Share splits may replace bonus issues

D.K. Hettiarachchi, Registrar General of Companies, has clarified some issues raised in last week’s report in The Sunday Times FT on share splits, an issue which has confused many listed companies.

In his letter, clarifying share splits, Hettiarachchi said:

“There are no provisions in the Companies Act No, 7 of 2007 against the subdivision or splitting of shares by a company.

A company may therefore make express provisions in its articles of association to allow for sub-division of shares. Under the Companies Act No 17 of 1982 Section 63(1) provided for sub-division of shares, notice of which had to be filed with the Registrar on Companies form 10. In the present circumstances since there is no express provision in the Act, the question as to how the Registrar is to be notified could arise. Section 51(4) (a) of the new Act provides for notice of issue of shares to the Registrar, by filing form 6.

Every company is also required to submit an annual Return (form 15) each year which includes among other particulars the total number of shares issues and the stated capital.

These figures must tally with the shares issued previously by a company. In the absence of a specific provision in the Act to notify the Registrar of a sub-division of shares by a company, the Registrar is not in a position to verify the correctness or otherwise of the figures given in the annual return by a company which has subdivided its shares. This matter could be resolved by a company which has express provision in its articles, by means of a special resolutions, notice of which is filed with the Registrar on form 39.”