Abstract

The article describes several types of shares. It is concentrated on different kinds of preference shares. It reveals the market price of ordinary shares. The notion of share certificate is introduced in the conclusion.

TEXT IV

IMF - THE INTERNATIONAL MONETARY FUND.

The International Monetary Fund is a cooperative intergovernmental monetary and financial institution. Its politics and activities are guided by its charter, known as the Articles of Agreement (the Article). The IMF is unique among intergovernmental organizations in its combination of regulatory, consultative, and financial functions, which derive from the purposes for which it was established: to facilitate the balance growth of international trade, promote exchange rate stability, and assist in the establishment of a multilateral system of payments in respect of current transactions between members and the elimination of foreign exchange restrictions that hamper the growth of world trade; to provide financial resources to enable its members to correct payments imbalance without resorting to trade and payments restrictions; and to provide a forum for consultation and collaboration on international monetary problems. Thus, the Fund is concerned not only with the problems of individual countries but also with the working of the international monetary system. Its activities are focused on promoting policies and strategies through which its members can work together to ensure a stable world financial system and sustainable economic growth.

The articles effectively place the IMF at the center of the international monetary system. The Fund provides a forum for international monetary cooperation, and thus for an orderly evolution of the system, and it subjects a wide idea of international monetary affairs to covenants of law, moral suasion, and understanding. The Fund must also stand ready to deal with crisis situations, not only those affecting individual members but also those representing systematic threats to the international monetary system.

As an essential aspect of its responsibilities associated with overseeing the international monetary system to ensure its effective monetary operation the IMF exercises surveillance over the policies of its members in complying with their obligations specified in the articles. Under the Articles, each member undertakes to collaborate with the Fund and other members to ensure orderly exchange arrangements and to promote a stable system of exchange rates. Members’ specific obligations include adopting economic and financial policies to foster economic growth with reasonable price stability, promising stability by fostering orderly underlying economic and financial conditions and a monetary system that does not tend to produce erratic disruptions, and avoiding manipulation of exchange rates or the international monetary system in order to prevent disbalance of payments adjustment or to gain unfair competitive advantage over other members. Members are obliged to follow exchange rate policies compatible with these undertakings. The Fund oversees the compliance of each member with its obligations through the principles and procedures of surveillance, including firm surveillance over the exchange rate policies of its members, and this serves as the focal point of its surveillance over other aspects of the members’ obligations.

Because the IMF is responsible for the smooth functioning of the international monetary and payments system, it is particularly concerned with global liquidity- that is, with the level and composition of reserves available to member nations to meet their trade and payments requirements. The Fund also has a major responsibility as a source of additional liquidity through the allocation to its members of the special drawing rights (SDR), a reserve asset that is the first asset ever to be created by international decision. The Fund has a promotional role in fulfilling the objective, as established in its articles, of making the SDR the principal reserve asset of the international monetary system. The Fund is also a repository of members' liquid international reserves in the form of reserve positions and loan claims on the institution.

The IMF maintains a large pool of resources from which to help finance temporary imbalance in the balance of payments of its members. These resources are of a revolting character and are primarily derived form currencies deposited by members. The IMF may supplement these resources by borrowing. To use Fund resources, a member must represent to the institution that it has need of them because of its balance of payments or its reserve position of developments in its reserves. The use of Fund resources is based on equal and nondiscriminatory treatment of members, with due regard to their domestic social and political objectives. The Fund’s policies encourage members to have resource to the Fund’s financial facilities at an early stage of the members’ balance of payments problems. Financial assistance provided by the Fund allows members to correct their payments imbalance without having to resort to trade and payments restrictions. The Fund acts as a catalyst in so far as policy adjustments implemented by members undertaking IMF- supported programs help to generate additional financial assistance form other sources, such as private and official creditors. The Fund functions as a financial intermediary in so far as it recycles funds from surplus to deficit countries.

The transactions of the IMF are exchanges of monetary assets by the Fund for other monetary assets. Operations of the Fund are other uses or receipts of monetary assets by the Fund. These financial transactions and operations are conducted through the General Department, the SDR Department, and the Administered Accounts.

The IMF’s unit of account is the SDR, whose value is calculated daily as a weighted average of five major currencies. The Fund's financial year runs from May 1 to April 30.

Each member country is required to designate a fiscal agency and a depository to conduct its dealings with the IMF. The fiscal agency may be the member’s treasury (ministry of finance), central bank, official monetary agency, stabilization fund, or other similar entity. The IMF can deal only with or through, the designated fiscal agency, which is accordingly authorized to carry out, on behalf of the member country, all operations and transactions authorized under the Articles. In addition, each member is required to designate its central bank as a depository for all the IMF’s holdings of its currency. If it has no central bank, it can designate another institution, such as monetary agency, or even a commercial bank, that is acceptable to the Fund.

The IMF maintains close contacts and collaboration with other international organizations, particularly its sister Bretton Woods institution, the International Bank for Reconstruction and Development (the World Bank). Relations with the World Bank are mainly of a nonfinancial character (except for the Bank’s status as a prescribed holder of SDRs) because of the fundamentally different mechanism by which the Fund and the Bank finance their respective activities, and because each institution has separate purposes, functions and operations.

Collaboration also takes place between the IMF and the General Agreement on Tariffs and Trade (GATT).

In 1989 the Fund became an Executive Agency for the United Nations Development Programme (UNDP), and this cooperative arrangement has enabled the Fund to expand the amount of technical assistance it provides, as well as to help the UNDP to achieve its development aims. Under the arrangements with the UNDP, projects aimed to improve economic or financial management in a country are agreed among the country, the IMF and the UNDP.

The IMF has also cooperated with regional development banks, including the African Development Bank, Inter-American Development Bank, and the Asian Development Bank. The areas of cooperation have included, among other, early clearance of arrears, normalization of creditor relations, and technical assistance programmes for member countries.

The Fund's Articles do not permit it to engage its general resources in guarantee or reinsurance schemes, including those for commercial bank lending or suppliers’ credits, nor does the Fund participate in negotiations between debtor countries and banks. Various links to IMF arrangements have been included in bank loan agreements with Fund members, although in general the Fund’s policy is to discourage such linkage where feasible and to accept the linkage only when necessary to obtain satisfactory bank financing agreements in concerted financing cases. Such links have included conditions in loan agreements that make disbursements under the agreement subject to the borrowing countries' having an agreement with IMF, having made specified purchases under an IMF agreement. In this connection, at the member's request, information about a member’s standing in the Fund or purchases made under an IMF arrangement can be provided to banks.

Fund Credit and Tranch Policies - the policies under which members may make use of Fund Credit. The amount of such use is related to a member's quota. Fund credit is made available in a range of four tranches, each of which is equal to 25 per cent of a member’s quota. A first credit tranche is defined as one that raises the Fund's holdings or a member's currency in the credit tranche from zero to 25 percent of quota. The three subsequent successive tranches, each equal to 25 percent of quota, are known as upper credit tranches. The distinction between first and upper credit tranches also reflects the higher conditionally that accompanies the use of Fund credit in the upper tranches. In addition to purchases under the Fund's credit tranche policies, members may use the Fund’s resources under the decision establishing the compensatory and contingency financing facility (COFF), the buffer stack financing facility (BSFF), and the extended Fund facility (EFF).

Charges and Interest.

When members purchase other members' currencies or SDRs from the IMF, they incur charges for the use of Fund credit. Purchases in the reserve tranche are not considered to be a use of Fund credit, but rather a use of reserve asset, and accordingly are not subject to charge or to repurchase. Also it is not required that a member first purchase its reserve tranche before it can have access to the Fund's various credit facilities.

Effective May 1 1993, a single rate of charge applies to the use of Fund credit financed from the Fund's general resources. Since May 1, 1989, the rate of charge has been set as a proportion of the SDR interest rate and varies weekly with changes in the SDR rate. The rate of charge is adjusted at the end of each financial quarter under the decision on burden sharing. Charges on the use of general resources are payable after the close of each of the Fund's financial quarters /July, October, January, and April/.

The rate of charge applies to the daily balance of all outstanding purchases during the quarter. A repurchase is applied against the balance of the outstanding purchase to which it relates and, accordingly, reduces the balance of the purchase that is subject to charge. In addition, special charges are levied on overdue obligations to recover the direct financial cost to the Fund resulting from late payments. Overdue repurchases are subject to an additional rate of charge equal to the difference between the SDR interest rate and the “basic” rate of charge. The SDR interest rate applies as a special charge to overdue charges.

A highly concessional interest rate, equal to Ѕ of 1 percent, is levied on loans outstanding under the Trust Fund, structural adjustment facility (SAF), and enhanced structural adjustment facility (EASF).

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