Sarah the Company Secretary of Beta Plc, The company is a non-listed public company. She seeks your advice on the following matters.

a)The Company has 100,000 1 preference shares and 500,000 1 ordinary shares. The Articles of Association provide that the preference shares carry the right to a 12% preference divided and a prior right to the return of their capital on winding up. They have no right to reduce the preference divided from 12 to 8 percent.

The company plans to allot an additional 30,000 ordinary shares with a nominal value of 1 to Roger for 1.30 each. Roger cannot afford to pay for the shares in full and has suggested that the company allows him to pay 1 per share, and that he acts as the Company legal advisor for the next three months in order to pay for the premium. Alternatively, he has suggested that the company get registered as a private limited company. Roger will then arrange a loan of 39,000 from his bank which will be guaranteed by the Company.

Advise Sarah

a.On the proposed dividend reduction and on any procedural matters necessary to implement it. (10mks)

b.On the validity of the plans to allot the additional ordinary shares to Roger.(10mks)