TOPIC 1: NATURE OF

REGISTERED COMPANIES &

CLASSIFICATION OF COMPANIES

Siti Aisyah Binti Safren

CORPORATE LAW (LAW303)
 THE PRINCIPLES OF CORPORATE
PERSONALITY AND OF LIMITED
LIABILITY
CORPORATE PERSONALITY
 Once a company is duly registered the law shall regard the company
to be a body corporate is bestowed with a corporate personality and
therefore the law regards the company to be a separate legal person
from its members and controllers.
 This proposition of law was firmly established by the House of Lord
in the English case of Salomon v. A Salomon & Co.
 LIMITED LIABILITY

 The company as a general rule is responsible for

its own debts.
 Members of a limited company enjoy the benefit
of limited liability in that the ability of a member
of a limited company is limited.
 Types of business :

 Sole proprietorship
• One man show

 Conventional partnerships

 Limited liability partnerships

 Company
 THE DISTINCTION AMONG COMPANIES,
CONVENTIONAL PARTNERSHIPS AND
LIMITED LIABILITY PARTNERSHIPS
Difference Company Conventional Partnerships Limited Liability Partnerships
1. Statute the Companies Act 2016 the Partnership Act 1961 the Limited Liability
Partnerships Act 2012
2. Number of members 1 – 50 for private company 2 – 20 any two or more persons,
(public company – unlimited) (professional partnership - consisting of, wholly or partly,
unlimited) individuals or bodies corporate
and no maximum limit
3. Registration company need to register with need to register their business a person may apply for
CCM under the Companies Act under the Registration of registration of a limited liability
2016 Business Act 1956 partnership to the Registrar

4. Capital share capital and loan capital partners contribution partners contribution
 Difference Company Conventional Limited Liability
Partnerships Partnerships
5. Management Board of directors manage partners generally entitle to partners
the company manage the firm
6. Liability liability of members is liability of partners is liability of partners is
limited unlimited limited
7. Separate legal separate legal entity not separate between the a limited liability
entity between the company and partnership and the partners partnership is a body
its members corporate and shall have
legal personality separate
from that of its partners
8. Dissolution company is dissolved by partnership may be a limited liability
winding up or liquidation dissolved informally partnership can be wound
which is a formal procedure up
 Companies Act 2016 [Act 777]

 Gazetted on 15 September 2016.

 Became operative on 31 January 2017.
 CLASSIFICATION BY LIMITATION OF LIABILITY:
LIMITED AND UNLIMITED COMPANY

 S 10(1) Three types of companies allowed to

be incorporated:
 S 10(2) A company limited by shares – the
liability of its members is limited to the
amount, if any, unpaid on shares held by the
members.
 The word “Berhad” at the end of its name.
 The most common form of companies in
Malaysia.
 S 10(3) A company limited by guarantee –
the liability of its members is limited to such
amount as the members undertake to
contribute in the event of its being wound up.
 Such a company does not have share capital.
 Funds derived from endowment, donations, fees or
subscriptions.
 Convenient for club and non trading companies.
(e.g. social activities, education, religious, sports ,
research)
COMPANY LIMITED BY GUARANTEE

 S 45(1) A company which is formed with any

one or all of the following objects:
a) Providing recreation or amusement;
b) Promoting commerce and industry;
c) Promoting art;
d) Promoting science;
e)Promoting religion;
f) Promoting charity;
g) Promoting pension or superannuation
schemes; or
h) Promoting any other object useful for
the community.
 S 45(2) A company limited by guarantee is required to
apply its profits or income in achieving and promoting its
objects but is prohibited from paying dividends to its
members or distributing its assets to its members on a
winding up.
 S 45(4) & (5) A company limited by guarantee shall not
hold land unless it obtains a licence from the Minister
charged with the responsibility for companies who may
prescribe such regulations or conditions as he thinks fit.
 S 45(2)(c) If the company to be wound up, the
distributions of assets during the winding up shall
be affected through a transfer of company’s assets
to another body with similar objects or another
body which has the object of promoting charity
and anything incidental or conductive to charitable
purposes.
 S 10(4) An unlimited company – no limit on the
liability of its members.
 It is more often used as mutual funds or in
investment company.
 Creditors have access to the personal property of
all members to an unlimited extent if the company
is wound up and has insufficient funds.
 Person proposing to apply for registration of a
company limited by shares must decide whether
they wish the company to be a private or public
company.
 CLASSIFICATION BY SIZE: PUBLIC AND PRIVATE
COMPANIES

 S 2 Private Companies (“Sendirian”)

a) Any company which immediately prior to the
commencement of the 2016 Act was a private company
under the repealed written laws;
b) Any company incorporated as a private company under the
2016 Act; or
c) Any company converted into a private company pursuant
to s 41 of the 2016 Act, being a company which has not
ceased to be a private company under s 42 of the 2016 Act.
• S 42(1) A company limited by shares having
not more than 50 shareholders may:
a) Be registered as a private company
b) Change its status from a public company into
a private company; or
c) Remained registered as a private company.
 S 43(1) Prohibition of private companies:
a) Shall restrict the transfer of its shares;
b) Shall not offer any shares or debentures of the
company to the public; or
c) Shall not invite the public to deposit money
with the company.
 EXEMPT PRIVATE COMPANY

 S 2 "exempt private company" means a private

company in the shares of which no beneficial
interest is held directly or indirectly by any
corporation and which has not more than
twenty members none of whom is a
corporation.
 They can make loans to the directors.
 PUBLIC COMPANIES

 S 2 A company other than a private company.

 End with the word “Berhad”.
 A public company is not affected by the
restrictions, limitations and prohibitions.
 In other words, a public company may offer
its shares and debenture to members of the
public.
 S 11(2) A company limited by guarantee shall be
public company.
 S 11(3) An unlimited company shall either be a
private or a public company.
 HOLDING AND SUBSIDIARY
COMPANIES
 Notwithstanding that a group may consist of
two or more companies, it is a principle of
company law that each company in a group is
an independent legal entity possessed of
separate rights and liabilities independent of
each other.
 S 4(1) A company is a subsidiary of another
company (the holding company) if the holding
company:
a) Controls the composition of the board of directors
of the subsidiary company;
b) Controls more than half of the voting powers of the
subsidiary company;
c) Holds more than half of the issued share capital of
the subsidiary company.
 The composition of the board of directors is deemed to be
controlled by the holding company if the holding company
has unrestricted power to appoint or remove all or a
majority of the subsidiary company’s directors.
 S 4(2) The holding company is deemed to have such
power if a person cannot be appointed as a director
without approval by the holding company.
 ULTIMATE HOLDING COMPANY

 S 5A Corporation A shall be deemed to be the

ultimate holding company of Corporation B
if:
a) Corporation B is a subsidiary of Corporation
A; and
b) Corporation A is not itself a subsidiary of any
corporation.
 WHOLLY-OWNED SUBSIDIARY
COMPANY
 S 6 Corporation B is a “wholly-owned subsidiary”
of Corporation A if Corporation B has no members
except;
a) Corporation A or its nominee; or
b) A wholly-owned subsidiary of Corporation A or its
nominee.