CORPORATE FINANCE : GENERAL PRINCIPLES :

1. CORPORATE FINANCE : GENERAL PRINCIPLES???? : ???? Purpose ?? Management power ??? Share capital and loan capital ????????? Security ??

2. SHARE CAPITAL Issuance of shares to raise capital in private limited companies. Private to public unlisted companies. Private to public listed companies. Public unlisted to public listed companies. Rights issue.

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4. LOAN CAPITAL Legal mortgage: secured by real estate. Bonds and notes: without security. Debentures: floating charges. Specialised loan capital: structured trade financing and bareboat charter party for trading and shipping companies.

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6. DEBENTURES Contractual in nature: creditor and debtor Nature of a debenture Publicly traded like shares, part of securities, raise loan capital Security: floating charges

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8. ISSUANCE & TRANSFER OF DEBENTURES Transfer mode: same as shares, executed in writing Debentures may be stored in central depository and transfer will be in the form of deposit receipts. Transfer can also be perfected by registration

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10. TRUSTEES FOR DEBENTURE HOLDERS Security given by the company is vested in the professional trustee. The trustee is the intermediary between the debenture holders and the company. Legal mortgage is registered in the name of the trustee. Trustee can also have a floating charge over the machinery and assets of the company.

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12. REDEMPTION OF DEBENTURES Can be redeemed anytime by the company or holder, at a fixed date or a determinable date under the contract. Same debenture can be re-issued or another debenture be issued in its place. Holder of a re-issued debenture will enjoy same rights and priorities as the previous holder.

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14. PRINCIPLES OF CREDIT SECURITY Possessory and non possessory. Common law recognises 4 kinds of security. Possessory: pledges and liens. Inconvenience of physical possession Non possessory: mortgages and charges. Borrower carries on business and manage the assets mortgaged or charged.

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16. DIFFERENCES BETWEEN A MORTGAGE & A CHARGE Legal mortgage: a conveyance of the legal title in the property subject to the right of redemption. Legal charge: the creation of a contract and gives the holder certain rights over the property. Floating and fixed charges: A floating charge becomes a fixed charge upon crystallisation.

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18. SECURITY � GENERAL PRINCIPLES Mortgagee or chargee. Secured creditor and unsecured creditor. Remedies of secured creditor, pursue the proceeds of the sold assets, enforcement proceedings etc Control over the business activities and management of the company.

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20. FLOATING CHARGE Assets: book debts, stock in trade or inventory, machineries etc Advantage: Company can carry on business using the charged assets. Floating charge becomes a fixed charge upon crystallization. Examples of companies: manufacturing and trading.

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22. CRYSTALLISATION: FLOATING CHARGE Effect: loss of management control over the charged assets. Triggered off automatically by: service of notice of crystallization, in the event of winding up order, administrative receivership. Priority at the time of crystallization: does not affect its priority ranking with other security interests at the time of crystallization.

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24. FLOATING CHARGES: PRIORITIES & DIFFICULTIES Dissipation and disposal without knowledge of debenture holder. Can be used for creation of a fixed charge � priority over floating charge. Lien on assets � priority over floating charges. Restrictive clause for creation of similar charges. No effect on chargee/mortgagee without notice.

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26. REGISTRATION OF CHARGES Purposes: debenture holder to obtain security interest against the company, potential lenders can have a list of security interests. Register opens to the public. Company secretary will provide full particulars of a charge to the Registrar of Companies for the purpose of registration. Effect of non registration within 21 days will affect the interest of the debenture holder.

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28. STRUCTURED TRADE FINANCING Loan agreement between lender and borrower. Characteristics. International sale agreement between borrower and seller. Bill of lading and shipment to lender company and lender warehouse. Borrower draws goods from warehouse and remits payment to lender.

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30. SHIPPING: PROJECT FINANCING & BAREBOAT CHARTER PARTY Vessel under construction: project financing. Characteristics and risks. Completed vessel: revenue from charter hire. Lender may be the owner and borrower is the demise or bareboat charterer. Legal title is transferred upon full payment.

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