Chapter 5: Share Capital

Question 1

Characteristics of Shares and Share Certificates (5)

Answer 1

• form of moveable property (asset), has rights and obligations, and is transferable
• must be paid for in full when it is allotted to shareholder
• distinguished by its distinctive number
• A certificate in physical form under signature of authorised officer of the company
  or
  issued in book-entry form (i.e. Electronic) shall be the main evidence of the title of person to such shares
• Manner of issue as may be specified

Question 2

Authorised Share Capital (2)

Answer 2

• Maximum amount of shares (each class) that company may issue
• Amount of the authorized share capital has to be specified in MOA

Question 3

Issued and paid up share capital (2)

Answer 3

• Nominal (Face) value of shares (in each class) that have been issued to shareholders.
• Issued share capital may be less than authorised share capital, but cannot exceed it.

Question 4

Adverts and notices regarding authorized and paid up share capital (2)

Answer 4

• If a company mentions its authorized capital in any advertisement or notice or statement

SHALL ALSO MENTION

amount of its paid up capital in equally conspicuous letters & equally
prominent position

• Default of the above = penalty level 1

Question 5

Ordinary Shares characteristics (3+4)

Answer 5

• Entitled to remaining profit after payment of preference dividend
• WU = Receive payment (if any) after paying nominal value to the preference share
• Classified on:
  > Different voting rights
  > Rights disproportionate to paid up shares
  > No voting rights
  > Different entitlements of dividend/rights/bonus shares

Question 6

Preference shares characteristics (5+4)

Answer 6

• Entitled to receive dividend before ordinary shareholders
• Percentage of Dividend is normally fixed (defined)
• WU = They have prior right of return of nominal value, but no further share in surplus
• Classified on:
  > - Cumulative preference shares
  > Non-cumulative preference shares
  >Redeemable/Irredeemable
  > Convertible to ordinary shares

Question 7

Procedure for change in rights of shareholders (2)

Answer 7

• Can only be made by alteration of AOA through special resolution
• If variation affects the rights of any particular class, it can only be passed if 3/4th majority of that class approves that variation.

Question 8

Right to challenge the variation in rights (5+2)

Answer 8

• Any member/s of affected class with at least 10% shares may apply to court against resolution
• apply W30D of such resolution
• Court shall declare that resolution null and void if:
  > company withheld certain facts
  > change is prejudicial to interest of members
• Court decision = final
• copy of decision sent to registrar W15D

Question 9

Procedure for alteration in capital clause (3+4)

Answer 9

1. Co. may alter capital clause of its MOA by passing Special Resolution to:
   - Increase SC by amount it thinks fit
   - cancel part of authorized capital not yet paid up
   - consolidate shares into larger amount
   - sub-divide shares into smaller amount
2. Co. shall file resolution and altered copy of MOA with the registrar within 15 days of passing the same (Otherwise resolution shall not be effective and shall lapse)
3. New shares shall rank equally to the existing ones