The Companies Act, 2013 defines “share” as a share in the share capital of a company. A person holding the shares of a company, whose name features in the records of a depository as a beneficial owner, is a member of the company. Raising capital through the issue of shares in the primary market is one of the key avenues for a company, so as to invest for the growth of the company. In the context of allotment and issue of shares, both the public and private companies need to comply with a host of legal requirements. Though the terms issue and allotment with regard to shares of a company have distinct legal meanings, they are in general used interchangeably. Allotment of shares to a person happens only after he acquires an unconditional right …show more content…
In the context of the legal aspects of allotment of shares, research questions include: What are the various means to allot and issue shares? What is the need for the various legal frameworks with respect to allotment of shares? What are the various legal aspects involved in allotment of shares? Means to allot and issue shares Companies Act, 2013 provides that both public as well as private companies may issue securities. Chapter III of the Companies Act, 2013 deals with Prospectus and allotment of securities. This chapter is divided into two parts, Part I deals with Public Offer and Part II deals with Private Placement. Public offer includes IPO (initial public offer) or FPO (further public offer) of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder of the company, through issue of a
A rights issue is an issue of rights to purchase new shares, which are issued pro rata to the existing shareholders, Armitage (2007). Rights issues were the dominate form of seasoned equity offers for fund raising in the United Sates and the United Kingdom . However, there has been a swing to other forms of share issues. The US has shifted towards firm commitments, Eckbo and Masulis (1992). In this the underwriter guarantees the sale of the issued stock at the agreed-upon price. The shift in the US occurred in the 1960’s. In the UK there has been a move towards open offers. Open offers are similar to rights issues but investors are unable to sell the stocks that they purchase under the open offer to other parties. The change in the UK occurred much later than the US, with the shift occurring in the 1990’s.
Shareholders are the owners of one or more units of equal value into which the company is divided and which are usually sold in order to raise capital either for the company itself or for its founders. A share carries with it a defined set of rights and duties e.g. right to receive a share of the company’s profits and the right to receive a share of the company’s assets if the company is wound up.
Justify your research question and explain why this topic has been chosen. Why is it significant and worthy of a discussion?
IPOs are created by underwriters. The first step in creating the IPO is to hire an investment bank and negotiate a contract. The contract will state the type of securities (either stocks or bonds), the amount of capital to be raised, and the details of the actual underwriting agreement. The company and the investment bank determine the structure of the contract. There are two different types of structured agreements. The first type of structured agreement is the firm commitment agreement, in which the underwriter guarantees that a certain amount of capital will be raised. This is done through buying the entire offer and reselling it to the public. The second type of structured agreement is the best effort agreement, in which the underwriter will sell the securities for the company but does not guarantee how much capital will be raised. To protect themselves with IPOs, an investment bank will often form a syndicate of underwriters. When a syndicate is formed, a lead underwriter will be in charge of the syndicate, while the others will each sell a portion of the securities issued. Once a contract agreement is reached, the investment bank files a registration statement with the Securities and Exchange Commission (SEC) (IPO, 2005).
Cost allocation is the process of identifying, aggregating, and assigning of cost to various separate activities. There is no overly precise method of charging cost to objects, hence resulting to approximate methods being used to do so. Amongst the approximation basis used includes square footage, headcount, cost of assets employed, and electricity usage amongst others. The main aim of cost allocation is to spread cost in the fairest possible method and also to impact the behavior pattern of the cost.
Regulation 26 (1)(c) prohibits the issue of shares during the offer period which will entitle the holder to voting rights in the company. Such an issue would require a special resolution by postal ballot to be passed. The case of Howard Smith v. Ampol Petroleum throws some light on this issue as well. In this case, Millers was subject to a takeover offer by Ampol Petroleum. A competing offer was made by Howard Smith Ltd. This bid by Howard Smith was supported by the Board of Millers who considered the former to be the white knight in the situation. To facilitate the bid, the company made a further issue in order to reduce Ampol to minority shareholders. The court in this case held that the directors of the company had a fiduciary duty and their power to issue further shares must always be for a ‘proper purpose’. Since Millers made the issue with the sole purpose of diluting the majority voting power, the issue was held to be not proper. The court held that the test to determine whether an issue was proper is to take
For issuing preference share there is no need to create mortgage on assets. So, companies have option to raise extra fund without any hurdles by creating charge on assets.
Float Shares in the Market Place – Floating shares can be identified simply as the shares of a public entity that are available for trading in a stock market. An advantage of this source of funds is that the entity gets access to new capital that can be used in developing the business. Although its disadvantage is that the shareholders’ interests may differ from the company’s interest or objective.
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
[7] Cavendish Lawcards Series (2002) Company Law (3rd edn), p.15 [8] [1976] 3 All ER 462, CA. [9] Griffin, S. (1996) Company Law Fundamental Principles (2nd edn), p.19 [10] [1990] Ch 433. [11] Lecture notes [12] Lecture notes [13] [1939] 4 All ER 116.
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
The essentials of IPOing in Japan are the same as they in the U.S. A company must select an underwriter to take charge of their IPO, that underwriter will then oversee the pricing, quantity, and actual sale of the stock. Once the sale is complete the proceeds will be transferred to the issuer. Stock listed on Japanese exchanges are divided into sections. The first two sections make up what are called the “Main Markets”, this is where the leading large and second tier Japanese and foreign companies are listed. The first of the two sections is especially view as top market for its size, liquidity, and the volume of foreign investors (Japan Exchange Group), while the second is for medium sized companies. The third section is called the Market of The High-growth and Emerging Stocks or (MOTHERS), a trading market for companies with high growth potential. What
The office of the Director of Corporate Enforcement (ODCE, 2015), Ireland defines Corporate Governance as “the system, principles and process by which organisations are directed and controlled. The principles underlying corporate governance are based on conducting the business with integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions and complying with all the laws of the land”. It is the system for protecting and advancing the shareholder’s interest by setting strategic direction for the firm and achieving them by electing and monitoring the capable management (Solomon, 2010). It is the process of protecting the stakes of various parties that have their interest attached with a company (Fernando, 2009). Corporate governance is the procedure through which the management of the company is achieving the goals of various stake holders (Becht, Macro, Patrick and Alisa,