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To what extent UK capital maintenance rule is fit for its purpose, Rule of UK vs Regulations in China elements affecting the rules and a comparison with China’s regulations.
Contents
1.1 Introduction
2. Background
3. Purpose of legal Capital
5.1. Dividend payment issue
5.2. Repurchases and Redeem of share
5.3. The problem of capital
6. Extended law or insolvency law
6.1. Creditor Protection by Contract
6.2.1 Solvency Law Approach
7. Differences on China’s legal capital rule
8. Conclusion/ Recommendation
9. References
1.1 Introduction:
Rule of UK vs Regulations in China, Financial conduct authroity is a financial regulatory body in the United Kingdom, and the purpose of the body is to regulate financial firms, by providing services to both consumers and markets and maintain integrity in United Kingdom’s financial authority. United Kingdom’s listing Authority is currently a part of Financial Conduct authority and previously was a part of financial Services authority. The purpose of the company is to maintain secrurity and integirty of the financial markets, and in order to achieve its objective, it has introduced a new regulatory system in 1999.
The regulatory system focuses on financial supervision, and in order to maintain the efficiency and effectiveness of the regulatory law,Rule of UK vs Regulations in China different regulations are made to protect private (LTD) and Public (plc) companies. The reason why private and public companies are looked upon differently is the difference in the kind and intensity of risks that private and public companies face. Since public companies are listed on the stock exchange they face higher financial risks, Rule of UK vs Regulations in China whereas limited companies have few shareholders, and only shareholders need to be managed to protect the companies. Shares purchased by shareholders for the company are not only liable for shareholders but for the company as well, thus shareholders’ coordination and management is essential for financial regulation of limited firms.
The easiest way for a shareholder to maximise his wealth is to get dividends that are proportionate to their shares. Since profit maximisation of the shareholders is usually the main objective of any company, it is important to explain what share is and how share distribution should be monitored and regulated?
Share is one of the equal parts into which a company’s capital is divided, and shareholders are entitled to to a proportion of profits on that shared capital. According to the Companies Act 1985 (Section 744), ‘a share is a share is a share in the share capital of a company’; Companies Act 2006 (Section 541) Interests of members other than the shareholders, Rule of UK vs. Regulations in China or interests other than shares are known as personal property. According to the companies Act 2006, ‘The shares or other interest of a member in a company are personal property’. The deifnitions of property and share as given by the companies Act are considered very important.
Howevever these definitions are not the only definitions, there are some other and interesting scholarly views on share. For example according to Davies, in modern day that the question is rather considered simple, but the answer to the question ‘what is share’? is not that simple. (Davies, 2008). According to him share can be considered as a choice in action, however choice in action is a vague term to define share because share and choice in action has little in common, because share is a possesion or an interest that can be considered as physical because it can be quantified whereas choice in action can not always be quantified.
Thus, this cannot be considered as a definition of a share because choice in action and share has only one thing in common which is right to possession.However even with this common factor they differ because share always refers to the portion of capital that belongs to a partner in company and is always professional whereas choice in interest can be personal or professional.
There are several legal frameworks attached with shares. One of the misconception about shares is that, there is no restriction on dividing share capital into different classes, and it can be done without taking into account, the concerns of equality
or concerns of other shareholders. Shares provide shareholders with voting rights and help companies decide their return on capital, attendance, voting and their rights in the company, thus shares cannot be divided without taking in account company’s capital, voting rights of shareholders and their presence in the company. Apart from the laws about how to divide shares, Rule of UK vs. Regulations in China there are laws on how companys can use their shares, e.g. companies have voting rights attached to their shares i.e. voting rights or weightage depends on the percentage of shares. It is not important for companies to always have standard one share, one vote policy.
In public companies the voting policy is mostly one share one vote, whereas in private companies, companies can formulate their own constitution and decide on voting policy, in the United Kingdom, however most public and private companies have similar regulation policies.
Share can be divided into two categories; ordinary share and preference share. The essay will also analyse the importance of fixed legal capital (share capital). According to research, the purpose of the legal capital is to protect shareholder minorities. (Rickford, 2004) In theory each shareholder should owe the same amount per share, however in reality several other factors should be taken into account. The other factors that need to be taken into account are causes that can lead to shares being diluted. Therefore, there should be laws to avoid dilution of shares, and the essay will further discuss the legal capital and issues related to it in detail….
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