Law 3102 Corps CAPITAL AND FINANCIAL STRUCTURE.ppt POST MODEL

Law 3102 Corps CAPITAL AND FINANCIAL STRUCTURE.ppt POST MODEL

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CAPITAL AND FINANCIAL STRUCTURE
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Types of Securities Debt - represents borrowing Equity – represents ownership interest
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Debt Securities Bond - instrument representing debt Unsecured = debentures If secured, bondholders have lien on specific property Indenture - agreement giving terms of borrowing Often contains restrictions on borrowing, dividends, redemption of shares
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Equity Securities Shares (stock) Represent ownership interest in corporation, but not in specific property of corporation C/I must specify number authorized and rights of each class
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Equity Securities (cont.) As to any class of shares, at any point in time there are: x number of authorized shares = the number specified in C/I y number of issued shares = number that have been issued to shareholders z number of outstanding shares = Number presently held by shareholders Difference: Issued- Outstanding = Treasury shares
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Treasury Shares Are shares that were issued to shareholders but have been reacquired by the corporation and not cancelled (issued but not outstanding) Treasury shares have: No vote No right to dividends No preemptive rights
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TREASURY SHARES RMBIA Sec. 6.31: eliminated the concept of treasury shares. All shares reacquired by a corporation constitute authorized but unissued shares, unless the articles of incorporation prohibit reissue, in which event the authorized shares are reduced by the number of shares reacquired .
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Types of Shares Par Value - arbitrary stated value - may not be related to value, market price RMBIA Sec. 6.21: eliminates the concepts of par value, stated capital and capital surplus. Instead, all shares may be issued for such consideration as authorized by the board of directors or, if the charter so provides, shareholders. RMBIA Sec. 2.02(b): Corporations may elect to issue shares with par value.
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TYPES OF SHARES No Par – No arbitrary stated value May be issued for any amount set by the board of directors or shareholders. Under RMBIA: the directors are free to allocate to capital surplus any or all of the consideration received, unless the no par stock has a liquidation preference. In that event, consideration in excess of liquidation preference may be allocated to capital surplus. No par shares provide directors with latitude in establishing capital surplus which provides fliexibility in declaring subsequent distributions to shareholders.
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Generally have rights to: Vote Receive dividends Share in distribution on liquidation May be divided into one or more classes bearing relative rights (i.e. different voting rights).
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This note was uploaded on 12/09/2011 for the course LAW 1101 taught by Professor Reed during the Spring '08 term at CUNY Baruch.

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Law 3102 Corps CAPITAL AND FINANCIAL STRUCTURE.ppt POST MODEL

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