Topic 2 - Own funding, Apuntes de Administración de Empresas

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Topic 2. OWN FUNDING

FINANCIACION

• Balance sheet. Relation funding-investment:

• Core funding : the long term financial

resources intended, generally, to finance

investments and non-current assets and to

cover a reasonable part of current assets.

INVESTMENT FUNDING:

Financial

resources

Own Funding

They have no fixed repayment date, so the owners

contributions are considered indefinite.

They are considered the guarantee of payment of

the debts of the company.

5

Own Funding in the SGAP

Balance sheet

A) EQUITY

A-1) Capital and reserves without valuation adjustments. I. Capital.

1. Registered Capital.
2. (Uncalled Capital). II. Share premium. III. Reserves.
3. Legal & estatutory.
4. Other reserves. IV. (Own shares and equity holdings). V. Prior periods’ profit & loss.
5. Retained earnings. 2. (Prior periods’ losses). VI. Other equity holder contributions. VII. Profit / (loss) for the period. VIII. (Interim dividend). IX. Other equity instruments. A-2) Valuation adjustments. I. Available for sale financial assets. II. Hedging transactions. III. Other. A-3) Grants, donations y bequests received.

Chart of accounts

Group 1 BASIC FINANCING

**10. Capital

11. Reserves and other equity instruments
12. Profit/Loss pending distribution or application**

CAPITAL

Accounts:

100. Share capital: for profit companies 101. Assigned capital: not for profit entities 102. Capital: individual firms

• Content of the capital account:

(Number of shares x nominal value)

The share capital in:

Spain: Sociedad anónima S.A.

UK: Public limited company or plc

USA: Corporation or Inc

Regulation in Spain:

Real Decreto Legislativo 1/2010, de 2 de julio, por el que se aprueba el texto refundido

de la Ley de Sociedades de Capital, BOE 161 de 3 de julio de 2010,

THE SHARE CAPITAL

Chart of accounts:

100 Share capital (number of shares x nominal value)

190 Shares issued

192 Subscribed shares

194 Issued capital pending regstration

103 Uncalled capital

1030 Uncalled capital

1034 Uncalled capital, pending registration

104 Uncalled non-monetary contributions

1040 Uncalled non-monetary contributions, capital

1044 Uncalled non-monetary contributions, capital pending registration

558 Receivable on called-up-capital

THE SHARE CAPITAL

Types of foundation of the Spanish Sociedad anónima S.A .:

• SIMULTANEOUS FOUNDATION , in only one act (at the same

time) take place the issuing shares, subscription and payment (at

least 25% of the nominal value of the shares).

• SUCCESSIVE FOUNDATION , there are several stages:

1. Issuance

2. Subscription

3. Payment of the mínimum required

4. Registration in the Commercial Register

5. Related expenses

6. Call for the remaining share capital

7. Cash-flow

THE SHARE CAPITAL

Initial contribution in the company’s creation

THE SHARE CAPITAL

SIMULTANEOUS FOUNDATION

• Later, The shareholders are asked to pay the remaining share capital:

75.000 (558)Receivable on

called-up-capital

a (103) Uncalled

capital

75.000 (57)Cash a (558) Receivable on

called-up-capital

• The account 558 means the amount asked to pay to the shareholders. It’s classified as a current asset in the Balance sheet.

Expenses as:

professional fees, legal fees and other related costs due of the

foundation of the company, and subsequent increases or

decreases of share capital.

are recorded along with the capital transaction, decreasing

directly the voluntary reserves account (even at the initial

moment of the company foundation)

THE SHARE CAPITAL

EXPENSES RELATED TO THE FOUNDATION AND CAPITAL INCREASE OR DECREASE

3.000 (113) Voluntary reserves a (57)cash 3.

THE SHARE CAPITAL

SUCCESSIVE CONSTITUTION

Issuance of 10.000 shares of 10€ of nominal value, fully subscribed by the founding members and

paid by 25%. Costs of 3.000€. Later the company asks the shareholders to pay the remaining

of the total capital:

DEBE HABER

1. Issuance (Issue price: NV+SP)

100.000 (190) Shares issued (10.000acc x 10€)

a (194)^ Issued capital pending registration

2. Subscription (Issue price: NV+SP)

100.000 (192) Subscribed shares a (190) Shares issued 100.

3. Payment of the minimum required 25%  K + 100% SP

(57) Cash (1034) Uncalled capital, pending registration

a 100.

4. Registration in the Commercial Register

100.000 (194) Issued capital pending registration

a (100) Share capital 100.

75.000 1030 Uncalled capital (1034) Uncalled capital, pending registration

THE SHARE CAPITAL

SUCCESSIVE CONSTITUTION

Issuance of 10.000 shares of 10€ of nominal value, fully subscribed by the founding members and

paid by 25%. Costs of 3.000€. Later the company asks the shareholders to pay the remaining

of the total capital:

DEBE HABER

5. Related expenses

3.000 (113) Voluntary Reserve a (57) Cash 3.

6. Call for the remaining share capital

75.000 (558)^ Receivable on called-up- capital

a (103) Uncalled capital 75.

7. Cash-flow

75.000 (57) Cash a (558) Receivable on called-up- capital

CAPITAL INCREASE

The share issue price

A PAIR:

Issue price of shares = nominal value of the shares.

WITH PREMIUM OR ADDITIONAL PAID IN CAPITAL:

Issue price of shares > nominal value of the shares.

(Issue price - moninal value = share premium)

Legal minimum payout: 25% of capital (nominal value of the

shares) + 100% of the share premium.

PARTIALLY OR FULLY RELEASED:

The partners’ contribution is lower than the nominal value,

covering the difference against reserves (part released).

CAPITAL INCREASE

PARTNERS’ NEW CONTRIBUTIONS

MONETARY OR NO MONETARY

• For the need of financial resources.
• Condition: current capital must be paid at least 97%.
• Minimum down payment of 25% of the nominal value

of the new shares, plus 100% of the share premium.

• Issue value can be: at par, with share premium or

partially or totally released.

• Same accounting process as the successive constitution

process