Topic 1: Issue of Shares and Debentures (Full Payment and Installment Basis)

Hjh Azmi Aminuddin

Shares and debentures can be issued by using the following bases and prices:

Payable in full on application at par, premium or discount Payment by installment - at par, premium or discount

Payable in full on application

Issue of shares/debentures at par Receipt of money during application Dr Bank Cr Application : OSC/PSC/Debenture Refund excess application Dr Application : OSC/PSC/Debenture Cr Bank Recognize OSC/PSC/Debenture Dr Application : OSC/PSC/Debenture Cr OSC/PSC/Debenture

Issue of shares/debentures at a premium Receipt of money during application Dr Bank Cr Application : OSC/PSC/Debenture Refund excess application Dr Application : OSC/PSC/Debenture Cr Bank Recognize Share Premium/Debenture Premium Dr Application : OSC/PSC/Debenture Cr Share Premium/Debenture Premium Recognize OSC/PSC/Debenture Dr Application : OSC/PSC/Debenture Cr OSC/PSC/Debenture

Issue of shares/debentures at a discount Receipt of money during application Dr Bank Cr Application : OSC/PSC/Debenture Refund excess application Dr Application : OSC/PSC/Debenture Cr Bank Recognize Share Discount/Debenture Discount Dr Share Discount/Debenture Discount Cr Application : OSC/PSC/Debenture Recognize OSC/PSC/Debenture Dr Application : OSC/PSC/Debenture Cr OSC/PSC/Debenture

Payment by installment: application, allotment, call (theory only)

Payment in a few stages (RM1.00 + 20 sen share premium): application stage 10 sen allotment stage 40 sen 1st Call 20 sen + 20 sen SP 2nd and Final Call 30 sen

Companies facing:

a risk of non payment by shareholders (Forfeiture of Shares) a situation of early payment by shareholders (call in advance) a situation of late payment by shareholders (call in arrears) A reissue of forfeited shares

Call in advance, Call in arrears,

Call in advance : eg. a situation whereby a shareholder is supposed to pay for the installment during 1st Call but he actually paid early during allotment stage Call in arrears : eg a situation whereby a shareholder is supposed to pay for the installment during 1st Call but only paid later during 2nd Call.

Forfeiture of shares

Shares not paid for when call was made being forfeited Owner of the forfeited shares is no longer a shareholder

Reissue of forfeited shares

Forfeited shares can be reissued Forfeited share reserve is created (amount already paid) Any premium from the reissue is recognised as Share Premium