Unit 49-LO3 Analyse the process of raising and maintaining capital for a company-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Process of Raising and maintaining capital for a company

1. Finish making the company’s financials and projections. Make them have a break-even point and the value of their expenses per unit.

2. Tell investors about your company by putting together slides that can be shown in 10-15 minutes or answered in 5 – 7 minutes. Do this on sites like LinkedIn groups or Group chat channels like Slack and Yammer.

3. Tell the truth about your business plan. Be honest about where you are at with product development and how many people you have reached so far. Do not be negative or make it sound like you are doing bad because this is a sales process and you want to sell your idea to someone else!

4. Send an email to all investors who have expressed interest after you pitch by asking if they have any questions.

5. Buy a domain, hosting, and email address from companies like Bluehost.

Raising of share capital:

The nature of shares, different rights, types of capital debt and equity, public subscription, issue of shares, authorized capital, pre-emption rights, payment of shares

Shares are pieces of ownership in a company. They can give you the right to vote at meetings or they can be the last piece of what is left after all other assets have been distributed.

Types of share capital:

There are two types of shares-Preference Shares and Ordinary Shares. The rights of each type of share depend on the event of bankruptcy.

Preference shares:

Preference shares are a type of share that pays dividends. These pay quarterly on calls by the board of directors and have a fixed cumulative dividend. They are senior in dividends to debt and ordinary equity, but junior in a bankruptcy situation. Some other advantages of preference shares: they can be listed on stock exchanges and their voting rights can be limited. You should think about this when you start a company because you might not get paid if your company goes bankrupt!

Ordinary shares:

These shares are not a preferential claim in bankruptcy or if the company is liquidated. They do not carry voting rights. They also do not have an interest rate that is attached to them and they can’t be used to participate in the profits of the company.

Public subscription:

A public Offer is when a company offers to sell shares of its stock to the public. Companies have an obligation to make their annual financial statements available for inspection before offering them for sale.

All share issues above N500k need approval from the SEC with a minimum review period of one month and a maximum of 6 months while companies are expected to spend at least two weeks on each submission during this time. Share issues below N500k could be completed in less than two weeks if there is no objection from SEC or any other relevant authority.

A “roadshow” promotes these offerings, by giving presentations and making deals with institutional investors around the world who may be interested in purchasing new shares.

Maintenance of share capital:

The general rule, reduction of capital, procedure, duties of directors, purchase of own shares, financial assistance by the company for the acquisition of own shares, statutory restriction, and distribution of profit

The reduction of capital is one way to get money for a company. You can buy or sell shares. Or, you can use the company’s own money to buy its shares back.

If you have shares in a company, the company might give you benefits. For example, they can send money to the company on your behalf. The company might pay for management services when they usually do not exist outside of its owners. Shareholder benefits may also include discounted purchase privileges (buybacks).

If a company wants to buy back its own shares, then it will not be able to do so at any time. They have to follow certain rules and regulations. But when they do this, it usually means that the company needs more money so they can borrow money from an external lender. This is how less investment goes into the company and more opportunities for outside parties to make profits happen at the expense of shareholders.

Loan capital:

The advantages and disadvantages of raising loan capital

There are good things to do when you raise loan capital. You can repay the money you borrow with a lower interest rate than what you would get on your own. But there are also bad things to worry about when raising loan capital. The lender may have restrictions and unfavorable terms that come with the loan if they think it is risky or if it will not make them any money.

Fixed versus floating charges

When you are making a budget, preparing for retirement, or managing your money, it is important to understand the difference between fixed and floating charges.

Fixed charges do not change. This means that the price of goods and services can go up but the cost of fixed charges stays the same. Fixed-rate plans are good for people because they will keep their monthly payments stable even if there is a change in their income. But if you use a fixed-rate plan for too long, inflation may happen.

Floating charges are different than fixed ones. They change as the price of things goes up. When prices rise, consumers can pay more for things without paying more for electricity and gas. But this is only a short-term solution because the trend will continue and prices will keep going up. Floating charges are also good if you’re trying to pay off the debt over time because they have payments that stay constant no matter how much prices go up.

Nature of debenture, comparison of share and debenture, debenture trust deed, fixed and floating charges, registration of charges, debenture holders’ remedies

Debentures are loans that a company can give to someone and they have to provide collateral or security. Debentures might have different rates and terms, but most of the time you get equity in the corporation. A share is what gives you distribution rights and voting rights for a corporation. It also has dividends which make sure it is kept.

Investors sometimes use it as a way to make money. This is because they do not pay taxes on leased equipment or property that they own. They can, however, be subject to usury laws.

A debenture trust deed is where the donor assigns rights over their home, freehold, or leasehold to an institution. The charity can make a loan against it. Security over leases by way of trusts allows tenants to take out mortgages on their premises and transfer any existing lease term to another investor who will become the legal tenant.

You need to register with the Land Registration Office within 21 days of the charges. You will need to do this according to CPR Parts 24 and 25 as amended by CPR Part 28.

Debentures holders have to repay the money with interest on a fixed date unless something happens before that time. Debentures holders may also earn more when there is a corporate action like liquidation or insolvency and they rank higher than mortgage creditors or redeemable shareholders.

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