1. RE-CAPITALISATIONS FOR CORPORATE CLIENTS OPTIONS/OPPORTUNITIES FOR LEGAL ADVISORS – DES MATETE

2. D EFINITION Broadly, re-capitalisation is the process by which companies restructure their debt and equity mixture even substituting one form of financing with another to ensure the company’s capital structure is robust, strong and stable. Reasons for re-capitalisation vary. Includes regulatory requirements (e.g. banks), fending off hostile take-over bids, leveraged buy-outs, tax planning and/or exit strategy for venture capital funding. Sometimes re-capitalisations are purely to support growth in business and market footprint. Broadly, re-capitalisation is the process by which companies restructure their debt and equity mixture even substituting one form of financing with another to ensure the company’s capital structure is robust, strong and stable. Reasons for re-capitalisation vary. Includes regulatory requirements (e.g. banks), fending off hostile take-over bids, leveraged buy-outs, tax planning and/or exit strategy for venture capital funding. Sometimes re-capitalisations are purely to support growth in business and market footprint.

3. CORPORATE RECAPITALISATION Possible Sources / Types of Funding Equity funding (shares/stock) Debt funding (loans/lines of credit) Quasi-debt (prefs, debentures + securities) Retained Earnings (profits not distributed) Possible Sources / Types of Funding Equity funding (shares/stock) Debt funding (loans/lines of credit) Quasi-debt (prefs, debentures + securities) Retained Earnings (profits not distributed)

4. WHAT INFORMS TYPE OF FUNDING Size of Company  Whether private/public  Publicly quoted or non-quoted  No. and capacity of Shareholders  Group or conglomerate (holding co. guarantees)  Ability to raise collateral Purposes of Funding  Working capital  CAPEX  Project finance  Acquisition & Expansion Cost & Tenure  Cheaper long-term funding preferred Size of Company  Whether private/public  Publicly quoted or non-quoted  No. and capacity of Shareholders  Group or conglomerate (holding co. guarantees)  Ability to raise collateral Purposes of Funding  Working capital  CAPEX  Project finance  Acquisition & Expansion Cost & Tenure  Cheaper long-term funding preferred

5. WHAT INFORMS TYPE OF FUNDING CONT /… Shareholder capacity  Institutional e.g. pension funds, PE Funds, Asset managers, Insurance companies, Banks  Individuals – perceived to be weak. Capital markets (maturity and appetite)  Securities, bonds, debentures etc Balance sheet Re-structuring  Swapping - expensive for cheaper funding  Refinancing costly short term debt Shareholder capacity  Institutional e.g. pension funds, PE Funds, Asset managers, Insurance companies, Banks  Individuals – perceived to be weak. Capital markets (maturity and appetite)  Securities, bonds, debentures etc Balance sheet Re-structuring  Swapping - expensive for cheaper funding  Refinancing costly short term debt

6. KEY CONSIDERATIONS Determine quantum of Funding Required Should be justified by Project/Business needs Determine Type of Funding (Equity/Debt) Check Corporate Approvals Required:  Board approvals (support resolutions)  Shareholder approvals (if equity)  Regulatory approvals – quoted companies and regulated entities e.g. banks, insurance firms Determine quantum of Funding Required Should be justified by Project/Business needs Determine Type of Funding (Equity/Debt) Check Corporate Approvals Required:  Board approvals (support resolutions)  Shareholder approvals (if equity)  Regulatory approvals – quoted companies and regulated entities e.g. banks, insurance firms

7. KEY CONSIDERATIONS CONT /....... Timing of Programme (market conditions and events) Engagement of Advisors (Independent advisors)  Auditors  Reporting Accountants  Financial advisors  Legal Advisors  Sponsoring Brokers (if Listing)  Share Transfer Secretaries Documentation for Capital Raising  Circulars and Media Briefs  Prospectus Timing of Programme (market conditions and events) Engagement of Advisors (Independent advisors)  Auditors  Reporting Accountants  Financial advisors  Legal Advisors  Sponsoring Brokers (if Listing)  Share Transfer Secretaries Documentation for Capital Raising  Circulars and Media Briefs  Prospectus

8. RIGHTS ISSUE (P UBLIC COMPANIES / PRIVATE COMPANIES ) Definition It is an issue of rights to buy additional shares in a company made to existing shareholders on a company’s share register. A common way of raising capital where shareholders have the privilege to buy a specified number of new shares at a specified price within a specified time. In quoted company, rights issues are a form of public offering but different from an offer to the general public. Definition It is an issue of rights to buy additional shares in a company made to existing shareholders on a company’s share register. A common way of raising capital where shareholders have the privilege to buy a specified number of new shares at a specified price within a specified time. In quoted company, rights issues are a form of public offering but different from an offer to the general public.

9. Key Items to Consider Price per new (rights issue) share No. of new shares to shareholders Issued shares vs Shares under the directors’ control Check capacity from Authorised Share Capital Special resolution – to increase ASC Determine potential dilution levels Renounceable or Non-renounceable Underwritten or Not underwritten  To guarantee capital required is raised  Existing shareholders can underwrite  Third party institutions can underwrite  Formal agreement required – fees and exit Key Items to Consider Price per new (rights issue) share No. of new shares to shareholders Issued shares vs Shares under the directors’ control Check capacity from Authorised Share Capital Special resolution – to increase ASC Determine potential dilution levels Renounceable or Non-renounceable Underwritten or Not underwritten  To guarantee capital required is raised  Existing shareholders can underwrite  Third party institutions can underwrite  Formal agreement required – fees and exit

10. Shareholder approvals – at an AGM or EGM Observe notice periods per Companies Act Ordinary Resolutions and Special Resolutions General rule of thumb - Issues which change capital structure and voting rights require Special Resolutions. Special Resolutions generally passed by 75% of shareholding. Anything other decisions require ordinary resolutions with a majority of 51% to pass. Shareholder approvals – at an AGM or EGM Observe notice periods per Companies Act Ordinary Resolutions and Special Resolutions General rule of thumb - Issues which change capital structure and voting rights require Special Resolutions. Special Resolutions generally passed by 75% of shareholding. Anything other decisions require ordinary resolutions with a majority of 51% to pass.

11. PRIVATE PLACEMENTS Definition Non-public offering of shares in a public company through a private offering. This is mostly an equity based offer to a party who is not already a shareholder in the company Both public and private companies can do private placements. Since private companies have privately held shares, any offering of shares is and can only be a private offering Definition Non-public offering of shares in a public company through a private offering. This is mostly an equity based offer to a party who is not already a shareholder in the company Both public and private companies can do private placements. Since private companies have privately held shares, any offering of shares is and can only be a private offering

12. MOTIVATION Mainly to raise equity or quasi-debt capital Basis for cementing strategic alliance – equity sweetener Strengthen relationship with Technical partners in line of Business. Mostly for technology driven businesses Management Contract – contract manager can be given share incentive Mainly to raise equity or quasi-debt capital Basis for cementing strategic alliance – equity sweetener Strengthen relationship with Technical partners in line of Business. Mostly for technology driven businesses Management Contract – contract manager can be given share incentive

13. LEGAL ISSUES TO COVER Review Shareholder Agreements - Anti-dilution clauses Pre-emptive rights for new issue shares Express Waivers by existing shareholders Market canvass & Road shows - gauge appetite/capacity If to existing Shareholder check impact on:-  Increase in Voting rights  Board representation/control  Management Control - Appointment of key management positions Review Shareholder Agreements - Anti-dilution clauses Pre-emptive rights for new issue shares Express Waivers by existing shareholders Market canvass & Road shows - gauge appetite/capacity If to existing Shareholder check impact on:-  Increase in Voting rights  Board representation/control  Management Control - Appointment of key management positions

14. PUBLIC LISTING – I.P.O / P.O INITIAL PUBLIC OFFER Public offering through which shares in a company are sold to the general public on the Stock Exchange for the first time. Reasons for listing include capital for expansion, fungibility of shares and profile for future ease of access to financiers. IPO converts a private company into to a public company Statutes to comply with - Companies Act, SEC and ZSE Listing Rules PREPARATION OF PROSPECTUS (Ss. 53, 54 Companies Act) Details of business plans, strategy and performance Disclosures – key information required by investors Financial information – projections, assets & liabilities Corporate Governance – practices, structure and profiles INITIAL PUBLIC OFFER Public offering through which shares in a company are sold to the general public on the Stock Exchange for the first time. Reasons for listing include capital for expansion, fungibility of shares and profile for future ease of access to financiers. IPO converts a private company into to a public company Statutes to comply with - Companies Act, SEC and ZSE Listing Rules PREPARATION OF PROSPECTUS (Ss. 53, 54 Companies Act) Details of business plans, strategy and performance Disclosures – key information required by investors Financial information – projections, assets & liabilities Corporate Governance – practices, structure and profiles

15. LEGAL ISSUES TO COVER Board and Shareholder Approvals Prospectus Approved by Stock Exchange Listing or Investor Diary/Calendar of Events included Prospectus Compliance with Companies Act (s.54) Registration of Prospectus by Registrar of Companies (s.56) Experts’ written Consents to the Prospectus (s.55) Underwriting and Sub-Underwriter Agreements (s.60) Road shows and Media campaign to build support for IPO Board and Shareholder Approvals Prospectus Approved by Stock Exchange Listing or Investor Diary/Calendar of Events included Prospectus Compliance with Companies Act (s.54) Registration of Prospectus by Registrar of Companies (s.56) Experts’ written Consents to the Prospectus (s.55) Underwriting and Sub-Underwriter Agreements (s.60) Road shows and Media campaign to build support for IPO

16. D EBT / LOAN FUNDING Approach Bank/Financier with Loan Application Check Borrowing Limits – see Memo & Articles. Gearing ratios always a concern for lenders and shareholders. Application of Funds and Repayment capacity Collateral – securitisation; Mortgage Bonds, Notarial Bonds (NGCBs/SNCBs), Suretyships, Pledges and Liens. Tangible cover. Loan Agreement – spell out tenure, interest, repayment of loan and foreclosure conditions + other terms. Approach Bank/Financier with Loan Application Check Borrowing Limits – see Memo & Articles. Gearing ratios always a concern for lenders and shareholders. Application of Funds and Repayment capacity Collateral – securitisation; Mortgage Bonds, Notarial Bonds (NGCBs/SNCBs), Suretyships, Pledges and Liens. Tangible cover. Loan Agreement – spell out tenure, interest, repayment of loan and foreclosure conditions + other terms.

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