20 Share Capital

2016 2015
Number of
US$'000 Number of
Authorised 36,000,000,000 360,000 3,600,000,000 360,000
Issued and fully paid
At 1 January 1,945,855,119 194,480 1,933,666,119 191,781
Capital reduction (a) - (175,117) --
Rights issue (b) 1,946,823,119 19,468 --
Shares issued to compensate the shipowners for the
      Charter Hire Reduction (c)
79,979,037 800 --
Shares purchased by trustee of the SAS (d) (16,413,000) (1,809) (1,452,000) (530)
Shares granted to employees in the form of
      restricted share awards (d)
17,951,000 2,173 4,205,000 2,463
Shares issued due to the adjustment for rights issue and
      upon grant of restricted share awards (d)
41,688,000 417 9,846,000 985
Shares transferred back to trustee upon lapse of
      restricted share awards (d)
(1,371,000) (366) (410,000) (219)
At 31 December 4,014,512,275 40,046 1,945,855,119 194,480

The issued share capital of the Company as at 31 December 2016 was 4,015,313,275 shares (2015: 1,946,823,119 shares). The difference from the number of shares in the table above of 801,000 (2015: 968,000) represents shares held by the trustee in relation to restricted share awards, amounting to US$107,100 (2015: US$202,700) as a debit to share capital.

(a) Capital reduction

Pursuant to a special resolution passed by the shareholders of the Company at a special general meeting held on 27 May 2016, the nominal value of each share was reduced from US$0.10 to US$0.01 by cancelling the paid up capital of US$0.09 on each share. The capital reduction took effect on 27 May 2016.

A new reserve entitled “contributed surplus” (Note 21) represents the amount of the capital reduction transferred from the share capital and share premium accounts as a result of the capital reorganisation of the Company that took effect on 27 May 2016.

Under the Company Act 1981 of Bermuda (as amended), the contributed surplus is available for distribution, but the Company cannot make a distribution out of the contributed surplus if: (i) it is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of its assets would thereby be less than its liabilities.

(b) Rights issue

Pursuant to an ordinary resolution passed by shareholders of the Company at a special general meeting held on 27 May 2016, the shareholders approved a rights issue of 1,946,823,119 rights shares at a price of HK$0.6 each on the basis of one rights share for every existing share. The rights issue was completed on 27 June 2016.

(c) Shares issued for Charter Hire Reduction

On 31 October 2016, a total of 79,979,037 shares were issued at a price of HK$1.218 each to 10 shipowners or their nominees in return for a US$12.6 million reduction in long-term charter hire rates (“Charter Hire Reduction”).

(d) Restricted share awards

Restricted share awards under the Company’s 2013 Share Award Scheme (“SAS”) were granted to Executive Directors and certain employees.The SAS under HKFRS is regarded as a special purpose entity of the Company.

On the grant of the restricted share awards, the relevant number of shares is legally transferred or issued to the trustee who holds the shares for the benefit of the grantees. A grantee shall not be entitled to vote, to receive dividends (except where the Board grants dividend rights to the grantee at the Board’s discretion) or to have any other rights of a shareholder in respect of the shares until vesting. If the shares lapse or are forfeited, they will be held by the trustee and can be utilised for future awards. Any dividends paid to the grantees in respect of those shares granted to them but prior to vesting are considered to be a cost of employment and charged directly to the income statement.

Movements of the number of unvested restricted share awards during the year are as follows:

000' shares 2016 2015
At 1 January 26,409 23,540
Granted 59,639 14,051
Vested (17,421) (10,772)
Lapsed (1,371) (410)
At 31 December 67,256 26,409

During the year, a total of 59,639,000 (2015: 14,051,000) restricted share awards were granted to certain employees. Following the Company’s rights issue (Note (b)), an adjustment was made pursuant to the rules of the SAS. Hence, awards granted during the year comprised the annual grant as well as the adjustment for awards vesting in 2016, 2017 and 2018. The market prices of the restricted share awards on the grant date represented the fair values of those shares.

The sources of the shares granted and their related movement between share capital and staff benefits reserve are as follows:
2016 2015
Sources of shares granted Number of
shares awards
Number of
shares awards
Shares issued 41,688,000 417 9,012,000 901
Shares purchased by the trustee of the SAS
     on the Stock Exchange funded by the Company
16,413,000 1,809 1,452,000 530
Shares transferred from the trustee 1,538,000 364 3,587,000 2,017
59,639,000 2,590 14,051,000 3,448

The vesting periods and grant dates of the unvested restricted share awards as at 31 December 2016 are as follows:
Vesting periods
Grant dates Number of
unvested share
14 July 2017 14 July 2018 14 July 2019
5 May 2014 9,778,000 9,778,000 - -
13 August 2014 666,000 666,000 - -
17 April 2015 23,858,000 1,704,000 22,154,000 -
12 August 2016 32,954,000 2,332,000 2,332,000 28,290,000
67,256,000 14,480,000 24,486,000 28,290,000

Accounting policy

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or share options are shown in equity as a deduction from the proceeds.

Where any group company purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax) is included in equity.


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