Company Law: Share Certificates

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Questions and Answers

What is required for a company to issue a share certificate?

The certificate must be printed on special paper.

The company must be publicly listed.

An application from a shareholder must be received. (correct)

A majority vote by the board of directors is necessary.

What does S. 101(1) state regarding the registration of members?

Members must renew their registration annually.

Registration of members provides evidence of legal title. (correct)

It is optional for companies to register members.

The register of members does not serve as legal evidence.

Which section addresses the delivery of share certificates?

S. 99 (correct)

S. 101

S. 98

S. 100

What is the primary responsibility of the secretary according to S. 102(1)?

To maintain the register of members. Signup and view all the answers

What does S. 100 specify concerning shares?

It mandates the numbering of shares. Signup and view all the answers

What is a necessary condition for a company to distribute profits to shareholders?

The company must be solvent Signup and view all the answers

Which of the following statements accurately describes interim dividends?

They can be revoked any time before payment Signup and view all the answers

What might happen to an officer who contravenes the regulation concerning distributions to shareholders?

They could be fined up to 3 million ringgit Signup and view all the answers

What type of dividend is considered a company's debt once it is declared?

Final dividend Signup and view all the answers

Which of the following represents a principle of dividend payment?

Dividends must be declared based on profits reported Signup and view all the answers

Which type of dividend does not have to be paid in cash?

Interim dividend Signup and view all the answers

Who has the authority to declare interim dividends according to a company's articles?

The board of directors Signup and view all the answers

What does a non-cumulative dividend imply?

Shareholders lose their right to unpaid dividends in the current year Signup and view all the answers

What distinguishes a fixed charge from a floating charge in terms of priority during insolvency?

Fixed charges rank before floating charges in insolvency. Signup and view all the answers

Under what condition can a dividend be declared?

Even if there was a loss in the business capital in the past year Signup and view all the answers

Which of the following statements is true regarding the registration of charges?

Registered fixed charges rank above unregistered charges. Signup and view all the answers

What is the definition of a 'debenture' as per the content?

A financial instrument representing a loan made by an investor to a borrower Signup and view all the answers

What is the effect of having a first floating charge holder in terms of subsequent fixed charges?

Subsequent fixed charges will be prioritized over the floating charge. Signup and view all the answers

What is a characteristic of a term debenture?

Becomes due on a single specified date Signup and view all the answers

In the context of floating and fixed charges, what happens if a fixed charge is registered after a floating charge?

The floating charge holder is prioritized. Signup and view all the answers

What is the requirement for maintaining a register of debenture holders?

It must be kept at the registered office or any designated place in Malaysia Signup and view all the answers

Which statement best defines the implications of having a second floating charge?

Second floating charges rank after any existing fixed charges. Signup and view all the answers

What must a company do after receiving money from the public for debentures?

Create a debt document within 2 months Signup and view all the answers

What best defines a serial debenture?

Components mature at various specified dates Signup and view all the answers

What is the role of a trustee corporation for debenture holders?

To ensure that debenture interests are represented and protected Signup and view all the answers

What type of corporation must a company appoint as a trustee for debenture holders?

A registered trust company under the Trust Companies Act 1949 Signup and view all the answers

What is a floating charge primarily useful for?

Allowing companies to borrow without specific security. Signup and view all the answers

What happens to a floating charge when it 'crystallizes'?

It specifies the charges to be enforced. Signup and view all the answers

In which situation does a floating charge commonly crystallize?

When a receiver is appointed for the assets. Signup and view all the answers

According to negative pledges, what does a borrower typically agree to?

Not to use assets as security for another loan. Signup and view all the answers

What must a company do within 30 days of the creation of a charge according to S. 352?

Register the charge with the Registry of Companies. Signup and view all the answers

What happens if a charge is not registered within the required timeframe according to S. 352?

The charge is void but the obligation to repay is still valid. Signup and view all the answers

Which of the following best describes a floating charge's flexibility for a company?

It allows the company to sell and replace assets freely. Signup and view all the answers

What is a consequence of appointing a receiver over a company's assets?

The floating charge typically crystallizes. Signup and view all the answers

What is one of the key duties of trustees according to the Act?

Exercise reasonable diligence to ascertain if the borrowing corporation and guarantor's assets are adequate to discharge the principal debt. Signup and view all the answers

Which type of charge provides immediate security over particular property?

Fixed charge Signup and view all the answers

What is a characteristic of a floating charge?

It allows the company to deal with assets in the ordinary course of business. Signup and view all the answers

Which of the following statements regarding fixed and floating charges is true?

A floating charge can become a fixed charge upon certain events. Signup and view all the answers

What does S. 177 CA 2016 emphasize regarding a borrowing corporation?

The trustee must ensure that the contents of the prospectus are consistent with debenture terms. Signup and view all the answers

What type of assets are typically secured under a floating charge?

All present and future assets of the company. Signup and view all the answers

Which is NOT a responsibility of trustees under the Act?

Provide financial support to the borrowing corporation. Signup and view all the answers

Why are charges important to a borrowing corporation?

They offer security to lenders against loans. Signup and view all the answers

Study Notes

A company is not mandated to issue a share certificate unless a shareholder makes an application or it is stipulated in its constitution.
Shareholders must formally apply for the issuance of share certificates as outlined in Section 98.
Delivery of share certificates to shareholders is governed under Section 99.
Section 100 requires shares to be numbered for identification purposes.

Register of Members

Legal ownership of shares is evidenced by the registration of members, as specified in Section 101(1).
The company secretary is responsible for keeping and maintaining the register of members in good order, ensuring all details related to issuance and transfer of shares are accurately recorded, as per Section 102(1).

Share issuance and transfer are governed by S. 98 and S. 99, requiring maintaining a proper register.
S. 100 mandates numbering of shares.
S. 131(1) permits distributions to shareholders only from company's available profits, provided the company is solvent.
S. 131(2) imposes penalties of up to 5 years imprisonment or a fine of up to 3 million ringgit for contravening the provisions.

Types of Dividends

Dividends serve as payments to shareholders from profits, and can be non-cash.
Types include:
- Interim Dividend: Can be declared by directors at any time; not considered a debt until officially declared.
- Final Dividend: Once declared, it's a debt owed to shareholders.
- Cumulative Dividends: Accumulate if unpaid.
- Non-cumulative Dividends: Do not accumulate if unpaid.

Dividend Payment Principles

Dividends cannot be paid unless the company is solvent and can meet its debts.
Payment can occur in cash or through assets like debentures.
Companies can declare dividends even with past losses or from gains on asset disposals.

Understanding Debentures

A debenture is a document establishing a debt, including stocks, bonds, and notes.
Sole debentures represent a series due on a single date, can be short or long term.
Serial debentures mature at different dates, allowing repayment flexibility.

Trustee for Debenture Holders

Must appoint a trustee corporation for public debenture offerings.
The trustee's role includes ensuring compliance with applicable regulations and the prospectus' accuracy.

Charges on Debentures

Charges can be fixed or floating, acting as security for borrowing.
- Fixed Charges: Secured against specific assets like property or equipment.
- Floating Charges: Cover all present and future assets, allowing business operation flexibility until "crystallization".

Crystallization of Floating Charges

Occurs upon specific events, such as default on the loan or liquidation.
Allows transition from a floating to fixed charge, prioritizing repayment upon crystallization.

Negative Pledges

Contractual clauses preventing the borrower from further pledging assets, protecting existing lenders.

Registration of Charges

S. 352 requires all charges to be registered within 30 days, with failures resulting in void status.
S. 353 lists charges that need registration and the obligations tied to them.

Priorities of Charges

Fixed charges are prioritized over floating charges in insolvency scenarios.
Registered charges rank higher than unregistered ones, but first and second charges rank based on registration date.

Questions

Significance of charges under debentures includes securing lending and defining priority in repayment.
Relevance of shares in dividends pertains to their solvency requirements and distribution rights.
Differences between fixed and floating charges hinge on asset specificity and flexibility during operation.

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Description

This quiz covers essential provisions related to share certificates under company law, including application processes, delivery, and legal registration of members. Test your understanding of significant sections such as S. 97 to S. 102. Enhance your knowledge of shares and corporate governance.