Types of company shares in Malaysia.

Understanding the different types of company shares in Malaysia is crucial for business owners, investors and corporate professionals. Shares represent units of ownership in a company, and the structure, rights, and obligations attached to these shares can significantly impact corporate governance, capital management, and investor returns.

This article explores the types of shares available under Malaysian law, their features and the key administrative processes associated with share ownership.

Types of company shares

In a Malaysian company, there are two types of shares:

Ordinary shares

Ordinary shares, also known as common shares, are the most prevalent type of shares issued by Malaysian companies. These shares represent ownership in a company and typically carry voting rights, allowing shareholders to participate in important company decisions.

Ordinary shares in Malaysia come with several key features that define shareholder rights and obligations. Shareholders typically enjoy voting rights, usually one vote per share, allowing them to influence important matters such as the appointment of directors and significant corporate decisions.

They are also entitled to receive dividends when declared by the company’s board, although these payments are not guaranteed and depend on the company’s financial performance and dividend policy.

In addition, ordinary shares offer potential capital appreciation if the company grows in value, while also giving shareholders a residual claim on assets in the event of liquidation, after all other obligations have been settled. Importantly, shareholders benefit from limited liability, meaning their financial responsibility is restricted to the amount invested in the shares.

While ordinary shares are the most common type issued, companies may also create different classes of ordinary shares with varying rights and privileges, provided this is allowed under the company’s constitution.

Preference shares

Preference shares, also called preferred shares, offer a hybrid between ordinary shares and debt instruments. These shares typically provide certain advantages over ordinary shares but may have limited voting rights.

Preference shares carry distinct features that differentiate them from ordinary shares. Preference shareholders are usually entitled to receive dividends before ordinary shareholders, with dividends set at a fixed or variable rate.

These shares can be cumulative, allowing unpaid dividends to accumulate and be paid in future years, or non-cumulative and cannot be carried forward. Some preference shares can also be convertible into ordinary shares under specified conditions, while others may be redeemable, enabling the company to buy them back at a predetermined price.

Voting rights for preference shareholders are generally limited or absent, except in cases where dividends remain unpaid for a certain period. In the event of liquidation, preference shareholders hold priority over ordinary shareholders in asset distribution. Malaysian companies may issue different types of preference shares, including

• Cumulative or Non-cumulative Preference Shares
• Participating or Non-Participating Preference Shares
• Convertible or Non-convertible Preference Shares
• Redeemable or Irredeemable Preference Shares

Each type offers different rights and features, catering to diverse investor preferences and company needs.

Value of shares

Upon the commencement of the Companies Act 2016, all shares issued have no par or nominal value.

The monetary value of a share under the no-par share system is determined by the paid-in capital at the time of issuing the shares.

Share certificate

A share certificate is proof of share ownership by a shareholder in a company. Since 31 January 2017, the share certificate requirement is no longer compulsory.

According to section 97 of the Companies Act 2016, a company is not required to issue a share certificate unless an application by the shareholder for a certificate relating to the shareholder’s share has been received or provided by its constitution.

Application for issuance of share certificate

Within 60 days of receiving the application receipt, the company must send a share certificate of the shareholder, including the following information:

• The name of the company
• The class of shares held by that person
• The number of shares held by that person

Loss or destruction of share certificate

If the share certificate is destroyed or lost, the company shall issue a duplicate certificate upon request and a fee of RM 50 from the shareholder.

Reduction of share capital

There are two methods a company can use to reduce its shares:

• Special resolution and confirmation by the court (section 116)
• Special resolution supported by a solvency statement (section 117 )

Ways that a company can reduce its share capital are:

• By exhausting or reducing the liability on any of the shares of the company in respect of unpaid share capital
• By cancelling any paid-up share capital which is lost or unrepresented by available assets
• By returning to the shareholders, any paid-up share capital which is in excess of the needs of the company

Transfer of shares

Before shares can be transferred, the shareholder must inform the company director. Once the director acknowledges the transfer, the shareholder is required to complete an instrument of transfer of shares as per Section 105 (formerly Form 32A).

Information to include in the instrument is:

• Company name
• Details of the transferor(s) and transferee(s)
• Number of transferred shares
• Value of transferred shares
• Signature of shareholders and witness

The next step is submitting the instrument of transfer of shares to the Inland Revenue Board for assessment and paying stamp duty to validate the transfer. The duly executed and stamped instrument accompanied with the original share certificate relating to the share (if any) must be lodged with the company. The company secretary must prepare a board resolution for the directors to approve/reject the transfer within 30 days after the instrument is lodged.

If approved, the returned share certificate shall be cancelled and the company secretary must then enter the transferee’s name into the register of members as shareholder, and no further share certificate shall be issued except at the request of the transferee.

Call on shares

Pursuant to section 82, directors can make calls upon shareholders concerning any unpaid shares and not by the conditions of allotment of shares made payable at a fixed date.

The call should not exceed one-fourth of the issued price of the share or be payable at less than 30 days from the date fixed for the payment of the last preceding call.

Each member must pay the amount called on the shares at least 14 days from the specified date, time and place of payment.

If the shareholder does not pay the call or instalment of the call within the specified date, the directors may issue a notice to the shareholder requiring payment of the unpaid amount along with interest or compensation that may have increased.

The notice mentioned above shall specify the date on or before the payment is required to be made and state that in the event of non-payment on or before the specified date, the shares are subject to being forfeited.

Conclusion

The landscape of company shares in Malaysia is multifaceted, encompassing not only various types of shares but also important processes related to share ownership and management. From the issuance of share certificates to the intricacies of share transfers and capital reduction, each aspect plays a crucial role in the functioning of Malaysian companies and the broader capital market.

Understanding these diverse elements is essential for investors, company directors and business professionals operating in Malaysia. It enables informed decision-making, ensures compliance with regulatory requirements and facilitates efficient capital management. As the Malaysian business environment continues to evolve, staying abreast of these share-related processes and regulations will remain crucial for all stakeholders in the corporate sector.

How Acclime can help with understanding and managing company shares in Malaysia

Acclime offers complete support in share structure advisory and company secretarial services. From share issuance to capital reduction procedures, our team of experts can assist with everything from drafting shareholder resolutions to preparing and submitting statutory forms. By partnering with us, Malaysian businesses and foreign investors can confidently navigate share-related regulatory requirements and ensure corporate compliance. Contact us to learn more about how we can support your company’s share management strategy and corporate governance framework.