companies

“Limited by shares or by guarantee” means that the members of those companies have a limitation on the amount that they may be required to pay into the company in the event that the company goes into liquidation

Where the members’ liability is limited by shares, the most that they may be required to contribute (subject to exceptional situations, principally involving fraud) is the amount, if any, as yet unpaid on shares held by them

Where the members’ liability is limited by guarantee, the most that they may be required to contribute (again, subject to exceptional situations, principally involving fraud) is the amount that they have guaranteed to contribute to the company’s shortfall in a liquidation

The capital redemption reserve is a statutory, undistributable, capital reserve and is an integral part of a company’s long-term financing. It’s up there with the share capital account and the share premium account and it arises in the situation where a company wishes to redeem some of its (typically) equity shares

But such a redemption represents a reduction in the buffer fund so, in the interests of protecting creditors, the law has introduced the requirement for a capital redemption reserve to be created to maintain the buffer fund at its previous level

The calculation for the amounts to be transferred out of profits that would otherwise have been available for distribution into the capital redemption reserve is the:

Nominal value of shares redeemed – the PROCEEDS of any new issue made to raise the funds to pay for the redemption

OK?