Alteration of Share Capital

Increase of share capital

A company may if so authorized by its

articles, and approval of the company in

general 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.

Alteration of Share Capital

An increase of share capital merely increases

the amount of the nominal or authorized share

capital 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 its

share capital into shares of larger amount than
its existing shares
Five RM1 shares may be consolidated to one
RM5

Alteration of Share Capital

Conversion of shares into stock
Paid up shares of a company may, if so

authorized by the articles, be converted

into stock, or that stock may be
reconverted into paid up shares of any
denomination
Stock is in fact simply a set of shares put

together in a bundle

Alteration of Share Capital

Conversion of shares into stock
Stock may be treated as merging the

shares to convert into one fund of a

nominal value equivalent to that of the
total shares
E.g. 1000 shares of RM1 each

(numbered from 1 to 1000) to RM1,000

stock.

Alteration of Share Capital

Subdivision of Shares
The opposite of consolidation
A company may subdivide its shares or

any of them into shares of a smaller

amount or value than is fixed by the
memorandum.
Where the market price of the shares is
very high and has become less attractive

For companies listed on Bursa

Malaysia - Rule 13 in relation to
Sub-division and Consolidation
applies

Alteration of Share Capital

Diminution of shares
A company may, if so authorized by its

articles, cancel shares (authorized, but

not paid up) which at the date of the
passing of the resolution in that behalf
have not been taken or agreed by any
person, and diminish the amount of its
share capital by the amount of the shares
so cancelled.

Alteration of Share Capital

Diminution of shares
It is merely extinguishing some or all

of the authorized capital which has

remained unissued

Reduction 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

Reduction of Capital
Sec 64
The common law constraints on a

company reducing its capital are mitigated

by
Sec 64 allows a company to reduce its
share capital
Subject to confirmation by the Court a
company may if so authorized by its
articles by special resolution reduce its
share capital in any way

Reduction of Capital
Sec 64 CA

Reduction of Capital
Sec 64 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
Court will have regard to interests of

creditors, members and the public

Capital Maintenance
Rules
Dealing By a Company in its own shares, etc
Sec 67 CA No company shall give,

whether directly or indirectly

- any loan,
- guarantee,
- the provision of security or
- any financial assistance
For the purchase or subscription by any
person of any shares in the company

Dealing By a Company in
its own shares, etc
Sec 67 CA

 The section also applies where the

company is a subsidiary, in relation to

shares in its holding company
The company shall also not purchase,
deal in or lend money on its own shares
Sec 67(2) certain exceptions

 Therefore, under Sec 67 CA a company

is not allowed to purchase, deal in or lend

money on the security of its own shares or
those of its holding company either
directly or indirectly

Sec 67 - The exceptions

S 67(2)

Rule 8.23 BMLR

A listed issuer or its unlisted subsidiaries may only (a)

lend or advance any money; or
(b)
guarantee, indemnify or provide collateral for a debt, to

(i)
directors or employees of the listed issuer or its
subsidiaries;

(ii)
persons to whom the provision of financial assistance (aa) is necessary to facilitate the ordinary course of
business of the listed issuer or its subsidiaries; or
(bb) pursuant to the ordinary course of business of the listed
issuer or its
subsidiaries;

www.maicsa.org.my

End of
Chapter 6 (File 2)
@ MAICSA. All Rights Reserved