Last Updated on December 15, 2022 by Anda Malescu
Corporate finance law focuses on an important part of the society’s economy. Corporate finance law consists of the legal rules that structure the financing of a business or start-up, i.e. how a company can obtain funds to finance its operations. Corporate finance law is related to other areas of law such as general contract law, property law, corporate law and securities law.
Corporate finance law refers to the sources of funding and capital structures used by corporations to increase the business value, raise operating capital and improve financial results of shareholders. Capital structure is more than simply the firm’s selection of its debt to-equity ratio. Generally speaking, it is the decision of how to raise the funds to pay for the corporation’s assets. The term “corporate finance” is also related to investment banking. The typical role of an investment bank is to evaluate the company’s financial needs and raise the appropriate type of capital that best fits those needs. The primary goal of financial management is to maximize or to continually increase shareholder value.
Corporate finance deals with the fundamental principle of what a company and its stock are worth
The law outlines what financial tools are used to determine value, the duties directors have to ensure value and the legal rights that various parties, including shareholders, have in regard to securities and dividend payments.
Corporations can be financed through a variety of methods such as stock sales and bond transactions. Many of these transactions are tightly regulated at the federal level by the Securities and Exchange Commission (SEC). Examples of corporate finance are the funds that are used as capital contribution when the company is incorporated. This is facilitating the start of the business. Later in the operation of a company, the company can require additional capital in order to finance new operations or to keep the existing operations running. Companies have a wide range of options when it comes to financing.
Companies can either obtain a loan from a bank or allow new shareholders to provide equity finance and therefore to become owners of the company. If so, the company should set the terms straight. This means that the company should mention the ordinary shares with voting rights, the preference shares with limited voting rights and the tracking of the shares. Companies can also issue debt instruments such as bonds and can list the equity or debt instruments on a primary market.
Capital budgeting is also related to the criteria on which companies choose the projects that receive investment funding to increase the value of the firm
Investments should be made on the basis of value-added to the future of the corporation. Projects that increase a firm’s value may include a wide variety of different types of investments, including but not limited to, expansion policies, or mergers and acquisitions. Corporate finance is a very important aspect for a corporation’s operation and evolution. A good financing policy allows successful business growth.
Contact us or schedule of consultation with your business lawyer in Miami, Florida USA to assist you in your corporate finance law needs and help you build a fundraising mechanism for your company.
Malescu Law P.A. – Corporate Lawyers
