Par Value

October 4, 2017

What is par value?

Par value is the minimum or nominal value that is attributed to a share. In a par value regime, shares in a company limited by shares cannot be issued and allotted to any person below the par value. Thus, all references to paid-up capital of a company are in fact references the total par value or nominal value of the shares that have been issued in the company.

Any issuance of shares below the par value was considered to be an issuance at a discount and this was generally void under Section 59 of the Companies Act 1965 (now repealed). For example, if the par value of shares in a company was RM1.00 each, such shares cannot be issued by the company to any person at a price below RM1.00 per share since this would tantamount to a discount, in breach of Section 59 of the Companies Act 1965 (now repealed).

If shares having a par value of RM1.00 each were issued at a higher price, e.g. at RM10.00 per share, then the additional RM9.00 per share will be considered to be a premium paid on the shares. Section 60(2) of the Companies Act 1965 (now repealed) generally provided that all premiums received by the company on the issuance of shares shall be transferred to an account called the “share premium account”.

Significant differences between the Companies Act 1965 and the Companies Act 2016 in terms of par value

Section 74 of the Companies Act 2016 provides that all shares issued before or upon the commencement of the Companies Act 2016 have no par or nominal value. The Companies Act 2016 came into force on 30 January 2017.

There is also no equivalent section in the Companies Act 2016 as Section 59 of the Companies Act 1965 (now repealed) [see above for discussion on Section 59 of the Companies Act 1965]. Lastly, Section 618(2) of the Companies Act 2016 provides for the abolition of the share premium account.