Chapter 41
FINANCIAL MANAGEMENT : Choice of corporate structure

Shareholder structure explains how power is distributed among a company's different shareholders or groups of shareholders. Major shareholder categories are as follows:

Defensive measures for maintaining control of a company's capital carry a cost, because they prevent investors from taking advantage of the potential opportunities a takeover might create.

These measures include:

The best protection against a change of control is a good operating performance and a high share price which make shareholders happy and loyal.

Tax considerations aside, whether a group is made up of subsidiaries or divisions depends on control and organisational factors. Listing certain subsidiaries gives the group access to additional equity capital without changing the shareholder structure of the group. But such carve-outs risk transforming the parent company into a financial holding company.

Lastly, remember that shares with low market liquidity, shares of a holding company or conglomerate or shares without voting rights often trade at discounted values. These discounts increase the cost of capital.