Sub division of shares

Sub-division of shares, also known as a stock split, is a process by which a company increases the number of its outstanding shares by dividing each share into multiple shares, without changing the company’s stated capital. This means that while the number of shares increases, the total value of the shares held by each shareholder remains the same, as the share price adjusts accordingly.

The procedure for the sub-division of shares, involves several key steps that a listed entity must follow to increase the number of shares without changing the stated capital. Here is a detailed breakdown of the procedure:

  1. Approval from Shareholders:
    • The listed entity must obtain approval from the shareholders for the sub-division, as per the Articles of Association of the entity.
  2. Announcement to the CSE:
    • The entity is required to make an announcement to the Colombo Stock Exchange (CSE) immediately upon the board resolving to effect the increase of the number of shares by way of a sub-division.
    • The announcement should include:
      • An extract of the Article that permits the increase of shares.
      • The proportion of the sub-division with reference to the existing shares.
      • The existing number of shares and the resulting number after the sub-division.
      • A statement confirming there is no change to the stated capital.
      • A statement that the increase of shares by way of a sub-division is subject to shareholder approval at a General Meeting.
  3. Submission of Documentation:
    • The following documentation must be submitted to the CSE within seven market days from the date of the announcement:
      • A certified copy of the board resolution recommending the increase of shares by way of a sub-division.
      • A certified copy of a board resolution confirming that the relevant Article permits such an increase.
      • A declaration signed by the entire board of directors as per the enclosed format in the document.
      • A circular to shareholders, which includes:
        • Notice of the meeting (date of sub-division/entitlement date).
        • Procedure regarding the updating of CDS records and the issue of share certificates subsequent to the share increase.
        • Information on the suspension of dealings for the purpose of updating CDS records.
        • The date on which the entity’s shares will commence trading after the change.
        • The number of shares before and after the increase.
        • Confirmation that there is no change to the stated capital.
        • Assurance that the shares will be directly deposited into the respective CDS accounts of the shareholders.
  4. General Meeting and Post-Meeting Requirements:
    • After the General Meeting, the entity must submit to the CSE:
      • Confirmation that the resolution has been adopted at the General Meeting (certified by the Company Secretary).
      • The number of shares subsequent to the change.
      • Confirmation signed by two directors that the provisions of the Companies Act No. 7 of 2007 have been complied with in connection with the increase of shares by way of a sub-division.
      • Confirmation that there is no change to the stated capital.
      • The total number of shares held by non-residents (main ledger + CDS quantity).
  5. Broker Wise Entitlement Schedule:
    • The entity is required to obtain a ‘Broker wise’ entitlement schedule from the Central Depository System (CDS) as at the end of trading on the third market date from and excluding the date of the General Meeting for the purpose of carrying out the direct upload of shares to the respective accounts in the CDS.

This procedure ensures that the sub-division of shares is conducted in a transparent and regulated manner, in compliance with the Articles of Association, the Companies Act, and the requirements of the CSE.

Source Documents