students online tutorial cl c6 1

8/21/2019 Students Online Tutorial Cl c6 1

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Share Capital

Learning Outcome

To understand the different types of share

capital and alteration of share capital To know about the issue of shares at a

premium and discount

To understand the capital maintenancerules

To know the rules on share buybacks


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Classification of Capital

Nominal or authorized capital

The authorized capital is the maximum

amount of capital which a company isauthorized to raise by issuing its shares

Issued capital An issued capital is that part of the

authorized capital of a company which

had been issued to its members


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Issued capital

A share is said to be issued and thusforms part of the issued capital of a

company if the name of the shareholder

has been registered in the register of

members in respect of those shares


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Paid up capital

The paid – up capital of a company

represents that part of the issued capitalwhich has been fully paid up by thatmembers, or credited as having beenpaid

!hen shares are allotted to a person, hebecomes liable to pay to the company thevalue of the shares allotted in accordancewith the articles


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Unpaid capital

An unpaid capital represents that

remaining part of the issued capital of acompany which has not been paid up by

the members and can be called up by the

company in accordance with its Articles

"calls and contributions#


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$or example, a company may have anauthorised capital of %&'((,(((

Ordinary shares divided into '((,(((

ordinary shares of %&) each

)((,((( shares is issued

%&*(,((( is paid up

+npaid capital is the remainder of the issuedcapital which has not been paid up ie%&(,(((


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Issue of Shares – Sec

132D

-n the event that the company wishes to

issue new shares, the directors must obtain

the approval of the company in general

meeting – .ec )*'/")# of the 0A

The approval in general meeting is not

re1uired if the shares to be issued are to beused in consideration or part consideration in

exchange for the purchase of shares or

assets – .ec )*'/"2A#


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Issue of shares at a premium

- Sec 6 C!

A company is allowed to issue shares at a

premium

The premium is the sum in excess of their

nominal or face value

The premium must be credited to a share

premium account


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Issue of shares at a premium

- Sec 6 C!

.o if shares issued are valued at %&)3(

per share and but the shareholder pays

%&)4( per share The premium of

%&(*( per share are transferred to a

share premium account

The share premium account may be used

to pay for bonus issue of shares, to payfor balance unpaid on shares issued and

also for payment of dividends


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Issue of Shares !t a

discount – Sec "#

To issue shares at a discount means – at

a price below their nominal value and

shareholder have no further liability to pay

the difference

The conditions for issue of shares at a

discount are –


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discount – Sec "#$1%


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discount – Sec "#$1%


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Pre-emption &i'hts –

&i'hts Issue

-n order to ensure that existing

shareholders rights are not diluted by new

issue of shares, the Articles of a company

may re1uire that all new e1uity shares

must before they are issued, first be

offered to the existing members in the

proportion of their existing shareholdings


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Pre-emption &i'hts –

&i'hts Issue – (a)le !

Such an offer is called a &i'hts Issue

The shareholders are said to have pre5

emption rights "ie rights of refusal# Listed companies must comply with %ule

2) to 2'4 of the 6&L%

%ights issue is essentially when the

shareholder is given the right to subscribefor ) new share for every ' shares theycurrently hold, for example


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!lteration of Share Capital

The share capital of a company is no

immutable, and can be altered in general

meeting

(he follo*in' modes of alteration of

the capital are authorized )+ section

62$1% C!


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Po*er of compan+ to alter its

share capital – S 62 if authorized

)+ !rticles in 'eneral meetin'


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End of

Chapter 6 (File 1) , !ICS! !ll &i'hts &eser/ed

www.maicsa.org.my

students online tutorial cl c6 1

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