The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 138. Rights and liabilities attached to shares
Subject to the provisions of this Act, the rights and liabilities attaching to the shares of a company or any class thereof shall—
(a) be dependent on the terms of issue or the company’s articles ; and
(b) notwithstanding anything to the contrary in the terms or the articles, include the right to attend any general meeting of the company and vote at such a meeting.
Section 139. Shares as transferable property
The shares or other interests of a member in a company are personal property transferable in the manner provided in articles of association of the company.
Section 140. Prohibition of non-voting and weighted shares
(1) Unless otherwise provided by any other enactment, any share issued by a company shall carry the right on a poll at a general meeting of the company to one vote in respect of each share, and no company may by its articles or otherwise authorise the issue of shares which carry more than one vote in respect of each share or which do not carry any right to vote.
(2) If a company contravenes any of the provisions of this section, the company and any officer in default are liable to a daily default fine as the Commission shall specify by regulation and any resolution passed in contravention of this section shall be void.
(3) Nothing in this section shall affect any right attached to a preference share under section 168.
Section 141. Power of companies to issue shares
Subject to any limitation in the articles of a company with respect to the number of shares which may be issued, and any pre-emptive rights prescribed in the articles in relation to the shares, a company has the power, at such times and for such consideration as it shall determine to issue shares.
Section 142. Pre-emptive rights of existing shareholders
(1) A company shall not in any event allot newly issued shares unless they are offered in the first instance to all existing shareholders of the class being issued in proportion as nearly as may be to their existing holdings.
(2) The offer to existing shareholders shall be by notice specifying—
(a) the number of shares to which the shareholder is entitled to subscribe ;
(b) the price ; and
(c) a reasonable time period after the expiration of which the offer, if not accepted, will be deemed to be declined.
(3) On the receipt of notice from the shareholder that he declines to accept the shares offered or after the expiration of the specified time, the board of directors may, subject to the terms of any resolution of the company, dispose of the shares at a price not less than that specified in the offer, in such manner as they think most beneficial to the company.
Section 143. Issue of classes of shares
(1) A company may, where so authorised by its articles, issue classes of shares.
(2) Shares shall not be treated as being of the same class unless they rank equally for all purposes.
Section 144. Issue with rights attached
Without prejudice to any special rights previously conferred on the holders of existing shares or class of shares, any share in a company may be issued with such preferred, deferred or other special rights or such restrictions, whether with regard to dividend, return of capital or otherwise, as the company may determine by ordinary resolution.
Section 145. Issue of shares at a premium
(1) Shares of a company may be issued at a premium.
(2) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premium on those shares shall be transferred to, “the share premium account”.
(3) The provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up share capital of the company.
(4) Notwithstanding anything to the contrary in subsection (2), the share premium account may be applied by the company in—
(a) paying up unissued shares of the company to be issued to members of the company as fully-paid bonus shares ;
(b) writing off the preliminary expense of a newly incorporated company ;
(c) writing off the expenses of, or the commission paid on any issue of shares of the company ; or
(d) providing for the premium payable on redemption of any redeemable share of the company.
Section 146. Issue of shares at a discount
It is unlawful for a company to issue shares at a discount.
Section 147. Issue of redeemable preference shares
(1) No company limited by shares shall, after the commencement of this Act issue any preference shares which are irredeemable.
(2) A company limited by shares may, if so authorized by its articles, issue preference shares which are liable to be redeemed subject to such conditions as may be prescribed in the terms of issue or in the articles of the company.
Section 148. Validation of improperly issued shares
(1) Where a company has purported to issue or allot shares and the issue or allotment of those shares was invalid by reason of any provision of this Act or any other enactment, of the articles or the terms of issue or allotment were inconsistent with or unauthorised by any such provision, the company may within 30 days of an application made by a holder, mortgagee of those shares or by a creditor of the company, and by special resolution, validate the issue or allotment of those shares or confirm the terms of the issue and allotment, as the case may be.
(2) Where a company refuses to validate the issue or allotment of the shares or confirm the terms of the issue and allotment, the Court may, upon application made by a holder, a mortgagee of those shares or by a creditor of the company, and upon being satisfied that in all the circumstances it is just and equitable to do so, validate the issue, allotment of those shares or confirm the terms of the issue and allotment, as the case may be.
(3) In every case where the court validates an issue, allotment of shares or confirms the terms of an issue or allotment in accordance with subsection (1), it shall make, upon payment of the prescribed fees, an order which is proof of the validation or confirmation and upon the issue of the order, those shares are deemed to have been issued or allotted upon the relevant terms of issue or allotment.
Section 149. Authority to allot shares
(1) The power to allot shares is vested in the company, and, in relation to a private company, this power may be delegated to the directors, subject to any condition or direction that may be imposed in the articles or by the company in general meeting.
(2) The power to allot shares of a public company is subject to the provisions of the Investment and Securities Act.
(3) The powers to allot the shares of a company are not exercised by the directors of a company unless express authority to do so has been vested in the board of directors by—
(a) the company in a general meeting ; or
(b) the company’s articles.
(4) In this section, the reference to shares includes any right to subscribe for, or to convert any security into, shares in the company other than shares so allotted.
(5) The authorisation to the directors under this section may be given to be exercised in a particular instance, or to be exercised generally, and may be unconditional or subject to conditions.
Section 150. Method of application and allotment
(1) Without prejudice to the provisions of the Investment and Securities Act, the following provisions apply in respect of an application for an allotment of issued shares of a company—
(a) in the case of a private company or a public company where the issue of shares is not public, there shall, if so required by the company, be submitted to the company a written application signed by the person wishing to purchase shares indicating the number of shares required ;
(b) in the case of a public company, subject to conditions imposed by the Securities and Exchange Commission where the issue of shares is public, there shall be returned to the company a form of application as prescribed in the company’s articles, duly completed and signed by the person wishing to purchase the shares; and
(c) upon the receipt of an application, a company shall, where it wholly or partly accepts the application, make an allotment to the applicant and within 42 days after the allotment notify the applicant of the fact of allotment and the number of shares allotted to him.
(2) An applicant under this section shall have the right at any time before allotment, to withdraw his application by written notice to the company.
Section 151. Allotment as acceptance of contract
An allotment of shares made and notified to an applicant in accordance with section 150 is an acceptance by the company of the offer by the applicant to purchase its shares and the contract takes effect on the date on which the allotment is made by the company.
Section 152. Payment on allotment
Subject to the provisions of sections 160 – 163 of this Act, a company may, in its articles, make provision with respect to payments on allotment of its shares.
Section 153. Effect of irregular allotment
(1) An allotment made by a public company before the holding of the statutory meeting to an applicant in contravention of the provisions of this Act, is voidable at the instance of the applicant—
(a) within one month after the holding of the statutory meeting of the company and not later, or
(b) where the allotment is made after the holding of the statutory meeting, within one month after the date of the allotment, and not later : Provided that the allotment shall be so voidable notwithstanding that the company is in the course of being wound up.
(2) If any director of a company knowingly contravenes, permits or authorises the contravention of any of the provisions of this Act with respect to allotment, he is liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby, but proceedings to recover any such loss, damages, or costs shall not be commenced after the expiration of two years from the date of the allotment.
What this means
Short answer
A company can issue shares at the times and for the consideration it decides (section 141), but in a private company new shares must first be offered to existing shareholders of that class in proportion to their holdings, who then have 21 days to accept (section 142, as amended in 2023). Shares cannot be issued at a discount (section 146), and every share carries one vote, with non-voting and weighted shares prohibited (section 140).
Amended since the gazette
Pre-emption rights under section 142 now apply to private companies only, with an offer treated as declined after 21 days. Section 149 now lets the board of any company allot shares where the company in general meeting or the articles give express authority, and section 154(1) shortens the return of allotment to 15 days. See all the amendments.
What attaches to a share
The rights and liabilities of shares depend on the terms of issue or the articles, but always include the right to attend general meetings and vote (section 138). Shares are personal property, transferable as the articles provide (section 139). Each share carries one vote on a poll. A company cannot authorise shares with more than one vote or with no vote, and a resolution passed in breach is void. Preference share rights under section 168 are unaffected (section 140).
Issuing shares
- Power and pre-emption. Subject to limits in the articles, a company can issue shares for such consideration as it decides (section 141). In a private company it cannot allot newly issued shares unless they are first offered to existing shareholders of the class in proportion to their holdings. The Business Facilitation Act 2023 limited this right to private companies. The offer notice states the number, the price and the acceptance period, and an offer not accepted within 21 days is treated as declined, after which the board can dispose of the shares at no less than the offer price (section 142).
- Classes and special rights. If the articles allow, shares can be issued in classes, and shares are of the same class only if they rank equally for all purposes (section 143). Preferred, deferred or special rights can be attached by ordinary resolution (section 144).
- Premium. Shares can be issued at a premium, which goes to the share premium account. That account can be used only to pay up bonus shares, write off preliminary expenses, write off expenses or commission on a share issue, or provide for the premium on redemption of redeemable shares (section 145).
- No discount. Issuing shares at a discount is unlawful (section 146).
- Preference shares. A company limited by shares cannot issue irredeemable preference shares. If its articles allow, it can issue redeemable ones (section 147).
Fixing an invalid issue
If an issue or allotment was invalid under the Act, the articles or the terms of issue, the company can, within 30 days of an application by a holder, mortgagee or creditor, validate it by special resolution. If it refuses, the court can validate it if that is just and equitable (section 148).
Allotment
- Who allots. The power to allot is the company’s. Directors of a private or public company can allot only with express authority from the company in general meeting or the articles (section 149, as amended in 2023, which removed the earlier limit of delegation to private companies). A public company’s allotment power is also subject to the Investments and Securities Act.
- Application. A private company can require a written signed application stating the number of shares. A public issue needs the application form prescribed in the articles. A company that accepts an application makes an allotment and notifies the applicant within 42 days of the allotment. An applicant can withdraw by written notice before allotment (section 150).
- Contract. The allotment, once notified under section 150, is the company’s acceptance of the applicant’s offer, and the contract takes effect on the date of allotment (section 151).
- Payment. The articles can provide for payments on allotment, subject to sections 160 to 163 (section 152).
- Return of allotment. A company limited by shares delivers a return of allotment to the Commission within 15 days of the allotment (section 154(1), shortened from one month in 2023).
Irregular allotment by a public company
An allotment by a public company before the statutory meeting, in breach of the Act, is voidable at the applicant’s instance, within the period section 153 allows after the statutory meeting. See meetings of a company for the statutory meeting.
Questions and answers
Do existing shareholders get the first offer of new shares?
In a private company, yes. Newly issued shares must first be offered to existing shareholders of the class in proportion to their holdings, and an offer not accepted within 21 days is treated as declined. The 2023 amendment limited this right to private companies (section 142).
Can a company issue shares at a discount?
No. It is unlawful (section 146).
Can a company issue non-voting shares?
No. Each share carries one vote on a poll, and shares with no vote or more than one vote cannot be authorised (section 140).
How long does a company have to notify an applicant of an allotment?
Within 42 days after the allotment (section 150(1)(c)).
What can the share premium account be used for?
Paying up bonus shares, writing off preliminary expenses, writing off expenses or commission on share issues, and providing for the premium on redemption of redeemable shares (section 145(4)).
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