An obligation to give an account. In the context of limited companies, it's assumed that the directors are accountable to the shareholders, fulfilled partially through annual reports and accounts.
An agreed bid is a takeover bid that is supported by a majority of the shareholders of the target company, whereas a hostile bid is not welcomed by the majority of the shareholders of the target company.
Allotted shares are distributed to new shareholders through the process of allotment, forming part of the allotted share capital. They are essential for companies as they raise capital by issuing these shares to investors.
An Annual General Meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders to receive the annual report and elect the board of directors.
An Annual General Meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders. It addresses critical governance and financial matters, including the presentation of the company's accounts, director and auditor reports, dividend recommendations, election of directors, and appointments of auditors.
An annual report is a comprehensive document prepared by a company at the end of its financial year, which summarizes its financial performance, business activities, and strategic goals. It is intended for shareholders, stakeholders, and the general public.
An Annual Return is a document that must be filed with the Registrar of Companies within seven months of the end of the relevant accounting period, containing key information about the company, its directors, and its financial status.
An essential ledger account in the process of share capital application and allotment, detailing the financial transactions related to the acquisition of shares in a company.
A 'Bear Hug' in corporate takeovers refers to an acquisition offer made by a potential suitor at a price significantly higher than the target company's current market value. If the target company's management resists the offer, it risks violating its fiduciary duty to act in the shareholders' best interests.
A body corporate is a type of corporation consisting of a body of persons legally authorized to act as one person, distinct from its individual members.
Bonus shares are additional shares issued to existing shareholders of a company at no extra cost, based on the number of shares that a shareholder already owns.
Called-up share capital refers to the part of issued share capital that has been requested to be paid by the shareholders. This term is relevant when dealing with partly paid shares.
The landmark case of *Caparo Industries plc v Dickman and others* (1990) significantly influenced the realm of audit law by ruling that auditors owe a duty of care to existing shareholders as a collective entity rather than to individual shareholders.
Capital distribution refers to the distribution of company’s funds to its shareholders. This usually happens in the form of dividend payments, share buybacks, or return of capital. It signifies how a company returns value to its shareholders.
A capital gain dividend is any distribution that is designated as such by a regulated investment company in a written notice mailed to its shareholders not later than 60 days after the close of its taxable year. It is treated as a capital gain by the shareholders.
The certificate that brings a company into existence; it is issued to the shareholders by the Registrar of Companies when the company's constitutional documents have been received and approved. Until the certificate is issued, the company has no legal existence.
The City Code on Takeovers and Mergers, initiated in 1968, provides guidelines and regulations to ensure fair practices in company takeovers and mergers, safeguarding shareholder interests and maintaining market integrity.
Corporate governance refers to the system by which companies are directed and controlled, focusing on the structure and relationships that determine corporate performance and accountability.
A code of best practice in corporate governance that outlines expected standards for UK's listed companies, originally issued with the Hampel Report of 1998.
The rate of return that a company's shareholders expect for holding stock in that company, used as part of the calculation of the total cost of capital for a firm. It represents the opportunity cost to investors of holding shares. The cost can be calculated by a formula dividing dividends per share by the current market value and adding the dividend growth rate.
A statement in which the directors of a company announce that a dividend of a certain amount is recommended to be paid to the shareholders, and the liability is recognized when declared.
A derivative claim is a legal action brought by a shareholder on behalf of a company for wrongs done to it, typically when those in control of the company are the ones responsible for the alleged misconduct.
The directorate, also known as directorship, is a group of people elected by shareholders to establish company policies and oversee the management of the organization.
An annual report by the directors of a company to its shareholders, which forms part of the accounts required to be filed with the Registrar of Companies under the Companies Act. It includes information on the company's activities, performance, future developments, and other crucial matters.
A distribution to owners represents the transfer of assets from a business to its shareholders or owners, often observed as dividends in the USA.
A dividend is the distribution of a portion of a company's earnings to its shareholders, typically articulated as an amount per share. Its yield is a popular metric for investors.
A dividend warrant is a cheque issued by a company to its shareholders that provides details of dividends paid, including tax deducted and the net amount payable.
Earnings and Profits refers to the economic capacity of a corporation to make a distribution to shareholders that is not considered a return of capital. If distributed, it constitutes a taxable dividend to the shareholder to the extent of current and accumulated earnings and profits.
A financial ratio indicating the ability of a company to pay dividends to its ordinary shareholders out of its distributable profits. A higher ratio suggests stronger dividend-paying capacity and financial health.
Equity finance involves raising capital through the sales of shares, where shareholders earn ownership in the company and potentially receive dividends based on company profits.
Equity financing involves raising capital through the sale of shares in a company, providing stakeholders with ownership interests in contrast to accruing debt.
Ex-rights refers to the period in which a stock is trading without the value of its newly issued rights attached. This typically happens after the record date for the rights issue, when new shares are offered to existing shareholders.
An external audit is a review of the financial statements or operations of a company conducted by an independent auditor. It serves as a key measure for shareholders to ensure the accuracy and reliability of financial information.
An extra dividend is an additional payment made to shareholders on top of the regular dividend, typically awarded after a particularly profitable year to reward shareholders and foster loyalty.
A fairness opinion is a professional evaluation provided by an independent appraiser or investment banker, assessing the fairness of the price proposed in corporate transactions such as mergers, takeovers, or leveraged buyouts. This document aims to ensure that the offered price is equitable and serves the best interests of the shareholders.
A for-profit corporation is a business entity established with the primary goal of earning profit for its shareholders. Unlike non-profit organizations, for-profit corporations operate to generate financial returns for their owners.
Understanding the concept of 'franked' in accounting, particularly within the context of dividends, and its implications on tax liabilities.
A 'general meeting' is a key event in the corporate calendar, during which the shareholders or members of an organization come together to discuss and vote on various issues concerning the business. It plays a critical role in corporate governance, transparency, and accountability.
The situation in which the objectives of agents coincide with those of principals, ensuring organizational and shareholder goals align with individual managers' objectives. Essential in agency theory for optimizing performance and reducing conflicts.
The process in the securities industry where a private company offers its shares to the public for the first time. This transition involves the shift of company ownership from a few private shareholders to a broader base of public shareholders and brings the company under the regulatory and legal requirements applicable to public companies.
The gross dividend refers to the total amount a company distributes to its shareholders before any withholding taxes or other deductions.
A hostile bid is an attempt to acquire a company without the approval of the company's board of directors. Unlike an agreed bid, a hostile bid is unsolicited and can be seen as unfriendly by the target company.
The Imputation System is a corporation tax framework in which the company distributing dividends pays tax on those dividends, and shareholders who receive the dividends are considered to have incurred tax on those dividends as well. The UK operated an imputation system until 1999.
A mutual fund designed to produce current income for shareholders through interest, dividends, or other income streams.
The process through which a private company offers its shares to the public for the first time, transforming into a publicly traded company.
An interim dividend is a type of dividend paid to shareholders during a company's financial year, prior to the annual dividend payout. It serves as an indication of the company's current profitability and financial health.
The Investor Relations Department in major public companies plays a crucial role in communicating and managing relationships with investors, ensuring transparency, and maintaining the company's image within the investment community.
Issued and outstanding shares are shares of a corporation that have been authorized in the corporate charter, issued, and are currently held by shareholders. These shares represent the capital invested by the firm's shareholders and owners.
Letter stock is a category of stock that derives its name from an inscription on the face of the stock certificate, indicating that the shares have not been registered with the Securities and Exchange Commission (SEC) and, therefore, cannot be sold to the general public.
A Limited Company (Ltd.) is a legal business entity structure characterized by providing limited liability to its shareholders and often being managed by directors. Limited companies are separate legal entities, meaning their assets and liabilities are distinct from those of their shareholders.
Limited liability is a legal principle whereby a company's owners and shareholders are protected from being personally liable for the company's debts and liabilities, limited to the amount of their investment.
Net Dividend refers to the dividend paid by a company to its shareholders after excluding the tax credit received by the shareholders.
In the USA and Canada, stock (shares) that have no par value or assigned value printed on the stock certificate, thus avoiding contingent liabilities and simplifying accounting entries.
An omitted dividend refers to a dividend that was scheduled to be declared by a corporation but was not voted for the time being by the board of directors. This situation often arises when a company faces financial difficulty and decides it is more important to conserve cash than to pay a dividend to shareholders.
An open-end management company is an investment company that sells mutual funds to the public and continually creates new shares on demand.
An ordinary resolution is a standard resolution that can be passed with a simple majority vote of more than 50% of company members either in person or by proxy. It is typically used when no specific type of resolution is required by the Companies Act 2006 or the company's articles of association.
Detailed exploration of partial liquidation in corporate finance, including examples, FAQs, related terms, resources, and suggested books for further studies.
The payout ratio represents the percentage of a firm's profits that is distributed to shareholders in the form of dividends. This metric provides insight into how much money a company returns to its shareholders compared to how much it retains for reinvestment and other corporate purposes.
Piercing the corporate veil refers to the legal decision to hold shareholders or directors personally liable for the debts and obligations of the corporation. This process is invoked by a court to disregard the separate legal corporate entity status typically afforded to corporations.
Ploughed-back profits, also known as retained earnings, are the portion of net income that is not distributed to shareholders as dividends but is kept within the company to reinvest in its core operations, pay off debt, or reserve for future use.
Pre-emption rights in UK company law give existing shareholders the first opportunity to buy new shares before they are offered to others, ensuring their ownership percentage remains unchanged.
Preemptive rights grant existing shareholders the first opportunity to purchase new shares of stock issued by the corporation, as specified in the corporation's charter.
A preference dividend is a type of dividend that is paid to holders of preference shares and often carries preferential rights compared to common share dividends. This term is closely associated with cumulative preference shares, especially concerning unpaid dividends from prior periods.
A professional corporation (PC) is a type of corporation formed for the purpose of engaging in a learned profession, such as law, medicine, or architecture, where traditionally such fields required personal qualifications that corporations lacked.
A proposed dividend is a dividend that has been recommended by the directors of a company but has not yet been approved by the shareholders or paid to the shareholders.
The proprietary view in accounting emphasizes the rights and interests of shareholders rather than viewing the enterprise as a separate entity.
A proprietor is an owner of a property or business. In the context of a company, the owners are referred to as shareholders.
A Proxy is a person authorized to act on behalf of a shareholder or member of a company during meetings to vote on matters discussed. This authorization includes specific instructions on how the proxy should vote on various resolutions.
A technique used by an acquiring company to attempt to gain control of a takeover target by persuading shareholders to oust the current management in favor of directors favorable to the acquirer.
A public limited company (PLC) is a type of company under UK, Indian, and certain Commonwealth countries' law which is publicly traded and operates with limited liability.
A historical notion referring to any dividend or other distribution from company assets to shareholders that carried a tax credit, allowing shareholders to offset this against their tax liability. This system was replaced by the dividend tax system in April 2016.
A raider is an individual or organization that seeks to take over a company, often through aggressive strategies and hostile takeover bids, to capitalize on undervalued assets.
A Real Estate Investment Trust (REIT) operates as a company that owns, operates, or finances income-producing real estate, allowing individual investors to earn a share of the income produced through commercial real estate ownership, without actually having to buy, manage, or finance any properties.
A Real Estate Investment Trust (REIT) is a company resident in the UK that owns at least three properties let to third parties and distributes at least 90% of its profits to shareholders. REITs are exempt from UK corporation tax, and distributions are taxed as rental income to shareholders.
Registered capital, also referred to as authorized share capital, is the maximum amount of share capital that a company is authorized to issue to shareholders as stated in its corporate charter.
Retained earnings represent the portion of net income that a company retains, rather than distributing it to shareholders as dividends, to reinvest in its core business or to pay off debt.
A method by which listed companies on a stock exchange raise new capital by offering new shares to existing shareholders. This concept is based on pre-emption rights, ensuring existing shareholders can purchase new shares proportionally to their existing holdings.
An S Corporation is a type of corporation that meets specific Internal Revenue Service (IRS) requirements allowing the company's income, losses, deductions, and credits to be passed through to shareholders for federal tax purposes.
A scrip issue, also known as a bonus issue, capitalization issue, or free issue, involves the issuance of new shares to existing shareholders to reflect accumulated profits in the reserves of a company. This process converts company reserves into issued capital without requiring shareholders to pay for the new shares.
Share capital is a crucial component of a company's finances, received from its owners or shareholders in exchange for shares. It represents the equity funding that a company relies on to conduct its operations and grow.
A share register, also known as a register of members, is an official record kept by a company that details the names and addresses of the shareholders and the number of shares they hold.
A type of corporate restructuring in which a parent company divests itself of a wholly owned subsidiary by giving its shareholders the opportunity to exchange their shares for shares in the subsidiary, thereby making it an independent entity. Unlike a spin-off where shares are distributed automatically, in a split-off, the parent company makes a tender to its shareholders, who can choose whether or not to acquire shares in the new company.
A split-up is a form of reorganization by which a corporation divides into two or more smaller corporations. The stock of the new corporations is distributed tax-free to the shareholders of the original corporation, who surrender their stock in the old corporation.
Stock rights, also known as subscription rights or warrants, are financial instruments that give existing shareholders the right, but not the obligation, to purchase additional shares of a company at a predetermined price before a specified expiration date.
A stock split increases the number of a corporation's outstanding shares while making the stock more marketable, without altering shareholders' equity or the overall market value at the time of the split.
In the USA, individuals, businesses, and groups that own stocks in a corporation are known as stockholders. They hold a portion of the corporation's equity.
A Stockholders' Derivative Action is a lawsuit filed by shareholders on behalf of a corporation. Such a suit aims to address grievances suffered primarily by the corporation, typically due to breaches of fiduciary duty by those managing the corporation. It's often the only civil remedy available to a stockholder for such breaches.
Stockholders' equity represents the ownership interest of shareholders in a corporation, calculated as the difference between total assets and total liabilities.
The right of existing shareholders of a corporation, or their transferees, to buy shares of a new issue of common stock before it is offered to the public.
A tax voucher is a document provided by an organization, typically to its shareholders, that outlines details of the dividend income and any associated tax credits. It assists in accurately reporting income for tax purposes.
A tender offer is a public proposal made to shareholders of a particular corporation to purchase a specified number of shares at a predetermined price. The offer generally contains specific conditions, such as the requirement that the offeror must obtain the total number of shares specified in the tender to proceed.
A transfer agent is an individual or firm responsible for maintaining records of a corporation’s shareholders, including names, addresses, and the number of shares owned. They handle the issuance and cancellation of stock certificates when shares are bought or sold.
Undistributed profit refers to the profit earned by an organization that has not been distributed to its shareholders by way of dividends. Such sums are available for later distribution but are frequently used by companies to finance their activities.
An unpaid dividend is a dividend declared by a corporation's board of directors that has not yet been distributed to shareholders. Once declared, it becomes a corporate liability until paid.
Voting right refers to the entitlement of a common shareholder to vote on the corporate affairs of a company either in person or by proxy.
The process of liquidating a corporation, involving the collection of assets, payment of expenses, satisfaction of creditors' claims, and distribution of remaining assets to shareholders.
A year-end dividend is a distribution of profits made by a corporation to its shareholders, declared at or near the end of the business year and typically paid from retained earnings.
