Auditing 200

• Company shares


  One of the units into which the proprietary interest in a profit company is divided
• Characteristics of company shares

  • A share issued by a company is a movable property, transferable in any manner provided for in this act or any other legislation
  • A share doesn't have a nominal or par value
  • A company may not issue shares to itself
  • Authorised share has no rights until issued
  • Shares will have the same status as authorized: Acquired per Section 48 or Surrendered
• Shares


  • Unauthorized
  • Authorized
  • Total
  • Issued
  • Unissued
• Rights of shares


  • All the shares of the same class have the same rights
  • Each share has one voting right, except to the extent otherwise provided in the MOI
  • Despite any restrictions on voting in the MOI, every share issued has an irrevocable right of the shareholder to vote on any proposal affecting the rights or preferences of that share
  • Redeemable or convertible shares may be issued
• Preference rights, limitations and other share terms

  The MOI may, for any class of shares, establish: Special, conditional or limited voting rights; or Provide for shares to be redeemable or convertible (how, price, etc.); or Entitle shareholders to distribution calculated in any manner, including dividends that may be cumulative or partly cumulative; or Provide for shares of a class to have preference over any other class with respect to distribution, or rights upon liquidation
• Distributions


  1. Dividends

  2. Capitalisation of shares (sec 47)

  3. Consideration for share buy backs (sec 48)

  4. Incurrence of debt for benefit of shareholder

  5. Waiver of debt owed by shareholder
• Requirements/conditions for distributions


  • It is made based on: A existing legal obligation or court order; or Board resolution authorizing the distribution
  • It reasonable appears that the company satisfy liquidity and solvency test immediately after the distribution
  • Board has acknowledged (through a board resolution) that it will satisfy the liquidity and solvency test immediately after the distribution
• Timing of distributions


  1. Within 120 business days of the legal obligation, court order or Board resolution

  2. If not within 120 business days of the legal obligation, court order or Board resolution, Board must reconsider the solvency and liquidity test and may not continue until a new Board resolution is effective
• A resolution approving a distribution knowing is contrary to sec 46, directors are liable ito sec 77 if at meeting or participated in making of decision and failed to vote against it
• Authorisation for additional shares

  Amendment of MOI (sec 16) by Special Resolution; or By the board (except if MOI provides otherwise) - also file Notice of Amendment: Increasing or decreasing the number of authorized shares of any class; or Reclassifying any classified shares that have been authorized but are not issued; or Classify unclassified shares that have been authorized but are not issued; or Determine any preference rights, limitations for the class of shares without rights specified
• Issuing of any unauthorized shares knowing those shares not authorized in accordance with sec 36, directors are liable ito sec 77 if at meeting or participated in making of decision and failed to vote against it
• Issuing shares


  1. If shares are authorized, Board resolution

  2. If shares are unauthorized, Authorize per Section 36 - then Board resolution (section 38)

  3. If retroactive authorization is not adopted, Share issue nullifies, Return fair value of consideration with interest, Share certificate nullified, Director liable ito sec 77
• Shareholders approval for issuing of shares


  • Special resolution for issue of share / securities convertible into share or option to: Director, future director or prescribed officer; or Person related or inter-related to director or prescribed officer; or Nominee of director or prescribed officer
  • Special resolution for issue of share / securities that present 30% or more of the voting power of the class of shares before issue
• Subscription of shares


  Each shareholder has the right before other person who is not a shareholder to be offered, and to subscribe within a reasonable time a percentage of the shares to be issued equal to the voting power of the shareholder before the offer was made; and No further restrictions may be added by MOI
• Consideration for shares


  • Board may issue authorized shares: For adequate consideration as determined by the Board; or In terms of conversion rights associated with the securities; or As capitalisation shares
  • Consideration may not be challenged, except if Board did not comply with fiduciary duty
• Options for the allotment of shares

  • Board decision to issue options: For shares; or For securities convertible into shares
  • Board determine consideration
• Securities other than shares

  • Debt instruments, Secured / unsecured
  • Authorisation - Board approval
  • Can have special privileges: Attending and voting at general meetings, Appointment of directors, Regarding the securities (allotment of securities, redemption, substitution of debt instrument for shares)
• Capitalisation shares


  1. Board resolution per Section 46

  2. Board resolution

  3. Capitalisation shares may be issued of one class in respect of shares of another class

  4. If the Board so decides, to permit the shareholders to receive a cash payment instead of shares
• Granting of options for shares or securities convertible into shares


  Knowing that shares not authorized ito sec 36
• Directors liable ito sec 77 if


  At meeting or participated in making of decision; and failed to vote against it
• Disclose ito Sec 30


  (included as remuneration)
• Securities other than shares

  • Debt instruments
  • Secured / unsecured
• Authorisation


  Board approval
• Securities


  • Can have special privileges (Attending and voting at general meetings, Appointment of directors, Regarding the securities (allotment of securities, redemption, substitution of debt instrument for shares))
• Capitalisation shares


  An issue of new shares to existing shareholders in proportion to their existing shareholding
• Requirements for capitalisation shares

  1. Board resolution per Section 46

  2. Board resolution

  3. Capitalisation shares may be issued of one class in respect of shares of another class

  4. If the Board so decides, to permit the shareholders to receive a cash payment instead of shares, if the Board is satisfied that Company satisfy liquidity and solvency test on the assumption that every shareholder would elect to receive cash

  5. Company satisfy liquidity and solvency test immediately on completion of the distribution
• Do not comply with sec 46 - transaction NOT void
• Financial assistance for subscription of securities

  Providing financial assistance (loans, guarantees, provision of security or otherwise) to any person for the purpose of, or in connection with the subscription of any option or any security (share, debenture, etc.) issued or to be issued by the company, an inter-related company (holding company / subsidiary), or inter related companies (fellow-subsidiary in group)
• Requirements / conditions for financial assistance for subscription of securities

  1. Authorization by special resolution, adopted within the previous 2 years of the issue

  2. Board is satisfied that: Company satisfy liquidity and solvency test immediately after providing the assistance; and Terms of providing the assistance are fair and reasonable to the company
• No authorization needed if: Assistance provided in the ordinary course of business as a money-lender or In terms of an employee share scheme
• Transaction is void if: Contrary to Sec 44 or Contrary to conditions in the MOI
• Providing financial assistance that is inconsistent with sec 44 or MOI


  Directors liable ito sec 77 if at meeting or participated in making of decision; and failed to vote against it
• Loans or other financial assistance to directors (or to related inter-related companies)

  Grant a loan, secure a debt or obligation, provide direct or indirect financial assistance to a director or prescribed officer of the company, related or inter-related company, or entity controlled by a director or public officer of the company, holding company, subsidiary, or fellow subsidiaries, or related or inter-related company or corporation
• Requirements / conditions for loans or other financial assistance to directors (or to related inter-related companies)

  1. Authorization by special resolution, adopted within the previous 2 years of the issue that approved such assistance, either for the specific recipient or generally for a category of potential recipients, and the specific recipient falls into the category

  2. Board is satisfied that: Company satisfy liquidity and solvency test immediately after providing the assistance; and Terms of providing the assistance are fair and reasonable to the company
• No authorization needed if: Assistance provided in the ordinary course of business as a money-lender; or An accountable advance to meet legal expenses concerning the company; or anticipated expenses incurred on the company's behalf; or An amount to cover the person's expenses for removal as a director or officer at the company's request; or In terms of an employee share scheme
• Written notice to shareholders and trade unions representing employees

  1. Within 10 days of the resolution if: Total value of all loans / other financial assistance exceeds 1/10 of 1% of the company's net worth at the time of the resolution

  2. Otherwise within 30 business days after year end
• Transaction is void if: Contrary to Sec 45 or Contrary to conditions in the MOI
• Providing financial assistance to a director that is inconsistent with sec 45 or MOI


  Directors liable ito sec 77 if at meeting or participated in making of decision; and failed to vote against it
• Shares issue summary


  • Issue to shareholder / new shareholder
  • Issue to Director / Prescribed officer / Nominee
• Shares


  • Unauthorized
  • Authorized
  • Issued
  • Unissued