MLL221 Study Guide - Final Guide: Debenture, Share Capital, Natural Person
24 May 2018
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Corporate Law Topic Five
Debentures and Personal Property Securities
• Know the distinction between share capital and loan capital
• Share capital comprises of common and preferred shares; funds being raised by issuing
these shares in return for cash or sometimes other assets. The return share holders get is
not paid back unless they sell their shares and sometimes, depending on the worth of the
shares when they sell they do not get all their money back. For example if the shares were
bought for £10k and were then worth £8k the share holder would lose £2k. Share holders
are partial owners of the business.
• Loan capital are classed as short or long term liabilities. The individuals or organisations
providing these loans are not partial owners of the business (like share holders would be).
Instead they are classed as creditors. Loan capital agreements will require specific amounts
to be paid of at specific periods.
• Discuss debentures as a means to raise capital for a company
Company borrowing money from a person (lender), which the company then uses over the course
of the loan for its business. Lender may be:
• Bank
• Other credit providers
• Shareholders
• Public
Companies can raise debt capital through the issue of debentures
• A debenture is a method of borrowing that is unique to companies
• A debenture includes an undertaking by a company to repay a debt.
➢ It often includes a security interest over the company's assets to
secure the debt.
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➢ Debentures may be issued to a large number of investors or to a
single creditor — such as a bank or other financier.
➢ Could be listed on the ASX
➢ Can sell just like shares
➢ When investor buys a debenture from company, the investor is
lending money to the company on terms set out in the debenture
trust deed
• Investor has a right to be paid interest, repaid principal and
security created under the debenture
• The iesto’s ight to e paid iteest is, i oeial
terms, a right to receive income from the company for the
term of the debenture
CONVERTIBLE NOTES
• Convertible notes allow holder to convert the debenture into shares
Debenture included in the definition of securities, so an offer of debentures must comply with the
Ch 6D fundraising provisions
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• Have an understanding of the key concepts and terminology used
in Personal Property Securities Act
• Personal Property Securities Act 2009 (Cth)
• Personal Property Securities (Corporations and Other Amendments) Act 2010 (Cth)
Replaced old registration of charge provisions in the CA with a new regime for registering security
interests in personal property.
• A charge is a type of security interest. A charge involves a borrowing company giving a
lender security over its assets.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Debentures and personal property securities: know the distinction between share capital and loan capital. Share capital comprises of common and preferred shares; funds being raised by issuing these shares in return for cash or sometimes other assets. The return share holders get is not paid back unless they sell their shares and sometimes, depending on the worth of the shares when they sell they do not get all their money back. For example if the shares were bought for 10k and were then worth 8k the share holder would lose 2k. Share holders are partial owners of the business. Loan capital are classed as short or long term liabilities. The individuals or organisations providing these loans are not partial owners of the business (like share holders would be). Loan capital agreements will require specific amounts to be paid of at specific periods: discuss debentures as a means to raise capital for a company.
