Malaysia Company Law - Share Capital

Topics: Stock market, Stock, Corporations law Pages: 11 (3922 words) Published: November 2, 2012
Share capital
A public company can acquire funding by offering or inviting the public to subscribe to its securities (shares). A company limited by shares issues and allots shares to a shareholder in return for capital. This called share or equity capital. Capital structure

Authorized Share Capital
Meaning of authorized and issued capital:
S18(1)(c) Company Act 1965: If the company is limited by shares, its memorandum must state the amount of share capital and its division into shares of a fixed amount. Any issuances of excess shares are void: Bank of Hindustan, China & Japan Ltd v Alison (1871). Reserved or Uncalled capital

Shares that are partly paid. The amount unpaid called ‘reserve capital’ or ‘uncalled capital’. Variation of authorized capital
Table A art 40(a) allows company to increase its authorized share capital in accordance with s62. The decision of increase must made by the general meeting. s62(1)(e): cancel shares which at the date of the passing of the resolution in that behalf has not been taken or agreed to be taken by any person... and diminish the amount of its shares capital by the amount of the shares so cancelled. s62(2) A cancellation of shares under this section shall not been deemed to e a reduction of share capital within the meaning of this Act. Issue of Shares

Contractual rules
Offer and acceptance
A company seek to raise equity funding from members of the public, the company will make an invitation to the public. The offer is accepted by the company through its director, to allot the shares and sends the applicant a notice of allotment, these communications usually by post, and acceptance by post is deemed effective when posted: Byrne v Van Tienhoven (1880) Consideration for shares

Nominal / Par value of shares
Shares issued by the company limited by shares must have a nominal or par value, as stated in s18(1)(c). Fixed amount refers to the nominal or par value of the share. In return for having allotted shares to a shareholder, must receive money or monies worth equal to the nominal or par value of the shares allotted: Ooregum Gold Mining Co of India Ltd v Roper (1892). Non-cash consideration

It is common for companies to issues shares for a consideration other than cash; this form of issue is permitted: Re Wragg (1897). Fully paid shares
Shares held by a shareholder will only be deemed to be fully paid up when a company receives payment that is equivalent to the nominal or par value of those shares: Ooregum Gold Mining Co of India Ltd v Roper (1892). Partly paid shares

As the company does not receive a payment that is equivalent to the nominal or par value of the shares held by a shareholder, those shares shall be deemed to be partly paid up shares. Prohibition against issuing and allotting shares at a discount When does a company issue and allot shares at a discount

A company that issues and allots shares to shareholder as being fully paid up when in fact the company has only received an amount less than the nominal or par value of those shares has engaged in an issue and allotment of shares at a discount: Ooregum Gold Mining Co of India Ltd v Roper (1892). Justification for this prohibition

An issue and allotment of shares at a discount is prohibited, contrary to s18(1)(c) and s214(1)(d). Implications of issuing and allotting shares at a discount
For the company’s officer, s67(3): if s67(1) is contravened, it is not the company but the company’s officers who have committed an offence punishable with imprisonment of up to 5 years or a fine up to RM100,000. S67(4): the court can also order the convicted officer to pay compensation to the company or any other person for loss or damage suffered as a result of the offence. For the shareholders, where shares are issued and allotted at a discount, the holders of those shares continue to remain liable to pay its full nominal value to the company: Ooregum Gold Mining Co of India Ltd v Roper (1892). Validity of...
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