FORMING & FINANCING THE CORPORATION

Question 1

ways in which you can set up a public company (2)

Answer 1

1. formation
2. transformation of an existing legal entity

Question 2

articles of incorporation/ instruments of constitution (6)

Answer 2

1. name of the company + legal form
2. objects of the company
3. amount of subscribed capital
4. amount of authorised capital
5. rules of corporate governance
6. duration of the company (unless indefinite)

Question 3

articles of association /statutes

Answer 3

1. registered office
2. info regarding shares (must be written for every different classe of shares, common, preferred, …)
   - no. of shares subscribed (& nominal value if specified)
   - any special condition restricting transferability of shares
   - type of share (registered or bearer)
3. amount of subscribed capital paid at incorporation
4. nominal value of shares issued for consideration other than cash + type of consideration + name of contributor

Question 4

4 substantive requirements to form a corporation

Answer 4

1. public company can be formed for ANY purpose in accordance with the law by ONE or more persons acting as founders or subscribers
2. capital requirements: at least €25,000, in some countries more
   !! at least 25% of shares issued for consideration must be paid at incorporation
3. a minimum capital must be maintained during the lifetime of the company ( to absorb losses, not present in every country)
4. shares may NOT be issued at a price < nominal value or accountable par

Question 5

independent expert’s report must contain: (3)

Answer 5

1. description of cash assets comprising the consideration
2. description of methods of valuation
3. state whether the values correspond at least to no. & nominal value of shares ad (if existing) to the premium

Question 6

exceptions (independent expert’s report NOT needed)

Answer 6

1. sh contribute transferable securities that are valued at the weighted avg price at which they have been traded
2. assets are contributed not more than 3 months after they have been valued by a recognised & independent expert
3. value of assets derived by statutory accounts of previous financial year

Question 7

what is needed if a sh sells an asset to the company within 2 years from formation

Answer 7

1. independent expert’s report
2. acquisition must be approved by general sh meeting
3. level of control = contribution other than cash

Question 8

reasons why a company should acquire its own shares

Answer 8

1. give them to employees
2. use them for deals with other companies
3. remunerate sh

Question 9

conditions for the company to reacquire its own shares (other conditions may be added by Member States legislations)

Answer 9

1. authorisation by general sh meeting
2. net assets < subscribed capital + undistributable reserves
3. only full paid shares may be included in the transaction

Question 10

2 cases in which the general sh meeting may decide for a reduction of capital

Answer 10

1. company has significantly reduced its activity
2. company has suffered a serious loss (in Italy 1/3 of subs capital) & nominal capital must be made close to real one

Question 11

what happens if sh NOT BUY new shares in case of an increase of capital

Answer 11

1. voting rights are diluted (better for majority sh bc minority sh will have less power)
2. BV of shares is lower

Question 12

what happens if sh BUY new shares in case of an increase of capital

Answer 12

1. same voting rights
2. same BV