Banner Services by Outcome

Services by Outcome

What we do

Objective

Objective

Why issue new shares

Goal: raising additional funds  

Purpose: working capital etc.

Method: issuing new ordinary shares

Checks and Considerations

Raising Capital through issue of new shares

Generally speaking, issuing new shares is a simple process in that all that is required is for the directors to pass a resolution authorising the company to issue the shares, subject of course to specific requirements in the Articles of Association, Companies laws, or shareholders’ agreement.

Prior Considerations

Ultimately, the question of whether to raise finance and the method of doing so should be in the best interests of the company, which the directors have the duty to consider.

Key Questions

  1. Do the directors have authority to issue shares?
  2. Will the allotment exceed a limit on authorised share capital? 
  3. Do existing shareholders benefit from pre-emption rights?
  4. Does a shareholders’ agreement restrict the issue of new shares?
  5. Are there any other restrictions in the Articles of Association?

Practical questions

Will the shares be of an existing share class or should a new class be created?

If new shares are to have different voting or other rights to existing shares, they will need to form a new class of shares. 

How much to value the shares at?

There are many models of how to value private company shares.

What payment terms will apply to the share issue?

Depending on the governing law of the corporation, it is possible to issue unpaid or partly paid shares where some or all of the required payment is deferred until a later date.

Is it required to offer the shares to existing shareholders first?

In most circumstances, it is necessary to offer the shares to existing shareholders before third parties. This will usually take the shape of an issue notice which details the number of shares offered and the duration they are available. Within this time frame, existing shareholders can exercise their preemptive right to purchase more shares. 

Understanding the process

The exact process for issuing shares varies by company based on requirements in the company constitution and the shareholders agreement (if it already exists).

The necessary documents need to be prepared

  1. A Share Offer/Subscription Letter
  2. A Share Subscription Agreement
  3. Shareholders Agreement

Conclusion

Issuing shares is an important commercial and legal practice to understand as an entrepreneur. It allows you to raise funds and attract skilled employees. The key takeaway is to get everything in writing and follow the requirements in your startup’s constitution, shareholders agreement 

Outcome

create a dedicated fund for the purposes of making an investment in a single target.

Types of Investment Funds

Types of Investment Funds

Key Requirements

Key Documents

Key Documents

Documents you may need to form a fund and get it up and running: For Companies

  • Private Placement Memorandum, subscription document (non-voting participating shares), investment management agreement
  • Memorandum of Association and Articles of Association are tailored to the specifics of each fund.
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  • Constitutional Documents: Partnerships: Private Placement Memorandum, Limited Partnership Agreement, subscription document (as a LP), investment management agreement Investments and Management . Private Placement Memorandum • Limited Partnership Agreement • Subscription Booklet • GP Entity LLC Agreement • Management Company LLC Agreement • Investment Management Agreement Operating Agreement

    Investment Fund Text

    What do we mean by investment fund

    An investment fund is an entity that pools investors’ money to provide investors with professional investment management. It involves the formation of a legal entity and designing an internal organization structure and the rights and duties of the internal stakeholders.

    STEP: 1 – Choice of legal entity

    The choice and availability of the legal entity depends on the country of origin or domicile of the fund, these include investment companies limited by shares, incorporated cell companies, segregated portfolio companies, limited partnerships, limited liability companies, unit trusts and contractual funds.

    STEP:2 – Structuring the Fund

    The organizational structure of a fund will outline the rights and responsibilities of each of the key components of the fund’s operations. The organizational structures include: Fund of funds, Master/ Feeder funds, closed-ended funds, stand-alone fund used to operate a single strategy) and Single Investor Funds.

    What we do

    We will help you determine the organizational structure and choice of legal entity that satisfies the nature of your investment strategy, fund terms and you. Once the structure is determined, FAA can assist and guide you to complete a series of steps that will bring that structure into existence and get the investment vehicle up and running for activities.

    Special Purpose Vehicle – H

    Special Purpose Vehicle

    Special Purpose Vehicle – T

    Successfully launching an investment entity has everything to do with properly structuring and administering the vehicles that are used to invest in private assets. 

    The phrase “special purpose vehicle” is an apt description – an SPV is an investment vehicle established for a special purpose. If we reduce an SPV down to its fundamental purpose, at its core it is a legal investment structure that enables the pooling of capital in order to invest in a particular private asset. For a capital-raising SPV, that purpose is almost always to raise capital that will be used to invest in or purchase an asset or stock in that asset.

    Common SPV Purposes

    The sponsor of a private equity fund typically creates a special purpose vehicle (investment fund) to control and administer the fund, and take actions on the fund’s behalf. 

    structure and direction in order to move 

    SPV is up and running, your next step is performing the legal documents that will determine how the entity functions. Your legal documents govern how this entity behaves, together with the rights and rules of those that belong to it. Of course, the documents and the included provisions will differ depending on the use and purpose of the entity.