PRESBYTERIAN UNIVERSITY OF GHANA, KUMASI CAMPUS

LLB

INDEX No: KS0307/20

NAME: BRIGHT MARFO
LEVEL: 400
COURSE: COMPANY LAW

Write short notes on the following

i. Fixed charged
ii. Floating charged
iii. Right issue

iv. Payment on shares

iv. Capitalization issue

v. Offer for sale
vi. Dividend
vii. Naked or secured debentures

ix. Perpetual or Redeemable debentures

x. Convertible or Non-convertible debentures

i. Fixed Charge in company law, fixed charges refer to a type of security interest that is
granted over a specific asset or assets of a company. Fixed charges are used to secure the
repayment of a loan or other debt, and they give the lender a priority claim over the assets
that are subject to the charge.
Fixed charges are usually created by way of a written agreement between the company and
the lender, which sets out the terms of the loan or other debt and the assets that are
subject to the charge. Once the charge is created, the lender has the right to take possession
of the charged assets and sell them to recover the debt if the company defaults on the loan.
Examples of assets that may be subject to a fixed charge include land and buildings,
machinery and equipment, and intellectual property rights such as patents and trademarks.
Fixed charges are an important tool for lenders to manage their risk when lending money to
 companies, as they provide a level of security that reduces the likelihood of loss in the event
of default.

ii. Floating Charged in company law, a floating charge is a type of security interest that is
granted over the assets of a company that are constantly changing in the ordinary course of
business. This can include assets such as inventory, accounts receivable, and other current
assets. Unlike a fixed charge, a floating charge does not attach to specific assets at the time
it is created. Instead, it 'floats' over the assets until a trigger event occurs that causes the
charge to 'crystallize' and attach to specific assets. A trigger event may include the
company's default on a loan or the appointment of an administrator or receiver. Once the
charge crystallizes, the lender's priority claim over the assets subject to the charge becomes
fixed, and they have the right to take possession of and sell the assets to recover their debt.
Floating charges are a common form of security interest in business lending, as they provide
flexibility for companies to manage their assets while still giving lenders a level of security
over the assets in the event of default. However, they can also be complex and can present
challenges in terms of determining the extent of the lender's claim over the assets,
particularly in insolvency proceedings.

iii. Right issue in company law, a right issue is a process by which a company offers its existing
shareholders the opportunity to purchase additional shares in the company at a discounted
price. The shares are offered in proportion to the number of shares that the shareholder
already owns. A right issue is typically used by a company to raise additional capital, as it
allows the company to raise funds from its existing shareholders without having to go
through the process of issuing new shares to the public. By offering the shares at a
discounted price, the company incentivizes its existing shareholders to invest more in the
company, while also potentially increasing the value of their existing shareholdings. The
process of a right issue is typically governed by the company's articles of association and the
relevant laws and regulations. The company must give notice to its shareholders of the right
issue, specifying the number of shares being offered and the price at which they will be
offered. Shareholders then have a specified period of time in which to exercise their right to
purchase the shares. If a shareholder chooses not to exercise their right to purchase
additional shares, they may have their existing shareholding diluted as a result of the
increased number of shares in circulation. However, the right issue can also present an
opportunity for shareholders to increase their stake in the company and potentially benefit
from future growth and profitability.

iv. Payment of shares in company law, payment on shares refers to the amount that a
shareholder is required to pay for their shares in a company. When a company issues
shares, it may require shareholders to pay for the shares in full at the time of issue, or it may
allow them to pay for the shares in installments over time. The payment on shares is
typically set out in the company's articles of association or in the terms of the share issue. It
 may be a fixed amount per share or may be calculated based on the par value of the shares.
If a shareholder fails to make payment on their shares as required, the company may have
the right to forfeit the shares and sell them to another party. The company may also be
entitled to recover any unpaid amounts from the shareholder, along with any interest or
penalties that may apply. Payment on shares is an important aspect of company law, as it
ensures that shareholders are contributing the necessary funds to the company and helps to
maintain the financial stability of the company. It also provides a mechanism for the
company to recover unpaid amounts in the event of default by shareholders.

v. Capitalization issue in company law, a capitalization issue (also known as a bonus issue or a
scrip issue) is a process by which a company issues additional shares to its existing
shareholders, free of charge. The shares are issued in proportion to the number of shares
that the shareholder already owns. The purpose of a capitalization issue is to increase the
number of shares in circulation, without the company having to raise additional funds. By
issuing bonus shares, the company can increase the liquidity and marketability of its shares,
and potentially increase the value of the shares held by its shareholders. The process of a
capitalization issue is typically governed by the company's articles of association and the
relevant laws and regulations. The company must give notice to its shareholders of the
capitalization issue, specifying the number of bonus shares being issued and the ratio of
bonus shares to existing shares. Once the bonus shares are issued, the company's share
capital will increase, but the value of each individual share will decrease proportionally.
However, the overall value of the shareholder's holdings should remain the same, as they
now hold a greater number of shares. Capitalization issues are a common form of corporate
action, particularly among companies that are looking to boost their share price or improve
the liquidity of their shares. They can also be used as a way to reward shareholders and
increase their loyalty to the company.

vi. Offer for sale in company law, an offer for sale (OFS) is a process by which a company's
existing shareholders, including promoters, can sell their shares in the company to the
public through the stock exchange. The shares are offered for sale at a market-determined
price, and the proceeds from the sale go to the selling shareholders rather than the
company. An OFS is typically used by existing shareholders who wish to sell their shares in
the company, either to realize their investment or to reduce their stake in the company. It
can also be used by the company to comply with regulatory requirements for public
shareholding or to raise additional funds without diluting the ownership of existing
shareholders. The process of an OFS is typically governed by the relevant laws and
regulations, including securities laws and stock exchange regulations. The company must
give notice of the OFS to the stock exchange, specifying the number of shares being offered
for sale and the price at which they will be offered. Once the shares are offered for sale,
they are available to be purchased by any member of the public through the stock
exchange. The selling shareholders may also have the option to place bids for the shares, in
order to determine the market-determined price at which the shares will be sold. An OFS
can provide a mechanism for existing shareholders to sell their shares in a transparent and
regulated manner, while also potentially providing an opportunity for new investors to
 acquire shares in the company. However, it can also lead to a decrease in the share price if
there is an oversupply of shares in the market.

vii. Dividend in company law, a dividend is a distribution of a portion of a company's profits to

its shareholders. The dividend is typically paid in cash or additional shares of stock, and is
distributed in proportion to the number of shares that the shareholder owns. The payment
of dividends is typically governed by the company's articles of association and the relevant
laws and regulations. The company must have sufficient profits available for distribution in
order to pay a dividend, and the payment of the dividend must be approved by the board of
directors and the shareholders. Dividends can be paid on a regular basis, such as quarterly
or annually, or they can be paid as a one-time distribution. The amount of the dividend can
be set as a fixed amount per share, or it can be calculated as a percentage of the company's
profits. Dividends are an important mechanism for companies to reward their shareholders
for their investment in the company, and they can also help to maintain shareholder loyalty
and increase the company's overall value. However, the payment of dividends must be
balanced against the company's need to reinvest profits in order to grow the business and
generate future profits. If a shareholder is entitled to receive a dividend but does not
receive it, they may have legal recourse to pursue the company for the unpaid dividend.
However, the company may be entitled to retain profits in order to meet its financial
obligations or to reinvest in the business, and shareholders should be aware of the
company's dividend policy before investing in the company's shares.

viii. Naked or secured debentures in company law, debentures are a type of debt instrument
issued by a company that can be traded in the market. Debentures can be classified as
either naked or secured, depending on whether they are backed by specific assets of the
company. Naked debentures, also known as unsecured debentures, are not backed by any
specific assets of the company. Instead, they are backed only by the general
creditworthiness of the company. In the event that the company is unable to repay the
debentures, the debenture holders will have to rely on the company's ability to generate
sufficient funds to repay the debt. Secured debentures, on the other hand, are backed by
specific assets of the company, such as property or equipment. In the event that the
company is unable to repay the debentures, the debenture holders will have a claim on the
specific assets that are pledged as security for the debt. Secured debentures are generally
considered to be less risky for investors than naked debentures, since the security provided
by the specific assets can provide greater assurance that the debt will be repaid. However,
the interest rates offered on naked debentures are often higher than those offered on
secured debentures, since investors are taking on a higher level of risk. The terms and
conditions of debentures are typically set out in a debenture trust deed, which governs the
rights and obligations of the debenture holders and the company. Debentures can be
bought and sold in the market, and the value of the debentures can fluctuate based on a
range of factors, including interest rates, market conditions, and the creditworthiness of the
company.
ix. Perpetual or Redeemable debentures In company law, debentures can be classified as
either perpetual or redeemable, depending on whether they have a fixed maturity date or
can be redeemed by the company at any time. Perpetual debentures are a type of debt
instrument that do not have a fixed maturity date. Instead, they continue to pay interest to
the debenture holders indefinitely, until the company decides to redeem the debentures.
Perpetual debentures are often used by companies as a way to raise long-term capital, since
they provide a relatively stable source of funding without the need to repay the debt on a
fixed schedule. Redeemable debentures, on the other hand, have a fixed maturity date, at
which point the company is required to repay the principal amount of the debt to the
debenture holders. Redeemable debentures can also be redeemed by the company at any
time prior to the maturity date, although this may be subject to certain conditions and
restrictions. Redeemable debentures are often used by companies as a way to raise short-
term or medium-term capital, since they provide a fixed repayment schedule and can be
redeemed by the company as needed. However, the interest rates offered on redeemable
debentures are often higher than those offered on perpetual debentures, since there is a
greater risk to the debenture holders that the company may not be able to repay the debt
on the maturity date. The terms and conditions of perpetual and redeemable debentures
are typically set out in a debenture trust deed, which governs the rights and obligations of
the debenture holders and the company. Debentures can be bought and sold in the market,
and the value of the debentures can fluctuate based on a range of factors, including interest
rates, market conditions, and the creditworthiness of the company.

x. Convertible or Non-convertible debentures in company law, debentures can be classified as

either convertible or non-convertible, depending on whether they can be converted into
equity shares of the company. Convertible debentures are a type of debt instrument that
can be converted into equity shares of the company at a predetermined conversion ratio
and price. This means that the debenture holders have the option to convert their
debentures into equity shares of the company, which may provide them with the potential
for greater returns if the company performs well. Convertible debentures are often used by
companies as a way to raise funds while also providing a potential equity upside for
investors. Non-convertible debentures, on the other hand, cannot be converted into equity
shares of the company. They are a pure debt instrument and provide a fixed rate of return
to the debenture holders. Non-convertible debentures are often used by companies as a
way to raise long-term capital, since they provide a relatively stable source of funding
without the need to dilute the company's equity. The terms and conditions of convertible
and non-convertible debentures are typically set out in a debenture trust deed, which
governs the rights and obligations of the debenture holders and the company. Debentures
can be bought and sold in the market, and the value of the debentures can fluctuate based
on a range of factors, including interest rates, market conditions, and the creditworthiness
of the company.