Unit 3 - Capitalisation

Word

Definition

Example

capitalisation

The process of converting profits, reserves, or other financial resources into additional capital or shares

The capitalisation of the company through a rights issue allowed for further expansion

memorandum of association

A legal document outlining the fundamental details and objectives of a company, typically required for company registration

The memorandum of association outlines the company's objectives and its relationship with shareholders

authorised share capital

The maximum number of shares that a company is legally allowed to issue, as specified in its articles of association

The company increased its authorised share capital to attract more investors

subscriber

Individuals or entities who initially purchase or subscribe to shares of a company during its formation

The initial subscribers of shares played a key role in the company's formation

issued share capital

The actual number of shares that a company has sold or allocated to shareholders

The issued share capital represents the total value of shares currently held by investors

ordinary shares

Common shares that represent ownership in a company and typically come with voting rights and a share in profits

The issued share capital represents the total value of shares currently held by investors

preference shares

Shares that grant specific privileges or preferences, such as priority in receiving dividends, over ordinary shares

Preference shares offer priority in dividend payments but often lack voting rights

dividend

A portion of a company's profits distributed to its shareholders as a return on their investment in the form of cash or additional shares

Shareholders eagerly await the announcement of the annual dividend payment

share subdivision

The process of dividing existing shares into a larger number of shares with a lower nominal value per share

The share subdivision increased liquidity by creating smaller units of ownership

share consolidation

The process of combining existing shares into a smaller number of shares with a higher nominal value per share

The share consolidation aimed to reduce the number of outstanding shares

pre-emption rights

The right of existing shareholders to purchase additional shares before they are offered to external parties

Shareholders with pre-emption rights can purchase additional shares before others

special resolution

A formal and resolution passed by shareholders or members requiring a higher majority for approval, often for significant corporate changes

A special resolution requires a higher level of shareholder approval for significant decisions

rights issue

A way for existing shareholders to purchase additional shares in proportion to their current holdings before they are offered to external parties

The company raised funds by offering existing shareholders a rights issue

loan capital

Funds obtained by a company through loans or borrowing, often with an obligation to repay the principal amount and interest

Loan capital was secured to finance the expansion project

debenture

A type of debt instrument issued by a company or government that acknowledges a loan and specifies repayment terms and interest rates

The company issued debentures to raise long-term capital

fixed charge

A legal claim or lien on specific assets of a company to secure the repayment of a debt, such as a mortgage on real estate

The fixed charge provides security over specific assets, such as real estate

floating charge

A legal claim on a company's assets that are subject to change or turnover in the ordinary course of business

A floating charge covers current assets like inventory and accounts receivable

as opposed to

In contrast or comparison with; used to highlight differences between two or more things

The company prefers debt financing as opposed to equity financing

in contrast to

In opposition or differentiation from; used to emphasize distinctions between two or more elements

In contrast to preferred shares, common shares offer voting rights

risk diversification

A strategy that involves spreading investments or assets across different types or classes to reduce risk

Investors often seek risk diversification by holding a mix of asset classes

awkward questions

Difficult or uncomfortable inquiries, often related to sensitive or contentious topics

During the deposition, the attorney asked several awkward questions

flow of information

The movement or transmission of information within an organization, system, or network

Maintaining a smooth flow of information is essential for corporate transparency

face obstacles

Encounter challenges or barriers that hinder progress or success in a particular endeavor

The legal team had to face various obstacles during the complex litigation

the free-rider issue

A situation where individuals benefit from a resource or service without contributing to its cost or maintenance

The free-rider issue arises when some individuals benefit from a public good without contributing

vote with one's feet

To express dissatisfaction or make choices by leaving or withdrawing from a situation, organization, or location

Investors who disagreed with the company's direction chose to vote with their feet and sell their shares

answer to the annual meeting

A response or solution provided during an annual meeting in response to questions, concerns, or issues raised by participants

Shareholders can pose questions and seek answers to the annual meeting

co-operative conflict resolution

A collaborative approach to addressing conflicts and disputes, involving all parties in finding mutually acceptable solutions

Co-operative conflict resolution can lead to more effective dispute resolution

participatory framework

A structured approach that encourages active involvement and engagement of stakeholders in decision-making processes

The participatory framework encouraged stakeholders to actively engage in decision-making

subjected to the public gaze

Made open or visible to the public for scrutiny, observation, or examination

Publicly traded companies are subjected to the public gaze, with financial disclosures readily available

exercise control

To actively manage or direct the actions and decisions of a person, organization, or entity

The board of directors must exercise control to steer the company towards success

restrict powers

To limit or confine the authority or abilities of an individual, entity, or organization

To prevent misuse of authority, the company may restrict powers granted to executives

restricted

Limited in scope, access, or availability, often implying certain limitations or conditions

The restricted shares cannot be sold until a specific vesting period expires

dismiss a member

To remove or terminate an individual's membership or affiliation with a group, organization, or team

The board may choose to dismiss a member who consistently violates company policies

accrue benefits

Gradually accumulate advantages, rewards, or benefits over time

The pension plan allows employees to accrue benefits throughout their career

thereto

To that place, situation, or thing; used in legal language to refer to something mentioned earlier

The contract stipulates the terms and conditions and refers thereto for clarification

thereon

On or upon that particular thing, place, or situation; referring to something previously mentioned

The investment agreement outlines the risks involved and elaborates thereon

thereof

Of or concerning that particular thing, situation, or matter; used in legal language to refer to a specific aspect

The agreement covers various aspects of the partnership, and details thereof are available for review

therewith

With or by means of that particular thing or method; used to indicate an associated action or relationship

The updated policy includes amendments therewith

therefor

For or in relation to that specific purpose, thing, or matter; used in legal language to indicate a specific reason or purpose

The company issued shares to raise capital, and the funds will be used therefor

therein

In or within that particular thing, place, or situation; used to refer to something contained or described earlier

The document contains critical provisions, and the solution lies therein

in my opinion

An expression used to signify that a statement or viewpoint represents the personal judgment or belief of the speaker

In my opinion, the best course of action is to seek legal advice

the way I see it

An informal expression used to preface one's perspective or interpretation of a situation or issue

The way I see it, the contract needs to be renegotiated

asset

A valuable resource or item owned by an individual, organization, or entity that has monetary or exchange value

Real estate is considered a valuable asset in a company's portfolio

equity

The ownership interest or residual value in an entity's assets after deducting its liabilities; also known as shareholders' equity

Equity financing allows companies to raise funds by selling ownership stakes

share

A unit of ownership in a company, typically representing a claim on the company's assets and earnings

Share ownership grants voting rights and dividends to shareholders

irrespective of

Regardless of or without consideration for a particular factor or condition

Irrespective of the market conditions, the company remains committed to expansion

regardless of

Without regard or consideration for a specific factor, situation, or circumstance

Regardless of the outcome, the legal team will vigorously defend the case

conversely

In contrast or opposition; used to introduce an opposing or contrasting point or statement

Conversely, if the company chooses not to settle, a court battle may ensue

discretionary

Left to one's judgment, choice, or decision, often without strict rules or requirements

The discretionary bonus program rewards employees for outstanding performance

mandatory

Required or obligatory, often imposed by law or regulation, without room for discretion

Compliance with mandatory safety regulations is essential to avoid penalties

obligatory

Mandatory or required, imposing a legal or moral duty to perform a specific action

Attending the annual general meeting is obligatory for all shareholders

entail

To involve or require as a necessary consequence or condition; to necessitate

The merger will entail the integration of two distinct corporate cultures

suggest

To propose or imply a particular idea, course of action, or interpretation, often without stating it explicitly

The data suggests a strong correlation between marketing spend and sales growth

involve

To include or incorporate as a necessary or integral part of a situation, process, or activity

The negotiation process will involve representatives from both parties

consequently

As a result or effect of a previous action or condition; therefore

The economic downturn affected consumer spending; consequently, retail sales declined

accordingly

In a manner that corresponds or is appropriate to a specific situation, circumstance, or context

The court ruled in favor of the plaintiff; accordingly, damages were awarded

relinquish

To voluntarily give up or surrender a right, responsibility, or claim

The founder decided to relinquish control of the company to a new CEO

cede

To transfer, yield, or surrender control, authority, or territory to another entity, often through a formal process

The company agreed to cede a portion of its market share to a competitor

postpone

To delay or reschedule an event, action, or decision to a later time or date

Due to unforeseen circumstances, the board decided to postpone the annual meeting