5 Equity Finance

Question 1

Procedure/steps for allotment of shares

Answer 1

STEP 1 = check whether there is a cap on the amount of shares

STEP 2 = check whether directors need authority to allot shares

STEP 3 = are the shares equity shares? consider whether the company needs to disapply pre-emption rights

STEP 4 = is the company creating a new class of share? if so, Articled need to be amended

STEP 5 = Board will resolve to allot the shares - REQUIRED

Finally - administrative matters

Question 2

What are pre-emption rights?

Answer 2

where the existing shareholders have a right of first refusal on any shares that are issued

Question 3

What is Financial Assistance?

Answer 3

A company having its shares purchased ie the target, the target company is assisting in the purchase of the shares

Question 4

Do pre-emption rights apply if the shares are equity securities?

Answer 4

Yes, and if not, they do not apply

Question 5

Who does Financial Assistance ONLY apply to?

Answer 5

Public companies

Question 6

What is buyback of shares?

Answer 6

When a company decides to buy shares from one of its shareholders

Question 7

What is the general prohibition under s19(1) FSMA?

Answer 7

“No person may carry on a regulated activity unless:
a) he is an authorised person
b) he is an exempt person”