Question

(a) What are the most common reasons for a corporation to reduce its share capital? (2...

(a) What are the most common reasons for a corporation to reduce its share capital?

(b) What are the allowable methods of reducing share capital?

(c) Discuss the differences between a share buyback and a capital reduction.

(d) What are the different types of debt instruments discussed in this unit?

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Homework Answers

Answer #1

a) The most common reasons to reduce its share capital by a company are :

1) to return excess general reserve to the shareholders

2) Buyback of shares

3) Redemption of capital

b) The allowable methods of reducing share capital are :

1) Buyback of shares

2) Redemption of preference capital

3) slump sale or divestment

c) capital reduction means a deduct in company's share capital by way of returning the money to members paid by them in respect of issued shares

Whereas Buyback of shares means acquiring shares in itself by the company from existing shareholders and cancelling those buy back shares

d) the different types of debt instruments are :

1) Debentures

2) Bonds

3) Short Term treasury bills

4) Term loans

PLEASE LIKE THE ANSWER IF YOU FIND IT HELPFUL OR YOU CAN COMMENT IF YOU NEED CLARITY / EXPLANATION ON ANY POINT.

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