Classes

 of  Shares
It  is  general  practice  for  a  co.  to  issue  different  classes  of  shares.  Such  classes  of  shares  may  differ  with  respect  to  
their  nominal  value,  or  more  fundamentally  the  rights  attached  to  them.

Section  66(1)  CA’65  provides  that  a  company  may  not  issue  PS  unless  certain  rights  are  set  out  in  the  Memorandum/
Articles  of  Association  on  e.g  -­‐  cumulative  or  not;  priority  to  dividend  payment  vis  a  vis  other  shares,  right  to  
participate  in  surplus  of  assets  and  profits,  priority  with  repayment  in  winding  up  and  voting  rights.

Class  Rights
Preference  Shares   Rights  enjoyed  by  particular  classes  of  
(J’09  6a) shares.  Such  rights  will  deal  with  matters  
Section  4  CA’65  -­‐  a  share  by  whatever  name  called  which  does  not   concerning  dividends,  return  of  capital,  
entitle  the  holder  to  vote  at  a  general  meeting  or  to  participate   voting  and  the  right  to  appoint  directors.  All  
beyond  a  specified  amount  in  any  distribution  whether  by  way  of   shares  carrying  identical  rights  are  grouped  
dividend  or  on  redemption,  in  a  winding  up  or  otherwise. together  into  a  class  of  shares.
(e.g  ordinary  shares  and  preference  shares)
-­‐  has  priority  over  ordinary  shares.
-­‐  carries  the  right  to  a  fixed  dividend.

Rights  attached  to  preference  shares

(i)  right  to  cumulative  dividends.
-­‐ refers  to  the  right  to  receive  arrears  of  dividends  IRO  those  years  
where  no  dividend  is  declared.

(ii) right  to  participate  in  surplus  profits.

-­‐ refers  to  the  right  of  the  PS/holder  to  enjoy  a  higher  dividend  in  
those  years  where  the  co.  has  made  higher  profits  and  is  able  to  
give  a  higher  dividend  to  its  ordinary  shareholders.

(iii)  right  to  participate  in  surplus  assets  in  the  winding  up.
-­‐ refers  to  the  right  of  PS/holders  to  share  in  the  surplus  assets  of  
the  co.  when  the  co.  is  wound  up.

(iv)  priority  to  repayment  of  capital.

-­‐ refers  to  the  right  of  the    PS/holders  to  be  repaid  their  capital  
ahead  of  the  ordinary  shareholders  in  a  winding  up  of  the  co.

(v) limited  voting  rights.

-­‐ although  s.4  defines  a  PS  as  a  share  that  does  not  carry  the  right  
to  vote  at  GM,  they  can  and  often  are,  given  limited  voting  
rights.  
e.g  s.148  CA’65

 16  -­‐  1                                                                                                                        ⓒ  Teh  Joo  Ling  All  rights  reserved

 Variation  of  Class  rights
(J’05  Q10a;  J’09  Q6b)
Section  65(1)  CA’65  -­‐  A  variation  of  a  class  right  is  one  
which  directly  alters  the  right  of  a  class  of  shareholders.
(A  distinction  must  be  drawn  between  a  variation  of  a  class  right  and  a  
mere  variation  of  the  enjoyment  of  class  rights.)

Art  4  Table  A  Fourth  Schedule What  is  NOT  variation?

the  rights  attached  to  any  class  of  shares   (a)  Issuing  shares  of  the  same  class  to  allottees  who  are  
(unless  otherwise  provided  by  the  terms  of  issue  of  the   not  already  members  of  that  class  
shares  of  that  class)  may  be  varied  by  one  of   (unless  the  defined  class  right  prohibits  this)
two  methods, -­‐ White  v  Bristol  Aeroplane  Company  Ltd
(although  W’s  block  voting  power  had  been  diluted,  there  were  no  
variation  of  W’s  rights  per  share)
(i) by  the  passing  of  a  special  resolution  at  a  
separate  meeting  of  that  class  of  s/
holders   Section  65(6)  CA’65  -­‐  the  issue  of  PS  ranking  pari  passu  
OR with  existing  PS  is  deemed  a  variation  unless  the  first  
(ii)  with  the  written  consent  of  the  holders   issue  expressly  authorized  it.  
of  at  least  three  fourths  (75%)  of  the   the  co.  will  have  to  follow  the  procedure  in  its  AA.
(the  Malaysian  position  is  diff  from  the  common  law  position  in  White  
issued  shares  of  that  class. v  Bristol  Aeroplane,  which  held  that  even  an  issue  of  PS  ranking  pari  
passu  with  an  existing  one,  will  not  amount  to  variation  of  rights.)

(b)  Subdividing  shares  of  another  class  with  the  

Dissatisfied  Shareholder incidental  effect  of  increasing  the  voting  strength  of  that  
other  class  
-­‐ Allows  holder(s)  of  not  less  than  10%  of  the   -­‐ Greehalgh  v  Arderne  Cinemas  Ltd
issued  shares  of  the  class  in  question (although  the  other  class  of  shares  had  increased  their  voting  power  
5  fold,  there  was  no  variation  of  G’s  rights  per  share)
-­‐ To  challenge  the  validity  of  the  Variation  /  
to  apply  to  court  under  Section  65  CA’65  to  
have  the  variation  or  abrogation  of  their  
rights  cancelled.

-­‐ Application  to  the  court  must  be  made  

within  1  month  after  the  date  on  which  the  
consent  was  given  or  the  resolution  was  
passed.

-­‐ The  variation  or  abrogation  will  be  of  no  

effect  until  confirmed  by  the  court.

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 Issue/Allotment  of  Shares  &  Transfers
When  shares  are  issued/allotted,  the  price  is  received  by  the  co.  When  shares  are  
sold,  the  money  is  paid  to  the  shareholder.  The  co.  receives  nothing.

Transfer  of  Shares

Shares Section  98  CA  ’65
Section  98  CA’65  -­‐  A  share  is  a   proper  sequence:
1. The  transferor  (must  be  the  registered  owner)  executes  a  proper  instrument
transferable  form  of  property.  Legal  title  
2. The  share  certificate  and  transfer  form  are  lodged  with  the  co.
in  a  share  is  vested  in  the  person  to   3.  If  the  transfer  form  is  in  order  and  there  are  no  share  transfer  restrictions,  the  
whom  the  share  is  allotted  or   co.  must  within  1  month  issue  a  new  share  certificate  in  the  name  of  the  
transferred  and  whose  name  is  on  the   transferee  -­‐  Section  105(1)  CA’65
4.  If  there  are  share  transfer  restrictions,  they  must  be  complied  with    otherwise  
register  of  members  IRO  that  shares. the  transfer  will  be  invalid.
5.  If  the  directors  have  a  discretion  to  refuse  to  register  a  transfer,  they  must  make  
Who  is  a  member? a  decision  within  a  reasonable  time.  In  the  event  that  the  transfer  is  rejected,  
notice  of  the  rejection  and  a  statement  of  facts  must  be  sent  to  the  transferor  
A  person  who  has  agreed  to  become  a   and  transferee  within  one  month  after  the  date  that  the  transfer  was  lodged  
member  AND  whose  name  has  been   with  the  co.  Otherwise,  the  transfer  must  be  registered  and  a  new  share  
entered  into  the  register  of  members. certificate  issued  within  1  month
(hence,  where  shares  have  been  sold  but  not  
registered  in  the  name  of  the  purchaser,  the   Restriction  on  Transfer  of  Shares
person  whose  name  is  on  the  register  of   Shares  are  freely  transferable  unless  restrictions  are  
members  remains  the  legal  owner  of  the  shares.)
imposed  by  the  MA  or  AA  
Company  must  within  1  month  issue  the  
-­‐ Lim  Ow  Goik  v  Sungai  Merah  Bus  Co
new  share  cert  with  the  transferee’s  
e.g.  Pre  emptive  rights  -­‐  A  transfer  in  breach  of  the  share  
name  provided  there  are  no  share  
transfer  restrictions  may  be  set  aside.  In  particular,  a  
transfer  restrictions.
transfer  in  breach  of  rights  of  pre-­‐emption  is  invalid.
How  do  you  cease  to  be  a  member?
1. When  M  dies DIR’s  Discretion  to  Refuse  Registration  of  a  Transfer
2. When  shares  are  transferred  and   Directors  have  no  discretion  to  refuse  to  register  a  transfer  
transfer  is  registered of  shares  unless  the  articles  so  provide.
3.When  co.  is  dissolved. Where  provided,  the  power  must  be  exercised  bona  fide    in  
what  they  consider  is  in  the  interests  of  the  co.  and  not  for  
any  collateral  purpose
-­‐ Kesar  Singh  v  Sepang  Omnibus  Co  Ltd

Blank  Transfers
Daily  Telegraph  Co  v  Cohen Executed  by  the  s/holder  named  in  the  share  certificate  but  
where  as  a  result  of  a  forged  transfer  the   which  is  blank  as  regards  the  transferee
original  owner  was  removed  from  the  
register  of  members  and  replaced  by  the  
Obtained  from  Registered  Owner  of  Shares
first  transferee.  X,  who  was  duly  issued  with   -­‐ The  transferee  obtains  an  equitable  interest  in  those  shares  
new  share  certificate  by  the  co.  X  in  turn   even  though  his  name  is  not  filled  in  on  the  transfer  form
transferred  the  shares  to  Y,  who  was  the   Obtained  from  person  other  than  Registered  Owner
registered  s/holder  when  the  forgery  was   -­‐ Most  of  the  problems  arise  when  a  transferor  purports  to  
discovered.  The  court  held  that  the  original  
transfer  shares  that  are  not  registered  in  his  own  name.  
owner  was  to  be  restored  to  the  register  of  
members,  but  Y  was  entitled  to  damages   -­‐ The  transferor  cannot  then  pass  good  title,  in  accordance  
from  the  co.  as  it  was  estopped  from   with  the  principle  nemo  dat  quod  non  habet.
denying  Y’s  title. -­‐ A  forged  transfer  is  a  total  nullity  and  no  title  can  pass  
under  such  transfer  -­‐  Barton  v  London  &  North  Western  
Railway

Share  Certificate  Estoppel

The  share  certificate  contains  the  name  of  the  holder  and  
the  amount  to  which  the  shares  are  paid  up.  This  amounts  to  
representations  by  the  co.  that  the  person  named  in  the  
share  certificate  is  the  owner  of  the  shares  and  the  co.  will  
be  estopped  from  denying  this  to  any  person  who  relied  on  
it  to  his  detriment  -­‐  Daily  Telegraph  Co  v  Cohen

 16  -­‐  3                                                                                                                        ⓒ  Teh  Joo  Ling  All  rights  reserved