BPP University College Of Professional Studies Limited (BPP)
A complete summary of all chapter handouts, lecture recordings and SGSs consolidated into clear and concise notes with worked examples. Contains everything you need to know for the equity finance and debt finance sections of the BPP BLP exam.
BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
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EQUITY FINANCE
BACKGROUND TO EQUITY FINANCE
- ‘Capital’: Funds available to run the business.
- ‘Share Capital’: Funds raised through the issue of shares.
- Issued share capital: Subscriber shares by 1st members and further shares after incorporation.
- Only receive back when company sells their stake, company sold on flotation or on winding up.
- Incentive to invest = receipt of income through dividends.
- S.542(1): Shares must have a fixed nominal value, S.542(2): Otherwise void.
- S.558: Allotment = when SH acquires unconditional right to be included on register of members.
- S.112(2): Issued = When actually registered on register of members, only have full legal title then.
PROCEDURE FOR ALLOTING SHARES
Step 1: CAP – Is there a cap in the A’s on the number of shares that can be allotted?
- All CA 1985 companies had a cap – an authorised share capital in their memorandum.
o S.28(1) CA ’06: Deemed restriction that CA ’85 companies will continue to have a cap as
memorandum becomes part of A’s.
Remove cap using -
o S.121 CA 1985: OR (exception to rule that need SR), or
o S.21(1) CA 2006: SR to adopt new A’s that do not include a cap.
- CA 2006 companies will not have a cap unless SH amend the A’s by SR to put one in.
o S.21(1): SR to amend A’s to remove or increase cap.
o S.617(2)(a): Share capital increases each time it issues shares, so check not reached cap using –
Articles: Will state cap, if any, pre-emption and classes
Resolutions: Show authority, pre-emption and class rights
Register of members – shows if issued and confirms filings
Form SH01 – shows most recent allotment (although no guarantee issued)
Confirmation statement – shows how many issued and how holds
S.853B: Notify if change in members or PSC
S.853D: Must include total shares, aggregate nominal value and rights attached
S.853F: Applies to traded and non-traded alike
Step 2: AUTHORITY – Do the D’s need authority to allot?
- S.549: Cannot allot shares unless in accordance with –
o S.550:
Private company with only 1 class of share, power to allot shares of same class.
If CA 1985 company then also need OR to authorise reliance on S.550.
o S.551:
S.551(1): Authority may be given in A’s (by SR) or by OR under S.281(3).
S.551(3)(b): Must state how many and date it expires (check if existing authority still valid –
too old or already issued too many shares?).
S.551(7)(a) & (b): Can allot after expiration if agreement to allot was made before but only if
authorisation expressly allows.
S.551(8): Authority can be revoked at any time by OR (even though usually would need SR).
CA 1985 company relies on S.80 1995 authority – OR.
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