Equity finance

Equity finance may be summarised as broadly the provision of capital from the company's owners, and usually takes the form of the issue of shares in the company in exchange for the owner contributing cash or other assets. Equity finance can be sought in a number of scenarios, such as share placements, an initial public offering, rights issues or bonus offerings.

Shares may be subscribed for cash or non-cash consideration, and shares may be partly paid or fully paid. In addition, options over unissued shares and other convertible securities may be issued to investors. Shares may be issued with different rights and in different classes, such as preference shares issued with preferential dividend rights.

Dividends are broadly payments made to members on their shares in return for their equity investment. Since June 2010, dividends no longer have to be paid out of profits but may be paid on satisfaction of a three part test.

See Equity finance.