Malta · Share capital, shares and the registers

Reduce the capital, deal with a serious loss or hold the company's own shares

the Companies Act, Chapter 386 · article 83, articles 104, 106, 107, 108, 109 and 112, and articles 110, 113, 114 and 114B

A reduction of issued share capital is a creditor-facing act, so the whole procedure is built around notice. The notice convening the general meeting must satisfy article 83(1)(c), a copy of the resolution goes to the Registrar, and a separate notice of the reduction has to be delivered by the company.

The second trap is holding the company's own shares. Voting rights on them are suspended, the shares have to be dealt with in the way article 107 requires if they are retained, and shares acquired or held in contravention of articles 106 and 107 must be disposed of under article 108. Financial assistance for the acquisition of a company's own shares is prohibited by article 110(1) except in the cases the same article allows.

The notice convening the general meeting at which an extraordinary resolution for a reduction of the issued share capital is to be taken must comply with article 83(1)(c). A copy of the resolution must be delivered to the Registrar under article 83(2). Where there are different classes of shares, the decision of the general meeting is subject to article 83(6). In the cases referred to in article 83(8), the amounts deriving from the reduction are dealt with under article 83(9). A notice of the reduction of the issued share capital must be delivered by the company as required by article 83(11).

Where the net assets of a public company are half or less of its called-up issued share capital, the directors must, not later than thirty days from the earliest day on which that fact is known to any director, duly convene a general meeting (article 104(1)), and only the steps mentioned in article 104(2) may be taken at that meeting.

Without prejudice to the principle of equal treatment of shareholders, the acquisition by a company of its own shares is governed by article 106(1), and the company must deliver a copy of the resolution to the Registrar under article 106(2). Article 106(1)(b) does not apply to the shares described in article 106(4). Within fourteen days after the cancellation of shares becomes effective, the step required by article 106(7) must be taken. Where shares acquired under article 106(1)(b) to (f) are retained by the company, article 107(2) applies, and shares acquired or held in contravention of articles 106 and 107(1) must be dealt with under article 108(1).

During the time that a company holds any of its own shares they carry no voting rights under article 109(a), and the treatment described in article 109(b) applies. Article 109 also applies to a forfeiture or surrender of shares under article 112(2).

It is not lawful for an undertaking to subscribe for, hold or acquire shares, or to give financial assistance, as prohibited by article 110(1), subject to the exceptions in article 110(2), (3) and (4). Shares issued in contravention of article 113 are dealt with under article 113(2), and the conditions in article 113(1) apply as described in article 113(3)(a) and (b). Where a company issues shares at a premium, a sum equal to the premium must be transferred as required by article 114(1). Where the issued share capital of the issuing company is divided into various classes, article 114B(6) applies.

Files 10, 15 and 16 of the MT-COMPANY pack separate three operations that are often run together and should not be. File 10 takes the reduction of issued share capital, checks the notice convening the meeting against article 83(1)(c) and asks for the date each of the two filings reached the Registrar. File 15 asks for the net assets figure and the called-up issued share capital, applies the half test in article 104(1), asks for the date the fact became known to any director and measures the thirty days, then walks every acquisition of own shares against articles 106 to 109. File 16 covers financial assistance, subscription by an undertaking, shares issued at a discount and the share premium account.

This situation is covered by these files from the pack MT-COMPANY

• File 10 · Reduction of the issued share capital
• File 15 · Serious loss of capital and the acquisition by a company of its own shares
• File 16 · Financial assistance, subscription by an undertaking and shares issued at a discount

ComplianceSME tracks the Companies Act and issues update files through the membership, so that you are never working from a superseded version. Membership

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