JSE’s directors not empowered to split stock

Directors of the Jamaica Stock Exchange approved a 5 for 1 stock split effective October 5, 2016 but the directors do not have the power to effect the change without the approval of shareholders at a general meeting.
According to a release today on the JSE website, the board of directors at a meeting approved the stock split of the company effective in October at the JSE’s board meeting held on September 21, the stock is expected to reflect the split in the price on the JSE on October 3, 2016. The release goes on to state that “as a result of the proposed stock split, the JSE will list an additional 561,000,000 ordinary shares, increasing the issued shares from 140,250,000 to 701,250,000”.
But there is a bit of a problem with the implementation of the decision. The directors have no power to effect the split. A change in the number of issued share capital has to be approved at a general meeting of the company. No resolution has been put to the shareholders at a meeting so to date and none is planned as such the decision will be voidable if legally challenged.
This development is strange as all of the several companies who have split their stock have had it approved by the shareholders at a general meeting. The latest is Cargo Handlers who have called an extraordinary meeting solely to approve it, admittedly, in this case the number of the authorised shares would be inadequate to facilitate it.
Best practice suggests that the directors should err on the side of caution even if they feel otherwise. Shareholders have the power to make fundamental changes to a company not the directors, the latter are just servants.
The Companies Act makes it very clear the subdivision of the shares must be approved in a general meeting. It is very clear directors can only recommend changes to the share capital, they have no power as directors to change it.
An extract of section 65 of the companies Act of Jamaica states.
(1) A company limited by shares or a company limited by guarantee and having a share capital, if so authorized by its articles, may alter the conditions of its articles as follows, that is to say, it may—
(a) increase its share capital by new shares of such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
(d) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the articles, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived.
(2) The powers conferred by this section must be exercised by the company in general meeting.
The company had in issue only 140 million shares with nine of the broker members holding 10 million units each leaving only a small amount to trade regularly. The stock which now sells at $27 tends to be a bit illiquid and it is expected that the split will foster greater liquidity and allow the stock to trade more freely.