Formation of Companies

FORMS OF BUSINESS
ORGANISATION

BUSINESS
ORGANISATION

SOLE
PROPRIETORSHIP

PARTNERSHIPS

COMPANY

Sole Proprietorship
Business organisation registered
Malaysia under the Registration
Business Act 1956

in
of

Owned by one person (Sole Proprietor)

Malaysian citizen or permanent resident

who has attained the age of 18 years and
above

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Not a legal entity

Not required to share profits with anyone
Owners liability is unlimited
Less formality and fewer legal restrictions
Control and decision making vested in one
owner
Personal names or trade names can be
used as business names

Partnerships
Two or more partners pooling their
resources in a business with a view to
profit
No more than 20 partners
Not a legal entity
Not commence doing business until it is
registered under the Registration of
Business Act 1956

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Firm is not subject to income tax
Profits added to personal income
Partners are liable for profit under
personal income tax
Not have to submit any report to the
Registry of Business
Ease of formation & Flexibility
Possible to obtain more capital than Sole
Pro/s

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Unlimited liability
Unstable life
[Elimination of any partner constitutes
automatic dissolution]
Firm bound by the acts of just one partner
as agent

Company
Types of Registered
Companies

Ltd. by Shares

Ltd. by Guarantee

Ltd. by Guarantee &

Shares

Unlimited

Limited by Shares
Members liability is limited to the unpaid
amount (if any) on the shares taken up by
them
No further liability attached to the holder of
fully paid up shares
Most common form of registered company

Limited by Guarantee
Liability of the members is limited to the
amounted guaranteed by the members
Usually formed by trade associations,
charitable bodies and are not for profit

Limited by Guarantee &

Shares
Companies (Amendment) Act 1985
Such companies cannot be created after
the appointed date

Unlimited Companies
No limit placed on the liabilities of its
members
Not very different from partnerships or sole
proprietorships

Never therefore been popular

COMPANIES
LIMITED BY
SHARES

Public
Companies

Private
Companies

Private & Public Company

Private Company

Memorandum and Articles: s. 15(1)

Restricts the right to transfer shares;
Limits the number of members to not more than 50;
Prohibits any invitation to public to subscribe
Prohibits any invitation to public to deposit money with the
company
Public Company a company other than a private company

Classification Public
Status
Companies classified according
to their public status

Public
company

Listed

Proprietary
company

Unlisted

Small
proprietary
company

Large
proprietary
company

Proprietary v Public
Proprietary

Public

Shareholders At least 2
shareholders, max 50

At least 2
shareholders

Directors

At least 2 directors, at
least 1 resident

At least 3 directors,
at least 2 resident

Finance

Cant get funds from

the public

Can get funds from

the public, but need
disclosure document

Listing

Cant be listed

Can be listed or
unlisted

Change of Status
Certain conversions permitted
For example

Pty Ltd Ltd

Ltd Pty Ltd
guarantee Ltd
NL Ltd
Special resolutions of members plus other requirements
ss 163-164