Company Securities
- Part I - Shares, Debentures and Enforcement of Securities -
Company Securities
Company securities are funds available for the company’s operations, which may be obtained internally or externally. They consist mainly of shares, debentures and bonds. Shares are internally generated while debentures are externally generated.
S868 - Statutory Definitions
- “Securities” includes shares, debentures, debenture stock, bonds, notes (other than promissory notes) and units under a unit trust scheme.
- “Share” means the interests in a company’s share capital of a member who is entitled to share in the capital or income of such company; and (except where a distinction between stock and shares is expressed or implied) includes stock.
- “Debenture” means a written acknowledgment of indebtedness by the company, setting out the terms and conditions of the indebtedness, and includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not.
Shares
Borland’s Trustee v Steel Brothers & Co Ltd [1901]
Farwell J gave the classical definition: “A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se... A share is not a sum of money settled in the way suggested, but is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount.”
Elements of a Share
- It is a unit of investment;
- It is not a sum of money;
- It is an interest measured by a sum of money;
- Measured for the purpose of interest or benefit;
- Measured for the purpose of liability;
- Confers the right of membership as contained in the AOA;
- Confers a right to the refund of capital in a more or less amount.
A share represents a unit of the bundle of rights and liabilities a shareholder has in a company. Rights include the right to attend and vote at meetings – S138(a) & (b). A share is a chose in action and is property transferable as provided in the articles – S139; Okoya v Santilli.
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