Equity- and Debt Financing. Pledges and Guarantees

Introduction

All companies need funding for starting and maintaining their business activities. Thus they have to finance their operations. This course gives an introduction to the basic rules of law pertaining to such financing. However, financing through the securities markets is not included in this course as such financing is the subject in another course.

Course content

1. Overview of possible financing structures and alternatives. When, why and how?
   1.1. The main differences between equity- and debt financing: The shareholders’ vs the creditors’ position
    
2. Equity financing
   2.1. Share issues. The Joint Stock Companies Act, Chapter 10
   - Capital increases. Bonus issues or issues of new shares towards payment of par value or above par value
   - Right issues vs private placements
   - The applicable procedures for the share issues
    
3. Debt Financing. The types of transactions. Bank loans vs bond loans
   3.1. Subordinated loans
   3.2. Loan Agreements
   3.3. Mortgage and guarantees. Negative pledges.
   3.4. Factoring
   3.5. Leasing/Sale- and leaseback
   3.6. Asset finance 
    
4. The Loan Agreements
   4.1. The lender
   4.2. The terms of the loan. The conclusion of a loan agreement. Set offs
   4.3. Loan agreements for a fixed amount
   4.4. Loan agreements for credit lines
   4.5. Covenants
   4.6. Due date clauses
    
5. Mortgage and security
   5.1. The relationship between the loan agreement and the mortgage. The secured sum and the underlying effective debt.
   5.2. The background and considerations
   5.3. The assets to be mortgaged
   5.4. Legal protection and priority
   5.5. The parties’ right to dispose of the mortgaged assets
   5.6. The termination of the mortgage period. Forced sales.
    
6. Factoring
    
7. Guarantees
   7.1. Introduction. What is a guarantee
   7.2. The types of guarantees
   7.3. Entering into guarantee agreements. The guarantee terms
   7.4. Due dates for guarantees
   7.5. Termination of guarantee periods
   7.6. Which defenses may the guarantor invoke towards the creditor
   7.7. The guarantor’s recourse claim against the main debtor.
    
8. Leasing/Sale- and leaseback