COMPANIES

COMPANIES
CONTENTS:
Types of Companies
Differences between Companies
and Partnerships
Advantages of Company over
Partnerships
Law of Assoc I/ Z.Elias
Law of Assoc I/ Z.Elias
WHAT IS A
COMPANY?
A company
is an association of persons,
existing as a
SEPARATE LEGAL ENTITY
from the owners (or members).
CORPORATION
Corporate Law / Z.Elias
LEGAL DEFINITION:

S.4(1) Companies Act (CA) 1965 corporation is any
body corporate wherever formed or incorporated.

Include any company or foreign company.

Exclude -:
Public authorities, Instrumentalities or agencies of the
Government of Malaysia or of any State or body
corporate not incorporated for commercial purposes and
declared as such by notice of the Minister in the Gazette;
Corporation sole;
Co-operative societies; and
Trade Unions

REGISTERED COMPANIES
Corporate Law / Z.Elias
Incorporated/registered under the CA
1965.

An artificial legal person may buy or
sell properties, exercise rights of
ownership and may sign contract by using
its common seal.

Common seal is the signature of the
company.


Types of Companies

Companies in Malaysia are classified according to
(i) liability, or
(ii) private or public status.

(i) By LIABILITY:
S. 14(2) Companies Act 1965 (CA) - a
company may either be:
A company limited by shares;
A company limited by guarantee;
A company limited by shares and guarantee;
An unlimited (liability) company.

Law of Assoc I/ Z.Elias
TYPES OF REGISTERED COMPANIES
Corporate Law / Z.Elias
Classification
according to liability
of members
S.14(2)
CO. LTD BY
SHARES
CO. LTD BY
GUARANTEE
CO. LTD BY
SHARES &
GUARANTEE
UNLTD. CO
COMPANY LIMITED BY SHARES
S.4 - company formed on the principle of having the
liability of its members limited by the
memorandum to the amount (if any) unpaid on
the shares respectively held by them.


Liability of a member of this company will depend on
whether his shares are fully paid or not.


If holds fully paid shares, has no further liability
to the company. (If the company becomes insolvent
he does not have to contribute to the assets of the
company).

If partly paid shares, will be liable to contribute
to the companys assets, up to the amount still
unpaid on the shares.

Law of Assoc I/ Z.Elias
COMPANY LIMITED BY SHARES
Corporate Law / Z.Elias

S. 214(1) liability of a member on the winding up does
not extend beyond the amount of unpaid shares.

S.22(3) Berhad or Bhd as part of its name to
indicate Ltd. Liability.
This is to inform the creditors that the liability of the
members are limited and that they can only look to
whatever assets the company has to seek payment of the
companys debt.

Most common form of company.

Classified into (i) Private Co. (ii) Public Co.
S.4 - liability of its members limited by the
memorandum to such amount as the
members may respectively undertake to
contribute to the assets of the company in
the event of its being wound up.

The liability of the members is specified in the
memorandum association.

Non-profit making purposes.

Does not have a share capital. Members not
required to contribute capital while company is
operating.



Law of Assoc I/ Z.Elias
COMPANIES LIMITED BY GUARANTEE
COMPANIES LIMITED BY GUARANTEE
Corporate Law / Z.Elias
Supported by subscriptions of the members.


Berhad or Bhd to indicate Ltd. liability.
S.22(3). May apply to the Minister (MDTCA)
to omit the word Berhad or Bhd-S.24.


After 1 February 1986 only in the form of
Public Company.

Law of Assoc I/ Z.Elias
If co is wound up, then its member who has undertaken in
the memorandum to contribute a certain sum of money to
the assets upon winding up, may be required to contribute
up to his amount of guarantee towards payment of
debts incurred by the company while he was a
member.

This liability extends to those who had left the co, but
was a member within a year before the co wound up.

Although this type of co does not have a share capital, it is
still a separate legal entity.

It is not normally used for trading, but often formed to
run clubs and other organizations that are maintained by
subscription, social activities and donation.

COMPANIES LIMITED BY GUARANTEE

UNLIMITED COMPANY

Defined by S.4 as a company formed on the principle
of having no limit placed on the liability of its
members.

In winding up, the members of this company are
liable for the debts of the company without limit
if the companys assets are not sufficient.

It is not much different from a partnership.

This type of company enjoys the advantage of being a
separate legal entity with two special features;
i. unlike other companies, they are free to return
their capital to their members;
ii. they must have their own Articles of
Association (unlike other companies that may adopt
Table A - Fourth Schedule).
Law of Assoc I/ Z.Elias
Law of Assoc I/ Z.Elias

UNLIMITED COMPANY

This company may or may not have a share
capital and is rarely used as a trading
company.

It has been used for mutual funds where
the company holds assets as investments
among the shareholders.

If a shareholder wishes to leave, he may
sell back his shares to the company.
Law of Assoc I/ Z.Elias
...UNLIMITED COMPANIES
Corporate Law / Z.Elias
Creditors have access to the personal
property of all members to an unlimited
extent if the company is wound up and has
insufficient fund.

Major advantage ability to return capital
to members without having to comply with
the restrictions imposed by S.64.

A past member is STILL liable if he has
ceased to be a member less than a year
prior to winding up.

Name of a private unlimited company need
only end with Sendirian or Sdn.


Corporate Law / Z.Elias

A member liable to pay the amount, if any,
unpaid on any shares held, in addition to
meeting the guarantee undertaking to contribute
a specified amount in the event that the
company is wound up S. 214(4)

S.14A no longer possible to
form such company ( as from
1986)
Classification as Private or Public Companies
Law of Assoc I/ Z.Elias
Classification According to
Status

Public Company
S.4:
Other than private
company
Private Company - S. 15(1):
* Restrict the right to transfer shares.
* Limit the number of members to not
more than 50.
* Prohibits the invitation or offer of shares
or debentures to public.
* Prohibits the invitation or offer the public
to deposit money with the company.
Non-Exempt

Exempt
PRIVATE COMPANIES - S. 15(1)
Where its Memorandum or Articles:

i. Restrict the right to transfer shares. No prescribed
form of restriction. The articles can state the restrictions,
e.g. - giving right of pre-emption only to other members
before shares can be transferred to other persons, or there
is to be no transfer of shares unless the board of directors
approve.

ii.Limit the number of members to not more than 50. If
shares are jointly held they are considered as held by one
person. Employees of the company or its subsidiaries who
are not members are not counted.

iii.Prohibits any invitation or offer to the public to
subscribe for shares in debentures of the company.

iv.Prohibit any invitation to the public to deposit money
with the company.

Law of Assoc I/ Z.Elias
May have a share capital with ltd. or unltd. liability.

May be distinguished from public co in having the word
Sendirian or the abbreviation Sdn. as part of its
name. (If the co is a limited liability co, then this word
should come before the word Bhd. e.g. the name
Syarikat X Sdn. Bhd. is a private limited co.)

Can be exempt or non-exempt private co.

Enjoy certain privileges that are not given to public cos.
as they do not seek funds from the public.
Law of Assoc I/ Z.Elias
PRIVATE COMPANIES - S. 15(1)
Exempt Private Company
Defined by s.4(1) :
a private co the shares of which no beneficial interest
is held directly or indirectly by any corporation, and
which has not more than twenty members none of
whom is a corporation.

Therefore its characteristics are:

i. Its shares are held by individuals and not companies,
ii. It has a membership of not more than 20 persons,
iii. It is required to prepare a balance sheet and a profit and
loss account for their shareholders, but is exempted
from having to file them with the co.s annual
return with the RoC.
iv. It can also give loans to the directors.

Law of Assoc I/ Z.Elias
PUBLIC COMPANIES
S.4 - a company other than a private company.

As this company raises funds from the public, it is
subjected to more regulatory controls than a private
company. necessary to protect large numbers of people
who are the investing public.

Conversion of Private to Public Companies
A private company may convert to a public company by
loading a special resolution with the Registrar of
Companies.
It may also involuntarily become a public company if it
contravenes the restrictions of s. 15(1).
A public company with a share capital may convert to a
private company also by lodging a special resolution.

Law of Assoc I/ Z.Elias
GROUP COMPANIIES
Holding and Subsidiary Companies

S.5 defines Holding (H) and Subsidiary(S) as:
i. H controls the composition of the BOD of S,
ii. H hold more than half of the voting power of S, or
iii. H holds more than half of the ISK of S;
iv. S is a subsidiary of any other corporation which is in
turn a subsidiary of H.


Ultimate Holding Co.
Where another co. is a subsidiary of a company (UH),
whilst the UH is not itself a subsidiary of any corporation.


Law of Assoc I/ Z.Elias
FOREIGN COMPANY
S.4(1) : Where the company, corporation , society ,
association or other body incorporated outside Malaysia,
but which carries on business in Malaysia or establishes a
place of business in Malaysia.

It is wholly or majority owned (measured in % of shares
held) by non-Malaysians.

Such company has to lodge certain documents as laid down in
section 332 (1) of the Companies Act 1965 and pay the
appropriate fees before commencing business in Malaysia.

A foreign company registered under the Companies Act
1965 has the power to hold immovable property in
Malaysia.

Law of Assoc I/ Z.Elias
LAWOF ASSOC 1/ Z.Elias
DIFFERENCES BETWEEN THE BUSINESS ORGANIZATIONS
PARTNERSHIP
P.A 1961
COMPANY
C.A 1965
Formation and
dissolution
ORALLY, IN WRITING OR BY
CONDUCT

FORMAL PROCESS OF
INCORPORATION - S.14(1)
Liability
JOINT LIABILITY CORP. LIABLE, NOT MEMBERS
Enforcement of
legal rights
PARTNERS CAN SUE OR BE
PERSONALLY SUED OR AS AGENT
FOR OTHER PARTNERS
CO CAN SUE OR BE SUED IN COS
NAME
Transfer of
interests
MAY NOT DO SO EXCEPT WITH
CONSENT OF ALL PARTNERSHIP
PTE CO. LIMITED
PUB.CO. FREELY RANSFERABLE
Management
ALL MAY BE INVOLVED BOARD OF DIRECTORS.
Limits on the size
2 - 20 PTE CO <50
PUB CO. NO LIMIT
Raising of capital
CONTRIBUTION OF CAPITAL BY
PARTNERS
PTE. CO RESTRICTED
PUB. CO NO LIMIT OF MEMBERS
Disclosure
NONE PUB.CO DISCLOSURE OF
ACCOUNTS
ADVANTAGES OF COMPANIES OVER
PARTNERSHIPS
COMPANY LAW/ Z.Elias
COMPANY PARTNERSHIP
Can sue and be sued in its own name. Legal action on a partnership generally
through its members.
As one legal entity, also owns the
companys assets.
Assets are generally collectively owned by
all the partners.
Has the unique ability to create floating
charges over their current assets to secure
a loan.
Can only borrow by charging on their fixed
assets.
May have limited liability. Partners liability is unlimited.
Continuous life until it is legally wound up,
and does not dissolve because of the death
of their member.
Death of a partner is a ground for
dissolving the partnership.
Law of Assoc I/ Z.Elias