Ordinary Shares: Features and Benefits

Ordinary shares are the most common types of company shares issued in Malaysia, and they represent ownership in a company. One of the primary features of ordinary shares is that they entitle the shareholder to vote at the company’s annual general meetings. Ordinary shareholders are also entitled to receive dividends, which are typically paid out of the company’s profits. However, the amount of dividends paid out may be subject to the terms of the shareholders’ agreement. Another benefit of holding ordinary shares is that they can potentially increase in value over time, which may result in a capital gain when the shares are sold. It is important to have a Shareholders Agreement in place that outlines the rights and obligations of each shareholder and ensures that everyone is on the same page.

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Advantages and Disadvantages of Preference Shares

Preference shares are another type of share that companies in Malaysia can issue to shareholders. 

➤ One advantage of preference shares is that they offer investors a fixed dividend payment, which can provide a steady source of income.
➤ Preference shares also have priority over ordinary shares in the payment of dividends and in the event of liquidation, meaning that preference shareholders are paid before ordinary shareholders.
➤ Additionally, some preference shares may have features that make them more attractive to certain investors, such as the ability to convert to ordinary shares.
➤ However, one disadvantage of preference shares is that they typically have limited voting rights, which can restrict shareholder influence over company decisions.
➤ Furthermore, the fixed dividend payment may be seen as a disadvantage if the company is performing well and ordinary shareholders are benefiting from higher dividends.

In summary, preference shares can offer certain advantages for investors and companies in Malaysia, but also have potential drawbacks that should be carefully considered.

Redeemable Preference Shares in Malaysian Companies

Redeemable preference shares are a type of preference share that allows companies in Malaysia to buy back the shares from shareholders at a later date, typically at a predetermined price. This feature can be beneficial for companies looking to raise capital without diluting their ownership or control over the company. Additionally, redeemable preference shares typically have fixed dividend payments, which can be attractive to investors looking for a steady income stream.

However, they may be more expensive to issue than ordinary shares, as they may require higher dividend payments or other features to make them attractive to investors. Furthermore, these type fo shares may be less attractive to investors who are looking for a longer-term investment, as the company may choose to buy back the shares at a set date.

ℹ️ Redeemable preference shares can be a useful tool for companies in Malaysia looking to raise capital while maintaining ownership and control over the company, but should be carefully considered in the context of the company’s overall capital structure and goals.

Other Types of Company Shares

Aside from ordinary shares and preference shares, there are other types of company shares that can be issued to shareholders in Malaysia. 

1. Companies can issue convertible preference shares, which allow shareholders to convert their shares into ordinary shares at a later date. This can be attractive to investors who want the potential for capital appreciation but also desire the fixed dividend payments of preference shares.

2. Companies can also issue non-voting shares, which provide capital to the company without giving shareholders voting rights. This can be useful for companies that want to raise capital without diluting their control over the company.

3. Other types of shares include founders’ shares, bonus shares, and cumulative preference shares, which each have their own unique features and benefits.

ℹ️ It is important for companies to carefully consider the costs and benefits of issuing different types of shares, as each type may have different requirements and potential drawbacks. Companies in Malaysia have a variety of options when it comes to issuing shares, and should carefully consider their overall capital structure and goals when deciding which type of share to issue to shareholders.

Legal and Regulatory Considerations when issuing shares

In Malaysia, companies must comply with various legal and regulatory requirements when issuing shares. For example, companies must comply with the Companies Act 2016 and related regulations when issuing and registering shares. Companies must also consider the Securities Commission Malaysia‘s guidelines and regulations related to the issuance of shares, which can include requirements related to disclosure, transparency, and investor protection. Additionally, companies must consider tax implications related to the issuance of shares, as well as any relevant industry-specific regulations or guidelines. You may contact one of our lawyers to ensure that you are compliant with all relevant laws and regulations.  You also have to carefully consider the costs and benefits of different types of shares before making a decision.

By carefully navigating the legal and regulatory landscape related to share issuance, companies in Malaysia can raise capital while also protecting the interests of shareholders and complying with relevant laws and regulations.

In conclusion, understanding the different types of company shares available in Malaysia is crucial for businesses looking to raise capital and attract investors. By carefully considering the unique features and benefits of each type of share, business owners can make informed decisions that best suit their company’s needs and goals. Ultimately, choosing the right type of share can help businesses achieve long-term success and growth while providing opportunities for shareholders to participate in the company’s success.

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