PART 2 (II) (Continuation) - THE NEW COMPANIES ACT

PART 2(ii) – CONTINUATION

I received a message (FB Inbox) telling me to express in the simplest form so that the ordinary layman can understand the Law.  

I’ll try my best  to do that while maintaining what the law actually try to say and avoiding changing the true meaning/definition attached to it. 

I am torn between the two world and may have to use more stroke/forward slash (“/”) and  parenthesis/Bracket all the way through.



4)  COMMON SEAL 

The current Companies Act requires a company to have common seal for the execution of document by affixing company’s common seal along with its authorized signatory.

The proposed new Companies Act makes common seal an optional requirement. 

If a company decide to have a common seal, the provision of the law must be observed and thus execution of documents can be done by affixing common seal as provided in the company’s constitution OR execution of document can be done by at least two person of which having been granted authority by the board. 

If the company has only one director, execution of document can be done singly in the presence of witness.

Common seal becomes an optional  requirement and thus save cost and time of company.

5)  COMPANY NAME

Currently, company’s name must be approved by the registrar. Name cannot be similar to any existing company’s name and Name must be reserved (s.22(6))

The proposed law requires that company’s name must be approved and it cannot be identical to any other existing name.

Reservation of name is now an optional matter. If the proposed name is not available, The Registrar has the power assign specific expression for it.

These changes are made to simplify the procedures involving company naming.

RESHAPING THE BOARD (BOARD OF DIRECTORS) TOWARDS BOARDROOM /MEETING EXCELLENCE

DEFINITION OF DIRECTORS

Section 4 of the current Companies  Act defines director to includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed (familiar/used to) to act and an alternate or substitute director

The proposed new law defines director to include any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions majority of the directors of a corporation are accustomed (familiar/used to) to act and an alternate or substitute director

That is it.  By inserting the word “majority of” reshaped the boardroom. The provision clarifies (explains) the definition of “shadow directors” by clarifying that a person is deemed  (believed/considered/supposed)  to be director if the majority of directors act in accordance to his direction or instructions.

DIRECTOR

Section 122. Directors

(1)  Every company shall have at least two directors, who each has his principal or only place of residence within Malaysia.

(2)  No person other than a natural person of full age shall be a director of a company.

The proposed new law

Every private company shall have at least one directors, and every public company must have at least two directors who must ordinarily resides in Malaysia

And Directors must be at least 18 years old.

The rationale behind this is to facilitate ease of doing business by allowing private companies to have only one director and retaining the requirement for public companies to have at least two directors to safeguard the interest of the public and that the minimum age for a person to be appointed as director is 18 years.

PERSONS CONNECTED (HAVING TIES/RELATION) WITH DIRECTOR

Now fasten you seat belt. It gets complicated now :)

Existing Company Law

Who is called person(s) connected with directors?

Person connected with director

“a member of that director’s family” shall include his spouse, parent, child (including adopted child and step-child), brother, sister and spouse of his child, brother or sister.

“a director” is deemed to have control in a body corporate if he holds more than 15% of the issued shares or the voting power or able to control the board of the body corporate.

The proposed law

Person connected with director

“a member of that director’s family” means his spouse, parent, child (including adopted child and step-child, brother, sister and spouse of his child, brother or sister.

“a director” is deemed to have control in a body corporate if he holds more than 20% of the issued shares or the voting power or able to control the board of the body corporate.

The changes is indicated in the bold letter.

The changes are made to the above clauses in order to clarify that family members of a director is consisted of only those falling within the category and also to clarify as to when director is deemed to have control over a body corporate.

The controlling interest is increased from 15%-20%

To be continued

Mohdarismail
Company Secretarial Practitioner