Part E Capital and the financing of companies 17: Capital maintenance and dividend law 265Quick Quiz
1 Where application is made to the court for confirmation of a reduction in capital, the court may require
that creditors should be invited by advertisement to state their objections. In which of the following ways
can the need to advertise be avoided?
Select all that apply.
A Paying off all creditors before application to the court
B Producing a document signed by the directors stating the company's ability to pay its debts
C Producing a guarantee from the company's bank that its existing debts will be paid in full
D Renouncement by existing shareholders of their limited liability in relation to existing debts
2 Fill in the blanks in the statements below.
Distributable profits may be defined as .................... ............ profits less .................... .............
losses.3 If a company makes an unlawful dividend, who may be involved in making good the distribution?
A The company only
B The directors only
C The shareholders only
D The company, the directors and the shareholders4 Give four examples of undistributable reserves.
5 Fill in the blanks in the statements below.
A private company does not need to apply to the court to reduce its share capital if it supports its
.................... ............ with a .................... ..............