Chapter 5 Forming a Company and Issuing Shares - PowerPoint PPT Presentation

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Chapter 5 Forming a Company and Issuing Shares

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  1. Chapter 5Forming a Company and Issuing Shares

  2. Lecture Topics • Formation of companies • Accounting for share capital • Undersubscription and oversubscription • Issue of different types of shares • Subsequent share issues • Forfeiture of shares and reissue

  3. Lecture References • Text - Chapter 5 • Corporations Act 2001

  4. Key Concepts • Registration • Company constitution • Underwriting • Prospectus • Stock exchange listing • Share capital

  5. Key Concepts • Subscription • Share option • Forfeiture of shares

  6. Formation of Companies • Registration • Application • ASIC • Constitution • Replaceable rules • Adoption and changes

  7. Formation of Companies • Initial administration • Appointment of officers • Record-keeping • Minutes • Registers • Underwriting

  8. Raising Equity Capital • The disclosure document • Prospectus content • Other disclosure document • Regulated vs unregulated offers • Trading in securities • Listing on the ASX • Regulation of secondary trading

  9. Share Capital • Types of shares • Ordinary • Preference • repayment of capital • participation in surplus assets and profits • dividends • voting • Classification of shares for financial reporting

  10. Share Capital • Components of share capital • Issue price • Called-up amount • Paid-up amount • Share issue procedure • Offer • Application • Allotment of shares

  11. Accounting for Share CapitalDirect Method Application Public applies for shares via prospectus Dr Trust account xx Cr Application xx

  12. Accounting for Share Capital Direct Method Allotment Directors approve share allocation Dr Application xx Cr Paid-up capital xx Dr Bank xx Cr Trust account xx

  13. Accounting for Share CapitalDirect Method Additional amount payable on allotment Dr Allotment xx Cr Paid-up capital xx Dr Bank xx Cr Allotment xx

  14. Accounting for Share Capital Direct Method Calls • call made on partly paid shares Dr Call xx Cr Paid-up capital xx Dr Bank xx Cr Call xx

  15. Oversubscription Excess application monies returned Dr Application xx Cr Trust account xx

  16. Over Subscription Excess retained and offset against amount due on allotment Dr Application xx Cr Allotment xx Dr Bank xx Cr Trust account xx

  17. Over Subscription Excess retained and off-set against amount due on calls Dr Application xx Cr Calls in advance xx Dr Calls in advance xx Cr Paid-up capital xx

  18. Issue of Different Types of Shares Issue of both preference and ordinary shares Public applies for shares via prospectus Dr Trust account xxx Cr Application - ordinary xx Cr Application - preference xx

  19. Issue of Different Types of Shares Allotment Dr Application - ordinary xx Dr Application - preference xx Dr Paid-up capital - ordinary xx Cr Paid-up capital - preference xx Dr Bank xxx Cr Trust account xxx

  20. Issue of Different Types of Shares • Share issue costs • Asset or expense? • AASB 1015 • UIG Abstract 23 • Mechanics of the process • Transaction costs arising of the issue of equity instruments

  21. Subsequent Share Issues • Rights issue • Unregulated share issue • Bonus issue • Share options • The ‘usual’ treatment • Financial reporting and the substance of the option

  22. Forfeiture of Shares • Effect of forfeiture • Unpaid calls • Reissue • Costs of forfeiture and reissue • Accounting for forfeiture

  23. Forfeiture of Shares Call made by directors Dr Call xx Cr Paid-up capital xx Call monies mostly received Dr Bank xx Cr Call xx

  24. Forfeiture of Shares Forfeiture of share with calls outstanding Dr Paid-up capital xx Cr Call x Cr Paid up cap. - forfeited shares x Amount unpaid Amount called up Amount paid

  25. Forfeiture of Shares Reissue of Shares Dr Bank x Dr PuC forfeited shares x Cr Paid-up capital xx Return of surplus to original s/holder Dr Paid-up capital xx Cr Bank xx

  26. Where to get more information • Other courses • List books, articles, electronic sources