Raising Finance Flashcards
What is equity finance?
Company sells ownership share to third party
What is the nominal or par value of shares?
The stated minimum value at company formation
What is the amount above the nominal or par value called?
Premium
What are pre-emption rights?
When a company issues more shares for cash they must first offer them to existing shareholders
What is the deadline for a shareholder exercising their pre-emption right?
14 days from offer
When do pre-emption rights not apply?
When the shares are not offered for cash
To preference shares
How can shareholders disapply a pre-emption right?
By special resolution
Can articles amend pre-emption rights?
Yes
What do the model articles grant to a directior regarding the transfer of shares?
Absolute power to refuse transfer
What is debt finance?
Where a company borrows to raise capital
What is the benefit of debt finance?
The debt holder has no ownership interest in the company
Who has the power regarding debt finance under the model articles?
The directors
What is debt finance?
A loan
What types of loan are there?
Secured or unsecured
What is a fixed charge?
A loan over assets that a company will hold for a long period of time
How is a fixed charge holder often protected?
The company will not be able to dispose of the asset or obtain an additional charge over it without permission of the creditor
What is a floating charge?
Charge over a group of assets that change regularly
What is the filing requirement for a charge?
Must be registered at companies house within 21 days
What is the priority of secured debts?
Fixed charges over the same asset take priority in date order of their creation, so long as they were validly registered at Companies House
Floating charges over the same assets take priority in date order of their creation, so long as they were validly registered at Companies House
A fixed charge will take priority over a floating share over the same asset, even if the floating charge was created before the fixed charge
