Forum Archive Index - May 2002

["John Wedde" <John.Wedde@weltec.ac.nz>]

Hi Redredwine,
I'll give this a shot.


I need to know the definition/description of/for an investor.

Questions:

Is an investor an owner in the company?
Can a person invest (financially) in a company without being a
shareholder?
An investor, in the broadest sense, could also be someone who has
loaned money to the company. In this case they are not a shareholder.
Loans however, whether secured [eg a mortgage or debenture], or
unsecured [trade creditors] would rank ahead of shareholders funds in
terms of repayment in the cases of both a statutory or voluntary
liquidation.
Investors who have loaned money to the company in a secured scenario
[eg mortgage] will receive returns on their investment through the
payment of interest. Interest is an expense of the company, not a
disbursement of profit. 
Shareholders receive a return on their investment through the value of
their shares increasing, but also through the dispersal of profits
[dividends]. Creditors of the company, secured or otherwise, do not
receive dividends and  receive no benefit from any increase in the value
of the shares in the company. 


Scenario:

If there are 100 shares in a company divided between 4 directors 33,
33, 
34, 0... do these holdings signify percentage of capital investment
(could 
be thousands of dollars) or simply $1.00 per share as stated in the 
minutes?
Here 3 directors only are shareholders. The 4th director is not a
shareholder, even though they may be an "investor" in the company in the
broadest sense, if they have loaned the company money.


If each shareholder has contributed thousands of dollars for their 
percentage of shares, are they entitled to that percentage of 
disbursements/profits? (Logically, I would say so and this is the point

that I need clearing up)
Shareholders only are entitled to a disbursements of profits
[dividends]. pro rata to the % of shares they hold in the company.
Creditors, are not entitled to dividends.

Is a written agreement between the directors for altered shareholdings

legal enough to be permanant; must it go through the Companies Office?
I think all companies, even small private companies, must advise the
Companies Office of this, but certainly listed public companies must
advise of even the smallest of changes in shareholding via their Share
Registry.

Hope this helps.
Cheers,
John


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