Amendments to Companies Act (Part 1)

What are the amendments made?

1. Shares no longer have a par value.
2. Companies can hold treasury shares.

Effective date - 30 Jan 2006

What are the implications?

1. In the absence of par value, a company may have greater flexibility in pricing new shares to be issued in raising new capital. This was a particular concern when distressed companies faced tremendous difficulties in attempting to encourage take up of new shares priced at par value.
2. The term "Authorised Capital" is now part of history too.
3. Treasury shares are shares of the company purchased during share buybacks for various reasons eg. to enhance shareholders' value. The company now has the flexibility to hold these purchased shares in a treasury account for possible subsequent issuance eg. as part of employee compensation scheme.
4. For balance sheets as at on or after 30 Jan 2006, you should not see any share premium account and capital redemption reserve. These accounts will now be part of Share Capital account under the Act.