|
Back to Index
This article participates on the following special index pages:
Sunrise of currency reform - Index of articles and reports on Zimbabwe's new currency reforms
Confusion
reigns on currency reforms' impact on shares
Dumisani
Ndlela, The Zimbabwe Independent
August 18, 2006
http://www.theindependent.co.zw/viewinfo.cfm?linkid=12&id=5266
COMPANY
consultants and corporate secretaries were this week grappling with
the impact of central bank measures re-denominating the local currency
as it emerged that the nominal value of issued shares could fall
below levels prescribed by law.
Several
firms, including top chartered accountants Ernst & Young’s secretarial
services department, have written to the Registrar of Companies
seeking clarification on the issue.
There
are fears that should the nominal value of share capital be re-denominated
in line with recent measures by the central bank, the nominal share
price could fall to less than a cent for most companies.
The
least currency denomination in the country is a cent.
"It
looks like when the central bank put in place the new measures,
they only considered the effect on consumable goods and money paper
but it is now evident that this extends to anything that forms part
of the valuation process," an analyst with a transfer secretary
told businessdigest.
Stockbrokers
said they had been inundated with enquiries from foreign investors
fearing the new measures could have an impact on their local portfolio
of shares.
Zimbabwe’s
central bank governor Gideon Gono lopped three zeros from the country’s
currency, ordering that old bearer cheques be replaced by re-denominated
notes and the old family of bearer cheques cease to be legal tender
by Monday next week.
The
move has forced companies to re-price their securities, but sources
indicated this week that a problem had emerged in the revaluation
of the nominal value of securities as this was re-pricing issued
share capital to non-existent currency denominations.
While
officials at the Registrar of Companies said the department would
not accept subscription for shares at a "nominal value of less than
a cent or a fraction of a cent", a statutory instrument released
by the central bank said companies could do so.
The
central bank said one dollar of the revalued currency would be equivalent
to one hundred cents, corresponding to two decimal places.
Whenever
the decimal part resulting from the conversion of old bearer cheques
to the revalued currency or new bearer cheques contained more than
two digits, and the third decimal digit resulting from the conversion
was equal to or above five, the central bank said the effect of
rounding off would be that the second decimal digit remained the
same.
"Where
the nominal value of any security is denominated in units of less
than four dollars and ninety cents of the old currency system, the
nominal value shall be expressed in fractions of a cent of the new
currency," reads part of statutory instrument 199 of 2006.
Where
the nominal value of a share was $5 under the old currency system,
the value would now be 0,005 or 1 cent when rounded off.
However,
for prices less than $5 under the old currency system, the price
cannot be rounded off to a cent when converted to the new currency
system.
An
accounting consultant spoken to by businessdigest on the
issue said there was no reason to revalue the nominal price of shares
as these had historically remained unaffected by inflation.
"The
capital of companies have remained unaffected by inflation. If companies
have to revalue the nominal value of their capital, they will have
to seek shareholder approval first," the consultant said.
The
nominal value of shares is used in the valuation of share capital
on the balance sheet.
Please credit www.kubatana.net if you make use of material from this website.
This work is licensed under a Creative Commons License unless stated otherwise.
TOP
|
