ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Kavala Ltd has 100,000 ordinary shares in issue. Ms Dube holds 10,000 of them. Kavala plans a cash issue of 40,000 new ordinary shares, with pre-emption rights applying. How many of the new shares must be offered to Ms Dube first?
Ms Dube must be offered 4,000 shares. She holds 10% of the existing shares, and pre-emption entitles her to the same proportion of the new issue, so 10% of 40,000 new shares equals 4,000. Her existing number of shares is not the entitlement.
- A4,000 sharesCorrect
- B10,000 shares
- C400 shares
- D40,000 shares
Explanation
Her proportion of existing shares is 10,000/100,000 = 10%. Applying this to the new issue gives 10% x 40,000 = 4,000 shares. Offering 10,000 wrongly equates her existing holding with her entitlement to new shares.
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