Prepared by:

Mohd Hafizee Shahri

BUSINESS LAW
(ALW10103/BLW10103)
Topic 2

LEGAL ASPECTS OF BUSINESS

ORGANISATIONS
 Learning Outcomes
At the end of this lecture, students should
able to:

• Explain all types of business organisations

available in Malaysia.
• Describe the legal aspects of business
organisations in Malaysia.
• Discuss the similarities and differences
between all types of business
organisations in Malaysia.
 Topic Outline

Differences
Types of business between types of
organisations business
organisations
 Introduction

Types of
business

Sole
proprietorshi Partnership Company
p
 Which one?
Procedure
required

Taxation Liability

Transferabilit
y Continuity
Sole Proprietorship
• One person.
• Fully responsible.
• No hassle legal process.
• But must register under
Reg. of Buss. Act 1956.
• Own the asset and capital.
• Has unrestricted
borrowing power.
• Unlimited liability.
Termination/Dissolution of Sole
Proprietorship
Partnership

Section 3(1) PA
• The RELATIONSHIP
that subsists
between PERSONS
carrying on
BUSINESS IN
COMMON with a
VIEW OF PROFIT.
 Nature of Partnership

The individual partners are each

liable.

A contractual relationship based

on the agreement.
 Characteristics of Partnership

Associatio • Persons include not only

n of NATURAL PERSONS, but
persons also ARTIFICIAL PERSONS.

Must be •
Include every trade,
carrying on occupation or profession.
a business
The business
must be • Possessed a COMMON INTENTION
carried on in to carry on the business.
common
The business
• Must be carried on with a PROFIT
must be
MOTIVE.
carried on • Not a non-profit oriented
with a view of businesses.
profit
Number of Members
• Max. 20.
• professional partnership – NO MAX.

Constitution
• A partnership may be formed orally or in
writing – AN AGREEMENT.
Relationship between Partners Inter Se

No
agreement Agreement
S.26 of PA

Rights and duties, conduct and

management of the firm, capital
and profit sharing arrangement
Relationship between Partners and Third
Parties
Sec. 7

• All acts done by a partner BINDS another.

Conditions

• The act must be done for the PURPOSE OF THE

BUSINESS of the partnership.
• In the firm’s ORDINARY COURSE of business.
• The act must be done by the partner AS A PARTNER,
not in his own capacity.
 Liability

Contractual Criminal

Holding out
Contractual
• Sec. 11 – all partners liable.
• May sue and be sued individually or the whole firm.

Criminal

• Only respective partner involved in the crime will be

punished.

Holding out

• Sec. 16 – represented himself as partner.

• 3rd party believe in that representation.
 Dissolution.

Court’s intervention. Without Court’s intervention.

Section 34. Section 35. Section 36.

Fixed Single Notice. Death. Bankrupt. Charge. Future

term. adventure. Illegality.

Section 37.

Lunatic. Permanently Prejudicial Breach of Continuously Just and

incapable. conduct. partnership at loss. equitable.
agreement.
 Company
• A legal personality that is
incorporated and treated
as a separate legal entity
from its members.

• An incorporated
company can take legal
action against a party as
well as assume full
liability in its own name.
 Classification of Company

Company

Public Private

Limited Unlimited Limited Unlimited

By
By share By share
guarantee
 Private Company

Limits the number

Restrict the right to
of members to not
transfer its shares
more than 50

Prohibits any
invitation to the
public to subscribe
for any shares
Public Company
 Special Feature of Company –
Separate Legal Entity

Shall be a BODY
CORPORATE:

Have legal personality

Legal separate than its
recognitio Section 20 members.
n
Continue its existence
until removed by
Registrar.
 Summary
• There are THREE types of business
organisations available in Malaysia.

• The most common mode of business widely

operated is partnership.