Topic 4 - Shares Capital II

4.6 - Register of Members

4.7- Rectification of Register

Company has a duty to maintain

Application

be

made

of

set out in s 158 CA.

wrongful

entry

or

wrongful

omission or wrongful retention: s 162

name, address etc.

CA.

Kept in registered office of company:

s 159 CA. Exceptions may be kept
elsewhere.
(1) The register of members and index, if any, shall be
kept at the registered office of the company, but
(a) if the work of making them up is done at another
office of the company within Malaysia they may be kept
at that other office; or
(b) if the company arranges with some other person to
make up the register and index, if any, on its behalf they
may be kept at the office of that other person at which
the work is done if that office is within Malaysia.

(1) If
(a) the name of any person is without sufficient cause
entered in or omitted from the register; or
(b) default is made or unnecessary delay takes place in
entering in the register the fact of any person having
ceased to be a member,
the person aggrieved or any member or the company
may apply to the Court for rectification of the register,
and the Court may refuse the application or may order
rectification of the register and payment by the company
of any damages sustained by any party to the
application.

Mode of application
Order 88 rule 2 Rules of Court
2012

matters

Originating Summon

inserted therein but not conclusive

Originating Motion

Prima

facie

evidence

of

evidence: s 158(4) CA.

(4)

The

register

of

members

shall

be prima

facie evidence of any matters inserted therein as

required or authorized by this Act.

Offence if non-compliance with s 158

CA: s 158(7) CA.
(7) If default is made in complying with this section the
company
and every officer of the company who is in
1
default shall be guilty of an offence against this Act.

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for

rectification of register on the ground

register of members - particulars as

-

can

Who can be an applicant?

s 162(1) CA - 'person aggrieved'

Allied Properties Sdn Bhd v Semua

Holdings Sdn Bhd
Held that the beneficial owner of shares
was a 'person aggrieved' and could apply
for rectification of the register.
Sing Eng (Pte) Ltd v PIC Property
Ltd [1990]:
This means a person whose name is
improperly omitted or one whose name is
left on the register after he has ceased to
be a member.
When an application for rectification
can or cannot be granted?
Sabah Penang Development Sdn Bhd
v Yeng Hing Enterprise Sdn Bhd
Held, dismissing the applicant's motion:
The jurisdiction of the court to grant the
summary remedy to rectify the register
of members of a company under s 162 of
the Act is general but the exercise of it is
discretionary.
The discretion will only be exercised in
favour of the applicant where the case is
clear and free from difficulty or material
doubt.
Where the case is complicated and there
is doubt as to the bona fides of the
2

transaction, or where the case involves

complicated questions of law and fact,
the court will refuse to order rectification
on a motion but will leave the applicant
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to seek rectification by way of an action.

Central Securities (Holdings) Bhd v

4.8- No Registration of Trust

Haron bin Mohadmed Zaid

an application for rectification cannot be
granted where there are serious disputes
regarding title and the issues cannot be
properly

decided

in

the

summary

proceedings under the section. Delay is a

material consideration. In the present
case, the delay is almost 2 years.
Pioneer Motor Service Co v Chin
Cheng Hong Sdn Bhd
Rectification was ordered in the Pioneer
Motor Service case, as the directors had
approved

transfer

in

disregard

of

articles conferring pre-emptive rights on

other members.
However, the fact that an allotment of
shares is irregular does not ipso facto
mean that the register will be rectified.
The court still has discretion not to rectify
the register and may decline to do so if,
for

instance,

the

applicant

has

acquiesced in regarding the allottee as a

member of the company notwithstanding
the

invalid

allotment:

Re

Organisation Ltd [1961] MLJ 295.

Asian

s 163(4) CA - Except as provided in

this section no notice of any trust
expressed, implied or constructive
shall be entered on a register or
branch register or be receivable by
the Registrar and no liabilities shall be
affected
by
anything
done
in
pursuance of subsection (1), (2) or (3)
or pursuant to the law of any other
place which corresponds to this
section
and
the
corporation
concerned shall not be affected with
notice of any trust by anything so
done.
Table A, article 7. - Except as
required by law, no person shall be
recognized by the company as
holding any share upon any trust, and
the company shall not be bound by or
be compelled in any way to recognize
(even when having notice thereof)
any equitable, contingent, future, or
partial interest in any share or unit of
a share or (except only as by these
regulations or by law otherwise
provided) any other rights in respect
of any share except an absolute right
to the entirely thereof in the
registered holder.
Yeng Hing Enterprise Sdn Bhd v Liow
Su Fah
A company is not bound to take notice of
trusts of its shares.
Sing Eng (Pte) Ltd v PIC Property
Ltd [1990]:
an attempt to register shares in the name
of a nominee may be rejected.

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 Referring to Yeng Hing Enterprise

Sdn Bhd v Liow Su Fah, the Court
of

Appeal

Construction

in Hi-Summit
Sdn

Bhd

Konsortium Lapangan Terjaya Sdn

Bhd & Ors [2015] 2 MLJ 247 held
that a beneficial majority shareholder
under a trust in respect of the shares
(who, in this case, attempted to
exercise rights under the shares ie
non-interest to pursue the appellant's
writ action) was not in the position to
exercise any rights under the shares
at all.

Consequence of this rule:

Simpson v Molsons Bank
Company treats every person whose
name is on the register as owner of the
shares and will therefore not be liable to
beneficiaries of the trust if a sale is in
breach of the trust.

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The exceptions to this rule:

(a) s 163(1) and s 163(2) CA
(1) Any trustee executor or administrator
of the estate of any deceased person who
was registered in a register or branch
register kept in Malaysia as the holder of
a share in any corporation may become
registered as the holder of that share as
trustee executor or administrator of that
estate and shall in respect of that share
be subject to the same liabilities and no
more as he would have been subject to if
the share had remained registered in the
name of the deceased person.
(2) Any trustee executor or administrator
of the estate of any deceased person who
was beneficially entitled to a share in any
corporation being a share registered in a
register or branch register kept in
Malaysia may with the consent of the
corporation and of the registered holder
of that share become registered as the
holder of that share as trustee executor
or administrator of that estate and shall
in respect of the share be subject to the
same liabilities and no more as he would
have been subject to if the share had
been registered in the name of the
deceased person.
Re LY Swee & Co Ltd

(b) s 163(3) CA.

-

4.9 - Share Certificate

Company affected by notice of the

rights of third parties

Shares listed in Stock Exchange

(3) Shares in a corporation registered in a

register or branch register kept in
Malaysia and held by a trustee in respect
of a particular trust may with the consent
of the corporation be marked in the
register or branch register in such a way
as to identify them as being held in
respect of the trust.

share certificates are deposited in

Central Depository (technically holder
of share certificates).
Transfer of shares are scriptless and
by book entry.

Chung Khiaw Bank Ltd v Four Seas

Communications Bank Ltd
The fact that a company is not obliged to
take notice of trusts does not mean that
it can ignore the fact that third parties
have equitable interests in its shares.
Thus, where a company claims a lien
over its shares, it may be affected by
equitable interests of which it has notice,
notwithstanding that such interests have
not been notified on the register.
Similarly, the fact that the company
can ignore equitable interests does
not

mean

that

such

equitable

interests are invalid.

Jin Sen Hong (1971) Sdn Bhd v
Khiing Sie Khuo [1988]:
where
a charging order was postponed to
5
an earlier equitable mortgage of shares.

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s 107C CA - The transfer of any

securities or class of securities of a
company whose securities or any
class of whose securities have been
deposited with a central depository
shall be by way of book entry by the
central depository in accordance with
the rules of the central depository.
Notwithstanding s. 103 & 104.
Companies which do not come under
Central Depository System must issue
share certificate to each member.
Companies which do not come under
Central Depository System must issue
share certificate to each member.

Statutory requirements
s 100(2) CA - (2)Every share
certificate shall be under the common
seal of the company or (in the case of
a share certificate relating to shares
on a branch register) the common or
official seal of the company and shall
state as at the date of the issue of the
certificatea) the name of the company and the
authority under which the company is
constituted;
b) the address of the registered office of
the company in Malaysia, or where
the certificate is issued by a branch
office, the address of that branch
office; and
c) the nominal value and the class of the
shares and the extent to which the
shares are paid up.

Offence if non-compliance with s 107

CA: s 107(2) CA
If default is made in complying with this
section the company and every officer of
the company who is in default shall be
guilty of an offence against this Act.
Penalty: One thousand ringgit. Default
penalty.

Prima facie evidence of title

s 100(1) CA - A certificate under the
common or official seal of a company
specifying any shares held by any
member of the company shall
be prima facie evidence of the title
of the member to the shares.
Kelapa Sawit (Teluk Anson) Sdn Bhd

Obligation to issue Share

v Dr Yeoh Kim Leng

Certificates

In the present case since the company

Companys

duty

to

issue

share

certificate and time frame: s 107(1)

CA.
Every company shall within two months
after the allotment of any of its shares or
debentures, and within one month after
the date on which a transfer (other than
such a transfer as the company is for any
reason entitled to refuse to register and
does not register) of any of its shares or
debentures is lodged with the company,
complete and have ready for delivery all
the
appropriate
certificates
and
debentures in connection with the
allotment
or transfer.
6

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had succeeded in establishing that the

resolution was invalid and the seal of the
company was affixed without authority,
in both cases in flagrant violation of Art.
54 and 55, respectively, s. 100 does not
apply in much the same way and for the
same reasons estoppel does not avail the
respondents.
What the company never did and what is
not attributed to the company does not in
law bind the company.

Effect of Share Certificate:

Kelapa Sawit (Teluk Anson) Sdn Bhd

Estoppel

v Dr Yeoh Kim Leng & Ors

Estoppel against the company

A

share

certificate

contains

two

statements of importance:
i. the name of the holder of the shares,
and
ii. the amount to which the shares are
paid up.
Both these statements amount to
representations by the company and
will estop the company from denying
their truth vis--vis any person who
has relied on such statements to his
detriment.
Burkinshaw v Nicholls
where a company was also estopped
from denying that shares stated to be
fully paid up were so in fact.
Estoppel can also provide a remedy for a
person relying to his or her detriment on
a share certificate where the problem is
not one of ownership of the shares but of
how much has actually been paid up on
them.

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Liability of company for issue of

incorrect share certificate
Re Bahia and San Francisco Railway
Co
In a proper case the company may be
liable to pay damages to a person
who suffers loss in reliance on these
statements. Such loss might arise
where the company issues a share
certificate to a person who does not
have a valid title to the shares and a
subsequent purchaser purchases the
shares on the faith of the certificate.

Estoppel and Transfer of Shares

Liability of company for issue of
incorrect share certificate

Stanley Yeung Kai Yung & Anor v

Hong Kong and Shanghai Banking

Re Bahia and San Francisco Railway

Corporation

Co (1868) :

The shareholder had had his share

good faith purchasers of shares relied

certificates stolen.

on share certificates which had been

The thief lodged forged transfers with

mistakenly issued to the vendors

stockbrokers, who in good faith sent

because of the latters submission to

the share certificates and transfer

the company of a forged transfer of

deeds to the bank for registration and

the shares. The purchasers were duly

transfer, which was done.

registered as members and issued

The

transferee

thus

came

to

be

with their own certificates but the

registered

register was rectified in favour of the

shares.

person who was originally entitled. It

asked for his name to be restored to

was held that the purchasers could

the register and for related relief.

claim damages from the company

The

and

The

bank

he

then

innocent

brought

sold

the

shareholder

third

party

since, by issuing the certificate to the

proceedings against the stockbrokers.

vendors, it had represented to the

The original shareholder succeeded

purchasers that the vendors were the

true owners.

against the bank. As between the

bank and the stockbrokers, at first
instance and in the Hong Kong Court
of Appeal the Judges relied on the
Barclay implied indemnity and found
the stockbrokers liable to indemnify
the bank. The stockbrokers appealed
to the Privy Council.

Held: The decision in Barclay was

upheld.

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No estoppel if forged certificate

Ruben v Great Fingall Consolidated
The company secretary, to pursue a
fraudulent

objective

of

his

own,

presented to innocent lenders a share

certificate appearing to be that of the
company and appearing to be signed by
two directors as well as by the secretary.
However, the seal had been affixed by
the

secretary

fraudulently

and

the

secretary had forged the two signatures

of the directors.

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Lord Macnaghten said: The thing put

forward as the foundation of their claim is
a piece of paper which purports to be a
certificate of shares in the company. This
paper is false and fraudulent from
beginning to end. The representation of
the companys seal which appears upon
it, though made by the impression of the
real seal of the company, is counterfeit,
and no better than a forgery. The
signatures of the two directors which
purport to authenticate the sealing are
forgeries
pure
and
simple.
Every
statement in the document is a lie. The
only thing real about it is the signature of
the secretary of the company, who was
the sole author and perpetrator of the
fraud. No one would suggest that this
fraudulent certificate could of itself give
rise to any right or bind or affect the
company in any way. It is not the
companys deed, and there is nothing to
prevent the company from saying so.

4.10- Transfer of Shares

s 98 CA. The shares or other interest
of any member in a company shall be
movable property, transferable in the
manner provided by the articles, and
shall

not

be

of

the

nature

of

immovable property.

s 103(1) CA - Notwithstanding
anything in its articles a company
shall not register a transfer of shares
or debentures unless a proper
instrument
of
transfer
in
the
prescribed form has been delivered to
the company, but this subsection
shall not prejudice any power to
register as a shareholder or debenture
holder any person to whom the right
to any shares in or debentures of the
company has been transmitted by
operation of law.

Transfer of shares in accordance

with the articles
A shareholder who desires to transfer his
shares must conform with the provisions
relating to transfer in the articles of

Relevant provisions: ss 103 107 CA;

Table A, arts 20 - 23
103 Instrument of transfer
104 Registration of transfer at request

association.
If he fails to do so, the company is

of transferor

entitled to refuse to register the transfer

105 Notice

and in such a case the court will decline

transfer

to

interfere: Re

Fraser

&

Neave

Ltd [1967]

of

refusal

Companies that do not come under

the Central Depository System:
Every transfer must be executed on
instrument of transfer as prescribed
by CA ie. Form 32A.
10

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register

106 Certification of transfers

107. Duties of company with respect
to issue of certificates

Procedure for Transfer

to

Restriction of Transfer
Shareholder has a prima facie right to
transfer his shares. Directors have no
discretion to refuse to register a
transfer of shares unless the articles
so provide:
Re Smith, Knight & Co, Westons
Case
Shareholder has a prima facie right to
transfer his shares. Directors have no
discretion to refuse to register a transfer
of shares unless the articles so provide.
Re Fraser & Neave Ltd [1967]
The MOA or AOA of a company may
provide for certain

conditions

to

be

fulfilled before a share can be transferred

and such restrictions are binding on the
registered owner of shares.
Ontario Jockey Club Ltd v
McBride [1927]
Share transfer restrictions may also be
imposed by contract.

11

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 Position

for

private

company

Pre-Emptive Rights

s.15(1)(a) CA

Meaning of pre-emptive clause or a

directors power of veto clause

'restricts the right to transfer its shares'

-

Directors may be given discretion to

The Act does not prescribe the manner in

refuse to register transfers of shares,

which the right to transfer shares is to be

thus

restricted.

undesirable outsider.

Commonly,

the

AOA

will

enabling

them

to

exclude

an

require that shares be offered to the

existing members before an outsider may

This discretion is subject to common law

purchase them.

and statutory rules.

Position for public company : Chapter

Re Smith & Fawcett Ltd [1942]

7 of Listing Requirements of Bursa

For example, the discretion must be

Malaysia Securities Berhad

exercised in good faith for the benefit of

the company and not for any collateral

Notice of refusal to register transfer: s

105(1) CA.

purpose:
-

Further the company has a primary

obligation to register transfers at the

If

company

refuses

to

register

transferor's request: s 104.

transfer of any share or other interests in

the company, it must, within one month

from the date on which the transfer was

refused, the applicant must be notified of

lodged with it, send to the transferor and

the refusal within one month of his

to the transferee notice of the refusal.

applying for registration: s 105

If registration of a transfer is to be

Failure to do so will entail a penalty.

Effect of pre-emptive clause.
Offence if non-compliance/default: s
12

105(2).

Offence

if

non-compliance/default:

105(2) -max penalty of a fine of RM1,000

and a default penalty.
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Effect of breach

Mahima Singh & Ors v Balde v Singh

The Seremban Town Service Sendirian
Bhd. had resolved at its AGM to allot
shares to bumiputras. The directors of
the company subsequently decided to
issue shares to Malay employees. No
offer or notice was given to the
respondent and other shareholders in
accordance with article 46 of the Articles
of Association of the company.
The respondent applied for a declaration
that the acts of the appellants, the
directors of the company, in issuing the
shares was ultra vires the AOA of the
company.
The learned trial judge allowed the
application, as he held that the act of the
appellants in alloting the shares was
contrary to the resolution passed at the
AGM.
The appellants appealed.
Held, dismissing the appeal: the acts of
the
appellants
were ultra
vires the
articles of association as the appellants
had failed to offer the shares or give
notice to the respondent and other
shareholders as required by the articles
of association of the company.

Mohamed Yahya v M S Ally Sdn Bhd

13

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Gan Sin Tuan v Chew Kian Kor

Rules on restrictions on
transfer
Shares

are

freely

transferable

directors have no power to refuse to

register unless such power is given
under the Articles of Association.
Directors power to refuse the transfer
and how it should be exercised.
Loh Eng Leong & Ors v Lo Mu Sen &
Sons (Sdn) Bhd

Pioneer Motor Service Company Sdn

Bhd v Chin Cheng Hong Sdn Bhd

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Re Smith and Fawcett Ltd

Kwality Textiles (Malaysia) Sdn Bhd

v Arunachalam
In this case the respondents had applied
to have their names registered as owners
of certain shares which had been
transferred to them. At the time of the
transfer of the shares the respondents
were already owners of other shares in
the company and were therefore
members of the company. The directors
of the company refused to register the
transfer in exercise of their discretion
under art 44(1) of the AOA of the
company.
Held, allowing the appeal: In this case
the discretion given by the article is by
its language absolute. The court should
not interfere with the proper exercise of
discretion by the board of directors
conferred by the AOA to refuse
registration for the well-being of the
company. Indeed the court should be
slow to question the exercise of the
discretion in the absence of evidence
that the board of directors had acted
mala fide.

Must the board of directors give

reason for the refusal?
-

If the articles state that the directors

are entitled to reject the registration on

certain grounds only:
In re Bede Steam Shipping Company,
Limited
15

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Lim Ow Goik & Anor v Sungei Merah

Bus Company Ltd
In this case the second applicant had
sold 15 shares in the company to the first
applicant

and

sent a

notice

to the

the

second

directors.
The

directors

informed

applicant

that

disposing

of his

his

application

for

shares to the first

applicant could not be approved, but it

could

be

considered

for

approval

provided he gave the pre-emption right

equally to all the existing shareholders.
The AOA of the company provide that the
directors may decline to register any
transfer of shares to a person of whom
they do not approve and may also
decline to register any transfer of shares
in which the company has a lien.
Held:
(1) although if the directors had simply
expressed their opinion it would not be
for the court to examine or to inquire into
the ground on which they had formed
their opinion, in this case, the directors
had exercised their power for a reason
not empowered by the articles of the
company and therefore this was an
improper exercise by the directors of the
16

powers vested in them;

(2) the second applicant had therefore a
legal right in favour of his claim and the
court must give effect to it by ordering
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the company to register the transfer.

 If directors are not required to give

reason but go forward to give reason:

was lodged with it, send to the

transferor and to the transferee notice
of the refusal.

Kesar Singh v Sepang Omnibus Co

Ltd

s 105(2) CA:

Where directors of a company are given

Consequence of default in complying with

by the AOA an absolute and uncontrolled

s 105 CA

discretion with regard to registering a

transfer of shares the only limitation on

Royal Trust Nominees Ltd v Sri

the directors' discretion is that it should

Hartamas Development Sdn Bhd

be exercised bona fide in the interests of

the company.
Mohan a/l Paramsivam v Sepang
Omnibus Company Sdn Bhd

David Hey v New Kok Ann Realty Sdn

Bhd

Re Hackney Pavilion Ltd [1924] 1 CH

276.
Decision to reject must be made at the
board meeting. If directors are equally
divided and no decision is made, then the
company must register the transfer
Allied Properties Sdn Bhd v Semua
Decision must be made within 1
month from the transfer was lodged
unless there are reasonable grounds
why the meeting will not be held.
s 105(1) CA - If a company refuses
17

to register a transfer of any share,

debentures or other interests in the
company it shall, within one month
after the date on which the transfer
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Holdings Sdn Bhd

4.11-

Transfer

of

Shares

in

4.12 - Transmission of Shares

scripless trading environment

Meaning of transmission of shares.
ss 107A, 107B, 107C, 107D, 107E and
107F into CA.

Proof of the personal representatives

status - document evidencing a grant
of probate or letters of administration:
s 103(3) CA.
A transfer of the shares, debentures
or other interest of a deceased person
made by his personal representative
shall be valid as if he had been such a
member at the time of the execution
of

the

instrument

of

transfer:

103(2) CA.
Provisions
regarding

as

contained

transmission

stipulated in arts 24-27.

18

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of

in

Table

shares

A
are