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MAR
27

The Advantages and Disadvantages of Share Capital

There are various ways to raise capital for a company. The company can use debt capital to fund a business (such as a bank loan) or it can raise equity capital by the sale of shares in the business. This can be more appealing and/or appropriate than other methods, but it raises further issues on the business that must be considered.

Advantages of Share Capital

One of the attractions of raising capital via the sale of shares is that the company does not have repayment requirements for the initial investment or for interest payments. This can make it more appealing than other forms, such as bank loans and bonds, that are debts of the company. Debts require the company to make payments at regular intervals in relation to interest, as well as eventually repaying the initial amount that was borrowed. Any shares sold can require a distribution of profits as a dividend but these can be halted if necessary. Therefore, the business is given more flexibility over its finances.

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  6824 Hits
6824 Hits
MAR
27

The Importance of Due Diligence and Disclosure

Why is due diligence and disclosure so important? The disclosure letter is one of the most significant documents in a sale of a business or shares and has major consequences for both the seller and the buyer. It has long-lasting importance to the deal and can have far-reaching consequences. Due diligence is assisting the buyer in determining that what they are actually buying is what they expect and at the same time protecting the seller from any future legal ramifications.

For the seller, correct due diligence and disclosure will give them valuable protection in the future if the buyer tries to bring a misrepresentation claim after the sale. For the buyer, due diligence and disclosure are vital and can either reassure the buyer about the key issues about the sale, or if a problem is revealed, can be used as a bargaining tool where the buyer can:

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  190 Hits
190 Hits
MAR
27

Conflict of interest" in Relation to Directors' Duties under the Companies Act 2006

The law on conflicts of interest in relation to directors was codified in the Companies Act 2006. Under this legislation, directors must ensure they avoid situations where any interest that they have conflicts (or possibly conflicts) with the interests of the business.

Directors of a board have a duty to act objectively and make decisions that are based on the best interests of the business. Section 175 of the Act covers the duty to avoid a conflict of interest, and states that "a director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company". The duty applies in particular to the exploitation of any property, information or opportunity and it is immaterial whether or not the company could actually take advantage of this property, information or opportunity.

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  149 Hits
149 Hits
FEB
21

Recent Decisions on Disclosure/Electronic Discovery/Privilege

At common law there exists a fundamental right, known as legal advice privilege, for communications and documents exchanged between a client and lawyer for the purpose of seeking or giving legal advice to remain undisclosed. A further right, known as litigation privilege, prevents disclosure of communications and documents between a client and lawyer, or the lawyer and a third party, used for litigation.

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  314 Hits
314 Hits
FEB
21

New Corporate Offence of Failure to Prevent Facilitation of Tax Evasion

On 30 September 2017 the UK introduced new offences targeting legal and partnership entities that fail to prevent facilitation of criminal tax evasion by persons working for that company or acting on its behalf. The law regarding tax evasion remains unchanged; however, the scope of persons who can fall foul of currently existing rules has been considerably broadened. The burden has been firmly placed on companies and partnerships operating in the UK, even if headquartered overseas, to provide evidence that they have enacted satisfactorily robust procedures to prevent facilitation.

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244 Hits

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