Verb Abstract noun Personal noun
administrate1 I o..d.-mLnstr<A:lIiooY.\.d.-mLnstr<Aior
5 Vocabulary: prepositional phrasesComplete these sentences using the
prepositional phrase from Exercise 4 that best fits in each one. For one of the
sentences, there is more than one correct answer.
1 In...fu?...~!i\r.~.~J,1f. choosing the name of the company, a number of matters
must be considered.
2 Confidential informatiop acquired """""""' , one's directorship
shall not be used for personal advantage.
3 I would advise that members of your project group formalise your
relationship ""'"'''''''''''''''''''''''' a partnership agreement, incorporation or
limited liability company.
4 This form of corporation is often considered to be the most flexible body
""'''''''''''''''''''''''''''''''''''''''''''''' corporate structure.
5 Our company formations expert is unable to provide advice
"""'"'''''''''''''''''''''''''''''''''''''''''' your query, as there are a number of factors which need
to be taken into account which do not relate directly to his area of expertise.
6 The relationship between management and boards of directors at US
multinational companies has been changed dramatically through a series of
corporate governance initiatives begun '"'''''''''''''''''''''''''''''''''''''''''''''' corporate
scandals, the Sarbanes-Oxley Act and other requirements.
7 Shareholders and other investors in corporations tend to view corporate
governance """""'''''''''''''''''''''''''''''''''''''''' the corporation's 'increasing value over time.
S Regular and extraordinary board meetings may be held by telephone, videotelephone
and ""'''''''''''''''' , written resolutions.
5 conduct e a law
7 Collocationswith file Decide which
1: I n
Companylaw is a verywide area.Thistext servesasan introduction to the legal terminologyand
issuesregardinghowcompaniesraisecapital in the UK.
1 Readthrough the text quickly and decide whether these statements are
true or false.
1 The shares of a company which are actually owned by shareholders are known
as authorised share capital. .
2 Share capital is subdivided into two basic types of share: ordinary and
3 People who already own shares possess the right of first refusal when new
shares are issued.
4 In addition to share capital, loan capital is another means of financing
1 (US) articles of incorporation
2 (US) authorized shares
3 (US) common shares
4 (US) preferred shares
5 (US) stock split
6 (US) reverse (stock) split
7 (US) preemptive rights
8 (US) security interest in specific assets (also chattel mortgage prior to the Uniform Commercial Code)
2 Match these terms related to shares (1-8) with their definitions (a-h).
1 authorised share capital
3 issued share capital
4 ordinary share
5 pre-emption rights
6 preference share
7 rights issue
a someone who agrees to buy shares or other securities
b offer of additional shares to existing shareholders, in proportion to their
holdings, to raise money for the company
c type of share in a company that entitles the shareholder to voting rights and
d entitlement entailing that, when new shares are issued, these must first be
offered to existing shareholders in proportion to their existing holdings
e maximum number of shares that a company can issue, as specified in the
firm's memorandum of association
f proportion of authorised capital which has been issued to shareholders in
the form of shares
g type of share that gives rights of priority as to dividends, as well as priority
over other shareholders in a company's winding-up
h part of a company's profits paid to shareholders
3 Underline the words (1-5) in the text. Then match them with their synonyms
2 to entail
3 to waive
4 to typify
5 to recover
a to be an example of
b to give up
d to regain
e to involve
4 According to the text, the minimum amount of share capital of a public limited
company in the UK is £50,000. Do similar restrictions apply in your
jurisdiction? If so, what are they?
Unit3 Companylaw: capitalisation
9 e 1: .
ng I n
Look at this
Issued share capital, as opposed toauthorised share capital, refers to shares
actually held by shareholders.
When describing a
listener is already
actually held by shareholders.
All three of these
sentence if the
share capital refers to
These prepositions can
same time. In such a case,
the maximum amount
refers to the maximum
issued share capital
5 Read the information in the table below about the two basic classes of shares:
ordinary shares and preference shares. Using the prepositions explained
above, make sentences contrasting the two share types.
1 (AnLi.keordincA..r!:jshcA..res, preference shcA..res cio not tAStA<AlLeynillie the
shcA..rehol,(ter to vote.
In contro...st to ordincA..r!:jshcA..res, ~hi.d1 entitle the shcA..rehol,(ter to vote,
preference shcA..res cio not tAStA<AlL9y~ve StAch 0...r~ht to the shcA..rehol,(ter.
Lawyerswith expert knowledgeof corporatefinance are often askedto explain complex
matters in simple termsto companymembersor to shareholders.Thisdialoguetakes
placeat a seminarheld at a large law firm specialisingin capitalisationmatters.
A memberof a shareholders'association[MrsWhiteman)is askinga corporatefinance
expert [Mr Young)to explaina rights issue,oneof the keyterms in Reading1.
6 ..::: Listen to the dialogue and answer these questions.
1 What is the purpose of a rights issue?
2 What options do the shareholders have if they do not wish to buy the newly
7 ..::: Listen again and choose the correct answer to each of these questions.
1 According to Mr Young, one reason why shareholders would want to take up
their pre-emption right is
a to help the company raise cash.
b to maintain the proportion of shares they own.
c to be able to waive this right later, if desired.
2 Why are the new shares offered to shareholders at a discount?
a so the shareholders do not sell their rights to non-shareholders
b to keep the market price of the shares from falling
c to increase the likelihood that the issue is fully subscribed
3 A share issue is said to be 'fully subscribed' when
a all of the shareholders have been duly informed of the share issue.
b all of the shareholders have sold their rights to the newbl issued shares.
c all of the newly issued shares have been agreed to be purchased.
4 What does Mr Young say about shareholders' reactions to rights issues?
a They can be unhappy about having to decide whether to buy shares or sell
b They fear that discounts may make the market price of the shares
c They are concerned about outsiders gaining influence in the company.
Theexcerpton pages38-39 dealswith the topics of shareholders'rights and the role of
the supervisoryboard.It is part of the requiredreadingin a comparativelaw course
dealing with Europeanand Anglo-Americancompanymanagementstructures.
8 Readthrough the text quickly and answer these questions.
1 What basic rights does a shareholder possess?
2 What options does a dissatisfied shareholder have in the Anglo-Saxon
3 What is meant by the concepts of the one-tier board and the two-tier board?
(Note: the word tier means 'rank' or 'level'.) Which do you think is the best
model of organisation?
Unit 3 Companylaw: capitalisation
9 Read the text again carefully. In which paragraph (A-G) are the following
mentioned? Some of the items may be found in more than one paragraph.
1 some stipulations of co-determination laws
2 the functions of supervisory boards in Germanic countries
3 two options open to a shareholder when dissatisfied with management
4 activities carried out at the annual general meeting
5 opinions on effectiveness of the two-tiered system in times of crisis
6 the difficulty of co-ordinating management monitoring efforts
7 three rights to which the owner of an asset is generally entitled
8 comparison of the composition of executive board and supervisory board
10In your own words, explain to a partner the meaning of the following
expressions (in italics in the text).
1 risk diversification
2 awkward questions
3 flow of information
4 face... obstacles
5 the free-rider issue
6 vote with one's feet
7 answer to the annual meeting
8 co-operative conflict resolution
9 participatory framework
10subjected to the public gaze
Unit3 Companylaw: capitalisation
Look at the
In return for the
as a group.
to control and monitor
the management board, ...
11Match the verbs (1-4) with their definitions (a-d).
1 exercise (control) a 1) to remove someone from their job, usually because they have done
something wrong; 2) to cease to consider, to put out of judicial
b to increase in number or amount over a period of time, especially in
a financial sense
c to make use of / apply something
d to limit someone or something
2 restrict (powers)
3 accrue (benefits)
4 dismiss (members)
12Match the verbs above (1-4) with the nouns in the box with which they collocate. Some
nouns can go with more than one verb.
authority benefits caution capital a case a charge a claim
an employee force freedom influence interest power pressure
restraint revenue rights sales spending
EXAMPLE: 1 exercise: OJAthor~, COJAUoI1,...
13Complete these sentences using exercise, restrict, accrue or dismiss.
1 A motion was filed by the Board of Directors to the case.
2 The chairman warned that if investors were asked for more money, they
might their option to sell their shares.
3 The Chief Executive resigned when the board tried to greater
control over the company's bankruptcy plan.
4 The company is expected to .""""."""."""" its spending while its markets remain
S Financial benefits .. to the owners and operators of the factories, as
well as to the shareholders.
6 A company spokeswoman advised shareholders to caution in their
share dealings until a further announcement is made.
7 One important Commercial Code provision may some of the
freedom of directors to grant options without shareholder approval.
S The annual general meeting has authority to draw up or amend the
constitution and to elect or member directors of the Board.
the framework of the
14A client of yours who is interested in investing in a German company has asked
~~~~TIlyou to explain the differences between the one-tier corporate management
»p.;s6j system characteristic of Anglo-Saxon countries and the two-tier corporate
management system found in Germanic countries. Write an email to your client
summarising the differences. Refer to Reading 2 for information.
In your email, you should:
0 divide the text into three distinct parts: an opening statement of the reason
for writing; the body of the email presenting the main points; and a
conclusion offering to provide further help or information if required;
0 make use of the words and expressions for signalling contrast introduced
earlier in the unit. .
nlng 2: n e
Lawyersoften have to explainthe meaningof a legal documentto a client in plain
language. This is a conversation between a lawyer, Mr Mansfield, and his client,
MrThorpe, about provisionsconcerningcapitalisation.
15Before you listen, discuss these questions.
1 Do you have any difficulties with legal language? Which do you consider
more difficult, reading or writing legal English?
2 Think about the style of legal documents written in your native language and
those written in English - are they equally difficult for non-lawyers to understand?
16..;:: Listen and decide whether these statements are true or false.
1 The client says that the subject of law is very complex.
2 'Legalese' refers to the process of enacting a law.
3 The client believes that legal texts are too difficult for most people to read.
17..;:: Listen again and answer these questions.
1 What is the Plain Language Movement?
2 Why is there some opposition to it?
3 What is Mr Thorpe implying when he says legalese makes people need
Unit 3 Companylaw: capitalisation
Legalese often poses problems for those umamlliar with It, SUch as
lawyers (clients). However, non-native English-speaking lawyers may also find
legalese difficult to read. An awareness of some of the typical features of this
writing style can make it easier to understand texts of this Some
features of legalese are the following:
clauses are joined together with commas or the co-ordinators
such, said, same,
By whom? No agent
carried out and not
18This is an excerpt from provisions regulating the capitalisation of a corporation,
written in legalese. Read it, noticing the lengthy and complex sentences. Then
underline the passive verbs and circle any archaic words and expressions.
19For each instance of the word such in the text above, suggest a more naturalsounding
20Match these words beginning with there- (1-6) with their equivalents (a-f). The
first three occur in the text on page 42.
a of it/them
b on it/them
c to it/that
d for it/that
e with that
f in or into a particular place or thing
21Complete the sentences below using the words in the box.
therewith thereof (x2) therefor therein thereon thereto
1 Each partner shall maintain both an individual drawing account and an
individual capital account; into the capital account shall be placed that
partner's initial capitalisation and any increases '"'''''''''''' .
2 Every issuer must comply in all respects with the provisions, including all
filing and notice deadlines. .
3 Her experience in corporate finance includes representing banks and other
financial institutions in numerous secured financings, including drafting and
negotiating credit agreements and security documents in connection
4 The Chair of the Committee shall, in consultation with the other members of
the Committee and appropriate officers of the Company, be responsible for
calling meetings of the Committee, establishing the agenda , and
supervising the conduct .
5 The circular prescribes requirements for the accounting and reporting of
interest on loans and other interest-bearing assets and for the capitalisation
of interest .
6 The memorandum of the company, together with a translation , if
any, certified and translated as prescribed in regulation 4, shall be lodged
with the Registrar.
n9: h opinio
22Working with a partner, take turns rephrasing the sentences from the text on
page 42 in your own words as if you were explaining their content to a client.
You may want to break them into shorter sentences and turn passive
constructions into active ones (e.g. instead of shares may be issued, say the
corporation may issue shares).
(1) A corporo.l.ion C<A..~Ys\s(Ae no more tho...n 25,000 sVt<AYes.f~ve thouso...ncL
of these <AYeworth $50 w.cl1 o...ncLthe remoJ,ning 2.0,000 Vti:lve no p<AY
23When expressing an opinion, it is common to begin the statement with a
phrase signalling that it is an opinion. Read the transcript of Listening 2 on
page 265 and underline the phrases the speakers use to signal an opinion.
Unit3 Companylaw:capitalisation E
24Complete the phrases below using the words in the box.
concerned firmly me mind
see seems think would
1 In my , ...
2 The way I it, ...
3 To my , ...
4 In view, ...
5 If you me, ...
6 Frommy of view, ...
7 As far as I'm , ...
9 It to me that...
10I believe ...
11For , ...
12I argue that...
25Discuss this topic with a partner. Whenever possible, make use of phrases for
Legal language differs greatly from everyday speech and writing. Do these
differences lead to clearer and more objective communication, as lawyers
generally claim, or do they actually have the opposite effect?
Reading3: New legislation
The text below is from the website of a large accountancy firm offering corporate finance
services. It deals with a change in UKlegislation concerning treasury shares from a few
26Read through the text quickly. What does the new law specify? Why has it been
Tr~asury $l1aresCacquisition Qf%()wl1$~~res}
Under current company legislation, companies that have used surplus cash reserves to buy back
their own shares are required to cancel those shares and not hold them in treasury to be resold
at a later date.
On 22 December 1999, Dr
Competition and Consumer Affairs at the Department of Trade and Industry (DTI), announced that
the law prohibiting companies to hold their own shares in treasury was to be deregulated.
Following the publication of a draft document detailing likely amendments to the regulations
2001, it was announced that a.;new will come; into
permit companies to buy back their own shares and hold them
This new legislation will only apply to company shares that are listed on the London Stock
Exchange's official list, corrl.Rarabl~\,Europ~.an
Economic Area (EEA) market, of other public companies
or private companies. Qualifying shares will be held in treasury until they are either resold or
transferred to an appropriate employee share scheme.
This change to company law t
without incurring the co'sts of
The new law will also bring the UK into line with other EEA countries.
Companies must buy back shares out of distributable reserves, and these shares must not at
any time exceed 10% of their issued share capital (surplus treasury must be disposed of
within 12 months). be
entitled to a dividend.
27List the six limits on the buying back of shares mentioned in the text.
28Discuss these questions.
1 Has similar legislation been enacted in your own jurisdiction?
2 Can you think of any examples of other laws passed recently in your
jurisdiction concerning company capitalisation?
29Which noun collocates with these verbs in the text?
buy back cancel hold in treasury transfer re-issue
30Complete the following phrases from the text using the prepositions in the box.
I into (x2)
to (x3) under with
1 current company legislation...
2 ... amendments the regu lations...
3 ... a new company law will come .. force ...
4 This new legislation will only apply company shares that are listed
on the London Stock Exchange's official list, ...
5 Thischange companylaw...
6 The new law will also bring the UK ..
line. other EEA
To improve your web-based research skills, visit www.cambridge.orgjeltjlegalenglish.click on
Research Tasks and choose Task 3.
Unit3 Companylaw: capitalisation
Vocabulary: distinguishing meaningWhich word each
You may need to consult a dictionary to distinguish
regardless of conversely despite
discretionary mandatory obligatory compulsory
entail suggest involve imply
consequently therefor therefore accordingly
relinquish cede waive postpone
Use of prepositionsComplete the sentences below using
box. The sentences are taken from texts
1 Initially, company capitalisation
2 A company may authorise capital
share capital but refrain
3 In return the privilege of
powers are generally restricted.
4 Someone with ownership a company can
disappointment company's performance by
their shares or in some way expressing their concern.
5 With the Anglo-Saxon one-tier board, managing executives
the board, and all
6 The shares shall be
having a par value, and common, to consist of 20,000
Adjective formationAdd the prefixes
form its opposite.
Word formation and meaningThe noun forms of the verbs in the table appear in
Readings 1-3. First match the verbs (1-9) with their definitions below (a-i). Then
complete the table with the abstract noun form. Consult a dictionary if necessary.
make their words or actions
h and support of someone or something in
or accept something
Understanding legaleseSummarise the following text in one sentence.
express or implied, these best wishes for an
responsible, low-stress, non-addictive and genderneutral
holiday as practised the most
enjoyable traditions religious persuasion of choice (but with respect for
the religious others, or for their choice
not to and further for a fiscally
successful, medically uncomplicated onset of the generally
accepted to, calendar, but not
without due of choice of other cultures). The preceding
wishes age, physical ability,
religious platform or sexual preference of
Verb ! Abstract noun
1 issue e ss(,t<A.Yice
9 rely (on)
Reading 1: Introduction to changes in
Thistext providesan overviewof the areaof companylaw dealing with the changesmade
to a companythat generallyrequirethe involvementof lawyers.
1 Before you read the text, match these key terms (1-7), which all refer to types
of changes in company structure, with their definitions (a-g). If necessary,
consult the glossary.
1 constitutional amendment
3 acquisition of controlling shares
4 voluntary liquidation
6 sale of substantially all assets
7 compulsory winding-up
a the liquidation of a company after a petition to the court, usually by a
b the combining of two companies to form an entirely new company
c liquidation proceedings that are supported by a company's shareholders
d a change in a company's name, capital or objects
e the purchase of shares owned by shareholders who have a controlling
f the acquisition of one company by another, resulting in the survival of one of
them and dissolution of the other
g a form of acquisition whereby all or almost all assets and liabilities of a
company are sold
At some a , -
the company. Some of these changes may merely be basically administrative, such as changing
the company's name. Other changes may entail alteration of the company's structure. These
changes sometimes place the rights of creditors and minority shareholders at risk and are thus
s.,ubject to special statutocry. r.eg"u" lation.','''T'r'he in ex.a".mples.:,oefo,t p.e alter~'",t\i'o~.'n. s "..~f:h'""jch. f"~f'11
Into this group are constltutloli'al amendm , mergers, cons tlO ale 'pt substantially all ,
assets, acquisition of controlling shares and liquidation.
The most common constitutional alterations in a companyInclude alteration of the company's
name, capital or objects. to English law, a chan of name can be
resolution in a
name of the company be changed to the new name. A signed copy of the resolution containing
the new name must then be submitted to the Registrar of Companies. If the submissionis in
order,Companies House will issue a Certificate of Incorporation on Change of Name.
Acompanymay alter its caDitalstructure. Dmvidedthat ar
1 (US) tender offer
2 (US) involuntary bankruptcy
3 (US) also dissolution or winding-up
.* pp n in
2 The text contains several pairs of opposing concepts. Find the counterpart of
each of these words.
1 acquiring company
2 hostile takeover
4 compulsory winding-up
3 Work in pairs. Making use of the prepositions introduced in the previous unit
(as opposed to, unlike, in contrast to), take turns contrasting the pairs of
opposing concepts listed in Exercise 2.
EXAMPLES: 11'1coY\tr<A-stto o.Y\o..cquixi¥\gcompo.Y\Y,whLcl1 ~s <A-compo.Y\Y thoJ;
purcl'1<A-ses o.Y\other, o.Y\ o..cquixe<:i compo.Y\Y ~s oY\e whLcl1 ~s
purcl'1<A-se<:io.Y\cLWkeY\ over by o.Y\other compo.Y\Y.
AY\ o..cquixe<:i compo.Y\Y ~s oY\e whLcl1 ~s purcl'1<A-se<:io.Y\cLWkeY\ over
by o.Y\other compo.Y\Y, uY\Like o.Y\ o..cquixi¥\g compo.Y\Y, whLcl1 ~s <Acompo.
Y\Y thoJ; purcl'1<A-ses o.Y\other.
Unit 4 Company law: fundamental changes in a company
ning. 1: on
A lawyer'sinvolvementin the mergersand acquisitionsof companiesoften entails
communicatingwith the partiesconcerned:a lawyermayexplainto the ownerof a
companywhat procedureshaveto becompletedin the courseof anacquisitionor inform
shareholdershowthe changesresultingfrom a mergerwill affect them.
In the following listening exercise,youwill heara lawyerspeakingto a groupof business
owners.Eachof thesebusinessownersis consideringacquiringanotherbusiness.
4 ~ ~ Listen to the first part of the presentation and choose the correct answer
to each of these questions.
1 Which of these is the most likely entry for the talk in the programme?
a Mr A. Crawford of Corporate Restructuring (evening session)
b Mr A. Cranford of Mergers and Acquisitions (evening session)
c Mr A. Crawford of Mergers and Acquistions (evening session)
d Mr A. Crawford of Mergers and Acquisitions (morning session)
2 What is the speaker's aim?
a to provide the business owners with an overview of the law of mergers
b to persuade the business owners that they should use this opportunity for
their businesses to grow
c to inform the business owners what they can expect if they decide to
carry out an acquisition
d to tell the business owners about the process of making their businesses
more attractive as potential targets
3 Which of the following topics will not be included in the presentation?
a factors involved in deciding on a company to acquire
b staffing issues after an acquisition
c evaluating the prospective acquired company
d details of one specific deal the speaker has carried out
5 ~ ~ Listen to the second part of the presentation, in which the speaker
discusses legal aspects of acquisitions. Decide whether these statements are
true or false.
1 The important legal steps that must be carried out in the course of the
acquisition process can be completed in any sequence.
2 'Due diligence' refers to the process of gathering and ana lysing financial
information and other relevant information about a business before it is
3 One aspect of due diligence is verifying ownership of intellectual property.
4 In the course of due diligence, the acquirer should terminate all of the target
company's contracts with suppliers.
5 A warranty is written statement by a party attesting that a fact relevant to
the deal is true.
6 The target may provide indemnities to protect the acquirer against future
InnIng p n
In Listening1,the lawyerbeganhis presentationby introducinghimself and his topic.
Followingthis, he providedan overviewof the pointshe plannedto cover.Healso
informed his listenersabout generalmatters related to his presentation,suchaswhether
there would bea breakor if questionswere permitted.
Thebeginningpart of anypresentation,whether short or long, informal or formal, should
fulfil thesefunctions. Listenersappreciateknowingwhat awaitsthem andwhat they can
6 .. ~ The following list provides useful phrases for the beginning of a
presentation. Listen to the first part of the presentation again and complete
each of the phrases using no more than three words.
1 Some of you may know me already, but allow me .
My name's Adrian Crawford.
2 Mergers and Acquisitions department of our firm.
3 I'll acquisitions this evening.
4 I'm you about...
5 Please feel free to at any time, should you have any
6 At this point, I'd like to give you a short my
7 I'm going to start with a how to ...
8 Then I'll . the issue of ...
9 After that, I'll the process of ...
10I think we'll. w a short break at that point.
11After the break, I'll the legal aspects...
12At the end, I'll a look at ...
13There'll be time for at the end.
7 Match the phrases from Exercise 6 (1-13) with the function (a-c) they serve.
The first phrase has been done for you.
a introducing the speaker (name, affiliation) 1, ...
b informing about points that will be covered
c telling listeners about practical matters related to the presentation
ng 2: in-
Thetext on page52is an excerptfrom an article about spin-offs, an alteration in the
structure of a company.It appearedon the websiteof a USfirm. Theprimarypurposeof
this text is to provideinformationfor clients. Doyouthink websitearticles are an
effectivewayfor clients to get information about complextopics?
8 Readthrough the text quickly and answer this question.
A subsidiary is a company which is controlled by another through share
ownership. What exactly is a spin-off?
9 Decide which of these phrases (a-d) best expresses the topic of each
a Advantages of IRS Code Section 355
b Reasons for creating spin-offs
c Definition of the term spin-off
d Various types of spin-offs
Unit 4 Companylaw: fundamental changes in a company E
1 The term 'spin-off' refers to any distribution by a corporation to its
shareholders of one of its two or more businesses. Sometimes the
spun-off business is transferred first to a newly formed subsidiary
corporation. The stock of that subsidiary is then distributed to the
shareholders of the distributing corporation. Other times, the stock of
a pre-existing subsidiary is distributed.
2 Spin-offs can include distributions on a proportional basis (i.e. pro
rata), in which the receiving shareholders do not give up any of their
stock in the distributing corporation when they receive the spun-off
stock. Sometimes the distribution only goes to certain shareholders. In
this case, the receiving shareholders give up some (or aiD of their
stock in the distributing corporation in exchange for the stock of the
controlled subsidiary. Non-pro-rata spin-offs are sometimes referred to
as 'split-offs'. A non-pro-rata spin-off that results in one group of
shareholders holding all the stock of the distributing corporation and a
second group holding all the stock of the former subsidiary
corporation is referred to as a 'split-up'.
3 A spin-off is used to separate two businesses that have become
incompatible. In a case where investors and lenders may want to
provide capital to one but not all business operations, a spin-off can
be a good solution. Spin-offs are also used to separate businesses
where owner-managers have different philosophies. Spin-offs may
furthermore be used by publicly held companies when the stock
market would value the separate parts more highly than combined
operations. The separation of business operations could also lead to a
greater entrepreneurial drive for success.
4 The tax characteristics of a qualifying spin-off under Internal Revenue
Code Section 355 make this an attractive tool for solving certain
corporate challenges. Without Section 355, the distributing
corporation would have to recognize a gain on the stock it distributed
as if it had sold that stock. In addition, shareholders receiving the
distribution would be taxed on the shares received, either as a
dividend or as capital gain. This double tax usually makes spin-offs
extremely expensive. Code Section 355 permits a spin-off to be
accomplished without tax to either the distributing corporation or to
the receiving shareholder. Any gain realized by the shareholder is
deferred until the stock is sold.
10Read the text again and answer these questions.
1 Under which circumstances would a company typically decide to make a
2 What benefits for the corporation and for the shareholders result from
Internal Revenue Code Section 355?
ng: ng n-
Oneof yourcorporateclients is planningto carryout a spin-off. Hehaswritten youthe
Dear Mr Daniels
Ms Diaz has told me that you are going to be at the shareholders'
meeting next Wednesday. Would you mind addressing the group
briefly before the meeting starts? I think they would appreciate
some basic information about things like what a spin-off is, why the
spin-off will be done, etc. just so they can understand the rationale
behind it better. Of course, it's very important that they realise that
the spin-off will not affect them negatively. I think 10-15 minutes
will be enough for this, and then you and I could field their
questions and try to clear up any misunderstandings.
Please let me know what you think.
11Using the presentation in Listening 1 as a model and the information from
Reading 2, prepare the beginning of such a presentation.
12Take turns presenting your beginning to a partner. Check that your partner has:
0 introduced him/herself
0 informed you about what points will be covered
0 mentioned any practical matters (questions, timing, etc.)
ning 2: ch
Lawyersplayan important role in the processesinvolvedin altering the structureof a
company.Forexample,they reviewthe documentsconnectedwith suchchangesto
ensurethat all the relevantstatutes havebeencompliedwith.
Checklistsare useful tools for makingsurethat the properprocedureshavebeenfollowed
and the necessarydocumentsdrawnup. Oncean issuehasbeenaddressed,a lawyerwill
tick the boxto confirmthat he hasconsideredthe particular matter listed. Youwill hear
two lawyersdiscussingsucha checklist.A moreexperiencedlawyerguideshisyounger
colleaguethroughthe list of actionsto betaken and documentsto befiled.
13.. ~ Listen to the dialogue and answer these questions.
1 What kind of change are they discussing?
2 What two meetings need to be held?
3 How many documents need to be filed at Companies House?
Unit4 Companylaw:fundamentalchangesin a company
14.. ~ Listen again and complete the missing items (1-10) in the left-hand
column of the checklist, using up to three words for each space.
Checklist on increasinga company'ssharecapital Maftercol1sidered
. Check the memorandum of association to ideQtifythe company's
1)........................ . See also authority to increasecapital tirid(\r
Articles. Consider whether creation of new shares will involve
variation of class rights. If so, appropriate consents may be
. Has the company issued all its share capital?
. 2)."'" of increase of share capital.
. Convene 3)........................ at reasonable notice: Normal
procedure or consider using written resolution procedure.
. Ensure a quorum of 4). .... . is present at the board
. Directors have to 5)....................... that they will put the
increase of share capital to vote at an extraordinary general
. Convene an EGM by notice or use written resolution procedure.
. If written resolution procedure is not used, notice to shareholders
e ordinary resolution
f consent to 6).... .......... ..........
. EQsure the 7).......................... presides at the EGM and that a
quorumof shareholdersis present.
. Pass the ordinary resolution by 8).... ...... "'" on a showof
bMds or by poll.
. board andEGMminutes.
. Lodge at Compallies.Hotise 9). .............. ............. days:
b notice of illc:reaseof 10) ""'''''''''''''''' ....,... (Form 123);
c amended memorandtitn and ,y) articles of
9 e 1: ning p
When explaining how a procedure is carried out, the order of the steps to be
taken can be indicated using sequencing words. Look at the following
examples from the listening text:
Well, the first thing you have to do is check the memorandum of
Then you have to find out whether they've issued all their share capital
already or not.
The next step would be to determine the amount of increase of share capital.
But before the EGM can take place, the shareholders to be informed by
notice about the
and it's necessary that a
15Think about a complicated legal procedure you have to deal with in the course
of your work or which you have studied. Make a checklist to identify what you
have to do to complete this procedure. Explain the procedure carefully to your
partner. He/She should make notes. When you have finished, ask your partner
to repeat back to you the stages of the procedure.
ng 3: e ng
When fundamental changes are made to a company, meetings of the directors and/or
shareholders must be convened so that the proposed changes can be voted on. The
official record of the proceedings of such a meeting is called the minutes.
16Discuss these questions.
1 Who writes the minutes of a meeting?
2 When would a lawyer have to read such a text?
17The text on page 56 is the minutes of a meeting held by board members of a
small company. Read through the minutes quickly. Why was the board meeting
called? Why was the EGM called?
Unit 4 Companylaw:fundamental changes in a company
Minutes of a meeting of the Board of Directors he.ld atCOI11Petnypr~t!;ii$~$,
Date: 2015-12-11; view: 2133