CLAW2201 notes
CLAW2201 Week 6: COMPANY FINANCE:
1. EQUITY FINANCE- fundraising through share issues
a) Share Capital:
i. Issue of shares
S124(1)(a): A company has a right to issue and cancel shares in the company.
S198A(1): The board of directors has discretion as to when and how to issue shares
S254B(1): A company may determine:
The terms of which its shares are issued; and
The rights and restrictions attaching to the shares.
S254D(1) CA: In a proprietary company, before issuing shares of a particular class, the director must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.
ii. Types of shares
a) Ordinary shares: right to vote at general meeting no automatic entitlements to dividends participate in surplus assets on winding-up if after paying everyone, ordinary shareH share the assets in same proportion as % of shared owned.
b) Preference shares:
Restricted voting rights
Cumulative entitlement to dividends
Priority of payment of dividends, once creditors paid off
Priority of repayment of capital on winding up
No share of surplus assets on winding-up
May be redeemable (for cash)/convertible (turned to ordinary shares at option of shareh/co) s254A(2): Co. can ONLY issue preference shares if there are rights in constitution or it is approved by special resolution that needs >75% approval)
iii. Dividends
Dividends are the distribution of the company’s profits to shareholders
S254T(1) Can only be paid if assets > liab, fair & reasonable to shareH as a whole, does not materially prejudice ability to pay creditors
S254T(2) Assets & Liab to be calculated in accordance w acctg stds in force at relevant time (payment time)
S254U Directors may determine that a dividend is payable and fix (a) the amount, (b) the time for payment and (c) the method of payment
GENERAL RULE: There is
1. EQUITY FINANCE- fundraising through share issues
a) Share Capital:
i. Issue of shares
S124(1)(a): A company has a right to issue and cancel shares in the company.
S198A(1): The board of directors has discretion as to when and how to issue shares
S254B(1): A company may determine:
The terms of which its shares are issued; and
The rights and restrictions attaching to the shares.
S254D(1) CA: In a proprietary company, before issuing shares of a particular class, the director must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.
ii. Types of shares
a) Ordinary shares: right to vote at general meeting no automatic entitlements to dividends participate in surplus assets on winding-up if after paying everyone, ordinary shareH share the assets in same proportion as % of shared owned.
b) Preference shares:
Restricted voting rights
Cumulative entitlement to dividends
Priority of payment of dividends, once creditors paid off
Priority of repayment of capital on winding up
No share of surplus assets on winding-up
May be redeemable (for cash)/convertible (turned to ordinary shares at option of shareh/co) s254A(2): Co. can ONLY issue preference shares if there are rights in constitution or it is approved by special resolution that needs >75% approval)
iii. Dividends
Dividends are the distribution of the company’s profits to shareholders
S254T(1) Can only be paid if assets > liab, fair & reasonable to shareH as a whole, does not materially prejudice ability to pay creditors
S254T(2) Assets & Liab to be calculated in accordance w acctg stds in force at relevant time (payment time)
S254U Directors may determine that a dividend is payable and fix (a) the amount, (b) the time for payment and (c) the method of payment
GENERAL RULE: There is