Question Tag: Shareholders

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BCL – Nov 2024 – L1 – Q2a – Legal Implications Relating to Companies in Difficulty or in Crisis

Advise Naami on the procedure for private liquidation of Shama PLC.

Question

a) On 26 February 2024, Shama PLC, a public limited liability company trading on the Ghana Stock Exchange sent a notice to its shareholders inviting them to an Annual General Meeting (AGM) on 2 March 2024. The notice simply states that the ‘purpose is to transact the ordinary business’.

Naami is a shareholder of Shama PLC and is very disturbed about the vagueness of the notice. She is also not satisfied with the performance of the company and is seeking to requisition for a special resolution to liquidate the company.

Required:

Advise Naami on the procedure for private liquidation. (10 marks)

Answer

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Tags: Annual General Meeting, Private Liquidation, Shareholders, Special Resolution, Winding-up
Level: Level 1

Topic: Legal implications relating to companies in difficulty or in crisis
Series: Nov 2024

FM – Nov 2014 – L3 – SC – Q6b – Financing Decisions and Capital Markets

Examine reasons for conflict of interest between shareholders and bondholders.

Question

Discuss any FIVE reasons why conflict of interest may exist between shareholders and bondholders. (5 Marks)

Answer

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Tags: Bondholders, Conflict of Interest, Financing decisions, Governance, Risk Management, Shareholders
Level: Level 3

Topic: Financing Decisions and Capital Markets
Series: NOV 2014

FM – May 2024 – L3 – SC – Q7 – Mergers and Acquisitions

Discuss manager-shareholder conflicts with examples and reasons for synergy in mergers and acquisitions.

Question

(a) Discuss conflict of interest that may exist between managers and shareholders and give examples. (8 Marks)

(b) Explain why synergy might exist when one company merges with or takes over another company. (7 Marks)

Answer

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Tags: Conflict of Interest, Corporate finance, Managerial Agency, Mergers, Shareholders, Synergy
Level: Level 3

Topic: Mergers and acquisitions
Series: MAY 2024

FM – Nov 2023 – L1 – SC – Q6 – Corporate Governance and Financial Strategy

Explain conflicts of interest between shareholders and managers and assess the impact of lower interest rates on a typical company.

Question

a. State and explain examples of conflicts of interest that may exist between shareholders and managers. (9 Marks)

b. Explain the likely implications for a typical company of lower interest rates. (6 Marks)

Answer

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Tags: Agency Problem, Conflicts of Interest, Corporate Governance, Financial Implications, Interest rates, Managers, Shareholders
Level: Level 3

Topic: Corporate Governance and Financial Strategy
Series: NOV 2023

BMF – Nov 2020 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Identify the item that is NOT considered an agency cost.

Question

Agency costs are the costs that the shareholders incur when professional managers run their company. Which of the following is NOT part of agency costs?
A. Costs of auditing accounts of the company
B. Remuneration paid to managers of the company
C. Cash bonuses paid to managers for meeting specified targets
D. Costs incurred paying too much for the acquisition of a subsidiary
E. Award of free shares to management of the company

Answer

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Tags: Agency Costs, Management Compensation, Shareholders
Level: Level 1

Topic: The Role of Professional Accountants in Business and Society
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q13 – Business and Organizational Structures and Choices

Identify the primary conflict of interest between stakeholders in a public company.

Question

The most significant conflict of interest between stakeholders in a public company is generally considered to be the conflict of interests between:
A. Shareholders and Government
B. Shareholders and Audit Committee
C. Shareholders and Executive Directors
D. Senior Executive Managers and Lenders
E. Government and Executive Directors

Answer

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Tags: Executive Directors, Shareholders, Stakeholder Conflicts
Level: Level 1

Topic: Business and Organizational Structures and Choices
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q1 – Nature of Business, Types, and Objectives

Identify the item that is NOT of interest to shareholders in an organisation.

Question

Shareholders in large companies are usually investors seeking to earn a return on their investment in the form of dividends and a higher share price. Which of the following is NOT a matter that would be of interest to shareholders in an organisation?
A. A proposal to invest in a major project where the return is high
B. A proposed takeover bid for another company that offers better returns
C. Bonuses and shares
D. High dividend payments
E. Increasing profits and share price

Answer

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Tags: Corporate Actions, Dividends, Investments, Shareholders
Level: Level 1

Topic: Nature of Business, Types, and Objectives
Series: NOV 2020

BL – Nov 2011 – L1 – SA – Q7 – Company Law

Understanding what part of issued capital is paid up by shareholders.

Question

The part of issued capital which has been paid up by the shareholders is ………………………….

Answer

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Tags: Capital, Company Law, Issued Capital, Shareholders
Level: Level 1

Topic: Company Law
Series: NOV 2011

CSME – Nov 2021 – L2 – Q3 – Corporate Social Responsibility (CSR)

Discuss the nature of CSR, its theories, aspects, and implementation steps for the company.

Question

At the last board meeting of a company, there was a heated argument about whether or not the company should have Corporate Social Responsibility (CSR) programmes. Some members of the board see CSR as a waste of resources, while others see it as a tool for achieving organizational goals.

Required:
a.
i. What is Corporate Social Responsibility (CSR)? (2 Marks)
ii. Explain stakeholders and shareholders theories on CSR. (2 Marks)

b. Explain to the board FIVE aspects of CSR. (10 Marks)

c. Advise the company on steps to be taken in implementing a CSR policy. (6 Marks)

Answer

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Tags: Corporate Social Responsibility, CSR Implementation, Shareholders, Stakeholders
Level: Level 2

Topic: Corporate social responsibility
Series: NOV 2021

FA – Nov 2012 – L1 – SB – Q40 – Elements of Financial Statements

Calculate the dividend payable to ordinary shareholders.

Question

If a 10% dividend is approved, what is the dividend payable to ordinary shareholders?

Answer

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Tags: Dividends, Equity, Shareholders
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2012

FA – Nov 2012 – L1 – SA – Q2 – Financial Statements

Identifying a non-characteristic of a bonus issue.

Question

Which of these is NOT a characteristic of bonus issue?

A. Increasing capital without diluting current shareholdings
B. Capitalising reserves, so that they cannot be paid as dividends
C. Not raising cash
D. Generating new shares
E. Could jeopardise payment of future dividend if profit declines

Answer

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Tags: Bonus issue, Capital, Dividends, Shareholders
Level: Level 1

BL – Nov 2015 – L2 – SB – Q2b – Company Law

Explain two ways shareholders can influence the composition of the board and decisions in a company.

Question

In a Limited Liability Company, there could be no membership of the Board of Directors except by the actions of shareholders.

Required:

Explain TWO ways by which shareholders could influence the composition of the Board and decisions of the company.
(5 Marks)

Answer

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Tags: Board of Directors, Company Law, Corporate Governance, Shareholders
Level: Level 1

Topic: Company Law
Series: NOV 2015

BL – Nov 2015 – L1 – SA – Q5 – Company Law

Exercising shareholder rights to challenge company management.

Question

The right of a shareholder to challenge the management of a company may be exercised through
A. Refusal to pay salaries to members of the Management Board
B. Protests and placards at the venue of the Annual General Meeting
C. Withholding payment for the value of shares held in the company
D. Payment of taxes
E. Voting at a General Meeting

Answer

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Tags: Company Law, Management, Multiple Choice, Shareholders
Level: Level 1

Topic: Company Law
Series: NOV 2014

BL – May 2018 – L1 – SA – Q5 – Company Law

Identify the representative of a shareholder during a company meeting.

Question

The representative of a shareholder during the meeting of a company is a/an:
A. Member
B. Promoter
C. Proxy
D. Accountant
E. Lawyer

Answer

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Tags: Company Meetings, Proxies, Shareholders
Level: Level 1

Topic: Company Law
Series: MAY 2018

SCS – Nov 2023 – L3 – Q5b – Sources of Finance

Explaining three advantages of issuing convertible bonds for NSL and investors/bondholders.

Question

To defer dilution of the Martinsons’ shareholding of NSL, they have agreed to issue a 10-year convertible bond to new investors/bondholders.

Required:
Explain THREE (3) advantages of issuing convertible bonds to NSL and to investors/bondholders, respectively.
(9 marks)

Answer

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Tags: Convertible Bonds, Debt Financing, Equity Dilution, Shareholders
Level: Level 3

Topic: Sources of Finance
Series: NOV 2023

BL – Nov 2019 – L1 – SB – Q1c – Company Law

Explanation of circumstances that may disqualify a director from office.

Question

Company directors are appointed by the shareholders to manage the company.
Required:
Explain briefly FIVE circumstances that may disqualify a director from office. (10 Marks)

Answer

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Tags: Company Law, Directors, Disqualification, Shareholders
Level: Level 1

Topic: Contract Law
Series: NOV 2019

AFM – May 2017 – L3 – Q3c – Valuation of acquisitions and mergers

Factors to be considered by the directors and shareholders in evaluating the worthiness of the takeover proposal.

Question

Discuss briefly any other factors that the directors and shareholders of both companies might consider in assessing the worthwhileness of the proposed takeover. (4 marks)

Answer

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Tags: Mergers and Acquisitions, Shareholders, Synergies, Takeover considerations, Transaction costs
Level: Level 3

Topic: Valuation of acquisitions and mergers
Series: MAY 2017

AFM – May 2017 – L3 – Q3a & b – Valuation of acquisitions and mergers

Calculating the maximum and minimum prices for Jacobs Ltd's acquisition of Idowu Co Ltd based on future revenue and cost synergies.

Question

Jacobs Limited and Idowu Company Limited both manufacture and sell auto parts. The summarised profit and loss accounts of the two companies for 2014 are as follows:

	Jacobs Ltd (GH¢’000)	Idowu Co Ltd (GH¢’000)
Sale Revenue	1,500	800
Operating Expenses	(800)	(620)
Profit	700	180

Each company has earned a constant level of profit for a number of years, and both are expected to continue to do so. The policy of both companies is to distribute all profits as dividends to ordinary shareholders as they are earned. Neither company has any fixed interest capital. Details of the ordinary share capital of the two companies are as follows:

	Jacobs Ltd (GH¢’000)	Idowu Co Ltd (GH¢’000)
Authorised Ordinary Shares	2,500	2,000
Issued Ordinary Shares	2,000	1,000
Market Value per Share (Ex Div)	3.50	1.50

The directors of Jacobs Limited are considering submitting a bid for the entire share capital of Idowu Co Limited. They believe that, if the bid succeeds, the combined sales revenue of the two companies will increase by GH¢60,000 per annum, and savings in operating expenses, amounting to GH¢50,000 per annum, will be possible. Part of the machinery at present owned by Idowu Co Limited would no longer be required and could be sold for GH¢100,000. Furthermore, the directors of Jacobs Limited believe that the takeover would result in a reduction to 9% in the annual return required by the ordinary shareholders of Idowu Co Limited.

Required:
i) On the basis of the above information, calculate the maximum price that Jacobs Ltd should be willing to pay for the entire share capital of Idowu Co Limited. (6 marks)
ii) Calculate the minimum price that the ordinary shareholders in Idowu Co Ltd should be willing to accept for their shares. (4 marks)

Assume that the takeover price is agreed at the figure calculated in part (ii) above, and that the purchase consideration will be settled by an exchange of ordinary shares in Idowu Co Ltd for the ordinary shares of Jacobs Ltd. Show how the entire benefit from the takeover will accrue to all the present shareholders of Jacobs Ltd. (6 marks)

Answer

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Tags: Investment, Mergers and Acquisitions, Shareholders, Synergies, Valuation
Level: Level 3

Topic: Valuation of acquisitions and mergers
Series: MAY 2017

AFM – May 2019 – L3 – Q4a – Ethical issues in financial management

Discuss how ethical issues influence financial policies in relation to shareholders, suppliers, and customers.

Question

Ethical issues arise even when the objective is clear. Financial managers face trade-offs fraught with ethical issues. Thinking through the trade-offs and all the costs and benefits is important.

Required:
Suggest ways in which ethical issues would influence the firm’s financial policies in relation to the following:
i) Shareholders
ii) Suppliers
iii) Customers

Answer

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Tags: Corporate Governance, Customers, Ethics, Financial Policies, Shareholders, Suppliers
Level: Level 3

Topic: Ethical issues in financial management
Series: MAY 2019

AFM – May 2016 – L3 – Q5 – Corporate Reconstruction and Reorganisation, Business reorganization

Calculate the maximum possible loss of the company and allocate it between preference and ordinary shareholders.

Question

Additional Information:

The realizable values of the assets are as follows:
- Furniture & Fittings: GH¢27.0m
- Motor Vehicle: GH¢67.5m
- Land & Building: GH¢26.25m
- Stocks: GH¢10.95m
- Debtors: GH¢7.5m
The stated capital of the company is made up as follows:
- 2,000,000 ordinary shares of no par value: GH¢67.5m
- 500,000 15% cumulative preference shares of no par value: GH¢30.0m
The cost of winding up is estimated at GH¢21.3m.
The bank overdraft and 18% debentures are secured by a floating charge on the company’s assets.
The preference dividends and interest on debentures are two years in arrears. However, no provision has been made for these in the financial statement.
The ordinary shareholders have decided to inject GH¢60.0m in consideration for a new issue of equity shares if the capital reconstruction scheme is accepted.
Although it is the company’s policy to amortize intangible assets over five years, the Board of Directors has decided to maintain the Goodwill indefinitely in the books due to the persistent losses, in contravention of the company’s policy. Goodwill has been outstanding since 2009. The current financial state of the company negates the value and existence of the goodwill.
The preference shareholders have indicated their willingness to bear any deficit resulting from the reconstruction in proportion to their interest in the stated capital. In return, their stake would be converted into equity, and they would be permitted to make nominations to key management positions, including chairing the board for the first five years. If these proposals are accepted, the preference shareholders will contribute further equity of GH¢60.0m. They have also agreed to waive 50% of the arrears of dividend and convert the rest into equity.
Any arrears of preference dividends are to form a first charge upon any surplus on winding up.
The original ordinary shareholders have decided to waive any dividend due to them during the first two years in order to put the company on sound financial ground.
The company is expected to improve its cash flow position and commence dividend payments if the additional capital of GH¢120.0m is introduced.

Required:
a) Calculate the amount available if Crave Cottage Industry Limited is liquidated and its distribution.

(7 marks)
b) Calculate the maximum possible loss of Crave Cottage Industry Limited and its allocation to Preference Share Capital and Ordinary Share Capital. (6 marks)
c) Calculate the Bank/Cash balance of Crave Cottage Industry Limited after the reorganization. (2 marks)
d) Calculate the new stated capital for the company after the reorganization. (2 marks)
e) Prepare a Statement of Financial Position of Crave Cottage Industry Limited showing the position immediately after the scheme has been put in place.

(3 marks)

Answer

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Tags: Capital structure, Loss Allocation, Ordinary Shares, Preference shares, Shareholders
Level: Level 3

Topic: Business reorganisation, Corporate reconstruction and reorganisation
Series: MAY 2016

Question Tag: Shareholders

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BCL – Nov 2024 – L1 – Q2a – Legal Implications Relating to Companies in Difficulty or in Crisis

Advise Naami on the procedure for private liquidation of Shama PLC.

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FM – Nov 2014 – L3 – SC – Q6b – Financing Decisions and Capital Markets

Examine reasons for conflict of interest between shareholders and bondholders.

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FM – May 2024 – L3 – SC – Q7 – Mergers and Acquisitions

Discuss manager-shareholder conflicts with examples and reasons for synergy in mergers and acquisitions.

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FM – Nov 2023 – L1 – SC – Q6 – Corporate Governance and Financial Strategy

Explain conflicts of interest between shareholders and managers and assess the impact of lower interest rates on a typical company.

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BMF – Nov 2020 – L1 – SA – Q14 – The Role of Professional Accountants in Business and Society

Identify the item that is NOT considered an agency cost.

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BMF – Nov 2020 – L1 – SA – Q13 – Business and Organizational Structures and Choices

Identify the primary conflict of interest between stakeholders in a public company.

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BMF – Nov 2020 – L1 – SA – Q1 – Nature of Business, Types, and Objectives

Identify the item that is NOT of interest to shareholders in an organisation.

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BL – Nov 2011 – L1 – SA – Q7 – Company Law

Understanding what part of issued capital is paid up by shareholders.

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CSME – Nov 2021 – L2 – Q3 – Corporate Social Responsibility (CSR)

Discuss the nature of CSR, its theories, aspects, and implementation steps for the company.

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FA – Nov 2012 – L1 – SB – Q40 – Elements of Financial Statements

Calculate the dividend payable to ordinary shareholders.

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FA – Nov 2012 – L1 – SA – Q2 – Financial Statements

Identifying a non-characteristic of a bonus issue.

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BL – Nov 2015 – L2 – SB – Q2b – Company Law

Explain two ways shareholders can influence the composition of the board and decisions in a company.

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BL – Nov 2015 – L1 – SA – Q5 – Company Law

Exercising shareholder rights to challenge company management.

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BL – May 2018 – L1 – SA – Q5 – Company Law

Identify the representative of a shareholder during a company meeting.

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SCS – Nov 2023 – L3 – Q5b – Sources of Finance

Explaining three advantages of issuing convertible bonds for NSL and investors/bondholders.

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BL – Nov 2019 – L1 – SB – Q1c – Company Law

Explanation of circumstances that may disqualify a director from office.

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AFM – May 2017 – L3 – Q3c – Valuation of acquisitions and mergers

Factors to be considered by the directors and shareholders in evaluating the worthiness of the takeover proposal.

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AFM – May 2017 – L3 – Q3a & b – Valuation of acquisitions and mergers

Calculating the maximum and minimum prices for Jacobs Ltd's acquisition of Idowu Co Ltd based on future revenue and cost synergies.

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AFM – May 2019 – L3 – Q4a – Ethical issues in financial management

Discuss how ethical issues influence financial policies in relation to shareholders, suppliers, and customers.

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AFM – May 2016 – L3 – Q5 – Corporate Reconstruction and Reorganisation, Business reorganization

Calculate the maximum possible loss of the company and allocate it between preference and ordinary shareholders.

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