Share Capital in GMC: No Par Value Shares, Redenomination, Treasury Shares, Buybacks and Capital Reduction

Summary

• All shares in a GMC company have no par or nominal value (Companies Act 2025, s. 62A). Share capital is the amount actually paid or credited as paid; there is no authorised capital and no share premium.
• Share capital may be converted from one currency to another by ordinary resolution at a spot rate taken within the 28 days before the resolution (ss. 73–73B); notice must reach the Registrar within 14 days.
• A company may buy back its own shares if its constitution permits, up to 20% of each class between annual general meetings (s. 76B(3)), provided it is solvent at the time of payment (s. 76F).
• Bought-back ordinary shares may be held in treasury up to 10% of the class (s. 76I); treasury shares carry no votes and no dividends (s. 76J).
• A private company may reduce capital by special resolution backed by a directors' solvency statement, with a six-week creditor objection window (ss. 78B, 78D–78E); the court-approved route under ss. 78G–78I is the alternative.

Why share capital rules matter in a no-par jurisdiction

Capital rules protect creditors by controlling what a company may return to shareholders. In GMC the starting point is clean. Section 62A(1) provides that "Shares of a company have no par or nominal value." There is no authorised capital and no premium account: whatever the company receives for a share is share capital. Shares may be issued for no consideration (s. 68), and share capital may be used to pay the costs of a new issue without that being a reduction (s. 67).

That simplicity shifts creditor protection onto the rules governing money going out: buybacks, redemptions, financial assistance and reductions. Throughout, "$" means United States dollars (s. 4A).

Altering share capital without reducing it

Section 71(1) permits a company, if authorised by its constitution, to consolidate and divide its share capital, convert paid-up shares into stock and back, subdivide shares and cancel shares not taken up or forfeited. Such a cancellation "is not deemed to be a reduction of share capital" (s. 71(2)). A private company lodges a notice, and the alteration takes effect when the Registrar updates the electronic register of members (s. 71(1B)–(1C)). Section 72 lets the court validate improperly issued shares where just and equitable.

Redenomination: moving share capital into USD (or out of it)

Companies arriving in GMC, particularly by redomiciliation, often have share capital in another currency. Section 73(1) allows a company by ordinary resolution to "convert its share capital or any class of shares from one currency to another currency", on one or more occasions and subject to conditions (s. 73(2), (6)). The conversion must be at a spot rate specified in the resolution, being the rate on a specified day or the average over a specified period, falling within the 28 days ending the day before the resolution (s. 73(3)–(5)). The resolution lapses if the redenomination has not taken effect within 28 days of being passed (s. 73(8)), and a constitution may exclude the power (s. 73(9)).

Redenomination changes the currency label only; it does not affect members' rights, dividend entitlements, voting rights or liability for unpaid amounts (s. 73A(1)). A notice setting out the redenominated capital and the rights of each class must reach the Registrar within 14 days (s. 73B(1)–(3)); default carries a fine of up to $4,000 and a $250 default penalty (s. 73B(4)).

Class rights and preference shares

Where a constitution allows class rights to be varied, holders of at least 5% of the class may apply to the court within one month to cancel the variation, which has no effect until confirmed (s. 74(1), (3)); the court disallows it only if it "would unfairly prejudice the shareholders of the class" (s. 74(4)). Section 75 requires the rights of preference shares as to capital, surplus, dividends, voting and priority to be set out in the constitution before any are allotted (see our guide to founder control in GMC).

Redeemable preference shares may be issued if the constitution authorises them; they must be fully paid before redemption, and redemption out of capital requires a solvency statement by all directors lodged with the Registrar (s. 70(1), (3)–(4)).

Buying back shares: ss. 76B to 76G

The baseline prohibition

Section 76(1A) prohibits a company from acquiring its own shares or lending on their security, and s. 76(1) prohibits a public company (or a company with a public holding company) from giving financial assistance for the acquisition of its shares, subject to exceptions including a 10%-of-capital-and-reserves whitewash backed by a solvency statement (s. 76(9A)). Buybacks are the express exception to the acquisition prohibition.

Authority and limits

Section 76B(1) allows a company to acquire its own shares "if it is expressly permitted to do so by its constitution", so the first drafting point is to check that permission. The limit is 20% of the ordinary shares (and separately of non-redeemable preference shares) in each class, counted at the date of the authorising resolution, during the "relevant period" from that resolution to the next annual general meeting (s. 76B(3), (3B), (4)); the designated officer may prescribe a different percentage. Redeemable preference shares may be acquired without limit (s. 76B(3D)).

Four routes are available, each requiring advance shareholder authority that expires no later than the next annual general meeting:

The solvency condition

Payment may be made "out of the company's capital or profits so long as the company is solvent" (s. 76F(1)). Solvency is tested at the date of payment on three limbs: no ground on which the company could be found unable to pay its debts; ability to pay debts as they fall due for the following 12 months; and assets not less than liabilities, including contingent liabilities, before and after the purchase (s. 76F(4)). A director or chief executive officer who approves a buyback knowing the company is not solvent faces a fine of up to $100,000 or imprisonment for up to three years (s. 76F(3)).

Consequences for capital

Ordinary shares bought back are cancelled immediately unless held in treasury under s. 76H (s. 76B(5)); preference shares are always cancelled (s. 76B(5A)). On cancellation, the company must reduce its share capital, its profits, or both proportionately, by the purchase price paid, depending on the source of funds (s. 76G). A private company effects the purchase by lodging the resolution and a notice of purchase with the Registrar (s. 76B(7)).

Treasury shares: ss. 76H to 76K

Ordinary shares acquired under ss. 76B–76G may be held as treasury shares, with the company entered in the register of members as holder (s. 76H). The cap is 10% of the total shares, or of each class (s. 76I(1)–(2)); excess shares must be disposed of or cancelled within six months or such longer period as the Registrar allows (s. 76I(3)).

Treasury shares are dormant while held. The company "must not exercise any right in respect of the treasury shares", has no right to attend or vote (s. 76J(2)–(3)), and may receive no dividend or other distribution on them, including on a winding up (s. 76J(4)). Bonus issues, subdivision and consolidation remain possible (s. 76J(5)).

Section 76K allows treasury shares to be sold for cash, transferred under an employee, director or other share scheme, transferred as consideration for an acquisition, cancelled, or used for other prescribed purposes (s. 76K(1), (1C)). Cancelling them does not require the capital reduction procedure (s. 76K(4)). A private company lodges a prescribed notice and the disposal takes effect on update of the electronic register (s. 76K(1A)–(1B)); a public company must lodge notice within 30 days (s. 76K(1D)). For a growth company this is a practical pool: shares bought from a leaver can later go to an employee share scheme without a fresh allotment.

Reducing share capital: Division 3A

What a reduction can do

Section 78A(1) allows a company to reduce its share capital in any way, including extinguishing liability on unpaid shares, cancelling paid-up capital that is lost, and returning capital that "is more than it needs". Reduction is possible only by a procedure in the Division (s. 78A(2)), the constitution may restrict it (s. 78A(3)), and the Division does not apply to redemptions under s. 70 or buybacks under ss. 76B–76G (s. 78A(5A)–(6)).

Route one: special resolution and solvency statement

A private company may reduce capital by special resolution if it meets the solvency requirements and any publicity requirements prescribed by the designated officer (s. 78B(1)). The solvency requirements are met if all directors make a solvency statement within the 20 days ending on the resolution date (s. 78B(3)); for a public company the window is 30 days and the statement must be lodged with the Registrar within 15 days (s. 78C(3)). No solvency statement is needed where the reduction involves no distribution of cash or assets and no release of any liability owed to the company (s. 78B(2), 78C(2)), which covers the common case of cancelling lost capital.

A "solvency statement" is defined in s. 7A: the directors' opinion that there is no ground on which the company could be found unable to pay its debts, that it will be able to pay its debts as they fall due for the next 12 months, and that assets are not less than liabilities including contingent liabilities before and after the reduction. For a company that is not audit-exempt, the statement must either be signed by every director or be accompanied by an auditor's report that the statement is not unreasonable (s. 7A(2)).

The statement must be available to members when they vote and to creditors at the registered office throughout the six weeks beginning on the resolution date (s. 78B(4)). Any creditor with a claim that would be provable in a winding up may apply to the court within those six weeks to cancel the resolution (s. 78D(2)–(3)). If none does, the reduction takes effect when the company lodges, after six and before eight weeks from the resolution date, the resolution, the solvency statement, a directors' confirmation and a notice of the reduction information (s. 78E(1)). If a creditor applies, the reduction proceeds only once every application is dismissed or withdrawn (s. 78E(3)). A director who makes a confirmation that is false and not believed to be true commits an offence (s. 78J).

Route two: court approval

Alternatively, a company may reduce capital by special resolution approved by court order (ss. 78G(1), 78I). Where the reduction reduces liability for unpaid capital or returns paid-up capital, the creditor protection procedure in s. 78H applies and the court must not approve unless each qualifying creditor has consented, been secured or otherwise safeguarded, or safeguards are unnecessary (s. 78I(2)). The order and reduction information must be lodged within 90 days (s. 78I(3)).

Following any reduction, a member's liability on a share is limited to the difference between the issue price and the sum of the amount paid up and the amount reduced (s. 78K).

Practical checklist / Next steps

1. Check the constitution for express buyback permission (s. 76B(1)) and for any exclusion of the redenomination or reduction powers (ss. 73(9), 78A(3)).
2. Choose the buyback route and draft the resolution to state maximum number, maximum price, expiry date and funding source (ss. 76C(2), 76E(2)).
3. Prepare a board solvency analysis on the three limbs of s. 76F(4) before any payment.
4. Decide whether to hold repurchased ordinary shares in treasury (10% cap, s. 76I) or cancel them (s. 76G).
5. For a capital reduction under s. 78B, diarise the 20-day statement window, the six-week objection period and the six-to-eight-week filing window.
6. If share capital is in a non-USD currency, pass a s. 73 resolution with a rate drawn from the preceding 28 days and file the s. 73B notice within 14 days.

Frequently asked questions

Can a GMC private company buy back shares from a departing founder?

Yes, by a selective off-market purchase under s. 76D, authorised by special resolution with the seller and its associates not voting. The constitution must permit buybacks (s. 76B(1)), the 20% per-class limit applies (s. 76B(3)) and the company must be solvent when it pays (s. 76F).

How many shares can be held in treasury?

No more than 10% of the total shares, or of each class where there are classes (s. 76I). Treasury shares carry no votes and receive no dividends (s. 76J).

Do we need to go to court to reduce capital?

The answer is usually no. A private company may use the special resolution and solvency statement route in s. 78B, with a six-week creditor objection window (s. 78D). Court approval under ss. 78G–78I is an alternative.

Can share capital be converted into US dollars?

Yes, by ordinary resolution at a spot rate from the 28 days before the resolution (s. 73). Members' rights are unaffected (s. 73A) and the Registrar must be notified within 14 days (s. 73B).

Key takeaways

• GMC shares have no par value; share capital is simply what the company receives for them.
• Buybacks need constitutional permission, shareholder authority, a 20% per-class cap and solvency at payment; knowingly approving an insolvent buyback carries a fine of up to $100,000 or three years' imprisonment.
• Treasury shares are capped at 10% and are silent while held, but are a flexible pool for employee schemes and acquisitions.
• Capital reduction by solvency statement is available to private and public companies alike, with a six-week creditor window; court approval remains available.
• Basnet Law can draft the constitution, resolutions and solvency statements so that each step is effective once filed on the Registrar's register.

This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.

You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.

References

• Companies Act 2025, ss. 4A, 7A, 62A, 67, 68, 70, 71, 72, 73, 73A, 73B, 74, 75, 76, 76B, 76C, 76D, 76DA, 76E, 76F, 76G, 76H, 76I, 76J, 76K, 78A, 78B, 78C, 78D, 78E, 78G, 78H, 78I, 78J, 78K, 161