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1. COMPANY LAW
SHARES AND SHARE CAPITAL
• Shares and variation of class rights
• The raising and maintenance of Share Capital
• Financial Assistance and share buyback.
1

2. INTRODUCTION
• S. 10 (1)(a) & (2) - A company may be incorporated as a company
limited by shares. It means that the liability of its members is limited
to the amount of unpaid (if any) for the shares held by the members
• S. 11 (1) - Company limited by shares can be either in a form of
private or public company
• Purpose of issuance of shares – to raise capital
2

3. 3 terms associated with share capital:
Issued Capital
• Number of shares that has been offered and taken by shareholders.
Paid up capital
• Paid up capital refers to the amount of money actually received by the
company from the shareholders. The amount can be smaller than
number of shares issued.
Unpaid Capital
• Unpaid capital refers to the amount of share capital, which the
company has called up the shareholders to pay but the shareholders
failed to pay. As such, that amount is called unpaid capital.
3

4. NATURE OF SHARES
• S. 2 - “share” as issued share capital of a corporation and includes
stock except where a distinction between stock and share is
expressed and implied.
• S. 2 – 'Owning shares
• S. 70 - Shares is a personal property and transferrable in accordance to
section 105.
4

5. RIGHTS ATTACHED TO SHARES
• S. 88 - The term ‘rights attached to shares’ refers to the right as members.
Payment of dividend.
Voting rights.
Capital return.
Any other rights specified under Companies Act 2016 or the constitution.
5

6. TYPES OF SHARES
• S. 69 (1) - shares in a company can be in different classes. It can be
redeemable in accordance to section 72. It also can confer upon the holders
preferential rights on distribution of capital and income. It may also have
special, limited, conditional right to vote or even carries no voting right at
all. In other words, shares of a company may be issued in different classes
with different rights. However, these rules may be modified by a specific
provision in the company’s constitution.
• S. 89 (1) - Shares are to be considered as in the same classes if they share
similar characteristics and the holders enjoy similar rights .
6

7. • S. 90 (1) – the company which has different classes of shares must
prominently state in its constitution:
a. The company’s share capital is divided into different classes of shares;
and
b. The voting rights attached to shares in each classes.
• S. 90 (2) – if the company has a class of shares without voting rights, the
descriptive title of those shares shall include the word “non-voting” AND
the company must ensure that those words appear legibly in the share
certificate, prospectus or director’s report issued by the company.
• However, this requirement does not apply to preference shares [ss (3)].
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8. TWO CLASSES OF SHARES
a) Ordinary Shares
• Ordinary share is the common type of share. If the
company does not declare for the existence of any
other type or class of shares, the shares in the company
is presumed to be ordinary shares. All the shareholders
in the company holding the ordinary shares hold the
same rights in the company, and they are treated
equally.
• Ordinary share is other than preference share (also
known as “equity shares”). Rights / characteristics
stated in S. 71
8

9. Rights & Powers Attached To Shares
• S. 71 (1) - Except for preference shares, rights and powers attached to
the shares are:
(a) To attend, participate and speak in meetings;
(b) To vote on show of hands;
(c) To have one vote for each shares on poll;
(d) To equal shares in distribution of surplus in company’s assets; and
(e) To equal shares in dividend as authorized by the Board.
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10. b) Preference Share
• S. 2 defines preference share = shares by whatever
names which do not give the right to vote on
company’s resolution, right to participate beyond the
amount specified in any distribution whether by way of
dividend or on redemption in a winding up or
otherwise.
• S. 72 (1) - subject to the constitution, a company with
share capital may issue preference shares.
• S. 90 (4) – no company shall allot preference shares or
convert any issued shares to preference shares unless
provided by the constitution.
10

11. •Rights of preference shareholder shall be set out in the
constitution – S. 90 (4).
•Those rights are with respect to:
Repayment of capital;
Participation in surplus assets & profits
Cumulative or non cumulative dividend;
Voting rights;
Priority in capital return and dividend payment
compared to other shares or other classes of preference
shares.
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12. Types Of Preference Shares
•Participating Preference Shares
•Cumulative and Non Cumulative Preference Shares
•Convertible Preference Shares
•Redeemable Preference Shares
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13. Types Of Preference Shares
1. Participating Preference Shares
Right to participate further in the distribution of
profits beyond the fixed rate of interests.
2. Cumulative and non-cumulative Preference Shares
Cumulative - whose dividend, if not paid will
accumulate. If the company does not pay the fixed
rate of dividend in any year, the deficiency will be
made up to the future year.
Non-cumulative – where dividend is not paid, it will
not be accumulated.
13

14. 3. Convertible Preference Shares
Preference shares that can be converted to ordinary
shares. The number of shares and conversion price
are predetermined.
4. Redeemable Preference Shares
Preference shares that can be re-purchased by the
issuing company. (see S. 72 (2))
• Must be authorised by the constitution.
• Redemption be made in accordance with the
constitution.
• The shares are fully paid up [ss (4)]
• It shall not be treated as reduction of capital [ss
(3)].
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15. • Redemption shall be out of profit / a fresh issue of
shares or capital of the company.
• In cases where shares are redeemed out of capital,
TWO things must be done i.e. [s.s. (6)]
a. A solvency statement is made by ALL the
directors, pursuant to sec. 113; and
b. The solvency statement has to be lodged with the
Registrar.
• The company need to notify the Registrar specifying
the shares redeemed within 14 days from
redemption[s.s(7)].
15

16. DIFFERENCE BETWEEN PREFERENCE
SHARE AND ORDINARY SHARE
• a) Voting right.
• b) Payment of dividend.
• c) Payment of Capital return.
16

17. VARIATION OF CLASS RIGHTS
• S. 91 - Variation of class rights may be carried out only:
a. In accordance to variation clauses in the company’s
constitution; Crumpton v. Morrine Hal Pty. Ltd.
Facts: Company’s sole asset was a building divided into 6
home units. Article of the company provides that the
share capital be divided into different class. Ownership of
shares for each class conferred upon the holder the right
to the exclusive use of the home unit. Modification on
rights in the article provides that the consent of majority
of that class is needed before any rights could be altered.
17

18. A resolution was passed altering AOA to restrict the right
to let out the home units. The company did not follow
modification clause. Plaintiff complained that she had
never consented to the alteration.
Held: The alteration did not affect plaintiff’s right as
modification clause had not been complied with.
18

19. b. If there is no such clauses, in accordance to the
consent given by the shareholders in the class.
• The said consent is EITHER by a written consent
representing not less than 75% out of the total voting
rights of shareholders in the said class OR by a passing
of a special resolution of shareholders of the said class
sanctioning the variation [S. 91 (2)].
19

20. • S. 92 – the company must notify all shareholders in
the varied class of such variation within 14 days from
the date it was made.
• S 93 (1) & (2) - Upon such variation, shareholders
representing not less than 10% out of total voting
rights may still forward an application to Court for the
variation to be disallowed. Such application shall be
made within 30 days from the date of variation.
Application may be made by any shareholders of the
class upon authorization in writing by all shareholders
of the said class.
• S 93 (3) – Upon hearing the application, Court may
either disallow or confirm the variation based on the
consideration of whether such variation will or will not
unfairly prejudice the shareholders represented by the
application.
20

21. •S. 94 – In cases where application was made under S.
93, a copy of Court order need to be lodged with the
Registrar within 14 days from the date of the Order.
Failure of which – the company & every officer may
be liable for a fine not exceeding RM10,000/- and
continuous default – additional RM500/- per day in
default.
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22. • S. 91 (3) – Any variation shall take effect:
a. If no application made under S. 93 – on the
expiration of period in which application may be
made i.e. 30 days after the variation (applicable as
well in cases where there is application under S. 93
but it was withdrawn before the expiry date [s.s.
(4)]);
b. If application was made under S. 93 – at the time the
application is determined unless the variation is
disallowed.
22

23. • S. 95 – within 30 days from the date in which the
variation take effect, the company must lodge with the
Registrar:
a. A copy of resolution or any document authorizing
the variation; and
b. Statement of capital as per date in which the
variation take effect.
• Greenhalgh v. Ardene Cinemas Ltd [1946] 1 All ER
512
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24. ISSUANCE OF SHARES
• S. 74 – shares issued without par / nominal value.
• The effect of no par value:
a. Premium account, capital redemption reserve and the
concept of authorized capital will no longer be applicable.
b. Transitional period of 24 months is given for companies
to utilized the amount standing in the premium account.
c. Shares will be issued at a price determined by the
directors based on current prevailing factors affecting the
company at the time of issuance.
• The rule of pre-emptive right applies in the issuance of
shares which rank in equal with the existing shares (voting
rights / distribution right) subject to the provision in the
constitution [S. 85].
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25. ALLOTMENT OF SHARES
• Generally, directors shall have no power to allot shares unless EXCEPT
there is a prior approval by a resolution of the company (refer to S. 76) for
the directors to do so [S. 75 (1)].
• However, the rule shall not applies in cases where it involves [s.s. (2)]
i. allotment of shares under an offer made to the members based on
shareholdings;
ii. allotment of shares in respect of bonus issue;
iii. allotment of shares to the promoter of the company; and
iv. issue of shares in consideration or part consideration for acquisition of
assets or shares made by the company. Members need to be notified
about the intention to issue such shares, 14 days before the date of the
said issuance.
25

26. • Any issue of shares in contravention with the rules shall
be void.
• Any consideration in respect of those shares shall be
recoverable [s.s. (4)]. The directors responsible in the
commission of those act (knowingly / permits / authorize
the contravention or fails to take reasonable steps to
prevent the contravention) shall be liable to compensate
the company or person to whom the shares were issued,
for any losses, damages or costs incurred as result of
such contravention. Any proceedings for damages etc in
respect of such contravention shall be made before the
expiry of three years from the issue date [s.s. (6)].
26

27. • After allotment, TWO documents need to be updated / prepared within
14 days from the date of allotment:
• S. 77 – register of members as prescribed in S. 50 need to be updated;
and
• S. 78 – return of allotment together with the statement as required in each
separate cases prescribed by S. 78.
• General – s.s. (2)
• Special cases – s.s. (6); However in cases where allotment was made
under scheme of arrangement pursuant to S. 366, the return of allotment
shall be lodged with a copy of Court order in lieu of statement under s.s.
(6).
27

28. Shares issued without formal allotment eg. during
incorporation, the shares is deemed to have been
allotted on the date of incorporation.
Contravention – the company and all officers are
committing an offence and liable for fine not
exceeding RM10,000. Any continuing default will be
fine not exceeding RM500/- per every day in default.
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29. - Payment usually by cash.
- In case where payment was made by cheque. The
payment is considered made once the cheque has
been cleared
Allotment for consideration other than cash
•Can be in any form other than money. Either
property or services.
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30. SHARE CERTIFICATE
 S. 97 – unless otherwise stated in the constitution, the company will
only require to issue share cert upon request by the shareholders under S.
97 (1).
 S. 98 – Upon receiving the request, the company shall issue the cert
within 60 days.
• S. 99 - If the company fails to deliver the cert, a request may be
forwarded to the company for delivery and the company has to deliver
the cert within 14 days from the date of receiving the request. Failure to
deliver gives the person entitle to the cert to apply for the Court order to
direct the company to do so within the period prescribed by the order.
The order may also prescribed on who shall bear the costs.
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31. Unlike the old statutory provisions, under the CA
2016, register of members shall be a prima facie
evidence of a legal title towards the shares [S. 101]. It
is the duty of the secretary to properly kept the register
and make necessary entry either in cases of issuance or
transfer of shares [S. 102[. The register may be
rectified on the application of aggrieved party for
Court order [S. 103].
S. 63 – Common seal (if any) shall be used as official
seal on the share certificate.
31

32. TRANSFER OF SHARES
• S. 105 – any shares or debentures may be
transferred either partly or fully by executing
the transfer instrument, stamped it or lodge it
with the company.
• Particulars of the transfer, shall be entered to
the register of members within 30 days from
the date of receipt of the instrument [S. 106].
If the company refuse to register the transfer,
either transferee or transferor may apply for
Court’s order [S. 107].
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