SHARE CAPITAL

PART II

Lee Jia Chern

Pre-emptive Rights to New Shares
1. S85(1) – Issue of new shares that rank equally should first be offered to the holders of
existing shares;
2. S85(2) – notice offering those new shares shall specify the number of shares offered
and the time frame to accept the offer;
3. S85(3) – if the offer is not accepted within the time frame, directors may dispose those
shares as they think most beneficial to the company;
4. S85(1) – the constitution may provide otherwise.
 Validation of Improper Allotment of Shares (s108)
1. Court may validate an improper issue or allotment of shares if it is just and equitable to do so.
2. Such an application may be made by the company, a shareholder, a mortgagee of any share, or a
creditor of the company. [s108(1)]
3. The issue is invalid due to:
• Any provision in the Companies Act 2016 or other written law;
• The constitution of the company or otherwise; or
• The terms of issue or allotment were inconsistent with or unauthorised by such provision.

4. Court’s discretion to grant a validating order.

5. Kelapa Sawit (Teluk Anson Sdn Bhd vYeoh Kim Leng & Ors [1991] 1 MLJ 301
6. Saw Seng Kee v Nadzri & Ng Securities Sdn Bhd [1996] 2 AMR 1578
7. Re Swan Brewery Co Ltd (No.2) (1978) 3 ACLR 168
CLASSES OF SHARES AND CLASS RIGHT
Classes of Shares
• S69(a) – a company is allowed to issue different classes of shares.
• S89(1) – ‘shares are in the same class if the rights attached to the shares are identical in
all respects’.
• Categories of shares in the capital structure of a company.
• Different in respect of rights, benefits, liabilities etc.
• s72 – issue of preference shares
• S90(1) – different classes of shares and their voting rights to be stated in the constitution
Classes of Shares – Ordinary Shares
• S2(1) – equity share
• S71(1) – Rights of the holder of an ordinary share
 The right to attend, participate and speak at a meeting;
 The right to vote on a show of hands on any resolution of the company;
 The right to vote for each share on a poll on any resolution of the company;
 The right to an equal share in the distribution of the surplus assets of the company; OR
 The right to an equal share in dividends authorised by the Board.
Classes of Shares – Preference Shares
• S2(1) – ‘a share … which does not entitle the holder to the right to vote on a resolution
or to any right to participate beyond a specified amount in any distribution whether by
way of dividend, or on redemption, in a winding up, or otherwise’.
• S90(2) – Constitution to clearly provide for the allotment of preference shares and the
rights attached, i.e.
 Repayment of capital;
 Participation in surplus assets and profits;
 Cumulative or non-cumulative dividends;
 Voting; and
 Priority of payment of capital and dividend
Class Rights
• General rule: s89(1) – shares are in the same class if the rights attached to the shares are
identical in all respects.
• BUT, s89(2) allows new shares in the same class enjoy a different right to dividends in the
first 12 months after allotment.
• Different classes of shares give different rights. There might be attempts to vary rights
enjoyed by a particular class of shares.
Variation of Class Rights – Common Law
• Rights attached to a specific class of shares are being modified, altered or changed.
• Question: When does variation of class rights occur?
• Answer: Distinction between ‘variation of class rights’ and ‘variation in the enjoyment of
class rights’.
 Greenhalgh v Arderne Cinemas Ltd & Anor [1946] 1 All ER 512
 White v Bristol Aeroplane Co Ltd [1953] 1 All ER 40
Variation of Class Rights - Malaysia
• S91(1) – variation by the company’s constitution;
• S339(6)(a) – amendment to the provision for the variation of class rights;
• S339(6)(a) – insertion of a provision for the variation of class rights;
• S96(1) + s339(6)(b) – abrogation of class rights;
• S91(5) – the issue of new preference shares ranking equally with the existing preference
shares.
Variation of Class Rights – the Procedures
• Constitution of the company or the Companies Act 2016?
• S91(1)(b) – with the consent of the holders of that particular class of shares
• s91(2) – Consent to be obtained in either way:
 Written consent - ≥75% of total voting rights; OR
 Special resolution
• S92(1) – company to give notice about the variation – within 14 days from the variation
• S95(1) – company to lodge the variation with the Registrar – within 30 days from when
the variation takes effect
 When does a variation take effect? S91(3), cf ‘Protection against Variation’
Variation of Class Rights – Protection Against Variation
1. Constitution
• Company is bound to follow clauses that provide for the procedure to vary class rights, if any.
 Crumpton v Morrine Hall Pty Ltd (1965) 82 WN (NSW) 456

2. Statutory Protection – s93

• S91(3) – a variation, although properly consented, will not take effect immediately.
• S93(1) – shareholders with 10% of the total voting rights in that particular class may apply to
the Court to disallow the variation.
• S93(2) – application to be made within 30 days from the date of variation; may be made by
representative with written appointment.

3. S93(3) – Court to disallow or confirm the variation.

REGISTER OF MEMBERS
Register of Members
• S101(1) – name in the register = prima facie evidence of his legal titles to
the shares
 Ming Yueh Holdings Sdn Bhd v Kong Ming Bank Bhd [1990] 1 MLJ 374
• Issuance of share certificate is no longer mandatory.
• S98 – a member may apply for a share certificate.
Register of Members – Rectification
• S103(1) allows an aggrieved person to apply to the Court to rectify the register and/or
for compensation.
• Application/Order for rectification of the register, or compensation for loss sustained, or
both.
• Who is an ‘aggrieved person’?
 Allied Properties Sdn Bhd v Semua Holdings Sdn Bhd [1988] 3 MLJ 185
 Central Securities (Holdings) Bhd v Haron bin Mohamad Zaid [1979] 2 MLJ 244
• Duty to notify the Registrar – s50(1)
TRANSFER OF SHARES
Transfer of Shares
• S70 – A share is transferable in accordance with s105.
• S105(1) – by a duly executed and stamped instrument of transfer; and shall be lodged
with the company.
• S98(2) – if a share certificate has been issued for the shares intended to be transferred,
the original share certificate shall also be lodged with the instrument of transfer.
• S106(1) – the Company shall enter the name of the transferee in the register of
members within 30 days from the receipt of the instrument of transfer.
Transfer of Shares – Refusal or Delay
• However, the company may refuse to enter the name of the transferee in the register of
members if: [para (a) – (c), s106(1)]
i. the Act or the constitution expressly permits for such refusal or delay with reasons;
ii. a directors’ resolution is passed to refuse or delay to register the transfer;
iii. That resolution is passed within 30 days from the date of receipt of the instrument of
transfer;
iv. The resolution sets out the full reasons of such refusal or delay to register; and
v. The notice of the resolution (and the reasons) is sent to the transferor and transferee
within seven days from the date of the resolution.
Transfer of Shares – Reasons for Refusal
• S106(2) – When the shareholder fails to pay an amount due in respect of those shares; or
any grounds as stated in the company’s constitution.
• The power to refuse or delay the registration of transfer shall be EXPRESSLY permitted
by the Act or the constitution – s106()(a).
 Ng Chong Wee v Ng Chong Geng & Sons Sdn Bhd [2018] 1 LNS 967
 Lim Ow Goik & Anor v Sungei Merah Bus Co Ltd [1969] 2 MLJ 101
TRANSMISSION OF SHARES
Transmission of Shares
1. Definition
 Re L.Y. Swee & Co Ltd [1968] 1 LNS 121
 “the term ‘transmission’ is used when shares are vested in some person by operation of
law, such as on the death or bankruptcy of a member.

2. Distinction between a ‘transfer’ and a ‘transmission’

 Re L.Y. Swee & Co Ltd [1968] 1 LNS 121
 Ng Chong Wee v Ng Chong Geng & Sons Sdn Bhd [2018] 1 LNS 967
 United Renewable Energy Co Ltd v TS Solartech Sdn Bhd [2019] 8 CLJ 721
3. S109(1) – to write to the company if one wishes to be registered as a shareholder as a result of a
transmission of shares;
4. S109(4) – a grant of probate or a letter of administration is sufficient to be evidence to be accepted
by the company;
5. S109(5) – the company shall register the person as a shareholder within 60 days from the date
receiving the notification;
6. S109(6) – the rights attached to the shares of that registered person shall remain unchanged;
7. S109(2) – he may elect another person to be registered, by transferring those shares to that person;
8. S109(3) – in executing the transfer, all laws and restrictions of the Subdivision relating to a transfer and
the registration of transfer shall apply to this transfer.
For example, s105(1) which requires a transfer to be executed by an instrument of transfer and
the transfer shall be lodged with the company.
THE END