Company Law

Lecture 1-
Introduction to Company Law

Ms Atikah
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What is company law?

• Formation and termination of companies

• Confers companies special features
• Regulates the relationship between the participant
in companies
• Facilitates dealings between companies and
outsiders

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 Introduction

• The Companies Act 2016 is the principal legislation

governing the formation and operation of companies in
Malaysia
• The Act enables an association of persons to form
various types of corporate organizations known as
registered companies
• This Act also provides facilities for the incorporation of
companies, its constitution, its relation with members
and creditors, management and winding-up
• Registrar Of Companies under the Companies
Commission of Malaysia (CCM) enforces and
administers the CA 2016
• Every company must register with ROC before
conducting any business activity

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 Business Organisations

Unincorporated Associations Incorporated Associations

Sole
Partnerships Companies
proprietorships

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 Differences between Types of Business Organisations

Members Separate legal entity Liability Succession

Company Minimum: 1  Company and  Limited  Continuity

A legal entity that Maximum: people who own it company: of
is separate and unlimited are considered as Limited to succession
distinct from its (except in the different entities value of – not
members and case of a pte ltd  Company capable of shareholding affected by
shareholders. company) owning property, death or
Governed by the making contracts,  Unlimited incapacity
Companies Act employing people, company: of one or
2016 – need to be being sued or of Unlimited more of its
registered with the suing liability members
Registrar of  Ceases to
Companies exist upon
being
wound up or
struck off
the Register
of
Companies

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 Differences between Types of Business Organisations (cont’d)

Partnership Minimum: 2  Does not exist  Each partner Lack of succession

A type of business Maximum: 20 as a separate liable for – partnership
organisation when at legal entity partnership ends if any
least 2 persons e.g. partnership debts even if partner resigns
agree to pool capital property caused by or dies (unless
and carry on a belongs to the actions of other agreement to
business with a view partners partners the contrary)
to sharing profit and  Each partner
risks – need to be may be liable
registered with the to use private
Registrar of resources to
Businesses meet
partnership
debts

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 Differences between Types of Business Organisations (cont’d)

Members Separate legal Liability Succession

entity
Sole Proprietorship 1  Does not exist  Unlimited Lack of succession
Simplest form of as a separate liability – business ceases
business legal entity once owner dies
organisation owned
by 1 person.
However need not
be solely operated
by that person.
- need to be
registered with the
Registrar of
Businesses

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Types of companies

• Section 10(1) classification of companies

A company may be
(a) a company limited by shares;
(b) a company limited by guarantee; or
(c) unlimited company

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Company Limited By Shares
 Section 10 (2): Liability of members limited to the amount of unpaid
shares respectively held by them (if any).

 Shares do not have to be fully paid upon issue; a portion of the nominal
value may be left outstanding as ‘uncalled capital’.

 Must state that liability of members is limited.

 a limited company (by shares/guarantee) which:

 PUBLIC Section 25(1)(a)- the word “Berhad” or the abbreviation “Bhd”
 PRIVATE Section 25(1)(b)- the word ‘sendirian berhad’ or its abbreviation
‘sdn bhd’

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 Company Limited By Guarantee
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 Section 10(3):
Liability of members limited to the respective amounts that they
undertake to contribute to the assets of the company in the event
the company is wound-up.

 Does not have a share capital under Section 12

 S.45(1) no company other than a company limited by guarantee

shall be formed with the following objects:
(a) providing recreation or amusement;
(b) promoting commerce and industry;
(c) promoting art;
(d) promoting science;
(e) promoting religion;
(f) promoting charity;
(g) promoting pension

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Unlimited Company

Section 10(4):

 No limit placed on the liability of its members.

 Members are liable upon winding-up for the debts of the

company without limit if the company has insufficient assets
to meet its debts.

 Section 25(1)(c) the word “Sendirian” or the abbreviation

“Sdn”

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 Status of Companies
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1. Private Companies:

1. Restriction on the right to transfer shares

2. Limitation on number of members to not more than 50
3. Prohibition from offering the shares to public

2. Public Companies
• Not prohibited from offering or inviting the public to invest in its
securities.

• Before it can offer or invite the public to subscribe to its securities,

must comply with Securities Commission Act 1993 & Securities
Industry Act 1983.

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 Related Companies
e.g. Papa Ltd will be the holding company of
Orange Ltd if any one of the following
conditions are met:

(a) Papa Ltd controls the composition of the

board of directors of Orange Ltd ;

(b) Papa Ltd controls more than half the voting

power of Orange Ltd ;

(c) Papa Ltd owns more than half the issued

share capital of Orange Ltd

*refer s.4(1)

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