Introduction to Company Law Development of Company Law Business Organization Types of Companies
Development of Company Law • Companies Act 1965 [Act 125] • Registry of companies : Companies Commission of Malaysia Act 2001 (CCMA) • Subsidiary legislations: • Companies Regulations 1966 • Companies (Winding up) Rules 1972
CA is modeled on the English CA 1948 and the Australian Uniform CA 1961. • Case law • Other branches of law: • Those that directly affect company law • Securities Commission Act 1993 (SCA), Securities Industry Act 1983 (SIA), Securities Industry (Central Depositories) Act 1991(SICDA), & Futures Industry Act 1993 (FIA). • Code on Take-Overs and Mergers 1998, Code on Corporate Governance 2000 and Offshore Companies Act 1990, SCA exemptions, modifications and guidelines, Accounting Standards, KLSE Listing Requirements and KLSE Rules.
Those that indirectly affect company law • BAFIA 1989 & Insurance Act 1996; • National Land Code eg: Kimlin Housing Development Sdn Bhd (in liq.) v Bank Bumiputra (M) Bhd -onS.108 of NLC & power of receiver and manager appointed pursuant to the debentures • Other areas of law: equity, agency, torts, contract and criminal laws.
“Company” and “Corporation” • Not co-extensive but overlap • Company: limited meaning; s.4(1) CA : 4 types; not including foreign company (Part XI, Div.2 CA) • Corporation: broader term; includes company. : s.4(1) : not including government agencies; corporation sole; co-operative societies & trade union.
Business Organizations • Sole proprietorship or sole trader • Partnership • Unincorporated joint venture • Company ~ find the special characteristics, advantages and disadvantages of the forms of business organizations above. Among other: definition,method & process of existence, entity, ownership of asset, management, liability, tax paying and dissolution. read CACL p.90-100.
Advantages of the corporate form • Limited liability: corpn is a separate legal entity (own debts) • Perpetual succession • Free transferability of investors’ interests, i.e. members are free to transfer their shares. • Large commercial enterprises • Corporate law as standard form contract between participants • Company charges, i.e. security interests over assets that are acquired, transformed and disposed of in the ordinary course of company’s business. • Taxation
Main disadvantages of the corporate form • Establishment and administration costs • Disclosure obligations or Publicity excluding exempt private companies. • Public law obligations, i.e. criminal sanctions
Types of Companies (s.14(2)) Classified according to two main ways: • Liability of its members, • Whether it is public or private company. The above classifications create: a) Public companies - Limited by shares - Limited by guarantee - Unlimited with share capital - Limited both by guarantee and shares b) Private companies - Limited by shares - Unlimited with share capital
Companies Limited by Shares • Most common form of companies in M’sia • It is a company formed on the principle of having the liability of its members limited, by the memorandum of association, to the amount (if any) unpaid on the shares respectively held by them - Effect? • Money or property of its members as share capital in return of a fully or partly-paid shares • S.18: states in the MOA the amount of share capital and its division into shares of a fixed amount • “Berhad” atau its abbreviation “Bhd”.
Other types of companies • Co limited by guarantee: liabilities; share capital; non-profit activities? • Co limited both by guarantee and shares: liabilities; no longer exist (s. 14A). • Unlimited companies: liabilities; share capital?
Private v. Public Companies • Why private? • Advantages of corporate entity to small/family business • As subsidiary to group of companies to circumvent, legally, the stricter disclosure requirements
Section 15. Private company. (1) A company having a share capital may be incorporated as a private company if its memorandum or articles -(a) restricts the right to transfer its shares;(b) limits to not more than fifty the number of its members(counting joint holders of shares as one person and not counting any person in the employment of the company or of its subsidiary or any person who while previously in the employment of the company or of its subsidiary was and thereafter has continued to be a member of the company);(c) prohibits any invitation to the public to subscribe for any shares in or debentures of the company; and(d) prohibits any invitation to the public to deposit moneywith the company for fixedperiods or payable at call, whether bearing or not bearing interest.
“Public company" means a company other than a private company • Public companies and their participants have more onerous obligations. • The followings may not apply to private co but obligatory to public co: ~need to maintain a register of substantial shareholders (s.69L) ~must lodge financial reports, regardless of the size of company’s operations (s. 169(1)) ~restrict loans to directors or connected persons (ss.133 & 133A)
Conversion • A private co may later wish to “go public” and raised share capital from the public. • Procedure: s. 26: pass a special resolution(at least 75% of those who vote) with appropriate alteration to the name to change its type, comply with with registration requirements & provide info to ROC • If private convert to public, lodge with ROC: a copy of special resolution, a statement in lieu of prospectus & a statutory declaration
Conversion does not affect identity of company, its rights and obligations or render defective any legal proceedings by or against the company. (s.26(4)).