Question

Mountain Co. Ltd. is a small public company limited by shares formed in September 2020 which adopts the Model Articles for public companies limited by shares as its articles of association. Mountain Co. Ltd. does not have much profit and it now wants to raise more share capital but does not want to spend a lot of cost on raising more share capital. Mountain Co. Ltd. seeks your advice on the possible ways for it to raise more share capital. Mountain Co. Ltd. also wants to know whether it can issue partly-paid shares.

Answer 1

Mountain Co. Ltd. can raise more share capital through private placement, convertible debt, and issuing partly-paid shares.

Step-by-step explanation:

Mountain Co. Ltd. can consider several options to raise more share capital without spending a lot of cost:

1. Private Placement: Mountain Co. Ltd. can privately offer shares to a select group of investors, such as venture capitalists. This allows them to raise capital without incurring the expenses associated with a public offering.
2. Convertible Debt: Mountain Co. Ltd. can issue convertible debt, which is a form of borrowing that can be converted into shares at a later date. This allows them to raise capital and defer the cost of raising equity until a later time.
3. Partly-Paid Shares: Yes, Mountain Co. Ltd. can issue partly-paid shares. Partly-paid shares are shares that are initially issued with only a portion of the share price paid upfront, with the remainder to be paid at a later date. This allows the company to raise capital while providing flexibility for shareholders to pay the remaining amount.