Malta · Share capital, shares and the registers

Increase the issued capital, offer shares pre-emptively or offer them to the public

the Companies Act, Chapter 386 · articles 85, 86 and 87, article 88, and articles 89, 93, 95, 96A, 97 and 103

An increase in issued capital is not a board matter alone. The decision has to be taken by the organ named in article 85(1), a copy of the resolution has to reach the Registrar, and where the increase is not fully taken up the issue is dealt with under article 85(5). The paid-up percentage is tested on allotment, not at some later call.

The second trap is pre-emption. Where shares of a public company are proposed to be allotted for consideration in cash, the existing shareholders have a right of pre-emption that must be offered for at least fourteen days, and the right may not be restricted or withdrawn except by the extraordinary resolution that article 88(5) requires. Companies that allot first and paper the resolution afterwards leave the allotment exposed.

Any increase in the issued share capital must be decided upon as required by article 85(1), and where there are several classes of shares by the further resolution required by article 85(2). A copy of the ordinary or extraordinary resolution must be delivered to the Registrar under article 85(3). Those provisions apply to the issue of all securities convertible into shares under article 85(4). Where an increase is not fully taken up, article 85(5) governs the issue.

Shares must be paid up on allotment to at least twenty five per cent of their nominal value in the case of a public company (article 86) and to at least twenty per cent in the case of a private company (article 87).

Whenever shares of a public company are proposed to be allotted for consideration in cash, article 88(1) applies, and where the issued share capital is as described in article 88(2) that provision applies. A copy of any offer of subscription on a pre-emptive basis indicating the period allowed must be delivered as required by article 88(3). The right of pre-emption must be exercised within a period of not less than fourteen days from the date of publication of the offer in the Gazette or on a website maintained by the Registrar (article 88(4)). The right may not be restricted or withdrawn by the memorandum or articles, but may be withdrawn by the extraordinary resolution described in article 88(5), a copy of which is delivered under article 88(6).

The memorandum or articles or an extraordinary resolution may make the provision described in article 88(7), and a copy of that resolution is delivered under article 88(8). Article 88(1) to (8) applies to the issue of all securities convertible into shares under article 88(9), and the right of pre-emption is not excluded in the case described in article 88(10).

It is not lawful for a company to make an offer of securities to the public except as article 89 allows. A copy of the prospectus signed in accordance with the Financial Markets Act must be dealt with under article 93(1), as applied by article 95(3). Where a public company makes an offer of securities to the public in a third country, article 96A(1) applies. No allotment may be made of any share capital of a public company offered to the public unless the conditions in article 97(1) are satisfied, and if they are not, the money must be repaid under article 97(2). If any of the money is not repaid within forty eight days after the issue of the prospectus, the directors are jointly and severally liable to repay it with interest under article 97(3). All money received from applicants must remain as required by article 97(5). Whenever a company makes any allotment of its shares it must, within one month, deliver a return of the allotments to the Registrar (article 103(1)).

Files 12, 13 and 14 of the MT-COMPANY pack cover every way shares leave the company. File 12 asks which organ took the decision, whether a copy of the resolution reached the Registrar and what percentage of nominal value was paid on allotment, then applies articles 86 and 87. File 13 walks the pre-emption offer, asks for the publication date and the closing date and tests the fourteen-day minimum in article 88(4), then checks that any withdrawal rests on an extraordinary resolution under article 88(5). File 14 covers the prospectus, the handling of applicants' money, the forty-eight-day repayment rule in article 97(3) and the one-month return of allotments in article 103(1).

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

• File 12 · Increase of the issued share capital and payment on allotment
• File 13 · Pre-emption rights on the issue of shares for cash
• File 14 · Public offers of securities: the prospectus, allotment and applicants' money

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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