Topic 4 - Funding the Corporation - Debt Funding and Shares Equity

Question 1

What is Equity Financing?

Answer 1

• Contributions from members showing ownership

Question 2

What is Debt Financing?

Answer 2

• Borrowing money, creating contractual obligations

Question 3

What does Gearing mean, and therefore, what does Higher Gearing mean?

Answer 3

• Gearing means debt:equity ratio. Higher gearing = higher debt

Question 4

What are debentures?

Answer 4

When someone owns stocks pretty much –> I buy Cole’s shares (helps Coles raise capital) and then they pay me back principal + interest

Question 5

Are Shares constituted as Personal Property?

Answer 5

Yes –> Under S1070(A)

Question 6

Types of Share Rights for Government and Finance

Answer 6

Finance = dividends, surplus assets

Government = voting rights, removal/appointment of directors

Question 7

What is the main rule when issuing and purchasing shares?

Answer 7

• MUST have exchange of sth w value (house, car, asset) NOT intangible thing (promises, services) in good faith

Question 8

Can companies vary class rights?

Answer 8

• IF company has a consti OR

a) Special res of company
b) Special resolution of class
c) 75% of written consent of affected class

Question 9

What is Capital Maintenance Doctrine?

Answer 9

• Companies CANNOT buy back shares unless it does NOT materially prejudice ability to pay creditors

Question 10

Can Companies give financial assistance to purchase shares?

Answer 10

• If it does NOT materially prejudice ability to pay back creditors

Question 11

Conditions for Dividends?

Answer 11

• DOES NOT DETRIMENTALLY IMPACT ABILITY TO PAY BACK CREDITORS