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ADM657

COMPANY SECRETARIAL PRACTICE II

ADM657 COMPANY SECRETARIAL PRACTICE II PM Alicia Tan & Dr Norziana Lokman

PM Alicia Tan & Dr Norziana Lokman

Lecture Outline

1. Consolidation

2. Subdivision

3. Reduction

4. Share buy back

Procedure for listed company: 1. Check the AOA. 2. At the BODM discuss and decide

Procedure for listed company:

1.

Check the AOA.

2.

At the BODM discuss and decide to make recommendations to consolidate the share, to form DDWG with members consist of principal

adviser (investment bank), solicitor, accounting firm, PR, IH etc for due

diligence purposes and authorised the principle adviser to make announcement.

3.

Announcement to BM after the trading hours at the end of the day of the board meeting.

4.

Due diligence work by various parties involved.

5.

Submit application to BM for approval within one month from the date of the announcement.

6.

Upon approval of BM, make announcement to BM.

7.

Principal adviser to finalise the draft circular to members and submit to

BM for approval.

8.

Upon approval of circular, instruct secretary to convene an EGM.

9.

Secretary to send out notice of the EGM at least 14 days before the meeting to all persons entitled to attend.

Procedure for listed company: 10. Immediately upon issuance of circular to shareholders, submit 15 copies

Procedure for listed company:

10. Immediately upon issuance of circular to shareholders, submit 15 copies of the circular to BM.

11. After the meeting, make announcement to BM after the trading hours

at the end of the day of the general meeting.

12. Lodge form 11 with CCM within 14 days after the passing of the resolution.

13. Insert a copy of Form 11 into every MOA.

14. Make announcement on the book closing date and the date of listing

and quotation of consolidated shares to BM.

15. At least three and half clear market days before the book closing date (lodgement date) make request to BMD for the Record of depositors (ROD).

16. BMD will within 3 clear market days issue the relevant ROD as at

lodgement date to the company together with the jumbo certificates

representing the deposited securities.

17.

The board of directors allots the new consolidated shares.

18. Announcement to BM on the book closing date, on the number, the type and par value of shares to be consolidated.

19. The consolidated shares are listed and quoted on BM on the next market day following the book closing date.

20. Upon finalisation of the consolidation, prepare and deliver to BMD a list of the allottees together with the jumbo share certificates before the listing of the consolidated shares. BMD then will credit or debit the respective CDS accounts.

21. After the date of listing and quotation of the new shares (no later than 4 market days of the date of listing and quotation), the company through the share registrar despatches notices of allotment of consolidated shares to shareholders.

22. Amend the register of members.

Procedure for subdivision (share split): Similar to that of consolidation of shares 6

Procedure for subdivision (share split):

Similar to that of consolidation of shares

1. Board Meeting to consider whether the reduction of capital is needed. Consult legal advisers

1.

Board Meeting to consider whether the reduction of capital is needed. Consult legal advisers and accountants

2.

Check the articles, if the articles provide the power to

reduce capital, then proceed with the following procedure.

If not, then the procedure for amending the articles to add

in the power shall be followed before proceeding with the following procedure

3.

After consultation, Board Meeting to decide to make

recommendation to shareholders to reduce the share capital. Appoint solicitors and principal adviser to prepare the necessary documents for submission to SC.

4.

Due diligence process.

5.

Submit application to SC for approval.

6. Upon approval of SC, principal adviser to announce to BM. 7. Secretary to issue

6. Upon approval of SC, principal adviser to announce to BM.

7. Secretary to issue Notice of EGM and circular to shareholders stating the proposed special resolution and

giving details of the capital reduction.

8. Before the general meeting, request for a second ROD as at a date not less than 3 market days from date of GM to ascertain who are the members who shall be entitle to

attend and vote at the GM.

9. After the passing of the special resolution with at least a three-fourth majority, make announcement to BM.

10. Lodge with the CCM Form 11 within 14 days of the passing

of the resolution

11.

The next step is to apply through the solicitors appointed

for a Court Order by presenting a petition for confirmation

of the reduction.

12.

On obtaining the court order, make announcement to BM.

13.

Lodge with CCM a copy of the court order within 14 days

together with a fee of RM50.

14.

The ROC having registered the court order and the special resolution shall issue a Certificate of Lodgement of Order

of High Court Confirming Reduction of Share Capital

(Form 29) which is conclusive evidence that all requirements of the CA 1965 with respect to reduction have been complied with and the share capital shall be as

stated in the order. The special resolution lodged takes

effect on the registration of the court order.

15. A copy of Form 11, the court order and Form 29 must be

inserted into every copy of the memorandum held in stock. 16. The court order may require a notice of reduction to be published.

17. Fix and announce book closing date (ie the entitlement

date or lodgement date) for the purpose of determining the eligible shareholders.

18. At least three and a half market days before book closing

date, request from BMD the ROD as at lodgement date.

19. BMD will within 3 clear market days issue the relevant ROD as at book closing date to the company together with the appropriate (jumbo) certificates representing the deposited

securities.

20. Trading of the share of the company will be suspended from 3 market days prior to the entitlement date.

21.

Upon finalisation of the number of shares of each member

after reduction, prepare and deliver to BMD a list of

allotees specifying the names of the allotees, their NRIC No., their securities account no. and the quantity of deposited securities allotted to their respective CDS

accounts together with the appropriate certificates

registered in the name of Bursa Malaysia Depository

Nominees Sdn. Bhd.

22. BMD will then credit or debit the respective CDS accounts

of the shareholders.

23. Within ten market days after the entitlement date despatch a notice to each member showing the number of shares he holds after the reduction of capital.

24. Amend the register of members.

25. Make arrangements for a listing of the new shares after the reduction of capital. The listing is to be effective from 3 market days following the day of the receipt by the BM of the following documents:

a full list of the shares;

confirmation that the notices of allotment have been issued and despatched to the shareholders; and

confirmation from BMD of the receipt of the allotment

for crediting the stock.

S 67(1) - a company is prohibited from purchasing its own shares or from providing

S 67(1) - a company is prohibited from purchasing its own shares or from providing any financial assistance whether directly or indirectly to any person to purchase or subscribe

for any shares in the company or shares of its holding

company.

Financial assistance includes:

a loan;

a guarantee; and

the

provision

of

assistance.

security

or

otherwise

any

financial

There are exceptions to S 67(1): i) where the lending of money is part of

There are exceptions to S 67(1):

i)

where the lending of money is part of the company’s

ordinary business for example a bank, finance company

and money lender.

ii)

the provision of money for purchase of shares in the company by a company to its employees in accordance

with a scheme for example ESOS.

iii)

the giving of financial assistance to persons other than the directors of the company with a view to enable employees to purchase fully-paid shares in the company

or its holding company.

S 67A provided that a listed company which is solvent may utilise its retained profits

S 67A provided that a listed company which is solvent may utilise its retained profits and share premium account to purchase its own shares through the stock exchange.

A listed company may purchase its own shares if the AOA authorised so. If not then procedure for amending the articles must first be carried out.

The conditions to be fulfilled before exercising share buy-

backs (s 67A(3) & Part IIIA s 18A-18G):

1. The articles of the company must authorise such action.

2. The company is solvent at the date of purchase and will

not become insolvent by reason of the purchase;

3. The purchase must be made through stock exchange;

4. The purchase must be made in good faith and in the interest of the company.

15

5. The purchase must be authorised by shareholders of the company by way of ordinary

5. The purchase must be authorised by shareholders of the company by way of ordinary resolution.

6. The directors must make a declaration of solvency at a board meeting

7. The share buy-back must be made wholly out of retained profits or the share premium accounts.

8. The purchase price must not be more than 15% above the weighted average market price for the shares for the five

market days immediately before the purchase.

9. The total amount of shares to be purchased or held as treasury shares by the listed company shall not in aggregate exceed 10% of its issued and paid-up capital

and shall not result in the company being in breach of the

public shareholding spread or its issued and paid-up share capital falling below the prescribed minimum.

Reason for purchase of own shares: 1. To give shareholders a price nearer to that

Reason for purchase of own shares:

1.

To give shareholders a price nearer to that of its assets value

2.

To provide a bolster to the earning per share

3.

To make a good investment of surplus corporate funds

4.

To return surplus funds to the shareholders

5.

To reduce volatility of share prices

Treatment for shares purchased

1.

Cancel all shares purchased

2.

Retain all the shares purchased as treasury shares

3.

Retain part as treasury shares and cancel the remainder.

Procedure for share buy-backs: 1. At the board meeting – to resolve to recommend to

Procedure for share buy-backs:

1. At the board meeting to resolve to recommend to

shareholders:

i.

to alter the articles of association (as to permit

share buy back)

ii.

to approve the share buy backs exercise

iii.

to call for an EGM.

2. Immediate announcement to BM and submit to BM the printed Circular to Shareholders or Share Buy-back Statement together with a checklist showing compliance

with Part A or B of Appendix 12A respectively.

3. Issue notice of EGM with Circular or Share Buy-back

Statement.

4.

At the EGM – pass the special resolution to alter the

At the EGM pass the special resolution to alter the

articles

of association and the ordinary resolution to

approve the

share buy backs exercise

5.

Immediately after EGM announce to BM of the resolution

passed at the EGM

6.

File form 11 (Notice of resolution, both the OR and SR) with CCM within 1 month of date of passing of the resolution

7.

Board meeting to determine the solvency of company.

8.

Declaration of solvency to be signed by majority of the company’s directors and must be supported by auditor’s report and lodged with BM. Send a copy to SC and CCM.

9.

Appointment of stockbroking firm and opening of CDS

account for share buy backs. Notice of appointment must

be lodged with BM immediately.

10. Any purchase of own shares must be announced to BM no later than 6.30

10. Any purchase of own shares must be announced to BM no later than 6.30 p.m. on the day the purchase is made.

11. Lodge with the CCM and BM a notice (F28A) within 14

days after the shares are purchased. Also send a copy to

SC.

12. All shares so purchased by the company shall be credited into the “share-buy back account’ and shall be treated as a

suspend and must not:

be dispose, transfer, change or otherwise deal with by the company except as specifically provided under s67A and any regulations; or

be entitled to or subject to any rights and obligations.

© Copyright Alicia Tan and Norziana Lokman