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Company Shares Terminologies

The Companies and Allied Matters Act, 2020 (CAMA) uses various terminologies to describe shares. This discussion briefly highlights and describes some of those terms.

Issue of shares – ss. 141-148 
This is the creation of new shares by the company. The shares may be freshly created through an increase in the company’s share capital; or by the re-issue of old shares which were either surrendered or forfeited by a former shareholder of the company.

Offer of Shares – s. 142 
This is the process whereby the company offers newly issued shares, either to existing shareholders of the company or to prospecting members.
Allotment of Shares – ss. 149-157 
This is the allocation of new or old shares to new or existing members of the company on terms and conditions prescribed by the company.

Call on Shares – ss. 158-159
This is the demand for payment from shareholders who are yet to pay for their shares. It is simply “a call” on the members of the company to pay for unpaid shares.

Payment for Shares – ss. 160-163
This is the payment by a member for shares which the company allotted to him. Payment for shares could be in cash or for other valuable consideration, or both.

Lien on Shares – s. 164
Like every lien, a company has a claim for the money on the unpaid shares of a member. Where the member in whose name the shares is registered fails to pay for the shares, the company can sell the shares and apply the proceeds to the unpaid shares.

Forfeiture of Shares – s. 165
Forfeiture of shares occurs when a member fails to heed to the call on shares of the company. For forfeiture of shares to be effective, the company must have served on the member a notice requesting him to pay for the shares within a certain number of days, failing which the shares will be forfeited. Thereafter, the directors will issue a resolution forfeiting the shares. A person whose shares have been forfeited ceases to be a member of the company in respect of the forfeited shares. 

Classes of Shares – ss. 166-169
This simply refers to the different classification of shares. Shares are classed based on the rights attached to them. The two common classes of shares are ordinary/equity shares and preference shares. While, ordinary shares have no special rights attached to them, preference shares on the other hand have special voting and dividend rights attached to them. 

Numbering of Shares – s. 170
Basically, the law requires that each share in a company having a share capital shall be distinguished by its appropriate number. Money paid by shareholders for shares allotted to them forms the share capital of the company. Every share that has been paid for must be numbered by the company to distinguish them from others. An allotted share will not be numbered unless it is paid for.

Share Certificates – ss. 171-174
This is a certificate or document given by a company to its members as evidence of membership or ownership of the company’s shares.

Bearer Shares – s. 174
These are shares in which the owners are unknown to everyone, including the company. The owner of a bearer share is simply called “The Bearer” on the share certificate and in the register of members. The law prohibits bearer shares. 

Transfer of Shares – s. 175-178
Like the transfer of any commodity, it involves the change of ownership of shares. Transfer of shares may be done by sale or by gift. Whatever the case, it must be done by an instrument of transfer, such as a transfer deed or transfer form.

Transmission of Shares – s. 179-181
This is the transfer of the shares of a dead or bankrupt shareholder to his survivor(s) or legal representatives.
Nominal/Authorised Share Capital
This is the share capital that a company states in its incorporation document. One of the reasons that it is called nominal/authorised share capital is because it represents the share capital that a company can issue at any point in time; and also the fact that it may or may not have been fully paid for by the initial subscribers of the company.

Articles on this site are meant for general knowledge only, not as professional advice. If you need personal advice on matters contained herein, you are advised to contact a professional.

We are a firm of legal practitioners and CAC certified agents. We help business owners, entrepreneurs and associations register their businesses, companies and associations with ease. If you need our help with any of the matters contained in the article, feel free to send us a mail at niyiama@yahoo.com or reach us on WhatsApp @ +234-08126194751.

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