Overview of Malaysia New Companies ACT 2016

Overview of Malaysia New Companies ACT 2016

The new Companies Bill 2015 (“Bill”), which will replace the current Companies Act 1965 (“Act”) as a whole and is expected to be gazzetted tentatively by end of August 2016 and its implementation shall commence as early as January 2017.

OBJECTIVES OF REVISING THE COMPANIES ACT in Malaysia

• To provide a regulatory framework to facilitate starting a business and reduce cost of doing business
• Accord protection to corporate directors and other stakeholders of a company
• Enhance internal control, corporate governance and corporate responsibility
• Provides flexibility in managing affairs of companies
• Simplification of compliance provisions

Key changes OF THE MALAYSIA COMPANIES ACT 2016

• Companies will no longer be required to state its authorised share capital
• Simplify laws and procedures for companies, promoters may incorporate companies
• Introduction of single member / director company
• Company may adopt M&A and A&A after incorporation
• Abolish requirement for private companies to hold Annual General Meeting
• Power of members to require circulation of statements
• Migration towards no par value regime
• Introduction of members’ right for management review
• Introduction of corporate rescue mechanism through Judicial Management & Corporate Voluntary Arrangement to rehabilitate companies
• Reforming policies relating to share buyback and financial assistance via introduction of solvency test
• Introduction of Business Review Report
• Introducing alternative procedures for reduction of capital through solvency statements
• Dividends can only be distributed out of profits and is only allowed if it meets solvency test
• Remuneration of directors of public companies to be sanctioned
• Abolish the maximum age for directorship
• Statutory declaration by promoters / directors to be replaced with statement of compliance
• Increased sanctions on directors and secretaries for breaches under the Act, which include heavier fines and longer terms of imprisonment.

Snapshots of THE MALAYSIA COMPANIES ACT 2016

• Single member company
  • Single member can also be the sole director
  • Public company must have at least 2 directors

• Simplified incorporation process
  • Superform – No more multiple forms
  • M&A at point of incorporation is optional
  • Secretary at point of incorporation is optional
  • Notice of registration is conclusive evidence

• Effect of incorporation
  • Company is a body corporate with legal personality separate from its members
  • Has full capacity to undertake any business activities

• Evidence of membership
  • Entry of names of members in the register of members
  • Share certificate is optional

• Execution of documents
  • Use of common seal is optional
  • Document may be executed by authorised officers

• Other requirements
  • Appointment of Company Secretary within 30 days after incorporation
  • New requirement for all Company Secretaries to register with Registrar and once registered, a practising certificate will be issued
  • In the event office of sole director or last remaining director becomes vacant due to death, disqualification or otherwise vacation of office, the Company Secretary is responsible to call for a meeting of next of kin or personal representatives for the purposes of appointing new director. If new director is not appointed within 6 months, the Registrar may direct to strike the company off the register.
  • Introduction of business review report (internal control and corporate responsibility report) to be part of directors’ report
  • Members must be given reasonable opportunity at meeting to question, discuss.
  • The Registrar has power to exempt certain categories of private companies from having to appoint auditor
  • No requirement to hold AGM for private companies and main method to make decision will be via written resolution.
  • Meeting at multiple venues is allowed but main meeting venue shall be in Malaysia where the chairperson is present
  • Share will be issued without par value and will be issued at a price.
  • Transitional period of 24 months will be given to companies to utilise the amount standing in credit in company’s share premium account.
  • Annual return to be lodged within 30 days of anniversary of incorporation date
  • De-coupling of requirement to lodge audited accounts and annual return
  • In case of private company, audited accounts to be lodged within 30 days from time circulated to members