1. Identify the characteristics of the holders of ordinary and preference shares.

The rights of ordinary shareholder can be described as follow:

a. The right to attend, participate and speak at company’s meeting;
b. The right to vote either by show of hands or a poll for each share on any
resolution of the company;
c. The right to be repaid their capital during winding up (after all claimants
paid);
d. The right to share pro rata in any surplus assets of the company; or
e. The right to share equally in any dividends (if declared and not fixed)
authorized by the board.
Preference shareholder
a. No right to attend, participate and speak at company’s meeting;
b. No right to vote either by show of hands or a poll for each share on any
resolution of the company;
c. Priority of payment of capital in relation to other shares and other classes
of preference shares during winding up (after all claimants paid);
d. No right to share pro rata in any surplus assets of the company; or
e. Priority of dividend payment in relation to other shares and other classes
of preference shares

2. Differentiate between fixed charge and floating charge. Provide examples of

assets for each types of charge.
Basis for Fixed charge Floating charge
comparison
1. Meaning Refers to a charge that Refers to a charge that is
can be ascertained with a created on the assets of
specific asset, while circulatory nature.
creating it.
2. Nature Static Dynamic
3. Registration of Compulsory Compulsory
charge
4. Status A legal charge An equitable charge
5. Preference First Second
6. Asset type Non-current asset Current asset
7. Dealing in asset The company has no right The company can use or deal
to deal with the property, with assets until
however subject to crystallization.
certain exceptions.
3. Describe two types of dividends.
 Interim Dividend: It is the dividend which is announced by the company’s
directors before the ascertainment of annual profit and loss and the
company’s annual general meeting (AGM). It is announced by the board of
directors, but it is subject to the approval of shareholders. The interim
dividend is paid either out of retained earnings in the profit and loss
accounts or out of profit and loss accounting year in which the dividend is
sought to be announced.
 Final Dividend: It means a dividend which the company declares after
financial statement for the fiscal year has been reported in the company’s
AGM and the financial and profitability position are ascertained. Once the
final dividend is declared, it becomes an obligation enforceable against
the company.
 Cumulative Dividend: It is paid on cumulative preference shares in which
the company is liable for in the next payment period if it is not satisfied in
the current payment period. Dividends on cumulative preferred shares
are an obligation regardless of the earnings of the company.
 Non-cumulative Dividend: It refer to share that does not pay the
shareholder any dividends that are omitted or unpaid. They do not have
unpaid dividends carried over from previous years. If the management
does not declare dividends for a particular year, it is not reported as
dividend in arrears.

4. Compare and contrast between sole and serial debentures.

 Sole Debenture: It is a secured loan from private individuals or financial
institution or banks. Also known as single debenture.
 Serial Debenture: It is an issue of debt securities or debenture stock in
which a loan is raised usually by means of an offer to the public via Bursa
Malaysia. Also known as public debenture.

5. Match the following sentences with the correct answer.

a. Ordinary shareholders
b. Ordinary shareholders
c. Debenture shareholders
d. Preference shareholder
e. Preference shareholder
f. Debenture shareholders
Discussion Question
1. Ordinary share or equity share is defined in section 2(1) as ‘any share which is
not a preference share’. In other words, shares that are not preferred and do not
have any predetermined dividend amount.
2.
a. The right to attend, participate and speak at company’s meeting;
b. The right to vote either by show of hands or a poll for each share on any
resolution of the company;
c. The right to be repaid their capital during winding up (after all claimants
paid);
d. The right to share pro rata in any surplus assets of the company; or
e. The right to share equally in any dividends (if declared and not fixed)
authorized by the board.
3. Based on section 2(1) of the Act, debentures include any debenture stock, bonds,
sukuk, notes and other securities of a corporation, whether they constitute a
charge on the corporation’s assets or not. A debenture represents a security for
repayment of a loan.
Example case: Levy v Abecorris Slate & Slab Co (1887)

4.
Debenture Holder Shareholder
 Meaning A subscriber to debentures; A shareholder subscribes to
Debentures are the part of loan; It is the shares of a company.
the debt of the company. Shares represent the capital
of the company.
 Status of Creditor of the company A shareholder is the joint
holder Has limited interest in the company owner of a company.
Has multiple interests in the
company.
 Right to A debenture holder is not invited and A shareholder is invited to
attend has no right to vote unless any attend and has the right to
meeting decision affecting his/ her interest is vote in the annual general
and made. meeting of the company.
voting
 Payment Interest on debentures is payable Dividend on shares is to be
of return whether there are profits or not. paid only when the
Interest on debentures may be paid company has earned profits.
out of capital. Dividend on shares can
never be paid out of capital.
 Security Debentures are generally secured and Shares are not secured with
for carry a charge on the assets of the any charges on the
payment company. As a secured creditor of the company’s assets. Shares
company, the debenture holder is are repaid after the payment
paid-off prior to shareholder in the of all the liabilities of
event of winding-up of a company. company.