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The module examines how companies finance their operations: by raising equity or debt capital, using forms of mezzanine financing, or relying on their retained earnings.Ìý

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We will approach the topic from both a finance and a legal perspective. We will discuss basic concepts of corporate valuation and theories of capital structure, including some of the cornerstones of finance theory, such as discounted cash flow and the capital asset pricing model.Ìý

These concepts will inform our analysis of the legal framework governing the capital structure of companies. Our discussion will cover the nature of legal capital, minimum capital rules and the capital maintenance regime pursuant to the UK Companies Act 2006, including the regulation of distributions, capital reductions, share buy-backs and redeemable shares.Ìý

The second part of the module will concentrate on issuing debt and equity. We will again consider the legal framework against the backdrop of finance theory, notably questions of market efficiency and the challenge that behavioural finance poses to the efficient capital market hypothesis.Ìý

We will consider both the corporate law requirements that apply when a company raises equity or debt capital and the extensive requirements of securities regulation that govern the public offering of equity and debt securities and their listing on regulated markets.Ìý

The module focuses on UK law, with references to relevant EU legislation and some other legal systems (particularly US law) where this is helpful to illustrate differences in approaches to regulation and shortcomings of particular regulatory solutions.Ìý

Background knowledge in finance is not required, but students should be willing to engage with the finance literature and familiarise themselves with key concepts of finance theory.Ìý

By the end of this module students should:Ìý

• have a good understanding of the key elements of the legal environment relating to corporate finance;Ìý

• have a solid basic understanding of key concepts of corporate finance, such as net present value, the relationship between risk and return, Modigliani-Miller irrelevance, and the efficient capital market hypothesis;Ìý

• have a solid basic understanding of the relationship between law and corporate finance and be able to evaluate regulatory mechanisms in light of corporate finance theory;Ìý

• have a basic understanding of the interaction of the regulatory environment and current market practice.Ìý