Company law

Chapter 1: introduction to company law

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Introductory issues: a new Act

• All provisions of the Companies Act 2016 took effect on 31 Jan

2017 except section 241 and Division 8 of Part III.

The Companies Commission of Malaysia (SSM) states that with the

enforcement of the first phase, The Companies Act 1965 is
hereby repealed.

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 Topics

• Types of Business Entities

• Introduction
• Formation procedures of incorporation
• Promoters
• Pre-incorporation contracts

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 Types of business entities

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 What is a company?

• England is responsible for introducing the concept of registered

companies as business vehicles to Commonwealth Countries,
which includes Malaysia.
• A company is a legal association of people who combine finance to
a business.
• Of course the nature of the business must also be legitimate.
• For present definition see Section 3 of the CA 2016.
• ..\..\Companies Act 2016 Act 777.pdf

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 Basic types of company

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 Basic types of company

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 Public v Private

See section 25 CA 2016

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 Limited liability

• A type of liability that does not exceed the amount invested in a

partnership or limited liability company. The limited liability feature is
one of the biggest advantages of investing in publicly listed
companies.

• While a shareholder can participate wholly in the growth of a

company, his or her liability is restricted to the amount of the
investment in the company, even if it subsequently goes into
liquidation and racks up millions or billions in liabilities.
• http://www.ssm.com.my/en/LLP-AboutLLP
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 Private and public companies

• A private company is prohibited from:

❑making any invitation to public to subscribe any of
the company’s shares or debentures;
❑making any invitation to public to deposit money
with the company
▪For other details see Sections 41-44 CA 2016

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 Incorporation of a company in Malaysia

• The law relating to incorporation of a company in Malaysia is

governed by the Malaysian Companies Act 2016. As per the Act any
company doing business or wishing to do business in Malaysia must
register with the Companies Commission of Malaysia (CCM) or also
known as Suruhanjaya Syarikat Malaysia (SSM).
• The CCM was established by the Companies Commission of
Malaysia Act 2001 (CCMA), which came into force on 16 April 2002,
which resulted in the merger of the Registrar of Companies (ROC)
and the Registrar of Business (ROB).
• The 8 key functions of CCM are set out in Section 17 of the CCMA.
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 Procedures for incorporation
OLD LAW (CA 1965) NEW LAW (CA 2016)
• To incorporate a company, a person must apply to the • A more simplified process
Company Commission of Malaysia (CCM). A person (Section 14 CA 2016)
must then lodge the following documents with the CCM
within the three months to secure the use of the • Today there is no requirement
proposed name: for the filing of the
i. Memorandum of Association Memorandum, the Articles, the
ii. Articles of Association declarations in Form 6 and
Form 48A)
iii. Declaration of Compliance (Form 6)
iv. Statutory declaration by a person before • ..\..\Companies Act 2016 Act
appointment as a director, or by a promoter before 777.pdf
incorporation of a company (Form 48A).

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 Procedures for incorporation - continued

• A certificate of incorporation will be bestowed by

the Registrar of Companies once registration
procedures are completed and approved.
• See section 17 CA 2016.

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 Certificate of incorporation - Sample

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 Significance of the certificate of
incorporation

• The certificate of incorporation serves as conclusive evidence that a company

has been duly registered from the date mentioned on the certificate and has duly
complied with the requirements of the Companies Act.
• Salleh Abbas FJ in Tan Lai v Mohammed Bin Mahmud (1982) 1 MLJ 338, “…
This provision makes it impossible for anyone to challenge the lawfulness and
validity of the existence of the company. A certificate of incorporation prevents
any doubt from being cast upon the legal existence and persona of the
company…”

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 Consequences of incorporation

• Once the Certificate of Incorporation is issued, the subscribers to the

Memorandum together with such other persons as may from time to time become
members of the company shall be a body corporate, capable of exercising the
functions of an incorporated company and of suing and being sued.
• It has a perpetual succession under common seal with power to hold property, but
with such liability on the part of the members to contribute to its assets in the
event of it being wound up, as provided for in the Companies Act. This is referred
to as a corporate personality.(see s21 CA 2016)

• The company shall also have Separate Legal Personality (see s20 CA 2016)

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