PART 2 - THE NEW COMPANIES ACT MALAYSIA

PART 2

THE NEW COMPANIES ACT

The corporate Law Reform initiative was made by the Suruhanjaya Syarikat Malaysia (SSM)  to repeal the current Companies Act 1965.

The proposed Companies Bill was drafted on the Reports issued by the Corporate Law Review Committee (CLRC) and  Accounting Issues Consultative Committee (AICC)

The review take into account recommendations made by the World Bank Reports namely the development in related laws such as capital market and Banking legislation.

The four(4) years review by the Corporate Law Review Committee has issued 12 consultative Papers.

The Corporate Law Review Committee’s Final report was issued in 2008 comprising of 188 recommendations on wide raging aspects from issues relating to Incorporation to issues on Companies winding-up and Its final report was completed and was submitted in 2011.

In July 2013 Public consultation on the drafted Companies Bill was conducted by the SSM and the Bill is expected to be tabled in Parliament in 2014.

WHAT IS THE IMPACT OF THE PROPOSED NEW COMPANIES ACT?

It was reported that the Law drafted helps enhancing the internal control, corporate governance and corporate responsibility.

It helps to facilitate starting a business as well as reduce the cost of doing it, simplification of compliance on provision and provides flexibility in managing the affairs of companies.

HERE COMES THE REVOLUTION OF STARTING BUSINESS IN MALAYSIA

1) SINGLE MEMBER

The current Company Law provides the minimum number of two(2) person, natural or otherwise as members and directors of a company.

With the CLRC recommendation , a company can be incorporated by a single member (person) and that single member can also be the single director of the company.

Nevertheless, Public company must have at least two(2) directors.

The rationale is to provide ease of doing business by facilitating entry with minimum requirement.

We are used to having meeting of at least 2 members and or directors. Any lesser, meeting cannot exist.  

With the new Company law,  a single person can meet on his own (Can decide and agree or otherwise, at his own whim and fancies :)

2)   MEMORANDUM & ARTICLES OF ASSOCIATION 

The existing Company Law requires company to have memorandum of association and the option of having articles of association and in default Table A will be Applicable.

The New Companies Act makes the above optional.  A company may adopt company’s constitution after its incorporation.

However,  companies Limited by guarantee is still required to have constitution at the point of  incorporation

The rationale again begs to ease of doing business. In the case of Companies Limited by Guarantee, company’s constitution is still required so that public can inspect the object of the company.

3)  CERTIFICATE OF REGISTRATION 

Section 16(4) of the existing law says that the certificate of registration issued is conclusive evidence of incorporation of a company.

With the new Companies Act,  NOTICE of registration is conclusive evidence and certificate of incorporation is optional. If you still need it, you can buy at your own cost from SSM.

The rationale behind this is still about ease of doing business and simplification of  incorporation process.

Now, what effect does the above proposal has on incorporation?

The effect of incorporation in the existing law is that a company is a body corporate and capable of suing and being sued, having perpetual succession and a common seal with power to hold land S.16(5)

With the proposed new companies Act the effect of incorporation is that a company is a body corporate WITH LEGAL PERSONALITY separate FROM ITS MEMBER and have the FULL CAPACITY TO UNDERTAKE ANY BUSINESS activities.

What derived here are the ENTRENCHMENT OF SEPARATE LEGAL ENTITY and UNLIMITED CAPACITY CONCEPTS which is not confined to object clause as currently used  in other leading jurisdiction.

To be continued...

Mohdarismail
Company Secretarial Practitioner