Mention 3 methods for raising equity
- allotting shares
- financial assistance
- buyback of shares
Name 2 types of charges that can be used for debt finance?
- fixed charge
- floating charge
Name the 5 steps for allotting shares
- check for cap in Articles
- directors authority
- pre-emption rights
- issuing new class
- allot shares
When does a company have an automatic directors authority to allot shares? (2)
i. private company with
ii. one class of share
What type of resolution is needed to give director authority to allot shares?
SH ordinary resolution
What type of shares must pre-emption rights be dissapplied? Give an example. What type of resolution is needed to dissapply pre-emption rights
- equity securities (uncapped dividend and capital)
- ordinary shares
- SH special resolution
What are equity securities?
shares that are uncapped to both dividend and capital
What type of resolution is needed if a company is issuing a new class of shares?
SH special resolution - to amend the articles and set out rights attached
What step will always be needed when allotting shares?
step 5: board resolution to allot the shares
What type of transaction is financial assistance relevant? (3)
- share transfer
- company issues shares to investor
- any other form of financial assistance e.g. loans, security
What are the steps to identify if there is a prohibition on financial assistance? (3)
- identify target company
- If plc, applies to both target and any subsidiary, whether private or public
- If private, applies to any plc subsidiary
What are the exceptions to the general prohibition on financial assistance to acquire shares in a holding company? 3)
- Incidental part of larger purpose of company
- Principal purpose in giving assistance is not for the acquisition
- Money lending in ordinary course of business AND i) private company; or ii) public company whose net assets are not materially reduced
What are the consequences for breach of financial assistance? (3)
- Fine
- Imprisonment
- Void transaction
What are the 3 ways to fund a buyback?
- Distributable profits
- Fresh issue of shares
- Capital (private companies only)
What are the 7 steps to buyback shares out of profit? What resolutions are needed? (4)
- initial checks
- draft contract - BR
- inspection period - 15 days before GM + at GM
- SH approve contract at GM - OR (can also use WR)
- enter contract - BR
- sign contract (director) - BR
- PMM - cancel shares + update register of members
What are the initial checks for buyback out of profits? (3)
- Articles: limits on buyback
- Distributable profits
- Fully paid up
What are the additional steps that must be taken when funding buyback using capital? (3)
- approve + sign DDS and AR (BR)
- notice in Gazette and national newspaper
- payment out of capital must take place within 5-7 weeks after SH OR
When must the DDS and AR be signed?
No earlier than 1 week before the GM or the passing of the WR
When must a notice be put in the Gazette and national newspaper?
Within 7 days of passing OR at GM
When must you check for distributable profits when funding a buyback using capital?
no earlier than 3 months before the directors prepare the DDS
What filings take place at CH when buyback using capital? (2)
- DDS and AR
- OR
What 3 documents must be available for inspection at the GM (capital buyback)?
- contract
- AR
- DDS
