Raising Capital Flashcards
What are the two primary methods for raising capital in company law?
Companies raise capital through debt (e.g., loans and bonds) and equity (e.g., issuing shares).
What does Section 755 of the Companies Act 2006 prohibit?
Section 755 prohibits private companies from offering shares to the public.
What is the minimum share capital required for a public company under Section 763 of the Companies Act 2006?
Public companies must have a minimum share capital of £50,000.
What distinguishes listed public companies from non-listed public companies?
Listed public companies have their shares traded on stock exchanges like the LSE, while non-listed companies do not.
What are the two main markets operated by the London Stock Exchange (LSE)?
The Main Market for established companies and AIM (Alternative Investment Market) for smaller, growth-oriented companies.
What is the role of the Financial Conduct Authority (FCA) in capital-raising?
The FCA regulates the issuance of securities, reviews prospectuses, enforces listing rules, and ensures market transparency.
What is a prospectus, and why is it required?
A prospectus is a detailed document outlining a company’s financials, risks, and governance. It informs potential investors and ensures transparency.
What is an ‘offer for subscription’ in the context of raising capital?
An offer for subscription is when a company offers shares directly to the public, often using advertisements to attract investors.
What is a ‘rights issue,’ and what statutory provision governs it?
A rights issue offers new shares to existing shareholders in proportion to their holdings. It is governed by Section 561 of the Companies Act 2006.
What are pre-emption rights under Section 561 of the Companies Act 2006?
Pre-emption rights give existing shareholders the first opportunity to purchase new shares before they are offered to others.
How does the FCA ensure compliance with disclosure rules?
The FCA enforces the Disclosure and Transparency Rules under Section 96 of FSMA, requiring companies to disclose material information affecting share prices.
What is the role of the UK Corporate Governance Code in capital-raising?
The Code promotes governance standards for listed companies, such as having independent directors and transparent audit committees.
What is the purpose of Section 417 of the Companies Act 2006?
It mandates listed companies to produce a business review detailing performance, risks, and stakeholder impacts.
What is the purpose of the City Code on Takeovers and Mergers?
The Code ensures fair treatment of shareholders during takeovers, promoting equality and transparency.
What triggers a mandatory cash offer under the City Code on Takeovers and Mergers?
A bidder acquiring 30% or more of a company’s voting shares must make a mandatory cash offer to all shareholders.
What does Section 979 of the Companies Act 2006 allow in takeovers?
It allows majority shareholders with 90% ownership to compel minority shareholders to sell their shares.
What constitutes insider dealing under the Criminal Justice Act 1993?
Insider dealing involves trading based on non-public, price-sensitive information to gain an unfair advantage.
What are the penalties for insider dealing under the Criminal Justice Act 1993?
Insider dealing can lead to fines, imprisonment, or both.
How does the Market Abuse Regulation (MAR) address insider dealing?
MAR imposes civil sanctions, such as fines and public censures, for insider dealing and market manipulation.
What is the Prospectus Regulation (EU) 2017/1129, and how does it affect small offers?
It simplifies disclosure requirements for small offers under €1 million and reduces compliance costs.
How does the FCA enforce investor protection in public offers?
By reviewing prospectuses, penalizing misleading disclosures, and ensuring timely information disclosure under FSMA.
What is an ‘offer for sale’ in capital-raising?
In an offer for sale, the company sells shares to an issuing house, which then sells them to the public.
What is the role of institutional investors in a placing?
Institutional investors are offered shares directly in a placing, which is a quicker method to raise funds without a public offer.
What are the continuing obligations for listed companies under FSMA?
Listed companies must disclose price-sensitive information and comply with governance standards to maintain investor confidence.