#business law##accounting#

Question 6: Corporate funding

Alta (NZ) Ltd (Alta) is the New Zealand subsidiary of a Danish company. Altas senior managers buy out the business from its Danish parent. The managers will retain a majority stake in Alta but will sell shares to Monica Reeves, a venture capitalist. They wish to reinvest the funds they receive from Monica back into Alta. They are prepared to assume risk but need a monthly return and want to rank above Monica on liquidation.

Monica would like a portion of her investment in debt-like finance. However, the high level of Altas debt to equity ratio means that the bank would not prepared to lend it any more if the financing is structured this way so an alternative must be found.

Recommend a form of business finance that would best suit the needs of:

a) Altas senior managers (5 marks)

b) Monica. (5 marks)

Give reasons for your choice.