Which of the following statements about share and loan capital is incorrect? Share capital comes from...

Which of the following statements about share and loan capital is incorrect?
Share capital comes from members whereas loan capital comes from creditors.

Rules about capital maintenance apply to share capital but not loan capital.

Raising funds through share capital can dilute a member’s shareholding, whereas an issue of loan capital will not.

Rules about capital maintenance apply to both share capital and loan capital.

Expert Solution

INCORRECT STATEMENT: "Rules about capital maintenance apply to both share capital and loans capital"

This is because,A shareholder loan is not treated as capital and is not added to the share capital accounts. Instead, it is treated as a liability owed to the lender (shareholder). As such, shareholder loans are not subject to the capital maintenance rules.

Rahul Sunny answered 1 year ago

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