NATURE & TYPE

OF
COMPANY
COMPANY LAW (DCA 5154)
 SOLE PROPRIETORSHIP
• A business structure in which an individual and his/her company are
considered a single entity for tax and liability purposes.
• A company which is not registered with the state as a limited
liability company or corporation.
• Sole proprietorship is a type of business organisation registered in
Malaysia under the Registration of Business Act, 1956, which is
under the jurisdiction of Suruhanjaya Syarikat Malaysia (SSM) or
Companies Commission of Malaysia (CCM) under the Domestic
Trade and Consumers Affairs Ministry.
 CONTINUE …
• In Malaysia, a sole proprietorship business is owned by one
person who is called a sole proprietor and only a Malaysian
citizen or permanent resident who has attained the age of 18
years and above is eligible to register for a sole proprietorship.

• The owner’s liability is unlimited.

• Limited to his area of expertise.

 LAW OF PARTNERSHIP
• A partnership is formed when two or more parties form to start a
business, sharing the workload and investing capital to get things
going.
• It is always wise to have a written partnership agreement and get it
checked by a solicitor.
• If you do not have a proper agreement and it all goes wrong, the
partnership will be covered by the Partnership Act, whose provisions
may not always seem fair.
 CONTINUE…

• Malaysian Law on Partnership serves as a guide for legal

practitioners and other professionals looking for a quick and
competent account of the relevant law.

• Some aspects of the laws relating to joint ventures where it

relates to partnerships, especially fiduciary duties of joint
ventures.
 BASIC INFORMATION ABOUT
COMPANY LAW IN MALAYSIA
• A company must have a minimum of two directors:
 being natural persons of full age.
 having their principal OR only place of residence in Malaysia.
 not under bankruptcy.
• Directors need not be shareholders of the company.
• A director has onerous duties under the Companies Act as in
common law.
 CONTINUE…
• A register of directors is kept at the registered office of the company
and is available for public inspection:
 Every company shall have at least two directors, who each have his
principal or only place of residence within Malaysia. "Director"
shall not include an alternate or substitute director.
 No person other than a natural person of full age shall be a director
of a company.
 The first directors of a company shall be named in the memorandum
or articles of the company.
 CONTINUE…
 Any provision in the memorandum or articles of a company which was
in force immediately before the commencement of this Act and which
operated to constitute a corporation as a director of the company shall
be read and construed as if it authorized that corporation to appoint a
natural person to be a director of that company.

 On the commencement of this Act any corporation which holds office

as a director of a company shall cease to hold office and the vacancy
may be filled as a casual vacancy in accordance with the articles of the
company.
 TYPES OF COMPANY
 Registered companies

A company is a type of corporation registered under the Act. There are

four types of company which may be registered under the Act:

• A company limited by share(limited company)

• A company limited by guarantee(members liability undertaken to

contribute)

• A company’s limited by both share and guarantee

• An unlimited company(members liability is not limited)

 CONTINUE…
 Listed companies

Companies registered under the Act may issue publicly listed

securities. Apart from the Act, listed company must also
comply with certain others registration, such as:

• Securities Industry Act

• Securities Commission Act

 DEVELOPMENT OF MALAYSIAN
COMPANY LAW

Malaysian company law is primarily

derived from the:
• Companies Act 2016
• Companies Regulations.
 OTHER LEGISLATIONS

 Securities Commission Act 1993

 Pengurusan Danaharta Nasional Bhd Act 1998

 Securities Industries (Central Depositories) Act 1991

 Companies Commission of Malaysia Act 2001.

CA 2016: INCORPORATION
PROCESS
• Easier than CA 1965
• Individual who is a single shareholder and single
director can incorporate a company.
• Single individual- can have complete control of the
company and still enjoy separate liability of the
corporate entity.
• Company incorporation is attractive for businesses,
entrepreneurs and business owners.
 Feature CA 1965
Minimum Requirements 2 resident directors for any
company
Docs required for -Statutory declaration by
registration each promoter/director
-MOA + AOA
-payment of reg. fee in
accordance with authorised
capital
Registration -certified by Registrar under
his hand and seal in the
Certificate of Incorporation
CA 2016
Private co- Single individual
and only 1 resident director
required (who can be the
sole shareholder of the
company)
Public co- must have 2
directors
-statement of compliance
by each promoter/director
-statement of consent &
non-disqualification to act
-reg fee set by Registrar
(MyCOID)
-there is also Certificate of
Incorporation and issued
upon application, without
needing MOA + AOA and
no authorised capital to be
fixed
 Feature CA 1965
Company Secretary Appointment required
Capacity of co. Object clause in MOA
defines co’s commercial
activities
Any acts beyond object
clause are beyond
power/authority of co (ultra
vires)
CA 2016
Appointment optional, at
point of incorporation
-Secretary to be appointed
within 30 days after
incorporation
-a co may choose not to
specify its objects
Unlimited capacity for co.
as it can carry on lawful
business/activity with full
rights, power and privileges
unless Constitution of co
provided otherwise.
-removes burden on third
parties to verify if a co has
capacity to enter into a
transaction
 Feature CA 1965 CA 2016
MOA + AOA Compulsory for Replaced by Constitution
incorporation -Constitution is optional
May adopt after
incorporation
If no Constitution, CA 2016
rules apply
-existing MOA+ AOA are
deemed to be the
Constitution
Common Seal required Optional

Execution of docs Through common seal and If no common seal, one of

signed by authorised the director must signed it,
person along with another
authorised officer
 THE REGULATORY BODIES

• COMPANIES COMMISSION OF MALAYSIA

• SECURITIES COMMISSION

• BURSA MALAYSIA
 NATURE OF COMPANIES

• It is a body corporate with the powers of an

incorporated company.
• It is capable of suing and being sued on its
own name.
• It has perpetual succession.
• It has its own common seal.
• It has power to acquire, hold and dispose of
property
• The liability of its members may be limited.
PRE-INCORPORATION
• A company is an artificial person.
• Once a co is incorporated by complying with the
prescribed procedure, it comes into being and is a
separate legal entity from its members and officers.
• A person who wishes to start a business venture may
take steps to incorporate a co.
• This person is called ‘promoter’ and he is given
fiduciary duties, to act in the best interests of the co,
and to avoid any conflict of interest with the co.
“PROMOTER”
• A promoter is the one who name the company by applying
to the Registrar of Companies (ROC).
• S.14(1) CA 2016: A person who desires to form a
company shall apply for incorporation to the Registrar
• S. 14(2): A co shall not be formed for any unlawful
purpose.
• S.14(3) every person who desires to form a co. shall apply
for :
• S.14(3) (a): name of the proposed co, (b) whether it is
private or public (c) nature of business (d) registered office
address
• S.14(4) Application shall be accompanied by
a statement from each promoter or director
confirming-
a)His consent to act as a promoter or to his
appointment as a director (depends on the
case)
b)That he is not disqualified under this Act to
act as promoter/director
 Power of Court to Disqualify
Persons from acting as a
director/promoter
• S.199(1): The Court may, on an application by the Registrar,
order for disqualification any person from acting or holding office
as a director or promoter of a company if
199(1)(a): within last 5 yrs, the person is a director of 2 or more
companies which went into liquidation resulting from co being
insolvent due to his conduct as a director which contributed wholly
or partly to the liquidation
199(1)(b): due to his contravention of the duties of a director; or
199(1)(c): due to his habitual contravention of this Act
• S. 15(1) if Registrar is satisfied that requirements
under CA 2016 are complied by the application to
incorporate, the Registrar shall-
a) Enter the particulars of the company in the register
b) Assign a registration number to the co as its co
registration number
c) Issue a notice of registration in the form and
manner as the Registrar may determine
Upon Incorporation,
Registration is required,
but…
• Q: But can Registrar refuse registration of
incorporation? Yes S.16(1) and (2) on
application that didn’t fulfil CA 2016 or
proposed company likely to be used for
unlawful purposes/prejudicial to public order,
morality and security of Malaysia)
 S.17 Certificate of
Incorporation
• Upon an application by a co and on
payment of a prescribed fee, the
Registrar may issue to the company a
certificate of incorporation in the form
and manner as the Registrar may
determine
• Prescribed fee under CA 2016? Fee
determined by the Registrar
• CA 1965: Fee based on authorised
 Salomon v. Salomon & Co Ltd [1897] AC
22 House of Lords

FACTS

Salomon was a boot manufacturer trading under the name of

“Salomon & Co” for many years. Later he formed a private limited
company. The subscribers to the memorandum were Salomon,
his wife and 5 children and each took one share. Salomon and
his 2 eldest children were directors. Salomon sold his business
to the newly formed company for 39000 pounds and all the
shareholders agreed to the price. Subsequently the company
went into liquidation. The assets were sufficient to discharge the
debentures but the unsecured who were owed some 8000
pounds got nothing.
 DECISION

• The trial court and the Court of Appeal ruled that Salomon & Co
Ltd was virtually ‘one man’ company and that he was either
agent or trustee for the company and he ought to indemnify the
creditors.

• On appeal by Salomon the House of Lords held that Salomon

was neither an agent nor a trustee for the company which was a
separate legal entity.
 Lee v. Lee’s Air Farming Ltd [1961] AC 12

FACTS

• Lee was in the business of aerial top-dressing. He formed a

limited company to carry on the business. He took 2999 out of
3000 shares 1 pound and the remaining share was allotted to his
solicitor as his nominee. Lee was the governing director and he
continued to work as a pilot for the company. The company took
out workers’ compensation insurance naming Lee as the
employee. Lee was subsequently killed when his plane crashed
while top-dressing. His widow made claim for compensation
under the Workers’ Compensation Act 1922.
 DECISION

• The claim was rejected by the lower courts on the ground that
Lee, having the full control of the company, could not have been
its employee within the meaning of the act which required ‘a
contract of service … with an employer’.

• Her appeal to the Privy Council was allowed and the court
observed that just as the company and the deceased were
separate legal entities so as to permit of contractual relations
being established between them, so were they separate legal
entities so as to enable the respondent to give an order to the
deceased.
 Sunrise Sdn Bhd v. First Profile (M) Sdn Bhd
[1996] 3 MLJ 533 FC

DECISION

• Chong Siew Fai CJ

• We are in complete agreement with the basic principle of the
fundamental attribute of corporate personality i.e. that the
corporation is a legal entity distinct from its members, be they
individuals or corporate bodies – principle firmly established
since Salomon v A Salomon & Co Ltd [1897] AC 22.
 Yang Sing Hock & Anor v. PP [1992] 2 MLJ 714

DECISION

• Peh Swee Chin SCJ

• Such veil has been lifted by statutes, e.g. the
Companies Act 1965 itself or by the courts for certain
specific purposes.
 Lifting the corporate veil at common law

In addition to the statutory provision providing for

the circumstances in which the corporate veil may
be lifted, the courts also have an inherent
jurisdiction to do so.

Doing justice seems to be the sole criterion that

motivates the courts in exercising their inherent
jurisdiction in Malaysia
 Hotel Jaya Putri Sdn Bhd v. National Union Bar
and Restaurant Workers & Anor [1980] 1 MLJ
109

DECISION

• It is true that while the principle that a company is an entity

separate from its shareholders and that a subsidiary and its
parent or holding company are separate entities having separate
existence is well established in company law, in recent years the
court has, in a number of case, by-passed this principle if not
made an inroad into it.
• The court seems quite willing to lift the veil of corporation …when
justice of the case so demands.
 CLASSIFICATION OF
COMPANIES

The liability of the members Public status of the company

Limited Unlimited Public Private

liability liability company company

The relationship with other companies The place of incorporation

Holding Subsidiary Local Foreign

company company companies companies

The type of business

Investment Trust
company company
 Public status of company
PUBLIC COMPANY
•S4(1) CA – definition
•Word BERHAD
•Members 2 – unlimited
•Have access to public
funding by offering or inviting
the public to invest in its
securities
•Must obtain permission from
SC and Bursa Malaysia to
list its securities on the stock
exchange
PRIVATE COMPANY
•S4(1) CA – definition
•Word SENDIRIAN BERHAD
•Members 2 – 50
•MA and AA must contain
restriction and prohibitions from
offering or inviting public to
invest
(s15)