ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Birch Co has 100,000 ordinary shares of $2 each in issue, fully paid. The members pass an ordinary resolution, permitted by the articles, to sub-divide each share into two shares of $1 each. Which statement correctly describes the effect?
A sub-division leaves issued share capital at $200,000 but doubles the number of shares to 200,000 at $1 each. Members' percentage holdings are unchanged, and since capital is not reduced, no court confirmation is needed.
- AIssued share capital rises to $200,000 because there are now twice as many shares
- BIssued share capital stays at $200,000, the number of shares becomes 200,000, and each member's proportionate holding is unchangedCorrect
- CIssued share capital falls to $100,000 and the court must confirm the change
Explanation
Sub-division changes nominal value and number of shares, not total capital. 100,000 x $2 = $200,000 before; 200,000 x $1 = $200,000 after. Percentage holdings are unchanged and no court approval is needed as capital is not reduced.
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