BPP University College Of Professional Studies Limited (BPP)
Corporate Finance
Exam (elaborations)
Distinction Level Corporate Fiancee Exam Notes:
34 views 4 purchases
Course
Corporate Finance
Institution
BPP University College Of Professional Studies Limited (BPP)
Distinction-Level Corporate Finance Revision Notes: Well-Organized, Comprehensive, Exam-Friendly - BPP and ULAW
For Sale: Exceptional Corporate Finance Revision Notes for Distinction-Level Success
Are you currently studying the Corporate Finance module and searching for comprehensive and we...
BPP University College Of Professional Studies Limited (BPP)
Unknown
Corporate Finance
All documents for this subject (5)
Seller
Follow
lpcnotes1
Content preview
CORPORATE FINANCE CONSOLIDATED NOTES
FLOTATIONS
Introductions • Flotations - The first-time shares are listed and traded on a public market
• Official List - only companies whose shares are listed on the ‘Official List’ are ‘listed
companies’ (main market of the LSE not AIM)
• Full Listing – company being listed on the Official List
• Regulated market = includes the Main Market of the London Stock Exchange (LSE),
but not AIM.
• Prescribed market = includes the Main Market and AIM.
Regulations
of the • Financial Conduct Authority (FCA) = UK financial services regulator.
financial • Financial Reporting Council (FRC) = Independent regulator responsible for
market promoting confidence in corporate reporting/governance.
Documents published by the FRC:
UK Corporate Governance Code (CGC)
UK Stewardship Code
Sources of
Law Statue Rules and regulations Guidance
• FSMA 2006 • Listing Rules • UK Corporate
Governance Code
• Companies Act 2006 • AIM Rules
• Share Capital
• Prospect Regulations Management
Rules (PRRs) Guidance (SCMGs)
• Disclosure guidance • Pre-exemptions
transparency rules Group Statement of
(DTRs) Principles (PEG)
• Market Abuse
Regulations (MAR)
Securities • Securities = include equity and debt instruments – shares are equity instruments;
and share bonds are debt instruments.
issues
• Primary issue = the first time that a company makes an offer of listed shares.
Also called flotation and initial public offering (IPO).
• Secondary issue = subsequent occasions when listed shares are issued.
1
, CORPORATE FINANCE CONSOLIDATED NOTES
Private,
Public and Private companies Public companies
Listed
Companies • A private company’s ability to • Private companies’ shareholders
raise equity finance is heavily may raise further equity finance by
restricted by s.755 CA 2006 converting the company to a
public company and offer shares to
• s.755 CA 2006 It is an offence the public.
for private companies to offer
its shares to the public. • s.90 CA 2006 sets out the
procedure for this is set out.
Listed Companies
• Listed companies = companies with shares listed on the Official List
(admitted on the Main Market of the London Stock Exchange).
• Most investors prefer to invest in listed companies so that they can
buy and sell shares freely. Thus, some companies will seek a listing and
admission to trading to raise finance – technically the company is not
listed but its shares are.
• A company must convert to a public company before applying to have its
shares listed/traded.
• AIM companies are also public companies but not listed.
CA 2006 Quoted company = includes a company whose shares are listed on the Official
List (= the Main Market).
Part 13 CA 2006 Traded company = a company any shares of which carry rights to vote
at GMs and are admitted to trading on a regulated market.
2
, CORPORATE FINANCE CONSOLIDATED NOTES
Pros & Cons There are a number of advantages and disadvantages of applying for, and obtaining a
of listing listing which can be summarised as follows:
Advantages Disadvantages
Access to capital to fund growth Burden of disclosure/reporting
and/or reduce debt requirements
• Injection of cash into a company • Must comply with a large number
used by the company to expand of regulatory requirements
i.e., organically or an acquisition,
paying off debt, new shareholders • LPDT Rules, MAR and LSE
because of a flotation > source of Admissions and Disclosure
future funding for company. Standards must be observed
• Failure to comply > penalties,
censure, suspension of
trading/listing company share
Providing for a market Management Time
• Shareholders can take advantage • Complex, time consuming task
of ready-made public markets in and will involve a significant
which they can trade their shares. investment of management
time.
• Easier for subsequent share issue • Company directors expected to
to be made to raise further devote all of their time in the
finance by a company. run up to a floatation +
continue to run business
• Floating by companies with large effectively.
number of shares will enable
employees to realise gains by
selling at the time of floating or
opp to invest in further shares
(employee incentive)
Public Profile Changes to the board
• Floating > fanfare of publicity for • Ensure that all directors have
the company in the business world appropriate experience/expertise
as it will be a consideration of
• Listed companies or AIM investors
companies must keep investors
informed of financial • Listed company will need to
performance, close monitoring can comply with Corporate
result in enabling a company to Governance Code re how a
gain confidence of investors. company should be constituted
>may result in new Director
appointment
• N/A AIM rules for AIM companies
3
, CORPORATE FINANCE CONSOLIDATED NOTES
Cost and Fees
• Significant + costly, various
advisors involved all need to be
paid often using substantial
amount from floatation cash.
• Likely to be in the six figures
range, somewhere between 8-
10% of the amount you need to
raise.
Loss of control
• Directors of a listed company will
be subject to additional
influences and pressures on how
they run the company.
• Institutional investors with
significant shareholdings in a
position to block resolutions.
• Listed companies must follow the
guidelines issued by the bodies
which represent institutional
shareholder:
o Investment Association (IA)
o Pension & Lifetime Savings
Association (PLSA)
o National Associations of
Pensions Funds (NAPF)
NB: Breaching guidelines would risk
incurring the displeasure of
institutional investors.
4
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller lpcnotes1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.28. You're not tied to anything after your purchase.
