DEVELOPMENT OF MALAYSIAN COMPANY LAW

Overview of Companies Act

Companies Bill 2015 was passed by the Parliament on 28 April 2016.The new Companies Act 2016 (new CA) will be implemented once the new regulations, rules and guidelines are drawn up. It will replace the Companies Act 1965 (CA 1965). 

How will the new Companies Act 2016 affect businesses in Malaysia?

Changes to the new CA will:

• spur entrepreneurship;
• make the corporate vehicle more attractive for businesses;
• deregulate certain aspects of the corporate processes;
• introduce the concept of corporate rescue for ailing companies;
• facilitate starting a business and reduce the cost of doing business;
• simplifying compliance provisions;
• provides flexibility in managing the affairs of companies, and;
• enhancing internal control, corporate governance and corporate responsibility.

What are the changes in the new Companies Act 2016?

The 10 new changes:

1. Introduction of a single director and single shareholder company.
2. The memorandum and articles of association is replaced with a constitution which is optional.
3. The use of Common Seal is optional.
4. New shares issued will have no par or nominal value.
5. Companies will no longer be required to state its authorised share capital.
6. The mandatory requirement for private companies to hold annual general meetings is removed.
7. Private company may pass members resolution by way of written resolution in lieu of meetings. The passing of the resolution need not be unanimous.
8. New alternative procedures for the reduction of capital through solvency statements instead of a court order.
9. Increased sanctions on directors for breaches under the Act, which include heavier fines and longer terms of imprisonment.
10. Two new corporate rescue mechanisms, Corporate Voluntary Arrangement and Judicial Management, to help financially distressed companies remain as a going concern and avoid winding-up.

The types of companies available for incorporation are:

Transitional provisions affected by the new CA are as follows:

No-Par Value Regime:

Shares are currently issued with a par/nominal value. Under the new CA, all new shares issued by a company shall have no par/nominal value. Under the transitional provisions, a company is given a 24-months period to utilise any amounts in its existing share premium account. Provisions under Section 618 (7) of new CA will help to preserve the effect of existing contracts and other instruments which rely on the concept of par/nominal value.

General Transitional Provisions

Section 619 of the new CA stipulates on the general transitional provisions.

Repeal and savings

Section 620(2) of the new CA stipulates on the repeal and savings provisions.

This article is written by our associate Elegant Management. Elegant Management Sdn Bhd has been in the company secretarial business for more than 41 years. They are based in Kuala Lumpur and have been helping clients throughout Malaysia in their company secretarial matters including but not limited to Company Incorporation & Registration, Company Secretarial Services, Strike Off of Companies and Winding Up of Companies.