Corporate finance law: principles and policy
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| Main Authors: | , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Oxford [u.a.]
Hart
2015
|
| Edition: | 2. ed. |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | C, 829 S. |
| ISBN: | 9781849466004 |
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MARC
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| 100 | 1 | |a Gullifer, Louise |e Verfasser |0 (DE-588)142900885 |4 aut | |
| 245 | 1 | 0 | |a Corporate finance law |b principles and policy |c Louise Gullifer and Jennifer Payne |
| 250 | |a 2. ed. | ||
| 264 | 1 | |a Oxford [u.a.] |b Hart |c 2015 | |
| 300 | |a C, 829 S. | ||
| 336 | |b txt |2 rdacontent | ||
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| 338 | |b nc |2 rdacarrier | ||
| 700 | 1 | |a Payne, Jennifer |d 1970- |e Verfasser |0 (DE-588)1076513565 |4 aut | |
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| _version_ | 1804175233974796288 |
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| adam_text | DETAILED TABLE OF CONTENTS
Preface and Acknowledgements....................................................................v
Summary Table of Contents.....................................................................vii
List of Abbreviations.............................·...........................................xxv
List of Common Texts....................................................................... xxix
Table of Cases...................................................................*.....*......
Table of Legislation......................................................................... lv
L Introduction..................................................................................1
2. Overview of Financing Options...............................................................8
2.1 Introduction............................................................................8
2.2 Equity Financing........................................................................8
2.2.1 Different Types of Shares.......................................................10
2.2.1.1 Ordinary Shares....................................................... 11
2.2.1.2 Preference Shares.........................................................13
2.2.2 Sources of Equity Finance...................................................... 14
2.3 Debt Financing........................................................................19
2.3.1 General................................................-........................19
2.3.1.1 Sources of Debt Finance...................................................19
2.3.1.2 Choice of Debt Financing Transaction.....................................20
2.3.1.3 Protection of Creditors: Contractual and Proprietary.....................22
2.3.1.4 Protection of Creditors: Regulation.......................................25
2.3.1.5 Multiple Lenders and Transfer of Debt....................................27
2.3.2 Loans...................................................................... 28
2.3.2.1 Bank Loans.............................................................. 28
2.3.2.2 Multiple Lenders...................................................... 30
2.3.2.3 Peer-to-Peer Lending......................................................31
2.3.3 Debt Securities..................................................................32
2.3.3.1 General................................................................. 32
2.3.3.2 Securities versus Loan....................................................33
2.3.3.3 Who Issues Bonds?....................................................... 35
2.3.3.4 Debt Securities versus Equity.............................................36
2.3.3.5 Varieties of Bonds........................................................36
2.3.4 Finance Based on Assets........................................................ 40
2.3.4.1 Receivables Financing................................................... 40
2.3.4.2 Supply Chain Financing....................................................42
2.3.4.3 Asset-Based Lending.......................................................42
2.3.4.4 Devices Based on Retention of Title..................................... 43
2.3.4.4.1 Sale and Leaseback..............................................44
2.3.4.4.2 Asset Finance............................................... 44
2.3.4.4.3 Stock Finance................................................. 46
2.3.4.4.4 Sales on Retention of Title Terms...............................46
x Detailed Table of Contents
2.3.5 Specialised Forms of Finance......................................................47
2.3.5.1 Project Finance..........................................................47
2.3.5.2 Financing of Group Companies.............................................47
2.3.5.3 Trade Finance.............................................................48
2.3.5.4 Islamic Finance..........................................................48
2.4 Hybrids................................................................................49
2.5 Retained Profits.......................................................................52
2.6 The Debt/Equity Mix....................................................................55
2.7 Conclusion.............................................................................58
3. The Relationship Between Equity and Debt...................................................59
3.1 Introduction...........................................................................59
3.2 The Relationship Between Equity and Debt in a Solvent Company..........................61
3.2.1 Position of Shareholders in a Solvent Company....................................62
3.2.1.1 Ordinary Shares..........................................................63
3.2.1.1.1 Rights to Capital...............................................63
3.2.1.1.2 Rights to Income................................................63
3.2.1.1.3 Voting Rights...................................................64
3.2.1.1.4 Summary........................................................65
3.2.1.2 Preference Shares........................................................66
3.2.1.2.1 Rights to Capital...............................................66
3.2.1.2.2 Rights to Income................................................67
3.2.1.2.3 Voting Rights..................................................67
3.2.1.2.4 Summary........................................................68
3.2.1.3 Role of Shareholders in a Solvent Company................................69
3.2.1.3.1 Section 172 of the Companies Act 2006...........................69
3.2.1.3.2 Explaining the Pre-Eminence of Shareholders.....................70
3.2.1.3.3 The Corporate Governance Role of Shareholders...................77
3.2.2 Position of the Creditors in a Solvent Company...................................78
3.2.2.1 Non-Adjusting Creditors..................................................80
3.2.2.2 Risks to Creditors from the Operation of a Solvent Company...............82
3.2.2.3 Restrictions on the Company’s Activities.................................84
3.2.2.4 The Corporate Governance Role of Debt....................................86
3.2.2.4.1 Debt Covenants..................................................87
3.2.2.4.2 Monitoring by Lenders........................................ 88
3.2.2.4.3 Lender Influence on Breach.....................................88
3.2.2.4.4 Lenders as Directors?..........................................91
3.2.2.4.5 Is Lender Governance Efficient?................................92
3.2.2.4.6 Effect of Transfer of Risk by Lenders..........................93
3.2.2.4.7 The Twilight Period before Insolvency..........................94
3.3 The Relationship Between Debt and Equity in an Insolvent Company.......................95
3.3.1 Order of Payment Out on a Winding Up or Distribution by
an Administrator................................................................ 97
3.3.1.1 Holders of Proprietary Claims.............................................98
3.3.1.2 Order of Priority........................................................99
3.3.1.2.1 Liquidation or Administration Expenses.........................100
3.3.1.2.2 Preferential Creditors........................................101
3.3.1.2.3 The Prescribed Part...........................................101
3.3.1.2.4 General Unsecured Creditors...................................102
3.3.1.2.5 The Shareholders............................................ 102
Detailed Table of Contents xi
3.3.2 Preservation of the Assets for Creditors on and During the Run-up
to Insolvency.................................................................105
3.3.2.1 Preventing Reduction of the Asset Pool..............................106
3.3.2.1.1 Statutory Provisions........................................106
3.3.2.1.2 The Anti-Deprivation Principle..............................107
3.3.2.2 Preventing Uneven Distribution of the Assets.........................110
3.3.2.3 Potential Overlap Between the Prevention of Reduction of the
Asset Pool and the Prevention of Uneven Distribution of Assets.......111
3.3.2.4 Protection of Creditors..............................................113
3.3.3 The Balance Between Creditors and Shareholders in an Insolvent Company......114
3.3.3.1 Directors’Duties..............1.....................................114
3.3.3.2 Lifting the Veil Between the Creditors and the Shareholders.........116
3.3.3.2.1 Common Law Mechanisms.......................................116
3.3.3.2.2 Statutory Mechanisms: Sections 213 and 214
Insolvency Act 1986......................................... 118
3.4 Conclusion.......................................................................122
4. Issuing Shares.........................................................................124
4.1 Introduction.......................................................................124
4.2 Shareholder Protection when Shares are Issued.....................................124
4.2.1 The Need for Shareholder Protection..........................................124
4.2.1.1 Dilution of Existing Shareholders’ Interests.........................125
4.2.1.2 Misuse by the Directors of the Power to Issue New Shares............126
4.2.2 Existing Company Law Mechanisms that Operate to Protect Shareholders........126
4.2.2.1 Directors’Duties.....................................................126
4.2.2.2 Minority Shareholder Protection......................................128
4.2.3 Justification for Additional Protection in Relation to Share Issues.........129
4.3 Directors’ Authority to Allot Shares..............................................131
4.4 Pre-Emption Rights................................................................132
4.4.1 Scope of Pre-Emption Rights..................................................133
4.4.2 Renounceable Letters of Allotment............................................135
4.4.3 Waiver of Pre-Emption Rights.................................................136
4.4.4 Is the Current Balance Correct as Between Shareholder Protection and
the Company’s Capital-Raising Needs?..........................................138
4.5 Registration of Shares............................................................139
4.6 Methods of Holding Shares....................................................... 140
4.6.1 Certificated Shares...................................................... 140
4.6.2 Uncertificated (Dematerialised) Shares.......................................141
4.6.3 Bearer Shares................................................................142
4.6.4 Shares Held Through an Intermediary.........................................142
4.7 Transfer of Shares................................................................144
4.8 Conclusion.................................................................. 145 5
5. Legal Capital..........................................................................146
5.1 Introduction........................................................................146
5.2 Function of the Legal Capital Rule֊s.............................................. 146
5.2.1 Conflict Between Shareholders and Creditors..................................14/
5.2.2 Policy Response to the Conflict...............................................148
5.2.3 The UK’s Legal Capital Regime.................................................150
xii Detailed Tahle of Contents
5.3 Rules Regulating the Amount of Money Paid In by Shareholders.......................151
5.3.1 Entry Price for Limited Liability: Minimum Capital Rules.....................151
5.3.2 Measurement of Consideration: Payment for Shares.............................153
5.3.2.1 Shares must have a Par Value..........................................153
5.3.2.2 ‘No Issue at a Discount’ Rule.........................................155
5.3.2.2.1 Cash Consideration...........................................155
5.3.2.2.2 Non-Cash Consideration.......................................156
5.3.2.3 Consequences of a Breach of the Provisions............................157
5.3.2.4 Efficacy of the Rules as a Form of Shareholder Protection.............160
5.3.2.5 Efficacy of the Rules as a Form of Creditor Protection................161
5.4 Maintenance of Capital..............................................................162
5.4.1 Dividend Payments.............................................................163
5.4.1.1 Potential Benefits of Dividend Payments..............................163
5.4.1.2 Constraints on Dividend Payments.....................................163
5.4.2 Repurchases and Redemptions of Shares........................................165
5.4.2.1 Potential Benefits of Repurchases and Redemptions of Shares..........165
5.4.2.2 Repurchases of Shares.................................................166
5.4.2.2.1 Rules Applicable to All Companies...........................166
5.4.2.2.2 Additional Flexibility for Private Companies................167
5.4.2.3 Redemption of Shares..................................................169
5.4.3 Reductions of Capital.........................................................170
5.4.3.1 Potential Benefits of a Reduction of Capital..........................170
5.4.3.2 Court Approval Route Available to All Companies......................171
5.4.3.3 Solvency Statement Mechanism for Private Companies...................172
5.4.4 Prohibition on Financial Assistance...........................................173
5.4.5 Efficacy of the Rules as a Form of Creditor Protection.......................176
5.5 Alternatives to the Legal Capital Rules............................................178
5.5.1 Creditor Protection via Contract.............................................178
5.5.2 Creditor Protection via Insolvency Law.......................................180
5.5.3 Solvency Statement Approach...................................................183
5.5.3.1 The Test of Solvency..................................................184
5.5.3.2 Liability of the Directors............................................186
5.5.3.3 Recovery of Unlawful Payments.........................................188
5.5.3.4 Potential for Reform..................................................189
5.6 Conclusion........................................................................190 6
6. Creditor Protection: Contractual........................................................191
6.1 Introduction.........................................................................191
6.2 Interpretation of Commercial Contracts...............................................192
6.2.1 Introduction...................................................................192
6.2.2 Basic Principle................................................................192
6.2.3 The Meaning of Words...........................................................193
6.2.4 Implication of Terms...........................................................194
6.3 Contractual Rights Against the Borrower..............................................195
6.3.1 Restrictions on the Borrower’s Activities......................................197
6.3.1.1 Restrictions on Borrowing..............................................197
6.3.1.2 Restrictions on Asset Disposal.........................................197
6.3.1.3 Restrictions on Dividend Payments......................................198
6.3.1.4 Change of Control Covenants............................................199
6.3.1.5 Debt Buybacks..........................................................200
Detailed Table of Contents xiii
6.3.1.6 Negative Pledge Clause................................................200
6.3.1.6.1 Forms of Negative Pledge Clause..............................202
6.3.1.6.2 Enforcement of Restrictive Covenants.........................202
6.3.2 Rights to Information and Financial Covenants................................206
6.3.2.1 Rights at the Time of Making the Loan.................................207
6.3.2.2 Ongoing Rights.........................................................209
6.3.3 Termination and Acceleration Rights...........................................213
6.3.3.1 Events of Default......................................................214
6.3.3.2 Effect of Wrongful Acceleration........................................215
6.3.3.3 Validity of Acceleration Clauses.......................................215
6.3.4 Set-Off.......................................................................218
6.3.4.1 Use of Set-Off and Flawed Asset Structures in Lending.................219
6.3.4.2 Independent Set-Off....................................................221
6.3.4.3 Transaction Set-Off....................................................221
6.3.4.4 Bankers Right to Combine Accounts.....................................222
6.3.4.5 Contractual Set-Off and Exclusion of Set-Off...........................223
6.3.4.6 Insolvency Set-Off.....................................................226
6.3.4.6.1 The Limits and Operation of Insolvency Set-Off...............226
6.3.4.6.2 The Mandatory and Exclusive Nature of
Insolvency Set-Off.............................................227
6.3.4.6.3 Policy Justifications for Insolvency Set-Off..................231
6.4 Contractual Rights Against Third Parties.............................................233
6.4.1 Guarantees, Indemnities and Performance Bonds.................................235
6.4.1.1 Introduction...........................................................235
6.4.1.2 Important Distinctions.................................................236
6.4.1.3 Guarantees.............................................................238
6.4.1.3.1 Protection of the Third Party: Construction
of the Guarantee...............................................238
6.4.1.3.2 Protection of the Third Party: Disclosure.....................238
6.4.1.3.3 Protection of the Third Party: Discharge of
the Third Party................................................239
6.4.1.3.4 Protection of the Third Party: Third Party’s
Rights Against the Principal Debtor............................241
6.4.1.4 Indemnity and Performance Bond.........................................241
6.4.2 Credit Insurance..............................................................245
6.4.3 Derivatives and Credit Default Swaps..........................................247
6.4.3.1 Management of Risk by the Use of Derivatives...........................247
6.4.3.2 Credit Default Swaps...................................................248
6.4.3.3 Are Credit Default Swaps Insurance?....................................249
6.4.3.4 Regulation of CDSs.....................................................252
6.4.4 Subordination.................................................................254
6.4.4.1 Types of Subordination............................................... 256
6.4.4.1.1 Turnover Trust................................................256
6.4.4.1.2 Contingent Debt...............................................260
6.4.4.1.3 Contractual Subordination.....................................260
6.4.4.1.4 Structural Subordination.................................... 262
6.5 Conclusion...........................................................................263
xiv Detailed Table of Contents
7.
Creditor Protection: Proprietary............................................
7.1 Introduction...........................................................
7.1.1 Purpose of Obtaining Proprietary Rights..........................
7.1.2 Absolute Interests...............................................
7.1.3 Distinctions in Relation to a Company’s Assets...................
7.2 Absolute and Security Interests........................................
7.2.1 What is a Security Interest?.....................................
7.2.2 Characterisation of Interests as Absolute or Security Interests..
7.2.3 Reasons for Choosing a Structure Based on an Absolute or
a Security Interest..............................................
7.2.4 Policy Considerations............................................
7.2.5 Process of Characterisation in Relation to Particular Structures.
7.2.5.1 Grant and Grant-Back....................................
7.2.5.2 Grant...................................................
7.2.5.3 Retention of Title......................................
7.2.5.4 Quistclose Trusts.......................................
7.3 Types of Security Interest.............................................
7.3.1 Introduction.....................................................
7.3.2 Non-Possessory Security Interests.................................
7.3.2.1 Security Over Future Property...........................
7.3.2.2 Mortgage................................................
7.3.2.3 Charge..................................................
7.3.2.4 Security Interest Over Lender’s Own Indebtedness........
7.3.3 The Floating Charge..............................................
7.3.3.1 Introduction............................................
7.3.3.2 Crystallisation.........................................
7.3.3.3 Distinction Between Fixed and Floating Charges..........
7.3.3.3.1 Introduction...................................
7.3.3.3.2 Defining Features of Fixed Charges and
Floating Charges................................
7.3.3.3.3 Methodology of Characterising a Charge as
Fixed or Floating...............................
7.3.3.3.4 Should Floating Charges be Treated Differently?
7.3.3.4 The Future of the Floating Charge.......................
7.3.4 Security Financial Collateral Arrangements.....................
7.3.4.1 Introduction...........................................
7.3.4.2 Current English Law....................................
7.3.4.3 Registration...........................................
7.4 Registration and Priorities..........................................
7.4.1 The Requirement of Registration................................
7.4.2 The Registration Process.......................................
7.4.3 The Effect of Registration.....................................
7.4.3. l Consequences of Failure to Register....................
7.4.3.2 Registration as Notice.................................
7.4.4 Priorities.....................................................
7.5 Enforcement..........................................................
7.5.1 Methods of Enforcement: Security Interests.....................
7.5.1.1 Foreclosure............................................
7.5.1.2 Appropriation of Financial Collateral..................
7.5.1.3 Possession and Sale....................................
7.5.1.4 Appointment of a Receiver..............................
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Detailed Table of Contents xv
7.5.2 Methods of Enforcement: Absolute Interests.....................................334
7.5.2.1 Devices Based on Retention of Title....................................334
7.5.2.2 Devices Based on the Grant of an Absolute Interest.....................336
7.5.3 The Effect of Administration...................................................336
7.6 Economic Arguments Concerning Secured Credit........................................338
7.6.1 Means of Assessing a System of Secured Credit..................................339
7.6.2 The Puzzle of Secured Credit...................................................340
7.6.2.1 Monitoring.............................................................340
7.6.2.2 Signalling.............................................................342
7.6.2.3 Non֊Adjusting Creditors................................................342
7.7 Reform..............................................................................347
7.7.1 Attributes of an Ideal Law.....................................................348
7.7.2 Unsatisfactory Aspects of English Law..........................................349
7.7.3 Options for Reform............................................................350
7.7.4 Outline of Notice Filing Scheme...............................................351
7.7.4.1 Functional Approach....................................................351
7.7.4.2 Registration...........................................................352
7.7.4.3 Priorities.............................................................353
7.7.4.4 Enforcement............................................................355
7.7.5 Assessment of Reform..........................................................356
7.8 Conclusion..........................................................................359
i. Multiple Lenders.........................................................................360
8.1 Introduction.........................................................................360
8.2 Basic Concepts......................................................................362
8.2.1 Trust..........................................................................362
8.2.1.1 Introduction...........................................................362
8.2.1.2 Use of the Trust in Commercial Transactions...........................363
8.2.1.3 The Three Certainties..................................................365
8.2.1.3.1 Certainty of Intention to Create a trust......................365
8.2.1.3.2 Certainty of Objects..........................................365
8.2.1.3.3 Certainty of Subject Matter...................................366
8.2.1.3.4 Equitable Nature of an Interest Under a Trust.................370
8.2.2 Agency........................................................................371
8.3 Issue of Debt Securities............................................................372
8.3.1 Attracting Lenders.............................................................372
8.3.2 Structure of Securities Issue.................................................375
8.3.2.1 Difference Between Bonds and Stock.....................................375
8.3.2.2 Stock..................................................................377
8.3.2.2.1 Debt Owed to a Trustee........................................377
8.3.2.2.2 Debt Contained in a Deed Poll.................................379
8.3.2.3 Eurobonds..............................................................379
8.3.2.3.1 Advantages and Disadvantages of the Trustee Structure.........380
8.3.2.3.2 Subject Matter of the Trust...................................383
8.3.2.3.3 Bond Issue Without Trustee....................................390
8.3.3 Ascertaining the Views of Holders.............................................391
8.3.3.1 The Decision-Making Process............................................391
8.3.3.2 Protection of the Minority.............................................392
8.3.3.3 Schemes of Arrangement.................................................394
Detailed Table of Contents
8.3.4 Trustees’Obligations.......................................................•5y6
8.3.4.1 Introduction.........................................................396
8.3.4.2 The Functions of a Trustee...........................................396
8.3.4.2.1 Modifications to the Terms of the Securities or
Trust Deed....................................................396
8.3.4.2.2 Receiving Information from the Issuer......................397
8.3.4.2.3 Taking Action on Event of Default...........................398
8.3.5 Excluding Trustees’ Duties..................................................403
8.3.5.1 Forms of Exclusion Clauses...........................................403
8.3.5.2 Contractual Construction of Clauses..................................405
8.3.5.3 Unfair Contract Terms Act............................................407
8.3.5.4 Public Policy: Common Law Constraints................................407
8.3.5.5 Public Policy: Legislative Constraints?.............................410
8.3.5.6 Conclusion...........................................................410
8.4 Syndicated Loans...................................................................411
8.4.1 Comparison Between Agency in Syndicated Loans and
Trustee Structure in Bond Issues..............................................411
8.4.2 Finding Lenders.............................................................414
8.4.3 Role of the Arranger........................................................414
8.4.4 Liability of the Arranger in Relation to False Statements in
the Information Memorandum....................................................417
8.4.5 Position of the Agent Bank..................................................420
8.4.6 Majority Lenders............................................................421
8.5 Conclusion.........................................................................422
Transferred Debt........................................................................423
9.1 Why is Debt Transferred?...........................................................423
9.2 Methods of Transfer................................................................426
9.2.1 Novation.....................................................................427
9.2.2 Assignment..................................................................428
9.2.2.1 Introduction.........................................................428
9.2.2.2 Statutory Assignments................................................429
9.2.2.3 Significance of Notice to the Debtor.................................430
9.2.2.4 Equitable Assignment.................................................430
9.2.2.5 Assignment of Equitable Interests....................................433
9.2.2.6 Clauses Prohibiting Assignment.......................................434
9.2.2.6.1 Introduction................................................434
9.2.2.6.2 Construction of the Clause..................................434
9.2.2.6.3 Where the‘Assignor’ has been Paid by the Debtor.............435
9.2.2.6.4 Where the ‘Assignor’ has not been Paid by the Debtor.......436
9.2.2.6.5 Declaration of Trust........................................437
9.2.3 Negotiable Instruments......................................................443
9.2.4 Transfer of Loans...........................................................445
9.2.4.1 Introduction.........................................................445
9.2.4.2 The Use of Novation..................................................446
9.2.4.2.1 Consent in Advance..........................................446
9.2.4.2.2 Restrictions on Transfer....................................447
9.2.4.2.3 Consent not Unreasonably Withheld...........................448
9.2.4.2.4 Security for the Loan.......................................449
9.2.4.2.5 Novation Subject to Equities?...............................450
Detailed Table of Contents xvii
9.2.4.3 The Use of Assignment..............................................450
9.2.5 Transfer of Receivables.....................................................452
9.2.5.1 The Use of Assignment in Receivables Financing....................452
9.2.5.2 Anti-Assignment Clauses and Receivables Financing.................453
9.2.5.3 Statutory Override of Anti-Assignment Clauses......................454
9.2.6 Transfer of Securities......................................................455
9.2.6.1 Transfer of Stock..................................................455
9.2.6.2 Transfer of Intermediated Securities...............................457
9.2.6.3 Transfers via CREST................................................461
9.3 Structures which have a Similar Effect to Transfer...............................463
9.3.1 Sub-Participation...........................................................463
9.3.2 Credit Derivatives.........................................................466
9.3.3 Securitisation.............................................................467
9.4 Conclusion........................................................................472
10. Public Offers of Shares...............................................................473
10.1 Introduction.....................................................................473
10.2 Why do Companies Go Public?......................................................473
10.2.1 Advantages of Going Public.................................................473
10.2.1.1 Opportunity to Raise Equity Finance from a Broader Range
of Investors.......................................................474
10.2.1.2 Providing an Exit for Existing Shareholders......................474
10.2.1.3 Increased Flexibility and Value Attached to the Shares in
a Publicly Traded Company..........................................475
10.2.1.4 Corporate Governance Improvements.................................476
10.2.1.5 Prestige..........................................................477
10.2.2 Disadvantages of Going Public..............................................477
10.2.3 Summary....................................................................478
10.3 The Process of Going Public......................................................478
10.3.1 Only Public Companies Can Offer their Shares to the Public.................479
10.3.2 An Offer to the Public.....................................................479
10.3.2.1 Offer for Sale or Subscription....................................479
10.3.2.2 Placing...........................................................480
10.3.3 Admission to Listing or to Trading on a Public Market......................481
10.3.3.1 Choice of UK Markets..............................................482
10.3.3.2 Choice of International Markets...................................483
10.4 The Theory of Regulation of Public Offers.......................................485
10.4.1 Objectives of Regulation...................................................485
10.4.2 The Need for Regulation....................................................486
10.4.3 Regulatory Strategies......................................................488
10.4.3.1 Governance Strategies.............................................488
10.4.3.2 Affiliation Strategies............................................489
10.4.3.3 Mandatory Disclosure..............................................489
10.5 Regulation of Public Offers in the UK: Ex Ante Protection via
Mandatory Disclosure..............................................................493
10.5.1 Regulatory Structure.......................................................493
10.5.2 Mandatory Disclosure in the UK.............................................494
10.5.2.1 Meaning of‘An Offer of Securities to the Public’..................495
10.5.2.2 Form and Content of a Prospectus..................................496
xviii Detailed Table of Contents
10.6 Regulation of Public Offers in the UK: Enforcement of the
Mandatory Disclosure Regime........................................................499
10.6.1 The Aims of Enforcement....................................................500
10.6.1.1 Encouraging the Accurate and Timely Disclosure
of Information......................................................500
10.6.1.2 Providing Compensation to those who Suffer Loss...................503
10.6.2 Private Enforcement: Liability for Defective Prospectuses..................504
10.6.2.1 Nature of the Claim Under Section 90 FSMA.........................505
10.6.2.2 Who can Claim?.....................................................508
10.6.2.3 Who may be Liable?................................................510
10.6.2.4 Remedy............................................................511
10.6.2.4.1 Financial Compensation...................................512
10.6.2.4.2 Rescission...............................................514
10.6.2.5 Summary............................................................515
10.6.3 Public Enforcement.........................................................515
10.6.3.1 Criminal Sanctions.................................................515
10.6.3.2 Administrative Sanctions...........................................516
10.6.4 Intensity of Enforcement...................................................517
10.6.4.1 Public Enforcement.................................................517
10.6.4.2 Private Enforcement................................................518
10.7 Regulation of Equity Crowdfunding.................................................519
10.8 Conclusion........................................................................521
11. Ongoing Regulation of the Capital Markets: Mandatory Disclosure.......................523
11.1 Introduction......................................................................523
11.2 Objectives of Regulating the Secondary Market.....................................524
11.2.1 Promoting an Efficient Market Price........................................524
11.2.1.1 Efficient Capital Markets Hypothesis...............................524
11.2.1.2 Role of Mandatory Disclosure in Promoting
Market Efficiency...................................................527
11.2.2 Promoting Corporate Governance.............................................529
11.2.2.1 Individual Investors...............................................533
11.2.2.1.1 Role of Individual Investors.............................533
11.2.2.1.2 Effect of Intermediation.................................533
11.2.2.2 Institutional Investors............................................535
11.2.2.2.1 Role of Institutional Investors..........................535
11.2.2.2.2 Encouraging Engagement by Institutional
Investors.................................................538
11.2.2.2.3 UK Stewardship Code......................................539
11.2.2.3 Role of Mandatory Disclosure in Promoting
Corporate Governance.............................................. 539
11.2.2.4 Summary............................................................540
11.3 Mandatory Disclosure in the Secondary Market......................................541
11.3.1 Periodic Disclosures.......................................................542
11.3.1.1 Annual Reports................................................... 542
11.3.1.1.1 Obligation to Produce Annual Reports
and Accounts..............................................542
11.3.1.1.2 Directors’Report and Strategic Report....................544
11.3.1.1.3 Corporate Governance Statement...........................546
11.3.1.2 Half Yearly Reporting..............................................546
11.3.1.3 Function of Periodic Disclosures...................................547
Detailed Table of Contents xix
11.3.2 Ad Hoc Disclosures........................................................548
11.3.2.1 Inside Information................................................548
11.3.2.2 Disclosure of Directors’ Shareholdings...........................551
11.3.2.3 Disclosure of Major Shareholdings................................552
11.3.2.4 Disclosures Required by the Listing Rules........................555
11.3.2.5 Function of Ad Hoc Disclosures...................................557
11.4 Enforcement of Secondary Market Disclosure Obligations...........................558
11.4.1 Private Enforcement.......................................................558
11.4.1.1 Enforcement by Shareholders of Misstatements in
Governance-Based Disclosures.......................................558
11.4.1.2 Enforcement by Shareholders and Other Investors of
Misstatements in Investor-Focused Disclosures......................560
11.4.1.2.1 Background..............................................560
11.4.1.2.2 Scope of the Section 90A FSMA Provisions...............562
11.4.1.2.3 Comparison of Section 90A FSMA and
Section 90 FSMA..........................................566
11.4.1.2.4 Assessment of Section 90A FSMA.........................567
11.4.2 Public Enforcement........................................................569
11.4.2.1 The FCA...........................................................569
11.4.2.2 The Corporate Reporting Review...................................570
11.4.3 Intensity of Enforcement..................................................570
11.4.3.1 Public Enforcement................................................571
11.4.3.2 Private Enforcement..............................................571
11.5 Regulation of Analysts...........................................................572
11.6 Conclusion.......................................................................576 12
12. Ongoing Regulation of the Capital Markets: Market Misconduct..........................578
12.1 Introduction......................................................................578
12.2 The Regulation of Market Abuse....................................................578
12.2.1 Justifications for Regulating Market Abuse.................................579
12.2.1.1 Justifications for Regulating Insider Dealing.....................579
12.2.1.1.1 Relationship-Based Justifications vs
Market-Based Justifications.............................579
12.2.1.1.2 Arguments Against the Regulation of
Insider Dealing.........................................581
12.2.1.1.3 Justifying the Market-Based Approach:
Enhancing Investor Confidence...........................582
12.2.1.2 Justifications for Regulating Market Manipulation..................584
12.2.2 The Offences of Insider Dealing and Market Manipulation....................586
12.2.2.1 The Criminal Offence of Insider Dealing Under the
Criminal Justice Act 1993..........................................589
12.2.2.1.1 Definition of an Insider................................589
12.2.2.1.2 Definition of Inside Information........................590
12.2.2.1.3 The Offence of Actual Dealing in Securities.............592
12.2.2.1.4 The Offence of Encouraging Another
Person to Deal...........................................593
12.2.2.1.5 The Offence of Disclosing Inside Information to
Another Person...........................................593
12.2.2.1.6 Penalties and Enforcement...............................593
xx Detailed Table of Contents
12.2.2.2 The Criminal Offences of Market Manipulation Under
Sections 89-91 Financial Services Act 2012........................595
12.2.2.2.1 Misleading Statements and Dishonest Concealment:
Section 89 Financial Services Act 2012...................596
12.2.2.2.2 Misleading Impressions: Section 90 Financial
Services Act 2012........................................598
12.2.2.2.3 Misleading Statements etc in Relation to Benchmarks:
Section 91 Financial Services Act 2012...................599
12.2.2.2.4 Penalties and Enforcement...............................600
12.2.2.3 The Regulatory Offence of Market Abuse Under
Section 118 FSMA...................................................600
12.2.2.3.1 Insider Dealing.........................................601
12.2.2.3.2 Market Manipulation.....................................608
12.2.2.3.3 Levels of Enforcement Under Section 118.................611
12.2.2.4 Private Enforcement of Market Abuse...............................613
12.2.2.5 Summary...........................................................616
12.3 The Regulation of Short Selling..................................................616
12.3.1 Justifications for Regulating Short Selling..............................618
12.3.1.1 Short Selling Destabilises Orderly Markets.......................618
12.3.1.2 The Use of Short Selling to Manipulate Markets...................620
12.3.1.3 Settlement Risk..................................................621
12.3.2 Constraints Placed on Short Selling.......................................622
12.3.2.1 Bans on Short Selling.............................................623
12.3.2.2 Disclosure and Reporting Obligations..............................624
12.3.2.3 Circuit Breakers and Uptick Rules................................626
12.3.2.4 Rules Designed to Mitigate Settlement Risk.......................627
12.3.2.5 The Role of National Authorities and ESMA........................628
12.3.3 Summary...................................................................630
12.4 Algorithmic and High Frequency Trading...........................................631
12.5 Conclusion....................................................................633 13
13. Regulation of Debt.....................................................................634
13.1 Introduction......................................................................634
13.1.1 General Scope of Regulation................................................635
13.1.2 Methods of Regulation......................................................637
13.1.3 Regulation by Disclosure Requirements......................................638
13.2 Regulation of Initial Issue of Debt Securities...................................641
13.2.1 Introduction...............................................................641
13.2.2 Factors Affecting the Disclosure Requirements..............................642
13.2.2.1 To whom the Securities are Offered................................643
13.2.2.2 Trading on a Market...............................................644
13.2.2.3 Denomination of Securities........................................645
13.2.2.4 Rationale of the Disclosure Regime................................646
13.2.3 Information Required in a Prospectus.......................................648
13.2.4 Disclosure Required for Listing on the PSM.................................650
13.2.5 Disclosure Requirements where Securities are not Listed....................651
13.2.6 Restrictions on Financial Promotion........................................651
Detailed Table of Contents xxi
13.2.7 Enforcement of the Mandatory Disclosure Regime............................653
13.2.7.1 Claims Against the Issuer.........................................653
13.2.7.2 Claims Against Other Parties......................................654
13.2.8 Comparison of Protection by Regulation for Holders of Debt
Securities and those Making Loans: Disclosure at the Initial Stage.........656
13.3 Ongoing Regulation by Disclosure..................................................657
13.3.1 Mandatory Ongoing Disclosure...............................................657
13.3.2 Enforcement of Ongoing Disclosure Requirements.............................659
13.3.3 Comparison of Protection by Regulation for Holders of Debt
Securities and those Making Loans: Ongoing Disclosure......................660
13.4 Regulation of Market Misconduct...................................................661
13.4.1 Application of the Market Abuse Rules to the Debt
Securities Markets..........................................................661
13.4.2 Application of the Market Abuse Rules to the Making and
Transfer of Loans...........................................................663
13.4.3 The Regulation of Short Selling............................................665
13.5 Accepting Deposits................................................................666
13.6 Convertible Debt Securities.......................................................667
13.7 Regulation of Credit Rating Agencies..............................................668
13.8 Regulation of Peer-to-Peer Lending................................................671
13.9 Conclusion........................................................................675
14. Takeovers..............................................................................677
14.1 Introduction......................................................................677
14.1.1 Objectives of the Takeover Regulation......................................678
14.1.2 Comparative Aspects........................................................680
14.2 The Regulatory Structure of Takeover Regulation in the UK.........................681
14.2.1 Historical Development.....................................................682
14.2.2 Implementation of the Takeover Directive...................................684
14.2.3 Role and Status of the Takeover Panel......................................685
14.2.4 Tactical Litigation........................................................687
14.2.5 Summary....................................................................688
14.3 The Substance of Takeover Regulation in the UK....................................689
14.3.1 The Procedure of a Bid.....................................................689
14.3.1.1 Initial Approach...................................................689
14.3.1.2 Formal Offer.......................................................690
14.3.1.3 Squeeze-Out........................................................693
14.3.1.4 Sell-Out...........................................................694
14.3.1.5 Further Offers.....................................................695
14.3.2 Relationship Between the Target Directors and the Target Shareholders.....695
14.3.2.1 Pre-Bid Defences...................................................696
14.3.2.1.1 Directors’ duties...................................... 698
14.3.2.1.2 Share Transfer Restrictions.............................700
14.3.2.1.3 Removal of Directors and Staggered Boards...............700
14.3.2.1.4 The Role of Shareholders................................702
14.3.2.1.5 Summary.................................................703
14.3.2.2 Post-Bid Defences................................................ 704
14.3.2.2.1 The No Frustration Principle.............................704
14.3.2.2.2 Consequences of the UK’s Adoption of the
No Frustration Principle................................../08
xxii Detailed Table of Contents
14.3.3 Relationship Between the Target Directors and Other
Stakeholders in the Target..................................................712
14.3.4 Relationship Between the Bidder and the Target Shareholders...............716
14.3.4.1 Undistorted Choice.................................................718
14.3.4.2 Protection of Minority Shareholders...............................722
14.3.4.2.1 Prevention of Oppression.................................723
14.3.4.2.2 An Exit Right...........................................725
14.3.5 Relationship Between the Bidder Directors and Bidder Shareholders.........726
14.4 Conclusion......................................................727
15. Schemes of Arrangement.................................................................729
15.1 Introduction.....................................................................729
15.2 The Mechanics of a Scheme of Arrangement..........................................730
15.2.1 Application to the Court for Meetings to be Summoned......................730
15.2.2 Meeting(s) of the Members or Creditors....................................732
15.2.2.1 Who Needs to Consider the Scheme?..................................732
15.2.2.2 Separate Class Meetings: General..................................733
15.2.2.2.1 The General Test.........................................734
15.2.2.2.2 Members’ and Creditors’ Rights.........................735
15.2.2.2.3 Selecting the Correct Comparator.......................735
15.2.2.3 Separate Meetings for Shareholders...............................737
15.2.2.4 Separate Meetings for Creditors...................................738
15.2.2.5 Approval at the Class Meetings....................................741
15.2.2.5.1 The Majority in Value Requirement........................741
15.2.2.5.2 The Majority in Number Requirement......................741
15.2.3 The Sanction of the Court..................................................743
15.2.3.1 Have the Statutory Provisions been Complied with?.................744
15.2.3.2 Exercise of the Court’s Discretion................................745
15.2.3.3 Effect of the Scheme..............................................746
15.3 Uses of Schemes of Arrangement...................................................746
15.3.1 As an Alternative to a Takeover Offer......................................747
15.3.1.1 Advantages and Disadvantages of a Scheme rather
than a Takeover Offer to Effect a Change of Control................748
15.3.1.2 Minority Protection in a Scheme...................................750
15.3.1.2.1 Concerns Regarding the Approval
Threshold for Schemes.....................................751
15.3.1.2.2 Concerns Regarding the Bypassing of
Minority Protection in Takeover Offers....................752
15.3.2 To Reorganise a Corporate Group............................................753
15.3.3 To Effect a Merger or Demerger.............................................754
15.3.4 To Effect an Arrangement Between the Company and
its Creditors...............................................................757
15.3.4.1 Restructuring the Debts of Financially
Distressed Companies................................................/58
15.3.4.2 Settling Claims within the Insurance Industry...................../61
15.4 Conclusion..................................................................../63 16
16. Private Equity........................................................................./64
16.1 Introduction..................................................................... 764
16.2 Historical Development.............................................................765
Detailed Table of Contents xxiii
16.3 Private Equity Funds............................................................768
16.3.1 Structure of a Typical Private Equity Fund...............................768
16.3.2 Sources of Funding for Private Equity Funds..............................771
16.3.3 Why have Investors Wanted to Invest in Private Equity Funds?.............772
16.4 Capital Structure of a Typical Private Equity Transaction.......................773
16.4.1 Equity Financing.........................................................774
16.4.2 Quasi-Equity.............................................................775
16.4.3 Debt Financing...........................................................776
16.4.3.1 Senior Debt......................................................777
16.4.3.2 Second Lien Debt.................................................779
16.4.3.3 Mezzanine Debt...................................................779
16.5 Public-to-Private Transactions..................................................780
16.5.1 Financial Issues.........................................................781
16.5.2 Recommendation by the Directors..........................................782
16.5.3 Equality Between Bidders.................................................782
16.5.4 Equality of Treatment of Shareholders....................................783
16.5.5 Market Abuse.............................................................783
16.6 A Comparison of Private Equity Backed Companies and
Non-Private Equity Backed Companies..............................................784
16.6.1 Ownership Structures.....................................................784
16.6.2 Board/Management Structures..............................................786
16.6.3 Disclosure and Transparency..............................................787
16.6.4 Debt vs Equity Levels....................................................788
16.6.4.1 Employees........................................................790
16.6.4.2 Creditors........................................................791
16.6.5 Summary..................................................................793
16.7 Regulation......................................................................794
16.7.1 The Need for Regulation..................................................795
16.7.1.1 Increased Transparency...........................................795
16.7.1.2 Systemic Risk....................................................797
16.7.2 The AIFMD................................................................798
16.7.2.1 Scope and Authorisation Requirements.............................798
16.7.2.2 Regulation at the Fund Level.....................................799
16.7.2.3 Regulation at the Level of the Portfolio Company.................801
16.7.2.4 Effect of the AIFMD on the Private Equity Industry...............802
16.8 Conclusion......................................................................803
Index.....................................................................................805
|
| any_adam_object | 1 |
| author | Gullifer, Louise Payne, Jennifer 1970- |
| author_GND | (DE-588)142900885 (DE-588)1076513565 |
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| dewey-ones | 346 - Private law |
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| dewey-tens | 340 - Law |
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| spellingShingle | Gullifer, Louise Payne, Jennifer 1970- Corporate finance law principles and policy |
| title | Corporate finance law principles and policy |
| title_auth | Corporate finance law principles and policy |
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| title_full | Corporate finance law principles and policy Louise Gullifer and Jennifer Payne |
| title_fullStr | Corporate finance law principles and policy Louise Gullifer and Jennifer Payne |
| title_full_unstemmed | Corporate finance law principles and policy Louise Gullifer and Jennifer Payne |
| title_short | Corporate finance law |
| title_sort | corporate finance law principles and policy |
| title_sub | principles and policy |
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