Security issuance is the process of offering new securities to investors in order to raise funds.
Goals of security issuance:
- to increase or to form the charter capital of a company;
- to raise financing.
The steps for issuing bonds:
- Approval from owners;
- Prospectus registration;
- Issue brief registration;
- State registration of a bond issue;
- Placement of bonds;
- A report on the results of placement of an issue of bonds is submitted to the republican authority.
Advantages of raising finance by issuing bonds:
- Bond interest rate is lower than loan interest rate;
- Company sets the term of borrowing;
- Diversification of Funding Sources;
- Company may set type of interest rate (fixed, variable);
- Freedom to operate as company decide;
- Improving company’s credit score while timely bond redemption;
- Exempting the interest on bonds from income taxation.