SHARE CAPITAL

PART 1

Lee Jia Chern

Introduction:
What is a ‘share’?
• S2(1), Companies Act 2016 – issued share capital of a corporation and includes stock
except where a distinction between stock and shares is expressed or implied.
• Borland’s Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279
• Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] 2 All ER 841
• Peters’American Delicacy Co Ltd v Health (1939) 61 CLR 457
• A share may represent both of the rights and liabilities of a shareholder.
Introduction:
Nature of Shares
1. S70, Companies Act 2016:
• Personal property; and
• Transferable according to s105

2. A movable property – s2 of the Sale of Goods Act 1957

3. A chose in action
4. A bundle of rights – Malpac Holdings Bhd v Malpac Capital Sdn Bhd [2017] MLJU 1257
Introduction: Terminologies
1. Registered capital
• The maximum amount of capital which a company is authorised to raise by issuing
its shares.

2. Issued capital
• Part of the authorised capital of a company that has been issued to its shareholders.

3. Paid-up capital
• Part of the issued capital that has been paid up by the shareholders.
 Introduction: Terminologies
4. Unpaid capital
• Amount unpaid on shares issued which could be called upon at a specific time.
• s82 – calls on shares
5. Called-up capital
• Portion of the shares which the shareholders are called upon to pay.
6. Uncalled capital
• The part of the capital which can be called only in the event of its winding up.
Introduction:
Unpaid Capital
• S82(1) – ‘the directors may make calls upon the shareholders in respect of any money
unpaid on the shares of the shareholders and not by the conditions of allotment of
shares made payable at fixed date’.
 No call shall be more than ¼ of the issued price of the shares;
 No call shall be payable within 30 days from the date fixed for payment by previous call;
 A 14 days’ notice to the member;
 Payment may be made in instalments;
 Joint holders of a share jointly and severally liable to pay all calls;
 Constitution may impose interests for any late payment; the rate shall not exceed 8%.
Unpaid Capital:
Failure to Pay
1. Forfeiture of Shares – s83
• In the event that a shareholder fails to make payment for any call or instalment within the
stipulated time, the directors may serve a notice on the shareholder.
• The notice is to ask for payment and inform the shareholder that the shares unpaid will be
forfeited if payment is defaulted.
• Forfeiture to be done by passing a directors’ resolution.

2. Lien on Shares – s111

Issuance of Shares
1. Koffyfontein Mines Ltd v Mosely [1911] 1 Ch 73
2. National Westminster Bank plc & Anor v IRC [1994] 2 BCLC 239
• Shares are issued when an application has been followed by allotment and notification and
completed by entry on the register. Once the shares have been issued, the shareholder is entitled to
a share certificate.
• The share certificate declares to all the world that the person who is named in it is the registered
holder of certain shares in the company and that the shares are paid up to the extent therein
mentioned.
• Cf ss97(1) and 101(1), Companies Act 2016.
3. Raja Kamarulzaman Shah bin Raja Aziddin v Zaman Indah Sdn Bhd [1979] 2 MLJ 181
Issuance of Shares:
Power to Allot Shares (s75)
1. Allotment of shares is to be approved by the members – company’s resolution.
[s75(1)]
2. Such approval may be made unconditionally or subject to certain conditions.
[s76(1)]
3. How long is the effective period of this approval?
• Public company [s76(3)(a)]
• Private company [s76(3)(b)]
4. The approval may be revoked or varied at any time by company’s resolution.
[s76(4)]
5. The approval may be exempted if the issuance falls under s75(2):
• The allotment of shares are made to the existing members in proportion to
their respective shareholding.
• A bonus issue of shares allotted in proportion to the members’
shareholding.
• Allotment of shares to the company’s promoter.
• Issuance as consideration or part consideration for the acquisition of shares
or assets by the company.
Issuance of Shares:
Non-compliance of S75
• Shares issued become void. [s75(4)]
• Consideration paid to be recovered accordingly.
• Directors shall take all reasonable steps to prevent any contravention of s75. Failure to
do so amounting to an offence. Hence, liable to compensate the company and the
shareholder for any loss or damage. [s75(5)]
• Limitation period – 3 years from the date of issue. [s75(6)]
• Directors may apply to validate the shares improperly issued.
Validation Of Improper Allotment Of Shares (s108)
1. Court may validate an improper issue or allotment of shares if it is just and equitable to do
so.
2. Such an application may be made by the company, a shareholder, a mortgagee of any share,
or a creditor of the company. [s108(1)]
3. The issue is invalid due to:
• Any provision in the Companies Act 2016 or other written law;
• The constitution of the company or otherwise; or
• The terms of issue or allotment were inconsistent with or unauthorised by such provision.

4. Court’s discretion to grant a validating order.

5. Kelapa Sawit (Teluk Anson Sdn Bhd vYeoh Kim Leng & Ors [1991] 1 MLJ 301
6. Saw Seng Kee v Nadzri & Ng Securities Sdn Bhd [1996] 2 AMR 1578
7. Re Swan Brewery Co Ltd (No.2) (1978) 3 ACLR 168