NEW COMPANIES ACT - PART 3 - ENHANCING SHAREHOLDERS ACTIVISM

PART 3 (i)

ENHANCING SHAREHOLDERS ACTIVISM.

Before we go further lets get some basic understanding of some basic terms used in this part.

What does it mean by “enhancing Shareholders Activism”?

“Enhancing” means intensify, increase, or further improve the quality, value, or extent of... according to Online dictionary.

“Shareholder” means the owner of one or more shares or stock in a corporation/company. Shareholder can be a natural person  (like you and me –  born raised and eventually die) or an artificial person (a body incorporated by the act of Laws eg a company – can own share or property, capable of suing and of being sued like you and me as natural person.) A company can own share in another company)

Member - Then who are those called “member” of a company?

The law did not use word “member” and “shareholder” to confuse us. The two words carry different/specific meaning in company law.

"Shareholder" holds or owns the shares in a company. On the other hand, a "member" is a person whose name appears on the Register of Members.  Just like in Persatuan as “Ahli Persatuan”. One cannot vote because he is not allowed by Persatuan's constitution for reason the Persatuan had agreed earlier in their constitution. Eg  A person did not pay up his annual subscription fee for three (3) consecutive times. He still have his right to be invited to a meeting but may not be allowed to vote.

For all practical purposes the words "shareholder" and "member" are used interchangeably. In normal course a shareholder will also be a member and a member will also be a shareholder.

We may come across a few exceptional cases where a "share­holder" may not necessarily be a "member" and a member may not neccesarily be a shareholder.

For example, companies limited by guarantee or unlimited companies having no share capital will have only mem­bers but no shareholders.

On the other hand, holder of a share warrant is a shareholder but not a member as his name is removed from the register of members immediately after the issue of such share warrant.

Similarly, a transferee (recipient of share in company) or legal representative of a deceased person may be a shareholder but he may not be member until he gets his name entered in the register of members.

On the other hand, the transferor or deceased person is a member so long as his name is on the register of members although he cannot be termed as share­holder.

“Activism” - the policy or action of using vigorous campaigning to bring about change and in this case in our Companies Act 1965.

Now we have to answer What it meant by “enhancing Shareholders Activism”?

Thus, summarily I can safely say that it is an act or rather a vigorous campaign by the authority, SSM and Corporate Law Review Committee to Promote Good Corporate Governance (improve policies) pertaining shareholder of a company.

(11) MEMBERS’ RIGHTS FOR MANAGEMENT REVIEW

        The following are new provision to be inserted in our Companies Act 1965

·        Members must be given reasonable opportunity at a meeting to question, discuss, comments or make recommendation on the management of the company.

·        Directors are only obliged to carry out the recommendation if it is passed as a special resolution and in the best interest of the company.

We do not have this provision in the existing Companies Act 1965. The reason or rationale why the above is made into our laws is to allow member of the company to provide iput on the management of the company.

However, in order to ensure that members do not abuse the above power given to them, the law also provide appropriate safeguard in that the directors are only compelled (duty bound/obliged) to carry out the recommendation if it is passed as a special resolution and that the recommendation made by the members is in the best interest of the company.

The laws safeguard director as well as member in order to promote good governance in a company.

To be continued on PART 3 –(ii) …..Next topic is on amendment to laws governng AGM (Annual General Meeting) of a company.

Mohdar Ismail

Company Secretarial Practitioner
* Posted unedited...here and there typo & grammer