Question

PKT Bhd. is planning to issue new shares in order to increase its share capital. based on the Companies Act 2016, advise PKT Bhd. on the following:

a) Types of shares a company may be issued (10 marks)

b) Rights and powers attaching to shares (10 marks)

c) The redemption of the preference shares (15 marks)

Answer 1

A)Types of share company can issue :

1. Ordinary Shares

2. Preference Shares

B) Rights and Power attaching to shares

i). Ordinary shares always enjoy voting rights but Preference shares need not.

ii). Preference share have preferential right when comes to dividend & other payments i.e they are given the priority in dividend payments as well as payments at the time of wind up.

iii).Dividend rate in case of Ordinary shares are not fixed unlike in case of preference shares.

iv) Preference shareholders are given the right of accumulation in case they are not paid dividend due to any reason in current year. There is no such right given in case of ordinary shares.

v) Ordinary Shares are not convertible unlike preference shares.

C) Redemption of preference shares

Redemption shall be differentiated from the reduction of share capital.

Preference shares can be redeemed out of the profits or through issue of new shares.

They can be redeemed only if they are fully paid up.

Other Conditions for redemption:

i) All the directors must be solvent and must file a solvency statement

ii) Copy of Solvency statement must be forwarded to registrar.