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Consolidated Corporate finance exam notes
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Detailed notes for the full course of Corporate finance
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Corporate FinanceBPP Exam notes 2022
1
, The exam:
• Two papers– 1.5 hours each (18% MCQs, 82% long form questions)
• Answer the questions in order
• Read the Questions and Enclosures
• Everything is examinable
• normally 7 long form overall.
2
, SGS 1: FLOATATIONS I: PREPARATION FOR LISTING
EXAM FOCUS SGS 1:
Long form: Given a corporate profile of a company and asked: What changes would you
make to the company to make it suitable to list? - mention ALL changes
• Go through solutions and sweep up provisions.
• If it says: 'what changes would you make to the corporate governance' - only
mention corporate governance. Make sure you mention that the corporate
governance code is not compulsory, but it is recommended to attract institutional
investors - it is a comply or explain procedure (comply or explain why not) .
Mention provisions discussed on code e.g. role of CEO and chairman should be two
different people according to code, code recommends balance or executive and non-
executive directors, Code recommends 3 separate committees, etc.
Seeking a listing/floatation:
PROS CONS
• Burden of disclosure and reporting
• Increased liquidity requirements and potential penalties.
• Access to a ready-made market • Management time: float takes up lots of
• Access to capital markets - opens up management time which could be used
funding elsewhere.
• Increase profile and visibility- can be a • Changes to the board (see preparation
good or bad thing (if you aren't doing for listing chapter LA)- the company
well this is publicised). must comply with the corporate
• More demand for shares = can ask for governance code - not compulsory but
higher share price compliance will encourage institutional
• Employee share schemes to incentivise investors. If you don't comply you need
employees to explain why, leaves it up to the
• Better reputation: knowledge that the market. Listed company directors are
company is in compliance with the also more likely to be sued.
LPDTs, and the code makes it more • Cost and Fees of the float: the banks,
attractive to investors both at flotation brokers, solicitors and other parties will
and in the future. charge high fees- however these will be
low compared to the capital raised.
• Loss of control - control diluted
• subject to increased regulations
• subject to the volatility of the markets
e.g subject to things that happen outside
your control e.g 9/11
• competitors might try and absorb you.
3
, Approach to exam question: always mention the
rules below even if they don’t need to be changed on
the facts - apply all below to the facts
1. CA 2006
2. LR (2,6,9)
3. DTR 7
4. LPs/PLPs
5. The code
Re-registering as a public company:
Private companies cannot offer shares to the public (s.755 CA 2006) and therefore must re-
register as public limited companies under s.90 CA 2006.
Requirements:
1. Allotted share capital of £50,000 to satisfy ss.91(1)(a) and 763 CA 2006; and
2. the company’s allotted shares must be paid up to at least ¼ of their nominal value and
the whole of any premium in order to satisfy ss.91(1)(b) and 586 CA 2006.
Re-registering requires:
Re
1. Under s.90(1) CA 2006 a private company may be re-registered as a public limited
company if a special resolution that it should be so re-registered is passed.
2. Such changes to the name and articles of the company as are necessary in connexion
with its becoming a public limited company (section 90(3)) as such any changes must
be by way of special resolution (sections 21(1) and 77(1) CA) - although note that a
company can change its name without an SR if its articles allow (section 77(1)(b)).
3. An application for registration must be submitted (s90(1)), containing:
• The proposed name on reregistration.
• The company's proposed secretary. (if it does not already have one).
• A statement of compliance that the above requirements of part 7 CA have been
complied with.
4. The application must be accompanied with the following documents (s.94(2) CA):
• A copy of the special resolution to re-register as a public company
• A copy of the Articles which will be amended
• A copy of the balance sheet required (s92 CA).
4
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