COMPANY LAW

INTRODUCTION
 Previously, the law relating to companies in Malaysia is covered by the Companies Act
1965.
 New act “Companies Act (CA) 2016” – enforced on 31 st January 2017.
 Objective:
(i) To provide a regulatory framework for a starting business and
subsequently reduce cost of doing business.
(ii) To provide a flexible regime in managing the company.
 DEFINITION OF CORPORATION

 Section 3 of the CA 2016: “Any body corporate formed or incorporated or existing

in Malaysia or outside Malaysia and includes any foreign company, limited liability
partnership and foreign limited liability partnership but does not include-
(a) any corporate that is incorporated in Malaysia and is by notice of the
Minister published in the Gazette, declared to be a public authority or any body
corporate which is not incorporated for commercial purposes;
(b) any corporate sole;
(c) any society registered under any written law relating to co-operative
societies; or
(d) any trade union registered under any written law as a trade union.

 The law exempts several entities incorporated not for the commercial purpose as a
corporation.
 A corporate sole, association and trade union are also not included under the definition
of corporation.
 KEY HIGHLIGHTS OF THE NEW COMPANIES ACT 2016

i) Introduction of single member/director for a private company.

- Public company remains status quo.
ii) Abolish requirement for private companies to hold Annual General Meeting
- Effective 31 January 2017.
iii) Abolish the maximum age for directorship.
- Previously, 72 years.
iv) Companies will no longer be required to state its authorized share capital.
v) New written shareholder resolution procedures are introduced for private companies.
 SEPARATE LEGAL ENTITY PRINCIPLE (GENERAL RULE)

 Salomon v Salomon Co. Ltd

Fact: Mr. Solomon ran a boot manufacturing business. He incorporated a company
in which he & his family were the only shareholders. He sold the business to the company
& in return, the latter pays in the form of shares & agreed to pay the remainder over time.
The company charged its assets to Mr. Salomon.

Issue: When the company failed, the value of the assets was insufficient to pay out of
both Mr. Salomon & the company’s other creditors.

Held: The court decided that Mr. Salomon got priority over the other creditors even
though he was the ex-shareholder of the company. The company was a separate legal
person. It has the right to sue & to be sued
in its own name. Therefore, a company in other words is an artificial person created by
the law.
EFFECTS OF TREATING THE COMPANY AS A SEPARATE
LEGAL ENTITY

Liabilities are its

own & not those
of its participants
The
Contract

A company can
sue & be sued
in its own name

The
Company’s
Properties

Perpetual
Succession
 EXCEPTIONS TO THE GR:
LIFTING THE CORPORATE VEIL

Tort Cases

Where the company acts

as the agent or partner of
the controller

Where the law shows an

intention that the corporate
veil is disregarded.
 CLASSIFICATION OF COMPANIES

1) Public Companies:

●
Not incorporated as or converted to a private company.
●
May be listed or unlisted.
●
Min no. of members is 2/ -without max no. of members

2) Private Companies:

●
Registered as or converts to a private company under CA.
●
Min no. director is 1/ Max 50 members
 HOLDING & SUBSIDIARY COMPANIES

 Section 4(1) of CA:

“A corporation shall be deemed to be a subsidiary of another corporation, but only

if-
(a) the other corporation-
(i) controls the composition of the board of directors of the corporation
(ii) control more than half of the voting power of the corporation or
(iii) hold more than half of the issued share capital of the corporation
excluding any part of the share capital which consists of
preference shares or
(b) the corporation is a subsidiary of any corporation which is that other
corporation subsidiary.
 MEMORANDUM (MOA) &
ARTICLES OF ASSOCIATION (AOA)

 The document by which the incorporators signal their intention to form a company.
 Features MOA:
a) Name of the company
b) Objects of the company
c) Amount of share capital
d) Number of shares (unless the company is an unlimited)
• AOA – may be lodged by the company private limited by share
• But for limited company by guarantee & unlimited company – must lodge their article
upon incorporation.
• Both bind the company & members once registered.
 DIRECTORS

 Section 2 of CA:

- Any person occupying the position of director of a corporation; or

- A person in accordance with whose directions or instructions the
directors of a corporation are accustomed to act & an alternate of substitute
director
 TYPES OF DIRECTORS

1) Executive Director
- a director
- a full-time employee of the company
- include CEO/MD or other Executive Director
2) Non-Executive Director
- not involved in the full-time management of the company
- not employees
- e.g: Independent Non-Executive Directors
3) Alternate Director
- sick, passive director may appoint alternate director
- Art. 72 table A of CA
- must be provided in the company’s AOA
4) Nominee Director
- to represent the interests of a particular group or another person
- e.g: among employees
5) De Facto Director
- a person not described to a position of a director but play actively the
role of the
director or vice versa.
- e.g: a consultant to the company yet undertake tasks typically expected
as a director.
6) Shadow Director
- not validly appointed but can instruct the directors of the company in
the direction of another company.
- e.g: a company can be a shadow director of another company