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Investment in small company

My client has a potential investor who would bring certain skills to their company. The investment will be for 45% stake and will be cash and assets (for newly issued shares). In circumstances where the shares cover the value of the assets so that no debt is showing in the company books against these assets, can the investor further protect themselves by raising a charge/debenture over these assets (plant and machinery)?

Would this be common practice?

Any other factors to consider?

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By BananaMan
23rd Nov 2012 10:07

Loan?

Is there a credit balance due back to the new investor?

If not, I'm unsure as to how you might raise a charge over the assets?

Share capital/premium does not constitute a debt due back. In essence, when investing, the consideration given for shares is the money you're comfortable to lose if the company goes under. Shareholders/members are paid from the residual 'worth' of the company upon liquidation so unless there is a long term loan etc. in addition to the Share Capital I don't think that there would be anything to secure.

 

Any other viewpoints?

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23rd Nov 2012 10:42

Separate transactions?

Treat the cash as financial consideration for the shares, and lease the equipment to the company while retaining ownership?

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