SHARES

Prepared by;
SALMIAH SALLEH
UiTM KAMPUS MELAKA

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 SHARE
What is share?
In Borland’s Trustee v Steel Bros & Co Ltd,
Farwell J defined share as:
“A share is the interest of a shareholder in the
company measured by a sum of money, for
the purpose of liability in the first place, and of
interest in the second, but it also consisting of
mutual covenants entered into by all the
shareholders inter se in accordance with (S
33). The contract contained in the article of
association (constitution) is one of the original
incidents of the shares.”
Shares & s/capitalcosalmiahsalleh201819 2
 A bundle
liabilities

Shares A bundle of
Shareholders interest/rights

Covenant/Contracts
based on Constitution

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 S 2(1) of The CA 2016
“Shares” means issued share capital of a
corporation and includes stock except where a
distinction between stock and shares is expressed
or implied.
”equity share” means any share which is not a preference share.

Nature of shares

S70 of the CA 2016- “A shares or other interest of a

member is personal property and transferable in accordance
with section 105”.

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 MAIN CHARACTERISTIC OF SHARES

1. It gives a right to receive dividend declared on that class of

share.
2. Unless it is a non-voting share, it carries a right to vote at a
general meeting.

3. On liquidation or reduction of capital, a share defines the

right to receive assets distributed to members of that class.
4. Where there is liability e.g the liability to pay calls and
the liability to contribute to the assets of the co in the
event of winding up.
5. Various ‘right of members’ are given by the CA and by
constitution in terms of shares.
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 Share Capital
-It is a capital which come from share.

Kinds of share capital

1. Authorized 3. Reserved or
2. Issued s/capital
s/capital. uncalled capital
It is the nominal
It is the amount The share issued
value of s/capital
of s/capital partly paid
that actually issued
which the co (paid-up capital).
by the co
can issue . The amount unpaid
is called reserved
or uncalled capital.
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 E.g.
AOA – 1,000,000 authorised s/capital.
600,000 issued by the co = issued s/capital.
400,000 paid by the s/holders = paid-up
s/capital.
200,000 – unpaid s/capital or reserved capital.

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 Issue & Allotment of shares
Allotment = the
appropriation to a
ABC Bhd. person of a certain
number of shares

Issue or allot shares Issue = when the

A shareholder is put in
(Transferor) control of the shares
B C (A,B & C subscribe
shares from the co) allotted to him i.e.
Transfer of share after his name is
entered in the register
of members & the
D (transferee)
share cert is issued.
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 Issue & Allotment of share

At a discount.
. At a premium.
-Means an issue
-means an issue of
for a value less
share for an
than the par value
amount greater
of the shares
than the par value
Share premium account
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No par value regime under
The CA 2016
All companies with share capital
migrated to no par value regime.
S 74 – All shares issued before or upon
the commencement of this Act shall
have no par or nominal value.

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Issues – no par value regime
Liability of members for unpaid shares
⚫ S618(1) – recognises unpaid shares(excluding premium)
⚫ S618(6) – liability of the s/holder is not affected.
⚫ S 82 – authorises director to make calls on unpaid shares.
Credit in share premium account
⚫ S618(2) – money in share premium account -> part of
company’s share capital
⚫ Co has option to use it as follows:
⚫ On redemption of debentures or redeemable p/shares
⚫ Write off preliminary expenses
⚫ To pay up under any agreement before Jan 31, 2017
⚫ To pay the balance unpaid on shares
⚫ To pay dividend declared before Jan 31 2017.
⚫ To transfer to any fund established under Financial Services
Act/Islamic Financial Services Act 2013
⚫ Co is given 24 months to use the money (s618(3))
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Share capital
Issues – no par value regime
(cont…)
Share capital
⚫ S618(10) – “…the aggregate value of the shares issued by
the company...” . Means it is the issued capital of the
company until the s/capital notice is filed with the ROC under
subsec (8) n (9).
⚫ S 618(2) – “…any amount standing to the credit of a
company’s share premium account and capital redemption
reserve shall become part of the company’s share capital”.
(if the co decides not to or could not utilised the moneys
within 24 months from Jan 31 2017).

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 POWER TO ISSUE SHARE
GR on members – s 75(1) – prior approval by way of
resolution of members must be obtained before any
allotment of share can be made by the directors.
Exceptions – s75(2) – Director can allot shares
without members’ approval:
⚫ Allot shares under an offer to existing members in proportion
to the members’ shareholding;
⚫ On a bonus issue of shares to existing members on
proportion to the members’ shareholding;
⚫ Allotment of share to a promoter of the company that he has
agreed to take;
⚫ The shares are issued as consideration or part consideration
for the acquisition of shares or asset by the company with
prior notice given to members of at least 14 days.(eg in
Salomon’s case) 13
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 Effect of breach s 75
S75(4) – the shares issued shall be void and the
money paid may be recovered.
S75(5) – the director shall be liable to compensate
the company and the allottee for any loss, damages
or cost which they sustained or incurred (action must
be within 3 year from the date of the issue).
However, the company or allottee may apply to court
for validation of the share under s 108.
Order for validation can be made if it is just and
equitable to do so.

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 CLASSES OF SHARES
S69 – Subject to the constitution of the
company, shares in a company may-
a) be issued in different classes;
b) Be redeemable in accordance with s 72;
c) Confer preferential rights to distributions
of capital or income;
d) Confer special, limited or conditional
voting rights; or
e) Not confer voting rights.
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 Ordinary
Classes of shares
shares Preference
shares

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 Ordinary shares
Is termed as ‘equity share’
S2(1) – “any share which is not a preference share”.
S 71(1) prescribes the rights conferred on the holder of
ordinary shares as follows:
⚫ The right to attend, participate and speak at a meeting;
⚫ The right to vote on a show of hands on any resolution of the company;
⚫ The right to one vote for each share on a poll on any resolution of the
company;
⚫ The right to an equal share in the distribution of the surplus assets of the
company; or
⚫ the right to an equal share in dividend authorized by the board. (may be
modified(negated, altered or added) by the constitution or by the terms on
which it is issued)
It is not necessary for the The company may
holder to enjoy all the rights issued different
prescribed here. classes of ordinary
shares.
Eg non-voting ord shares
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 Preference share
S 2(1)- “a share by whatever name called, which does not entitle the
holder to the right to vote on a resolution or to the right to participate
beyond a specified amount in any distribution whether by way of
dividend, or on redemption, in a winding up, or otherwise”.
Preference shareholder may not have the right:
⚫ Vote; or
⚫ To participate beyond a specified amount on the distribution of:
⚫ Dividend, or

⚫ Surplus assets upon the company’s winding up.

S90(4) – the constitution shall stipulate to rights of preference

shareholders with respect to:
⚫ Repayment of capital;
⚫ Participation in surplus asset and profit;
⚫ Cumulative or non-cumulative dividends;
⚫ Voting;
⚫ Priority of payment of capital; and
⚫ Priority of payment of dividends. 18
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Preference Share
P/shareholder entitled to be paid dividend before
ordinary s/holder.
The dividend is usually paid at a fixed rate. e.g. 10%
per annum.

Ordinary Shares
It is a share when the holder is not to be paid a
dividend until the holder of preference shares have
received a certain minimum dividend.
Generally not fixed but payable at the rate declared by
the co. It will depend on the fortune of the co. It may
be larger or smaller amount.

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 Variation of class right
The CA 2016 allows the class right to be modified.
S 91(1) – the rights attached to share may be varied only:
⚫ In accordance the constitution for the variation of those rights; or
⚫ If no provision in the constitution, with the consent of shareholder in that
class.
Consent of holders may be obtained as follows(s91(3):
⚫ By way of written consent representing not less than 75% of the total voting
right of the holder of shares of that class; or
⚫ By special resolution passed by the holders of share of that class.
The company must give written notice to each shareholder of
that class within 14 days from the date of the variation is
made.(s 92)
Company also must lodge with ROC within 30 days the
following documents:
⚫ Copy of resolution or other document authorising the variation; and
⚫ Any notice as may be required by the ROC.
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 When it takes effect?

It does not take effect immediately.

It take effect-
⚫ If no application is made under s 93 for it to be
disallowed, at the expiration of the period in which
the application may be made(30 days); or
⚫ If the application is made within that period, at the
time the application is finally determined, unless
disallowed.

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 Relief for the holder of class share against
variation of class rights

It does not take effect immediately

S93 – holders of shares representing at least 10% of the total
voting right in that class may apply to the court to cancel the
variation.

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 What is variation of class right?
1) The rights attached to the shares of that class is varied(s91(1)).
2) The provision in the constitution for the variation of right
attached to shares is amended.(s339(6)).
3) The insertion into the constitution a new provision on the
variation of right attached to the class shares(S339(6)).
4) There is abrogation of any right attached to the class share
(ss91(1) & 339(6)).
5) If new preference share are issued ranking pari passu with the
existing preference shares unless when the term of the existing
preference shares authorised it.(S91(5)).
6) New preference shares ranking pari passu may be issued
without subjected to rules on variation if:
1) The terms of existing preference share authorised it; and
2) The new preference shares must be offered to existing holders unless the
constitution states otherwise.

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 What is variation of class right?
The test is whether after the amendment of the constitution, the
holder of the share in question have the rights they had before the
amendment.

If they have the same right,

no variation of class right even though the enjoyment of
those right may have changed.

Eg. The variation of rights attached Class A

share which has the impact on the rights of the
other holder of Class B share does not amount to
variation of class right of Class B shares
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e.g. X hold 30 shares out of 100. Each of these shares carries 5
votes. Y holds the remaining 70 shares which carries 1 vote for
each share.
X = 150 votes
Y = 70 votes
Alteration 1 – If a resolution is passed to reduced X’s
voting power from 5 to 1 for each share. =>30 votes
a variation of class right of X.
Need to follow procedure in s 91(1).

Alteration 2 – If a resolution is passed to increase Y’s voting

power from 1 to 5 for each share. => 350 votes.
it is not a variation of class right of X.
No need to follow s 91(1) or X’s consent is not necessary.
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 Greenhalgh v Arderne Cinemas Ltd

G– 2 s shares Equal voting power (1 vote per share)

10s shares

Resolution – to divide 10s into 2s share => 5 votes.

G sought a declaration that the subdivision was void because
that was without his consent.

Held – G’s consent was not necessary. No variation of class

right of G. G still have the same right as he had before the
resolution ie. 1 vote per share.

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 Transfer of Shares
- occurs when a shareholder(transferor) passes
ownership of the share to another(transferee)

The transferee becomes a new member

of the company.

The transferor ceases to be a member

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General Rule – Shares are presumed to be freely transferable.
S70.
- Public co – shares are transferable unless the constitution
put restrictions.
- Listed Public co – are prohibited by stock Exchange Listing
Requirement from including such restriction in constitution.
- Private co – required by s42(2) to restrict the transfer of
shares.
This is commonly done by:
a. giving a discretion to the directors to refuse to register a
transfer, or
b. stipulating to whom shares may be transferred, or
c. giving to the existing members a right to have any shares
offered to them first before they can be transferred(pre-
emption rights)
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How the shares transferred?

1. Contract between transferor & transferee

e.g. contract of sale & purchase
contract of mortgage.

2. Further steps/procedures

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 Procedure of transfer of
shares
➢ must be in the prescribed form (duly executed
and stamped instrument of transfer) –S105(1) of
the CA 2016.
➢ The form must be signed by the transferor. –
➢ The transferor delivers a signed transfer + share
certificate(if any) to the transferee.
➢ Must be lodged with the co before the name of
the transferee is registered as a
member(s105(3)). Usually done by the
transferee.
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 Procedure of transfer of shares(fully)
contract bt tferor Tferee becomes a
& tferee new member of
the co

Tferor hands over

executed transfer + New share cert issued
share cert(if any) (only if requested)
to the tferee

Tferee lodge the 2 The co registers the

documents to the co name of tferee in
the register of member

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 Procedure of transfer of shares(partly)
contract bt tferor Tferee becomes a
& tferee new member of
the co
Tferor forward the share
Cert(if any) and executed
transfer to the co for New share cert issued
certification
of transfer

Tferor hands them The co registers the

over to the tferee name of tferee in
the register of member

Tferee lodge them

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to the co
 Restriction of transfer
S106(1) – requires a company to enter the name of
the tferee in the register of members as shareholder
within 30 days from the receipt of the instrument of
transfer unless:
⚫ The Act or the constitution expressly permits the director to
refuse or delay the registration for the reason stated;
⚫ The director have passed a resolution to refuse or delay the
registration of the transfer within 30 day from the receipt of
the instrument of transfer and it sets out in full the reasons
for refusing or delaying the registration; and
⚫ The notice of the resolution is sent to both tferor and tferee
within 7 days of the resolution, and if it is a public company,
the notice must include the reason for rejection.

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S106(2) – the directors may refuse or
delay..if the shareholder fails to pay the
company an amount in respect of those
share. (i.e where the shares are not fully
paid-up)
S107 allows the tferor or tferee to apply
to the court for an order to compel the
company to register the transfer.
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 Bona fide
When the director exercise his power to refuse the
registration of transfer, the director must do so bona
fide in the interest of the company.
Mohan v Sepang Omnibus Co Ltd (1964)
⚫ The director rejected the transfer of shares to
Mohan so as to preserve the company’s
bumiputra status.
⚫ Held: the court upheld the decision of the directors
as it was done in the company’s interest.
Kwality Textiles (M)Sdn Bhd v Arunachalam (1990)
⚫ The court held that the director could reject the transfer of
shares in order to prevent a possible breach in the condition
of the company’s manufacturing license.

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 Re Smith & Fawcett Ltd.
AOA : “the directors may at any time in their absolute and
uncontrolled discretion refuse to register any transfer of
share”.
A father(400 shares) The company
died
Applied for registration. But director
refused unless 200 of the shares
Applicant were sold to a certain director at a
stated price. Will register the
remaining.
Held – the director had unfettered discretion which had only
to be exercised bona fide in the interest of the co. The
Applicant failed to challenge the refusal as he could not
prove that the director had
Shares &acted in bad faith.
s/capitalcosalmiahsalleh201819 36
 RE Charle Fort v Amanda
-The director refused to register the new member who
oppose the co’s policy & interset.

Held – The director had properly exercised his discretion

which is for the best interest of the co.
It is not wise to have such a member.

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-S106(1) – If co refuses to register…the co shall within 30
days…send to the tferor & tferee notice of refusal.

-S106(3) – If default – commit an offence. Fine RM50000.

RM500 for each day of continuing offence.
-Also the co may lose the right to deny registration(Re
Swale Dale Cleaners Ltd )

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 Competing Claims arising from transfer of
shares
A forged transfer (bt Other cases – not
true owner & been forged (bt 2
transfree). transfrees):
Is a nullity a. bona fide registered
holder of share will
It does not deprive the have the stronger
person whose signature claim as he is the
is forged of the right registered holder.
Re Bahia and San b. Between 2
Francisco Rail Co unregistered holders –
whose claim arose
first will usually
preferred by priority of
time.
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 Re Bahia
The company
vs
or

Sued for
C forgery A damages
(true owner) B

Held; C, as the true owner, was entitled to have his name

restored to the register as a forgery is a nullity. B could not
acquire better title than the defective title of A. As a result B’s
name was removed.
B has the right against:
-A for fraud
-The co liable to B for damages
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 EG tan & Co v Lim & Tan

P Executed Khoo Transferred to D D

transfer by fraud for payment of
a gambling debt

Held: the court found that D had obtained the shares from Khoo
in payment of a gambling debt. He accordingly held that D was
not a bona fide purchaser for value without notice. D was
ordered to return the shares to the P.

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 Restriction on Transfer of shares
(in brief)

Must be
bona fide
Restrictions If not, the
or conditions refusal
may be
S106(1)(b) and (c)
challenged
Must give notice
of refusal and the reason
for refusal within
7 days of the resolution
being passed.

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 Transmission of shares
it is a transfer of ownership of shares which is
affected by operation of law.
It can be either in one of the following:
1. A shareholder dies
2. A shareholder becomes incapable through mental or
physical incapacity or
3. Becomes bankrupt
to the personal representative or trustee.

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 DIFFERENCE BETWEEN TRANSFER AND
TRANSMISSION OF SHARES
Transfer of shares Transmission of shares
It involves an active act of a Occurs by the operation of law
member. on the death or bankruptcy of a
S105(1) – a transfer cannot be members (if the member is a
registered unless a proper company, on its going into
instrument of transfer in the liquidation).
prescribed form has been S109(2) – but this subsection
delivered to the company shall not prejudice any power to
register as a shareholder or
debenture holder any person to
whom the right to any share in or
debentures of the co has been
transmitted by operation of
law.(no need to be in the
prescribed form).
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 Santapan Minda
Ada 3 kategori manusia:-

•BERJAYA : Hari ini lebih baik

daripada semalam
•TERPEDAYA : Hari ini sama seperti
semalam
•CELAKA : Hari ini lebih teruk
daripada semalam
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 Santapan Minda & Rohani
Wang RM50 kelihatan begitu besar bila
dibawa ke kotak derma masjid, tetapi
begitu kecil bila kita bawa ke supermarket.
45 minit terasa terlalu lama untuk berzikir
tapi betapa pendeknya waktu itu untuk
pertandingan bola sepak.
Semua insan ingin memasuki syurga
tetapi tidak ramai yang berfikir dan
berbicara tentang bagaimana untuk
memasukinya .

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