Hi Peace. Can you explain how Noorwood is able to control so...

Hi Peace.

Can you explain how Noorwood is able to control so much of what is going on?

How can they issue such an enormous amount of new shares? Surely there are limits to how many shares you can issue, even if you are the majority holder. What have they done to get round restrictions, or are there just no real restrictions in place - i.e. if you have X% of voting rights you can issue as many shares as you like.

My confusion stems from this possible scenario (I will use the names Noorwood and MRY only for illustrative purposes to make it easier to understand):


There are 100 shares a public company (MRY). The private company (Noorwood Group) get hold of 90. With 90% voting rights they now issue 1000 new shares to 'pay' for their private company (Noorwood Group) effectively giving themselves 1090 of the 1100 total shares. The remaining 10% shareholding in MRY has been diluted to less than 1%, the shareholding by Noorwood has increased 9%, nothing has been paid in return for the 9%.

In the MRY - Noorwood case they will also do a capital raising. But imagine they didn't (this might be a point where I'm tripping up, do they HAVE to do a capital raise? Can you point the legislation to me to read?). Imagine a case where MRY sells the 90% stake to Noorwood for $3m. Remaining shareholders now have a 10% stake in $3m. They do the issue and remaining shareholders in the shell now have a 1% stake in the $3m and Noorwood has its $5m back and has done a back door listing for next to nothing.... Remember this is just for illustrative academic purposes - this is not what has happened here.