ and the share buyback is made in good faith and in the interests of the company company will not become insolvent and capital not impaired at the date of the insolvency statement

buyback

Section 127(2)(a) cash or ______ para 12.11 of BMLR borrowing is allowed

borrowing

Test your knowledge on the maintenance of capital, share buy-backs, reduction of capital, dividends, and financial assistance in company law. Explore the concept of maintaining capital to protect creditors and the limitations on returning share capital to shareholders.

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