Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface and acknowledgments
- Glossary
- List of abbreviations
- Table of cases
- Table of legislation
- PART I The essential qualities of the corporation
- PART II The corporation and its capital
- 4 Incorporating the company
- 5 Constituting the company's share capital
- 6 Increasing the company's capital
- 7 Distribution of dividends and maintenance of share capital
- 8 Repurchases of shares
- 9 The nature of shares and classes of shares
- PART III Governing the corporation
- PART IV Corporate combinations, groups and takeovers
- References
- Index
6 - Increasing the company's capital
from PART II - The corporation and its capital
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface and acknowledgments
- Glossary
- List of abbreviations
- Table of cases
- Table of legislation
- PART I The essential qualities of the corporation
- PART II The corporation and its capital
- 4 Incorporating the company
- 5 Constituting the company's share capital
- 6 Increasing the company's capital
- 7 Distribution of dividends and maintenance of share capital
- 8 Repurchases of shares
- 9 The nature of shares and classes of shares
- PART III Governing the corporation
- PART IV Corporate combinations, groups and takeovers
- References
- Index
Summary
Required reading
EU: Second Company Law Directive, arts. 25–29
D: AktG, §§ 182–220
UK: CA 2006, secs. 549–554, 560–573
US: DGCL, §§ 102(a)(4), 152–154, 156, 162–166
Choosing a capital structure and increasing the share capital
Introduction
We have seen that all of our jurisdictions require the creation of a share capital as a prerequisite to establishing a stock corporation. In Chapter 4, we briefly examined the constitution of such initial share capital in the context of the incorporation process, and, in Chapter 5, we discussed how members contribute assets to the company in exchange for their shares. Here we will examine a company's options when approaching an increase of the capital assets it uses to fund its activities, the factors it would consider when making a decision about the composition of its capital structure, and the rules governing capital increases in our three jurisdictions.
The determinants of capital structure
Sources of financing
Two basic sources of corporate finance present themselves to a company. First, it can retain earnings to increase capital surplus (internal financing) that can be used to fund operations. The decision to use internal financing is made in connection with a company's payout policy, as the distributable profits that the company does not pay out to shareholders as dividends or use to repurchase shares can be applied to the finance of ongoing operations. Absent sufficient expansion of profits, an increase in internal financing means a decrease in the amount of dividends distributed.
- Type
- Chapter
- Information
- Comparative Company LawText and Cases on the Laws Governing Corporations in Germany, the UK and the USA, pp. 188 - 218Publisher: Cambridge University PressPrint publication year: 2010