OAO Sportclub is a high profile sports and leisure company that owns a professional football club. The club has enjoyed considerable success in the last three seasons. Revenues from spectator attendances have increased and sales of merchandise have become highly profitable. Konstantin is the club’s major shareholder. He has injected new capital in recent years, but he now has to decide how to fund ambitious and costly expansion plans for the stadium and sports facilities. His preferred approach is to issue new shares in order to raise capital, and he feels that the club’s supporters would be prepared to invest for this purpose. However, Konstantin does not want to reduce his own personal influence in the company. Marina is the company’s finance director. She has suggested that the company should consider issuing bonds in order to raise the necessary funds.Both Konstantin and Marina are aware that the financial performance of a sporting enterprise can change quickly and feel that they need to seriously consider the implications of each option before any decision is taken.Required:Analyse the legal rights and obligations that will be created by funding the company’s future plans by issuing new shares and those that will be created by funding the plans by issuing company bonds. (10 marks)
