May 10, 2007 (LBO) – A listed hotel firm in Sri Lanka has decided not to go ahead with a share split citing provisions in a new company law that came into effect earlier this month. Dividends declarations are subjected to solvency tests under the new law. Associated Hotels, went through a process to split its shares in March but it had not yet taken effect.
The company said its shareholders had passed a resolution, sub-dividing its shares to smaller priced units, but a new company law that came into effect on May 03 had made it redundant.
The new law does not recognize a par value for a share.
“Section 49 of subsection (04) of the new act states that ‘No share in a company shall have a nominal or par value’,” the company said in a statement to the Colombo Stock Exchange adding that shareholders would be informed by circular soon.
Legal experts have said that resolutions passed by shareholders relating to bonus issues under the law could be implemented but those who have only made a declaration would have to repeat the process as a share split.
Under the old law, share splits (subdividing the ‘par value’ of a share into smaller par value) and bonus shares (is