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Company Law - Assignment Example

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The paper "Company Law" presents a discussion of the issues related to corporate and business law and activities such as raising and lowering of share capital, uses of loan capital, fixed charges and etc. on the example of the Green Books Plc…
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Company Law
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Download file to see previous pages The interest rate is dependent upon the commercial factors which tend to include the security that has been offered, the total amount that is being borrowed, the time duration of the loan as well as the creditworthiness of Green Books Plc. Another important factor which would be discussed later is the fact that debt financing is favoured by the tax system. Contrary to that in respect of share capital, the cost is difficult to ascertain as no fixed schedule is provided for whereby a determination of the amount to be paid to the shareholders can be made and the tax system does not favour share capital as it is distributed after deduction of tax and subsequent taxation again.
Another disadvantage in respect of raising share capital is the fact that the person who is given shares acquires a right or in other words, becomes a member of the company and is granted rights in accordance with his class whereby he can exercise a certain degree of influence in matters related to the running of the company. The position remains the same even if a person is a minority shareholder. However, in loan capital the lender gets his loan and interest and cannot exercise any control over the running of the company as long as the company in this situation Green Books Plc is in compliance with the terms and conditions that have been agreed upon to raise such loan capital thus no action in respect of running of the company can be undertaken or claimed.
An advantage of raising share capital is the fact that the dividend which is received for such shares would be paid only if there is a profit and that also is a discretionary measure which can be exercised by the directors who decide as to whether such dividends should be paid or not. As far as loan capital is concerned, the interest and repayment of loan have to be made in accordance with what had been agreed upon between the parties and so is not dependent upon the profit of the company. ...Download file to see next pagesRead More
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