ACCA Applied Skills · Corporate and Business Law (Global) · Capital maintenance and dividend law
Brava plc, a public company, has redeemable shares. Which of the following is a condition that must be satisfied before it can redeem or buy back its shares?
Shares can only be redeemed or bought back if they are fully paid up. This prevents the company from effectively releasing shareholders from their outstanding liability to pay for the shares, which would reduce the capital available to creditors.
- AThe shares must be fully paid upCorrect
- BThe shares must be partly paid so that unpaid amounts may be called
- CThe company must have no other class of shares in issue
- DThe company must first obtain a court order
Explanation
Shares can only be redeemed or bought back if they are fully paid, so the company does not release shareholders from liability on unpaid amounts. A court order is not generally needed, and the company may have other classes of shares. The company must also retain at least some non-redeemable shares.
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