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    something2cool's Avatar
    something2cool Posts: 2, Reputation: 1
    New Member
    		  
    #1

    Dec 12, 2008, 02:30 PM
    Issuing new shares, to purchase assets that increase the value of all of the shares,
    As an example ABC ltd, has assets of $500,000 and liabilities of $500,000, with a turnover of $100,000 and a profit of $10,000, retained earning of negative $20,000.

    ABC Ltd was set up with only one share and it is held by the single share holder.

    Then ABC Ltd (under the direction of the shareholder) issues 999 more shares.

    899 of those shares are given (at no cost) to the original one share holder.

    Then the company sells the remaining 100 shares to an investor for $100,000.

    This $100,000 is then used to purchase assets necessary for the company to grow.

    With this asset in place the company wins a contract that increases its turnover and profit.

    Can anybody see anything wrong with this scenario? Both share holders are fully informed of all the facts at all stages.
    Curlyben's Avatar
    Curlyben Posts: 18,514, Reputation: 1860
    BossMan
    		  
    #2

    Dec 12, 2008, 02:31 PM
    Thank you for taking the time to copy your homework to AMHD.
    Please refer to this announcement: Ask Me Help Desk - Announcements in Forum : Homework Help
    something2cool's Avatar
    something2cool Posts: 2, Reputation: 1
    New Member
    		  
    #3

    Dec 12, 2008, 02:39 PM
    Quote Originally Posted by Curlyben View Post
    Thank you for taking the time to copy your homework to AMHD.
    Please refer to this announcement: Ask Me Help Desk - Announcements in Forum : Homework Help
    Hi, did it sound like home work, it is a real company, (I just changed it to ABC Ltd.) that I am involved in. my concern was does this produce tax problems for the initial share holder, I don't want to set up a shareholder loan to the original shareholder as that is not the deal.
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