Capital structure generally refers to the balance sheet composition of capital of a company, for example, the proportion of debt and equity to total capital (comparative to asset structure on the asset side of the balance sheet).
Other indicators of capital structure equity ratio and debt. The composition of the capital structure can be changed by buying back of liabilities with equity, acquisition of additional equity or inclusion of additional liabilities.
To ensure the long-term solvency (liquidity) and for optimal leverage some funding rules have been developed as demonstrated by Business Consulting Services experts.
A share is a title issued by a corporation (eg, a corporation or a partnership limited by shares). It gives the holder ownership of part of the capital, with the relevant rights. These include participating in the management of the company and receiving income in the form of dividends.
Issuance and Cancellation
The shares are issued in exchange for contributions in the foundation of the company, which creates its share capital. The company may issue new shares in a capital increase subscribed by existing shareholders or third party shareholders.
The decision to issue new shares, which are offered for sale and at what price are sensitive elements in the course of the life of a company. New shares acquired by third parties or new shareholders relatively decrease control of the existing shareholders. The price at which shares are offered to third parties must incorporate the value created by the company before the capital increase.
This is why the capital increase is typically the responsibility of the general meeting of shareholders, which may delegate its powers, at least temporarily, to the Executive Committee.
Conversely, but more rarely, a company may purchase its shares for cancellation (such redemption is not to be confused with the purchase made to the share price through a liquidity contract, since in the latter case the shares will be sold as soon as possible).
The share issue is often synonymous with the capital increase while the redemption followed by cancellation is typically a capital reduction.
Transmission
In general, the transfer of shares is free, and the shareholders may decide at any time to offer them to some other investors. However, there are ways to restrict the free transfer of shares, at least temporarily, in order to ensure stability in the direction of the company.
Split and Consolidation
A company may decide to split its shares or consolidate. A split action amounts to replacing the existing shares for new ones, any relationship is possible. According to Business Consulting Services, The reverse stock split is the inverse operation.
