Share Capital and Characteristics

Share Capital

• Share capital refers to the initial sum invested in a company, which comes from shares.
• A share is defined as a personal property and transferable in accordance with section 105 of the CA 2016.
• Shares are regarded as chose in action, although intangible in nature, and confer certain rights on shareholders which are enforceable by law.

Characteristics of Shares

• A share is an interest of a shareholder in the company, measured by a sum of money, for the purpose of liability and interest.
• Shares consist of mutual covenants entered into by all shareholders inter se in accordance with section 33.

Types of Shares

• Issued Capital: The total amount of capital paid by shareholders, registered in the register of members.
• Paid Up Capital: The part of issued capital that has been fully paid up by members or credited as having been paid.
• Unpaid Capital: The remaining part of issued capital that has not been paid up by members and can be called up by the company.

Classes of Shares

• Equity Shares (Ordinary Shares): Any share that is not a preference share, conferring rights to attend and participate in meetings, vote, and receive dividends.
• Preference Shares: Shares that do not entitle holders to vote or participate beyond a specified amount in any distribution, and are liable to be redeemed in accordance with the constitution.

Issue and Allotment of Shares

• The process involves invitation to offer, offer, issue of shares, and entry of shareholders' names in the register of members.
• Directors have the power to issue shares after receiving prior approval from shareholders by way of resolution.

Alteration of Class Rights

• Classes of shares should be stated in the constitution, and alteration of class rights requires the consent of holders of shares in that class.
• Variation of share class rights can be done by passing a special resolution, and holders of at least 10% of total voting rights in the class may apply to the Court to have the variation disallowed.

Protection of Holders of Class Rights

• Holders of class rights who are affected by the variation of class rights may apply to the Court to have the variation disallowed.
• The Court may order the company to deliver a share certificate to the shareholder within a specified period.

Issuance of Certificates

• A company does not need to issue share certificates unless requested by shareholders.
• A share certificate must be sent to the shareholder within 60 days from receipt of an application, stating the name of the company, class of share, and number of shares held.

Learn about the fundamental concepts of share capital, including its definition, characteristics, and the rights conferred upon shareholders.