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Published 11 May 2020
A cash box placing is a method of raising cash from the issue of equity securities structured as an issue of shares for non-cash consideration. This allows companies to issue shares without seeking any shareholder consent or convening a general meeting and is very useful for a company that needs to raise funds quickly. It allows for an issue when there is either none or not sufficient disapplication of pre-emption rights authority and enables a larger issue than would be authorised by a standard disapplication, although a general authority to allot shares is still required. In addition, this structure may allow distributable reserves to be created by using merger relief.
Note that this is in addition to the usual general authority required by the directors to allot shares
The issuer issues shares in exchange for the transfer to it of redeemable preference shares in a special purpose subsidiary. The only material asset of the subsidiary is the cash paid to it upon a subscription of shares by an investment bank (or broker). The bank/broker funds the subscription price for the preference shares from the proceeds of the placing of the company's equity securities.
Whilst avoiding the pre-emption rules is one of the key advantages to a cash box placing, it also helps avoid the costs of producing and distributing a circular (where applicable) and notice of meeting, the delay in waiting for the requisite resolutions to be passed and the risk that the resolutions might not be passed.
There will normally be a put and call option agreement in place between the issuer and the bank (or broker). In the event the placing does not proceed for whatever reason, a put and call option agreement will enable the bank/broker to transfer to the issuer the ordinary shares it holds in Newco.
See below an illustration of the steps set out above.
Newcos in cash box placing structures tend to be in Jersey for various reasons including the following:
This note gives a general overview of cash box placings from an English law perspective and its contents are intended to be informative only. This note is not intended to provide legal advice.
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