Metal Fabricators Zambia PLC, also known as ZAMEFA, will this February 20th, 2020, hold their Annual General Meeting at which the Board of Directors will be seeking a vote on the increase in the company’s authorized shares, according to a statement from the company.
The special resolution will seek approval from shareholders to “to the increase of the authorized share capital of the Company from 54,4 million ordinary shares of ZMW 0.01 to 150 million ordinary shares of ZMW 0.01”, read a statement published by BDO Zambia Limited, who provide company secretary services on 30th January 2020.
This move however does not impact in the number of issued shares that are listed on the Lusaka Securities Exchange as it will be reflected when the company’s PACRA documents are updated.
There is a marked difference between authorized shares and issued shares. On the one hand, the company’s authorized shares are the units into which the ownership interest in a profit company is divided. The share capital of a company is made up of the funds contributed by shareholders to the company in exchange for their shares in the company. This is the detail that an SME would be filling out when creating and registering a company with PACRA. PACRA recently sent a “call out” to those whose authorized capital was below the 15,000 threshold and gave an ultimatum of this being resolved by December 2019.
On the other hand, issued shares are the total of a company’s shares that are held by shareholders. A company can, at any time, issue new shares up to the full amount of authorized share capital. Hence why the Authorised Share Capital is the maximum capital the company is authorised to issue and was defined in the articles of association.
In order to achieve the changes in the articles of association, shareholders will be called upon to vote on this matter as well. “Amendment of Article 5 of the Company’s Articles of Association To approve the amendment of the amended Articles of Association of the Company” according to the SENS announcement of 30th January 2020 issued by BDO, ZAMEFA’s company secretarial service providers, also indicates that shareholders will vote to so that “the authorised share capital of the Company will be 150 000 000 par value shares of ZMW 0.01 each”.
There are numerous reasons for companies to increase their issued shares. As the company progresses, additional shares may be issued for the following reasons: Introduction of new investment or investors, Amendment of the rights attaching to shares, and Resolution of shareholder disputes. In the case of ZAMEFA, shareholders are advised to ask the question of why this is the case at the coming AGM.