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

Zeta Co has an authorised share capital of 500,000 shares of $1 each. It has issued 300,000 shares, and all of them are fully paid. Which of the following describes the 200,000 shares that have not been issued?

The 200,000 shares are unissued authorised share capital. Authorised capital is the maximum a company may issue under its constitution, and the part not yet allotted remains unissued. Treasury shares were issued earlier and then repurchased, which is not the case here.

  1. AThey form part of the company's unissued authorised share capitalCorrect
  2. BThey are treasury shares held by the company
  3. CThey are redeemable shares that the company has bought back

Explanation

Authorised (nominal) share capital is the maximum the company may issue under its constitution. Shares that are authorised but not yet allotted are simply unissued capital. Treasury shares are shares that were previously issued and then bought back by the company, so they do not apply here.

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