3bros Berhad Case Summary

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Based on the roughly explanation of the equity capital and loan capital, we will like to suggest to Hassan, Harjeet, and Henry to raise their company lnamed ‘3Bros Berhad’ to increase their working capital through loan capital.

As we can see that loan capital is a loan that entitled to suffer fixed interest instead of dividend whether the company is having profits or losses. Moreover, company who fail to pay back the loan within a specified period will be sued by the debenture holder. Based on the situation above, 3Bro Berhad had been set up since 3 years ago and now the company recently has been appealing more and more customers. Nevertheless, they required to raise RM2 million as working for the growth of business due to the reason that …show more content…

The interest rate of share capital can either be variable (ordinary shares) or fixed (preference share). Shareholders will expect at least an annual dividend as their investment return. The company will distribute dividend based on the profit they made for the year. 3Bros Berhad may have option on distribution of dividend whenever the company is making a profit or loss for the year or even after the distribution is authorized, they can on hold or recall the distribution right off. However, if 3Bros Berhad decide to raise the RM2 million fund by issue share capital, 3Bros Berhad will need to declared dividend until the company collapse or bankrupt. Which means, as long the company still exist in the registry, it have the responsibility to distribute dividend for their shareholder for the entire corporate life even though the company have the option to not distribute the dividend to shareholders. Assume that, if the company issue preference share capital, 3Bros Berhad must distribute the dividend annually with a fixed interest rate and the dividend must be cumulated over the years if the company making a loss and paid to the preference shareholders while making

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