Commercial Paper Short Term Financing

Commercial Paper Short Term Financing-73
Public sector companies if they fulfil the conditions set out in 2;4.Public sector companies without equity capital but which are authorised to launch a public offer;5.Negotiable debt securities can be issued at a price other than par, and can offer a redemption premium.

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And due to this, only companies with high credit ratings are eligible to sell their commercial paper at reasonable prices.

Further, due to the shorter maturity period, the rate of return is relatively low.

532-18 of the Monetary and Financial Code and authorised to hold cash accounts; e) the Caisse des Dépôts et Consignations; f) a legal entity established in France whose principal or sole purpose is the custody or administration of financial instruments referred to in point 5° of Article L. Before agreeing to domicile the securities, the institutions acting as issuing and paying agents must ensure that the issuer complies with the terms and conditions of issue as set forth in Articles L. 213-4-1 of the Monetary and Financial Code and the texts implementing said articles. Such bodies are included in a list laid down by order of the Minister of the Economy and approved by the Banque de France.

Each issuing and paying agent must submit information on the market for the issuer’s securities to the Banque de France, in accordance with a process determined by the Banque de France. Prior to the issue, the issuers must submit financial documentation to the Banque de France, comprising:1° A presentation of the issuing programme(s) containing the details required by order of the Minister of the Economy;2° A presentation of the issuer’s legal and financial situation;3° The documents pertaining to the previous two financial years distributed at meetings of the shareholders or of the body acting in such a capacity, notably the annual financial statements and, where applicable, the consolidated financial statements, the reports of the board of directors, the management board and the supervisory board, as the case may be, and the reports of the statutory auditors, or of the persons acting as such, certifying the true and fair nature of the information provided in the accounts.

Issuers incorporated outside the European Economic Area must submit accounting data that has been audited in accordance with a public oversight system that is deemed equivalent by the European Commission.

If the issuer is a company that is responsible for cash management within a group, the accounting data must be submitted for the group as a whole based on the consolidated financial statements of the consolidating company.4° A declaration by either an individual, stating their identity and their role within the company, or by a legal entity, indicating their company name and their place of incorporation, in which they accept responsibility for the financial documentation and certify that, to the best of their knowledge, the information submitted by the issuer is accurate and precise, that no information has been omitted such that the significance of the information may be altered, and that the documentation does not contain any false or misleading statements.Definition: Commercial Paper or CP is defined as a short-term, unsecured money market instrument, issued as a promissory note by big corporations having excellent credit ratings.As the instrument is not backed by collateral, only large firms with considerable financial strength are authorised to issue the instrument. 213-3 of the Monetary and Financial Code are authorised to issue negotiable debt securities:1.Credit institutions, investment firms and the Caisse des Dépôts et Consignations, provided that they comply with the relevant conditions laid down by the Minister of the Economy;1a.Economic interest groupings and partnerships made up solely of joint-stock companies that meet the conditions set forth in point 2;6. The Agence centrale des organismes de sécurité sociale (France’s central social security agency) only for short-term negotiable debt securities;13.European Union institutions and international organisations;7. The Caisse d'amortissement de la dette sociale (social security debt amortisation fund) instituted by Article 1 of Ordinance 96-50 of 24 January 1996 on the reimbursement of social security debt;8. Associations governed by the Act of 1 July 1901 on the contract of association or by Articles 21 to 79 of the local civil code applicable in the Bas-Rhin, Haut-Rhin and Moselle departments that meet the conditions for the issue of bonds by public offering;10. Regional hospitals, the list of which is established by decree, up to the amount of the overall issuance ceiling established for each of them by the said decree.The primary purpose of issuing commercial paper is to raise short-term funds so as to meet working capital requirements of the firm.However, firms also raise money through CP’s to fill the gap between fund required currently and long term funds raised from the market.CP’s are sold at a discount but redeemed at face value.Thus, the effective pre-tax cost will be calculated as: In India, commercial paper can be issued by large corporates, primary dealers and all-India financial institutions.


Comments Commercial Paper Short Term Financing

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