Q1.

Shares and its types

In corporate finance, a share is a unit of ownership in a company, representing a shareholder's

interest in the company's assets. Shares are issued by companies to raise capital and provide
investors with the opportunity to participate in the company's growth.

Here are some key points about shares:

Ownership

Shareholders own their shares, but the company owns its assets. Shareholders are not entitled to
any property rights in the company's assets.

Rights

Shareholders have a variety of rights, including voting rights, the right to dividends, and a share in
the company's losses.

Types

Shares are primarily divided into two categories: equity shares and preference shares. Equity shares
represent partial ownership and come with voting rights, while preference shares typically guarantee
fixed dividends but may not have voting rights.

Capital stock

The total number of shares a company issues is known as its "capital stock" or "equity".

Dividends

Companies may distribute payments to shareholders through dividends, but they are not legally
obligated to do so.

Stock market

Shares are bought and sold on the stock market, where supply and demand dynamics determine
their prices.

The terms "shares" and "stocks" are often used interchangeably, but there are some subtle
differences between them. "Shares" is a more specific term, while "stocks" is more generic.

 Here are some types of shares that a public company can issue:

Ordinary shares

The most common type of share, with no special rights or restrictions. They have the potential for
the highest financial gains, but also the highest risk.

Preferred stock

Listed first in the shareholders' equity section of the balance sheet. Preferred shareholders receive
dividends before common shareholders, and have preference during liquidation.

Cumulative preference shares

Allow shareholders to receive dividends that the company did not pay in previous years.

Convertible preference shares

Can be converted into equity shares after a predetermined period.

Callable preferred shares

The issuing company can choose to buy back these shares at a fixed price in the future. This benefits
the issuing company more than the shareholder.

Treasury stock

A company can buy back its own shares in the open market. When a company announces a stock
repurchase, the share price often increases.

A company's Memorandum of Associations must specify the maximum amount of capital it can raise
by issuing equity shares. This limit can be increased by paying additional fees and completing certain
legal procedures.

Q2. A)Paid-up capital is the amount of money that a company receives from shareholders in
exchange for shares of its stock. It's also known as paid-in capital, equity capital, or contributed
capital.

Here are some things to know about paid-up capital:

No minimum requirement

As of the Companies Amendment Act, 2015, there is no minimum paid-up capital requirement for a
company. This means that a company can be formed with as little as Rs 5,000 as paid-up capital.

Less than or equal to authorized share capital

Paid-up capital is always less than or equal to a company's authorized share capital.

Not borrowed

Paid-up capital is not borrowed money, which is a major benefit for funding a business.

Creditworthiness

A company with higher paid-up capital may be more credible with investors and creditors.

Auditing

Regular audits of paid-up capital help ensure that a company's financial records are accurate and
comply with regulatory standards.

Debt ratio

Analysts compare a company's paid-up capital to its debt obligation to calculate its debt ratio and
assess its financial health.

B) Deep discount bonds are a type of bond that are sold at a discount to their face value,
usually at least 20% lower. They are often zero-coupon bonds, meaning they do not pay interest
during their term. Instead, the investor receives the face value of the bond when it matures. The
difference between the purchase price and the face value is the investor's return, which is expressed
as a percentage of the purchase price. This percentage is known as the bond's yield to maturity
(YTM).
Deep discount bonds can be attractive to investors who are looking for capital appreciation rather
than income from interest payments. However, they can also be risky, especially if the issuer's
financial stability is questionable. Some risks associated with deep discount bonds include:

Survival of the company

The bond's maturity period can be very long, so there may be doubts about the company's ability to
survive for that length of time.

No regular income

Since deep discount bonds are zero-coupon bonds, there is no regular income. The investor only
receives the yield on maturity.

Tax

The investor must pay annual income tax on the interest received on maturity.

C) Here are some laws and regulations related to foreign currency convertible bonds
(FCCBs):

Eligibility

Indian companies that are not eligible to raise funds from the Indian capital market are not eligible to
issue FCCBs.

Taxation

The tax treatment of FCCBs depends on the bond's specific terms and the tax laws of the jurisdiction
where the bond is held. The interest paid on FCCBs is usually taxable as ordinary income. If the FCCB
is converted into equity shares, any gain or loss on the conversion may be subject to capital gains tax.

TDS

The interest payment on FCCBs is usually subject to TDS at a rate of 10 percent.

Conversion

FCCBs can be converted into ordinary shares of the issuing company in whole, or in part, on the basis
of any equity related warrants attached to debt instruments.

Scheme

FCCBs must be issued in accordance with the "Issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993".

FCCBs are debt securities that allow investors to share risk and reward with the issuing corporation.
Investors take on risk by putting faith in the corporation's financial performance, while companies
can raise money in different currencies to finance their operations.

Q3. Corporate finance law is a vital part of the business world that ensures corporations
follow legal frameworks for their financial transactions and operations. It's important because it:

Governs how businesses raise capital

Corporate finance law helps businesses raise capital through reliable sources, and it also helps them
comply with securities regulations.
Guides mergers and acquisitions

Corporate finance law helps businesses navigate mergers and acquisitions.

Maintains corporate governance

Corporate finance law helps businesses maintain effective corporate governance.

Advises on legal matters

Lawyers in this field advise businesses on legal matters related to finance and investments.

Corporate finance is a broad field that involves managing a company's financial resources,
including:

 Budgeting: Preparing a budget for expenses and allocating funds to different projects and
business areas

 Capital structure: Determining the mix of debt and equity financing

 Dividend policy: Determining how profits are distributed to shareholders

 Risk management: Identifying and mitigating financial risks, such as currency risk, interest
rate risk, and operational risks

Que) Investment property-Financial instruments are legal contracts that give the holder a financial
right or obligation. They can be real or virtual documents that are used in transactions involving
monetary assets, such as buying, creating, or trading.

Some examples of financial instruments include:

Bonds

A type of debt instrument that involves lending a principal amount to an issuer, usually a company. In
return, the investor receives regular interest payments.

Derivatives

A financial contract that derives its value from another instrument, such as a stock or index.
Derivatives can be used for hedging or speculation.

Cash instruments

A financial instrument whose value is directly influenced by the cash used to buy, sell, or trade it.
Common stock is an example of a cash instrument.

Foreign exchange instruments

A trading platform where one currency is traded for another. Examples include currency futures,
currency swaps, and currency options.

Other examples of financial instruments include:

 Stocks

 Checks

 Exchange-traded funds (ETFs)

  Mutual funds

 Real estate investment trusts (REITs)

 Certificates of deposit (CDs)

 Bank deposits

 Loans

Que) Some new financial instruments include:

 Note issuance facility (NIF): A contractual agreement between a bank and a borrower to
fund notes that the borrower issues. The bank is obligated to purchase the notes if they can't
be sold to a third party. The notes are short-term, and the borrower pays an underwriting
fee.

 Floating rate bonds: A new financial instrument

 Zero interest bonds: A new financial instrument

 Deep discount bonds: A new financial instrument

 Revolving underwriting finance facility: A new financial instrument

 Auction rated debentures: A new financial instrument

 Secured premium notes with detachable warrants: A new financial instrument

 Non-convertible debentures with detachable equity warrants: A new financial instrument

Some other financial instruments include:

 Derivatives, such as synthetic agreements, forwards, futures, options, and swaps

 Exchange-traded funds (ETFs), which are similar to mutual funds but are traded on stock
exchanges

Financial instruments are legal obligations for one party to transfer something of value to another
party at a future date.

Que) Raising finance for corporate body Corporate finance law governs how a company raises
capital through debt and equity financing. It's important to understand the legal aspects of these
methods to ensure compliance and protect the interests of both the company and its investors.

Here are some ways a company can raise finance:

Debt financing

A company borrows money from a lender, usually a bank, and agrees to pay it back at a later date.
The cost of borrowing is usually interest on the amount borrowed.

Equity financing

A company issues shares to investors in exchange for ownership stakes. Companies with equity
capital don't need to make debt and interest payments, but instead share company profits with
investors.
Crowdfunding

A public way to raise money from private investors. This is a popular option for startup companies,
especially those developing new technologies.

Other ways to raise capital include: Angel investment, Personal contacts, Venture capital, and Private
equity.

The best fundraising strategy depends on the company's situation, how established it is, and how
much time is available to secure capital.

Que) Buy back of shares-The Companies Act, 2013 and related regulations govern the buy-back of
shares by companies in India:

 Section 68(1): This section of the Companies Act, 2013 governs the buy-back of securities
and provides sources for buy-back.

 Companies (Share Capital and Debentures) Rules, 2014: These rules are related to the buy-
back of shares.

 Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998: These
regulations are related to the buy-back of shares.

 Securities and Exchange Board of India (Buy-back of Securities) (Amendment) Regulations,

2013: These regulations are related to the buy-back of shares.

Here are some important aspects of the buy-back of shares:

Buy-back process

A company buys back its own shares or specified securities, usually at a price higher than the market
price.

Purpose

Companies may buy back shares for various reasons, such as to improve earnings per share, to avoid
hostile takeovers, or to realign capital structure.

Taxation

Share buybacks are more tax-effective than dividends for both companies and shareholders.

Share destruction

In India, shares bought back by a company must be extinguished and destroyed.

Public advertisement

A company must make a public advertisement within two days of the buy-back period ending.

Return of buy-back

A company must file a return with the Registrar of Companies and SEBI within 30 days of completing
the buy-back.