UCL3612 Company Law I Tri 1, 2022/2023

Topic 1: Introduction

Tutorials 02

1. How companies may be classified by reference to the liability of the

members?

Limited Unlimited
Shares Guarantee
 Definition – Sec  Definition – Sec
10(2) CA 2016 & 10(3) CA 2016 &
Sec 192(2)(a) – Sec 192 (2)(b) –
limited liability – up to the
up to the unpaid amount the
amount of the members agree  Sec 10(4) – no
shares only to contribute – limit on the
 General principle wound up liability of its
- member would  No share capital members
not be liable for  Sec 11(2) –  Members –
the debts public company liable for all
incurred if he  Sec 45(2) – not debts of the
has fully paid up allow the company
on his shares. company to  Sec 25(1)(c) –
 For the member distribute profits “Sendirian” or
who has not fully as dividends and “Sdn”.
paid on his assets to the  Can be either
shares, - called members – private or public
upon to wound up company – Sec
contribute or  Sec 432(2)(c) – 11(3)
pay the unpaid no exceeding
portion amount
 Liability of undertaken o be
member should contributed by
not exceed the member
amount unpaid  Sec 38 – must
on his shares have
unless the constitution
 corporate veil is
lifted - Sec
435(2)(b) of CA
2016.

2. Unikom Bhd. holds 33% of the share of Unitele Sdn. Bhd. and elects 7 out of
the 9 members of the Board of Directors. Unitele Sdn. Bhd. holds 70% of the
shares in Papikom Sdn. Bhd. and 100% of the shares in UMW Sdn. Bhd.
Unikom Bhd. also holds 40% shares in Hatch Bhd.
Explain with reference to the relevant provisions of the Companies Act 2016:

(i) the types of each company

 Sec 25(1)(a) of CA 2016 – the name of a public company shall
end with the word “Berhad” or its abbreviation “Bhd”.
o Unikom Bhd and Hatch Bhd are public companies as the
company name end with the abbreviation of “Berhad”.
 Sec 25(1)(b) of CA 2016 – the name of a private company shall
end with the word “Sendirian Berhad” or its abbreviation
“Sdn.Bhd”.
o Unitele Sdn Bhd, Papikom Sdn Bhd andUMW Sdn Bhd are
private companies as the company name end with the
abbreviation “Sdn.Bhd.”

(ii) the relationship between all companies

 Sec 4(1)(a) of CA 2016 - a company is deemed to be a subsidiary

of a holding company, but only if the holding company
o controls the composition of the board of directors
(BOD)of the subsidiary company;
o controls more than half of the voting power of subsidiary
company; or
o holds more than half of the issued share capital of
subsidiary company, excluding any part of the share
capital which consists of preference shares
  Sec 4(1)(b) of CA 2016 - a company is deemed subsidiary of
holding company if that subsidiary is a subsidiary of another
company which is also the holding’s subsidiary
 Sec 4(2) CA 2016 – the composition of BOD is deemed to be
controlled by the holding company if the holding company can
appoint or remove all or a majority of the subsidiary
company’s directors.
 Sec 5 CA 2016 - a company (UH) is deemed to be an ultimate
holding company of another company if
o S is a subsidiary of UH and
o UH is not a subsidiary of another corporation.
 Sec 6 CA 2016 - a company (WOS) is deemed to be wholly-
deemed subsidiary of another company (H) if it has no member
except
o H or its nominee; or
o A wholly-owned subsidiary of H or its nominee.
 Sec 7 CA 2016 - a corporation is deemed to be related to each
other if
o it is the holding company of another corporation;
o it is a subsidiary of another corporation; or
o it is a subsidiary of the holding company of another
corporation.
 Sec 136(1)(b) CA 2016 - substantial shareholding in a company if
the person has an interest in one or more voting shares in the
company and the number or the aggregate number of such
shares is not less than 5 per centum of the total number
of all the voting shares included in the company.
 Sec 136(2) CA 2016 - a person who has a substantial
shareholding in a company is a substantial shareholder in such
company.

By applying Sec 4(1)(i) and Sec 4(2) CA 2016, Unikom Bhd is the holding
company of Unitele Sdn Bhd and Unitele Sdn Bhd is the subsidiary of Unikom
Bhd. This is because Unikom Bhd control the composition of BOD of Unitele Sdn
Bhd as the Unikom Bhd can elects 7 out of 9 directors which is the majority of the
directors.

By applying Sec 4(1)(a)(ii) & (iii) of CA, Unitele Sdn Bhd is the holding company of
Papikom Sdn Bhd and Papikom Sdn Bhd is the subsidiary of Unitele Sdn
Bhd. Unitele Sdn Bhd holds more than half of the voting power and issued capital
of Papikom Sdn Bhd which is 70% of the shares.

By applying Sec 4(1)(a)(ii) & (iii) of CA, Unitele Sdn Bhd is the holding company of
UMW Sdn Bhd and UMW Sdn Bhd is the subsidiary of Unitele Sdn Bhd since
Unitele Sdn Bhd holds 100% of the shares of UMW Sdn Bhd. In addition, UMW
Sdn Bhd is the wholly-owned subsidiary of Unitele Sdn Bhd as Unitele Sdn Bhd
holds 100% of the share of UMW Sdn Bhd by the virtue of Sec 6 of CA.

By applying Sec 4(1)(b) of CA, Unikom Bhd is the holding company of Papikom
Sdn Bhd and Papikom Sdn Bhd is the subsidiary company of Unikom Bhd. In
addition, by the virtue of Sec 5(a) and (b) of CA, Unikom Bhd is the ultimate
holding company of Papikom Sdn Bhd.

By applying Sec 4(1)(b) of CA, Unikom Bhd is the holding company of UMW Sdn
Bhd and UMW Sdn Bhd is the subsidiary of Unikom Bhd. In addition, by the virtue
of Sec 5(a) and(b) of CA, Unikom Bhd is the ultimate holding company of UMW
Sdn Bhd.

By applying Sec 7(c) of CA, Papikom Sdn Bhd is related company to UMW Sdn
Bhd.

By applying Sec 4(1)(a)(iii) of CA, Unikom Bhd is not the holding company of
Hatch Bhd and Hatch Bhd is not subsidiary of Unikom Bhd as Unikom Bhd only
holds 40% of shares of Hatch Bhd which is not more than half of the issued
capital. Hence, Hatch Bhd fails all the three tests laid down in Sec 4(1)(a) of CA.

In addition, by applying Sec 136(1)(b) and (2) of CA, Unikom Bhd is the substantial
shareholder in Hatch Bhd because Unikom Bhd holds 40% of shares in Hatch Bhd
which is more 5 per centum. By applying Sec 7 of CA, Unitele Sdn Bhd is not
related company to Hatch Bhd

Companies can be classified as limited and unlimited liability companies to

determine whether a member is liable for the company’s debts in the event
the company is wound up. It can be further seen under the provision of Sec
10(1) of CA 2016 where it states that a company may be incorporated as a
company limited by shares, a company limited by guarantees or an unlimited
company.

By virtue of Sec 10(2) and Sec 192(2)(a) of the said Act, the liability of the
member is limited to the amount unpaid on their shares in the case of
company limited by shares. Whereas for the company limited by guarantee,
Sec 10(3) and Sec 192(2)(b) of CA 2016 provide that the liability is limited to
such amount as the member agrees to contribute in case the company goes
wound up. On the other hand, no limit is placed on the liability of the member
of an unlimited company as stated under Sec 10(4) of CA 2016.

Since the liability of the member of a company limited by shares, is limited to

the amount unpaid on their shares, the general principle is that such member
would not be liable for the debts incurred if he has fully paid up on his shares.
The same principle shall be applied in the circumstances of the company
getting wound up or the failure of assets of company meeting its liabilities
towards its creditors. However, upon the lift of the veil of incorporation, he
can be made liable or called upon to contribute.

For the member who has not fully paid on his shares, he shall be called upon
to contribute or pay the unpaid portion in the event the company is wound
up. In such circumstance, the liability of member should not exceed the
amount unpaid on his shares unless the corporate veil is lifted as per Sec
435(2)(b) of CA 2016.