1. Define a share：The share is the interest of the shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders. In a word, the shares are assets in the company capital, which can get dividend and right to influence company with a vote.
Ordinary shares: all shares are ordinary unless defined otherwise, they share profits equally,and there is a certain dividend, besides, shareholders can attend meetings and vote on company matters.
Preference shares: the shareholders of preference shares have right with preferential treatment, they have a fixed rate dividend, and will receive their dividends first before ordinary shareholders. If company makes loss payment in one year, the preference dividend becomes the debt which need to be paid when the company made profits., where they may be purchased. Shares in public company purchased on stock exchange. Whilst shares in private company purchased by company secretary. Shareholders of ordinary shares have a right to acquired the share.
2.1. Company can raise money but usually needs authority of board of directors, sometimes managing director has authority to borrow on his/her own, not usually a single director. A company can take a loan and issues shares. Debentures (sometimes likened to a company mortgage) can be issued to raise loan capital.
2. Debentures are like a company mortgage, they listed with company register. Besides, debentures and shares have some similarities,they are termed as securities, and they all bought and sold on stock market. But there still are some differences: in terms of debenture, holders are then creditors of company, interest must be paid even if no profit, companies can buy debentures issued by themselves.
3. Company charges (Securities in Scotland),it likes straight forward loans, which registered at Companies House There are two types of company charges: Fixed; this agreement specifies an asset to act as security for the loan. Floating; this charge does not attach to the property until it is deliberately invoked.
4. Secured / unsecured loans; preferential rates of interest can sometimes be obtained if a company asset is used as collateral against the loan. Defaulting on the loan means the lender can sell the asset to pay off the debt. If an asset is used the loan is ˉsecuredˇ against it. Unsecured loans are not protected this way.
3. The rules that govern how the company can raise finance can be found in the Articles of association. Decisions on borrowing are usually taken by the Board of the directors. The Managing Director can be authorised to act alone sometimes, but a single director could not enter into a borrowing agreement on behalf of the company. In addition, other powers to raise finance can be agreed at Company General Meeting.
Lenders must ensure that the directors have the power to borrow otherwise the loan may not be recoverable. If the directors has acted over their power and it is not recoverable, it becomes known as ‘ultra vires’ and may be unenforceable. However, in some cases the board can decide at its meeting to ratify the decision.