Students Online Tutorial Cl c6 2

8/21/2019 Students Online Tutorial Cl c6 2

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Alteration of Share Capital

Increase of share capital

A company may if so authorized by its

articles, and approval of the company ingeneral meeting, increase its share capital

by the creation of new shares

An increase of the share capital may

enable the company to increase its

borrowing capacity.


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An increase of share capital merely increasesthe amount of the nominal or authorized sharecapital of a company and not its issued or paid

up share capital.

Consolidation of shares A company, if so authorized by its articles,

may consolidate and divide all or any of itsshare capital into shares of larger amount thanits existing shares

Five RM1 shares may be consolidated to oneRM


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Conversion of shares into stock

!aid up shares of a company may, if so

authorized by the articles, be convertedinto stoc", or that stoc" may be

reconverted into paid up shares of any

denomination

#toc" is in fact simply a set of shares put

together in a bundle


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Conversion of shares into stock

Stock may be treated as merging the

shares to convert into one fund of anominal value equivalent to that of the

total shares

E.g. 1000 shares of !1 each

"numbered from 1 to 1000# to !1$000

stock.


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Subdivision of Shares

%he opposite of consolidation

A company may subdivide its shares orany of them into shares of a smaller

amount or value than is fixed by the

memorandum.

$here the mar"et price of the shares is

very high and has become less attractive


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&or companies listed on 'ursa

!alaysia ( ule 1) in relation to

Sub(division and Consolidationapplies


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*iminution of shares

A company may, if so authorized by itsarticles, cancel shares %authorized, butnot paid up& which at the date of thepassing of the resolution in that behalf

have not been ta"en or agreed by anyperson, and diminish the amount of itsshare capital by the amount of the sharesso cancelled.


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*iminution of shares

It is merely e+tinguishing some or allof the authori,ed capital -hich has

remained unissued


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eduction of Capital

A Reduction of capital is a reduction of the

issued capital

Fundamental principle of company law '

the share capital once raised cannot be

returned by the company to its members

unless the reduction of capital is

sanctioned by the court


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eduction of Capital

Sec /

(he common law constraints on acompany reducing its capital are mitigatedby '

#ec )* ' allows a company to reduce itsshare capital '

+Subject to confirmation by the Court a

company may if so authorized by itsarticles by special resolution reduce itsshare capital in any way


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eduction of Capital

Sec / CA


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eduction of Capital

Sec / CA

Any return of capital to the members

would reduce the assets that are available

for distribution to the creditors should the

company be wound-up

ourt will have regard to interests of

creditors, members and the public


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Capital !aintenance

ules

/ealing 0y a ompany in its own shares, etc

#ec ) A ' 2o company shall give,whether directly or indirectly

- any loan,

- guarantee,

- the provision of security or

- any financial assistance

For the purchase or subscription by anyperson of any shares in the company


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*ealing 'y a Company in

its o-n shares$ etc

Sec / CA


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(he section also applies where thecompany is a subsidiary, in relation to

shares in its holding company (he company shall also not purchase,

deal in or lend money on its own shares

#ec )%3& ' certain exceptions


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(herefore, under #ec ) A ' a companyis not allowed to purchase, deal in or lend

money on the security of its own shares orthose of its holding company eitherdirectly or indirectly


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Sec / ( %he e+ceptions

S /"2#


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ule 3.2) '!4

A listed issuer or its unlisted subsidiaries may only -

%a& lend or advance any money4 or

%b& guarantee, indemnify or provide collateral for a debt, to

%i& directors or employees of the listed issuer or itssubsidiaries4

%ii& persons to whom the provision of financial assistance -

%aa& is necessary to facilitate the ordinary course ofbusiness of the listed issuer or its subsidiaries4 or

%bb& pursuant to the ordinary course of business of the listedissuer or its

subsidiaries4


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End of

Chapter 6 (File 2) 5 !AICSA All i ht d

www.maicsa.org.my

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Students Online Tutorial Cl c6 2