SHARES

• Section 2 of the CA 2016 defines “share” as issued

share capital of a corporation and includes stock
except where a distinction between stock and share is
expressed and implied.
• “Preference share” is defined as a share by whatever
name called, which does not entitle the holder to the
right to vote on a resolution or to any right to
participate beyond specified amount in any
distribution whether by way of dividend.
• “Voting share” in relation to a body corporate means
an issued share of the body corporate:
• (a) to which there is attached a right to vote in all
circumstances; or
• (b) not being a share to which a right to vote is
limited only to 1 or more of the following
circumstances:
• (i) during a period in which a dividend, or part of a
dividend, in respect of the share is in arrears;
• (ii)upon a proposal to reduce the share capital of the
body corporate;
• (iii)upon a proposal affecting the rights attached to
the share;
• (iv)upon a proposal to wind up the body corporate;
• (v)upon a proposal for the disposal of the whole of
the property, business and undertakings of the body
corporate;
• (vi )during the winding-up of the body corporate.
• A share or other interest of a member in a company is personal
property and transferable in accordance with Section 105 of the CA
2016.
• Section 71(1) of the CA 2016 provides that a share in a company, other
than preference shares, confers on the holder:
• (a) the right to attend, participate and speak at a meeting;
• (b) the right to vote on a show of hands on any resolution of the
company;
• (c) the right to 1 vote for each share on a poll on
any resolution of the company;
• (d) the right to an equal share in the distribution of
the surplus assets of the company; or
• (e) the right to an equal share in dividends
authorised by the Board.
• Subject to the constitution of the company, shares in a
company may:
• (a) be issued in different classes;
• (b) be redeemable in accordance with Section 72 of the
CA 2016;
• (c) confer preferential rights to distributions of capital or
income;
• (d) confer special, limited or conditional voting rights; or
• (e) not confer voting rights (Section 69, CA 2016).
• Shares are in the same class if the rights attached to
the shares are identical.
• Subject to the constitution of the company, the rights
attached to shares are not to be regarded as different
from those attached to other shares in the same class
only because they do not carry the same rights to
dividends in the 12 months immediately following
the allotment.
• If a company has different classes of shares, the company must
state prominently in its constitution that the company’s share
capital is divided into different classes of shares and the voting
rights attached to shares in each class (Section 90(1), CA 2016).
• If a company has a class of shares of which the holders are not
entitled to vote at the general meetings of the company, the
descriptive title of shares in the class shall include the words
“non-voting” and the company shall ensure that those words
appear legibly on any share certificate, prospectus or directors’
report issued by the company (Section 90(2), CA 2016).
• Pursuant to Section 97(1) of the CA 2016, a company
shall not be required to issue a share certificate unless an
application by a shareholder for a certificate relating to the
shareholder’s shares in a company has been received or
otherwise provided by its constitution.
• A company shall within 60 days from receipt of an
application under Section 97(1) of the CA 2016, send a
share certificate to the shareholder stating the name of
the company, the class of shares held by that person and
the number of shares held by that person.
• Under Section 101(1) of the CA 2016, in the absence
of evidence to the contrary, the entry of the name of
a person in the register of members as shareholder is
prima facie evidence that legal title to the share is
vested in that person.
• A company may by resolution convert any paid-up
shares into stock and reconvert any stock into paid-
up shares of any number, subject to the constitution
(Section 86(1), CA 2016).
• The stockholders may transfer the shares or any part
of the shares in the same manner as the transfer of
shares from which the stock arose may have been
transferred before the conversion. The directors have
the power to fix the minimum amount of stock
transferable and may restrict or forbid the transfer of
fractions of that minimum.
• The stockholders shall, according to the amount of the
stock held by the stockholders, have the same rights,
privileges and advantages with regards to dividends,
voting at meetings of the company and other matters as if
the stockholders held the shares from which the stock
arose.
• No privilege or advantage except participation in the
dividends and profits of the company and in the assets on
winding-up shall be conferred by any such part of stock
which would not, if existing shares have conferred that
privilege or advantage (Section 87, CA 2016).
 Abolition of Par Value Regime
The CA 2016 has abolished the par value of a share. However,
Section 618 of the CA 2016 provides the transitional provisions
relating to the abolition of nominal value. Under Section 618(1)
of the CA 2016, where a share is issued before the
commencement of Section 74 of the CA 2016:
(a) the amount paid on the share shall be the sum of all amounts
paid to the company at any time for the share, but not including
any premium; and
(b) the amount unpaid on the share shall be the difference
between the price of issue of the share, but not including any
premium, and the amount paid on the share.
• Upon the commencement of Section 74 of the CA 2016,
any amount standing to the credit of a company’s share
premium account and capital redemption reserve shall
become part of the company’s share capital.
• However, a company may, pursuant to Section 618(3) of
the CA 2016, within 24 months upon the commencement
of Section 74 of the CA 2016, use the amount standing to
the credit of its share premium account to:
• (a) provide for the premium payable on redemption of
debentures or redeemable preference shares issued before
the commencement of Section 74 of the CA 2016;
• (b) write off:
• (i) the preliminary expenses of the company incurred before
the commencement of Section 74 of the CA 2016;
or
• (ii) expenses incurred, or commissions or brokerages paid or
discounts allowed, before or upon the commencement of
section 74 of the CA 2016, for any duty, fee or tax payable on
or in connection with any issue of shares of the company;
• (c) pay up, under an agreement made before the
commencement of Section 74 of the CA 2016, shares
which were unissued before that date and which are to be
issued upon that date to members of the company as fully
paid bonus shares;
• (d) pay up in whole or in part the balance unpaid on
shares issued before the commencement of Section 74 of
the CA 2016 to members of the company; or
• (e) pay dividends declared before the commencement of
Section 74 of the CA 2016, if such dividends are satisfied
by the issue of shares to members of the company.
• Section 618(4) of the CA 2016 provides that a company
may within 24 months upon the commencement of
Section 74 of the CA 2016, use the amount standing to
the credit of its capital redemption reserve account to pay
up shares which were unissued before that date and which
are to be issued to members of the company as fully paid
bonus shares.
• The same manner of application of capital redemption
reserve is provided for in the CA 1965.
 Preference Shares
• Subject to the company’s constitution, a company having
a share capital may issue preference shares. If it is
authorised by its constitution, a company may issue
preference shares which is liable or at the option of the
company are to be liable, to be redeemed in accordance
with the constitution.
• The redemption of the preference shares shall not be
taken as reducing the amount of share capital of the
company (Section 72(1) to (3) of the CA 2016). The
provisions in the CA 2016 in relation to preference shares
are similar to those provided for under the CA 1965.
• However, preference shares can now be redeemed out of
capital of the company under Section 72(4) of the CA
2016. Preference shares too can be redeemed out of
profits or a fresh issue of shares.
• Redemption of preference shares can only be done if the
shares are fully paid up. Where any such shares are
redeemed otherwise than out of the proceeds of a fresh
issue, a sum equal to the amount of the shares redeemed
shall be transferred into the share capital amounts of the
company out of profits which would otherwise have been
available for dividend.
• If the redemption of shares is from the capital of
the company, it will be subject to the following:
• (a) all the directors have made a solvency statement under
Section 113 of the CA 2016 in relation to the redemption;
and
• (b) the company has lodged a copy of the solvency
statement with the Registrar.
• The Company shall give notice to the Registrar
specifying the shares redeemed within 14 days from
the redemption.
• The rights of a preference shareholders are not
provided for under the CA 2016 unlike Section
148(2) of the CA 1965. In the absence of such
provision under the CA 2016, the constitution of the
company should clearly spell out the rights of
preference shareholders.
 Process of issuance of share

Invitation to Offer Issue of

offer • Interested shares
• Offer of shares parties apply for • Company allot
by company shares and enter
shareholder’s
name in the
register
 Power of Directors to Allot Shares or Grant Rights

• Section 75(1) of the CA 2016 provides that the directors

of a company shall not exercise any of the following
powers unless prior approval by way of resolution by the
company has been obtained:
• (a) to allot shares in the company;
• (b) to grant rights to subscribe for shares in the company;
• (c) to convert any security into shares in the company; or
• (d) to allot shares under an agreement or option or offer.
• It retains the provision of Section 132D of the CA 1965,
except that directors need not obtain prior approval of
the company in relation to the following matters:
• (a) an allotment of shares, or grant of rights, under an
offer made to the members of the company in proportion
to the members’ shareholdings;
• (b) an allotment of shares, or grant of rights, on a bonus
issue of shares to the members of the company in
proportion to the members’ shareholding;
• (c) an allotment of shares to a promoter of a
company that the promoter has agreed to take; or
• (d) shares which are to be issued as consideration or
part consideration for the acquisition of shares or
assets by the company and members of the company
have been notified of the intention to issue the
shares at least 14 days before the date of issue of the
shares.
• For the purposes of Section 75(2)(d) of the CA 2016, members
of the company are deemed to have been notified of the
intention to issue shares of the company if:
• (a) a copy of the statement explaining the purpose of the
intended issue of shares has been sent to every member at his
last known address according to the register of members; and
• (b) the copy of the statement has been advertised in 1 widely
circulated newspaper in Malaysia in the national language and 1
widely circulated newspaper in Malaysia in the English language
• Any issue of shares made by a company in contravention of
Section 75 of the CA 2016 shall be void and consideration
given for the shares shall be recoverable accordingly.
• Any director who knowingly contravenes or permits or
authorizes the contravention of, or fails to take all reasonable
steps to prevent the contravention of Section 75 of the CA
2016 with respect to any issue of shares commits an offence
and shall be liable to compensate the company and the person
to whom the shares were issued for any loss, damages or costs
which the company or that person may have sustained or
incurred.
• Section 75(6) of the CA 2016 provides that,
notwithstanding the Limitation Act 1953, no
proceedings to recover any such loss, damages or
costs shall be commenced after the expiration of 3
years from the date of the issue.
 Allotment

• Dixon CJ in Commonwealth Homes and Investment

Co. Ltd v Smith defined allotment as, ‘Allotment is an
acceptance by the company of the offer for the
shares subscribed and the appropriation of a given
number of shares to the allottee.’
• In Raja Khairulzaman Shah Bin Raja Aziddin v
Zaman Indah Sdn Bhd stated that allotment is an
appropriation to a certain person to a certain number
of shares, but not necessarily of any specific shares
• Section 78(8) provides that any shares without formal
allotment for the purpose of incorporation of a
company shall be deemed to have been allotted on
the date of the incorporation.
• A company shall register an allotment of shares in
the register of members within fourteen day from
the date of the allotment as stipulated by section 77
of the CA 2016.
 Issue

• Issue is when the shareholder is put in control of the

shares allotted to him i.e after his name is entered in
the register of members (and the share certificate is
issued, if any).
• Issue of shares involves allotment, entry of the
shareholder’s name in the share register.
 Share Certificate

• Section 97 of the CA 2016 states that a company

does not need to issue share certificate unless
requested by shareholders or stated otherwise in the
its constitution.
• In the event there is an application by a shareholder
for a certificate relating to the shareholder’s share in
the company, a company shall within 60 days from
receipt of an application, send a share certificate with
the shareholder.