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Chartered Secretaries Malaysia

ICSA International Qualifying Scheme (ICSA IQS)

STUDY MANUAL CORPORATE LAW

ICSA IQS Corporate Law

Contents
Page Syllabus Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Nature of Registered Companies Classification of Registered Companies Companys Constitution Listing and Prospectus Corporate Transactions Share Capital Membership Debentures and Loan Capital Corporate Governance Duties of Directors and Other Officers Auditors Meetings Members Remedies Insider Trading Takeovers Liquidations iv 1 42 56 84 115 137 183 214 240 289 327 342 356 376 390 414

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2004 MAICSA All rights reserved. No part of this work covered by copyright may be reproduced or copied in any form or by any means (graphics, electronic or mechanical, including photocopying, recording taping, or information or information retrieval systems) without the written permission of the writers. Disclaimer This publication is sold on the terms and understanding that (1) the editor or the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) as the publisher, are not construed as giving legal, secretarial, professional or other advice or services. (2) No person or entity should rely on the contents of this publication without first obtaining advice from another professional person. (3) To the extent permitted by law, neither MAICSA nor the editor is responsible for; (a) the results of any act or omission by any person or entity who relied on the whole or any part of this book; or (b) the completeness or accuracy of the information contained in this book. (4) To the extent permitted by law, the editor and MAICSA, each of them disclaim all and any liability for the consequences of any act or omission, including but not limited to any negligent act or omission by any person or entity who relies on the whole or any part of this publication. (5) Neither the editor nor MAICSA assumes any responsibility to inform any person or entity or any matter arising or coming to the notice of the editor or MAICSA which may affect or quality the completeness or accuracy of the information contained in this book. (6) Paragraph (1) to (5) of this Disclaimer prevail over any representation to the contrary that may be contained in this publication. First published in April 2004 Updated November 2006

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SYLLABUS
1.0 SUBJECT DECRIPTION

To provide an understanding of the principles of Malaysian Corporate Law and a thorough knowledge of the regulation of companies by law, including statutes and case laws. 2.0 LEARNING OUTCOMES

Students who have successfully completed the modules on this subject will be able to understand the core principles of corporate law and these include: The nature and functions of companies; The concept of a company as a corporate entity; The relationship between the two major organs in the company, namely the general meeting and the board of directors; The relationship between the members inter se and the protection of minorities; The law and procedure relating to meetings and the rights of shareholders during meetings; The concept of corporate liability, The concept and meaning of corporate governance, in particular, the duties of directors and the limits on their powers; The law relating to corporate finance and corporate control transactions; and The effect and consequences when companies undergo the reconstruction, receivership or winding-up process.

3.0

LEARNING CONTENT

Nature of registered companies. The process and effect of registration - the principles of corporate personality and of limited liability. The distinction between companies and partnerships.

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Classification of companies. Classification by limitation of liability, by method of formation, by size -public and private companies. Holding and subsidiary companies. Constitution of a company. The memorandum of association; doctrine of ultra vires. The articles of association, effects of alterations. Promoters. Flotation. Methods of flotation. Prospectus - form and content. Misrepresentation and omissions. Allotment of shares and commencement of business. Underwriting and commission. Corporate transactions. Capacity of companies and the concept of agencies as applied to companies. Preincorporation contracts. The Corporate seal.

Share Capital. Raising, maintenance and reduction of share capital. The principle of capital. Issue of shares at a premium and at a discount. Acquisition and redemption by a company of its own shares. Methods of flotation, prospectus, Kuala Lumpur Stock Exchange listing requirements. Dividends. Shares. Nature and types of shares. Variation of class rights. Membership and the register of members. Disclosure of substantial and nominee share holdings. Share Certificates - transfer and transmission of shares. Restrictions on transfer. Mortgage of shares. Calls, liens, surrender and forfeiture of shares. Share warrants. Effects of shares deposited with the Central Depository. Loan Capital. Borrowing powers of a company. Debentures and debenture stock. Charges securing debentures - fixed and floating charges. Registration of charges. Remedies of debentureholders.
ICSA IQS Corporate Law

Corporate Governance. Directors - Qualification; appointment and remuneration; disclosure; service contracts; removal; retirement and disqualification; powers and fiduciary duties; loans by company to directors and contracts in which directors are interested. Role and duties of directors in relation to good corporate governance. Company Secretary. Qualification, appointment, vacation of office, duties and responsibilities. Auditors. Appointment and removal; powers and duties. Meetings and shareholders' rights. Types of meetings; convening of and proceedings at meetings; resolutions; majority control rule; protection of minority shareholders. Insider Dealing. Types; elements of insider trading; remedies and statutory relief. Reconstruction, Disputes and Liquidation. Reconstruction and takeovers; reconstruction Compulsory acquisition of shares on takeover. and schemes of arrangements. Compulsory and voluntary liquidation. Including grounds for winding up, order of application of assets of insolvent companies, preference and avoidance of transactions, fraudulent trading and wrongful trading, outline of powers and duties of liquidator and consequences of winding-up. NOTE A detailed knowledge of the Malaysian Companies Act 1965, and subsequent amendments, the Malaysian Code on Takeover and Mergers, the Kuala Lumpur Stock Exchange Listing Requirements and the Securities Commission Act 1992 is expected of students.

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4.0

RECOMMENDED READING Lipton & Herzbergs Understanding Company Law in Malaysia Law Book Co. 1995 Company Law FT Law & Tax Asia Pacific, 1997, (2nd Edition) Guide to Company Law in M'sia & S'pore CCH Asia Ltd., 1995, (3rd Edition) Guide to Company Law and Secretarial Practice, Malaysia CCH Asia Ltd, 2006 Chan & Koh On Malaysian Company Law : Principles and Practice 2nd Edition (Thomson/Sweet & Maxwell Asia), 2006

Dr Krishnan Arjunan & Assoc Prof Low Chee Keong

Woon W.C.M. CCH Asia.

Cheah Foo Seong

Ben Chan Choon Philip Koh Tong Ngee Peter SW Ling 5.0 FURTHER READING

Davies PL Farrar Ford, Austin, Ramsay Mayson, French & Ryan Pennington Pillai P.N.

Gowers Principles of Modern Company law Sweet & Maxwell, 1997, (6th Edition) Farrars Company Law Butterworths, 1991, 4rd Edition, 1998 Fords Principles of Corporations Law Butterworths, 1997, (8th Edition) Company Law Blackstone Press 1998, (15th Edition) Company Law Butterworths, 1995, (7th Edition) Source Book of S'pore & M'sian Company Law (2nd Edition - 1986) Butterworths Principle of Modern Company Law (4th Edition - 1979) Steve (Supplement 1989) Company Law in Malaysia Cases & Commentary Malayan Law Journal 1998

Gower L.C.B.

K Arjunan

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6.0

Other References The Companies Act of Malaysia: An Annotation Butterworths Asia, 1996, (2nd Edition)

Woon & Hicks

Malaysian Company Law Study Manual available from Foulkes Lynch Distance Learning. Malaysian Companies Act 1965, and any amendments. Kuala Lumpur Stock Exchange Listing Requirements, and any amendments. Securities Commission Act 1992, and any amendments. Securities Industry Act 1983, and any amendments.

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