30 November, 2019
On 28 September 2019, the Companies (Amendment) Act 2019 (“the Amendment Act”) which amends certain provisions of the Companies Act 2016 (“CA”), was gazetted. At the time of publication, the Amendment Act has yet to come into force.
One of the key changes under the Amendment Act is in relation to redemption of redeemable preference shares (“RPS”).
Under the CA, preference shares are redeemable out of profits, a fresh issue of shares, or capital of the company. Pursuant to section 72(5), where preference shares are redeemed out of profits or capital of the company, the company would be required to transfer, out of profits, an equivalent amount into the share capital of the company.
Once the Amendment Act comes into force, section 72(5) will be amended to provide that only shares redeemed out of profits would require a transfer by the company of an equivalent amount from its profits into the share capital account. This change removes the ambiguity of redemption of preference shares out of capital, which would then only require the satisfaction of the solvency statement obligation.
Nonetheless, there are issues relating to redemption of preference shares that the Amendment Act does not address.
The full article can be found from Zicolaw's site here.
For more information, please contact:
Ahmad Zulkharnain Musa, Partner | ZICO Insights Law
ahmad.zulkharnain@zicolaw.com
