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ACCA Applied Skills · Corporate and Business Law (Global) · Share capital

Kora Ltd has 200,000 ordinary shares of $1 each, all fully paid. Its members pass the appropriate resolution to subdivide each share into four shares of $0.25 each. Which statement is correct after the subdivision?

The company has 800,000 shares of $0.25 and issued capital of $200,000. Subdivision increases the number of shares and lowers nominal value proportionately, so the total nominal capital stays the same and no new money is raised.

  1. AThe company has 800,000 shares and issued share capital of $200,000Correct
  2. BThe company has 800,000 shares and issued share capital of $800,000
  3. CThe company has 200,000 shares and issued share capital of $50,000
  4. DThe company has 50,000 shares and issued share capital of $200,000

Explanation

Each $1 share becomes four shares, so 200,000 x 4 = 800,000 shares of $0.25 each. Capital is 800,000 x $0.25 = $200,000, unchanged. Distractors confuse share number with capital value.

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