Wednesday 1 February 2017
COMPANIES ACT 2016: IN STAGES OF IMPLEMENTATION
The Companies Act 2016 (CA 2016) will be implemented over several stages, starting with phase one which came into effect on Jan 31.
The Companies Commission of Malaysia (SSM) said on Wednesday that with the enforcement of the first phase, the Companies Act 1965 is hereby repealed.
However, it pointed out that several provisions in the CA 2016 which have yet to be effective are:
Section 241 – provision relating to the requirement for company secretaries to register with Registrar; and
Division 8 of Part III – provisions relating to corporate rescue mechanisms on corporate voluntary arrangement and judicial management.
SSM said a company may be incorporated by or have only one member and that single member can also be the sole director of the company. However, for public companies, the CA 2016 still retains the minimum requirement of two directors.
The CA 16 also sees the change of “certificate of registration” to “notice of registration”
SSM will issue a notice of registration for the incorporation of a new company to confirm that provisions relating to the requirements for registration have been complied with in line with the requirement of the law.
Under the CA 2016, a company does not have to state its authorized capital. Instead, a company is required to notify its issued share capital and paid-up capital and the related changes through the return of allotments.
It said from Jan 31, 2017, any newly issued share will no longer be tied with the nominal value when the company was incorporated. A company may issue shares at a price depending on the factors affecting the current circumstances and needs of the company.
SSM also pointed out that a company incorporated from Jan 31, 2017, has the option whether to adopt a constitution or otherwise.
For a company which was incorporated before the CA 2016 came into effect, the existing constitution (memorandum & articles of association) will continue to be applicable to such companies until the companies resolve otherwise. However, it is still mandatory for a company limited by guarantee to have a constitution.
Effective from Jan 31, 2017, a company has the option to have a common seal. Execution of documents must comply with the procedures outlined under Division 9 of Part II including situations when a company decides to have a common seal.
Beginning from Jan 31, 2017, all private companies are no longer required to hold annual general meetings. Instead all decisions of private companies can be fully made through circular resolutions.
Under the CA 2016, the requirement to lodge Annual Returns is based on the anniversary of the incorporation of a company, and the date for the lodgement of Financial Statements is no later than seven months from the financial year end of the company.
SSM advised the owners of the company to take into account of the changes when reviewing, formulating or implementing policies and procedures which may affect companies when dealing with the ministry/department/agency/organisation.
It also said this was to ensure that the business friendly policies which are contained in the CA 2016 can be implemented efficiently and the benefits could be enjoyed by the business community in general.
Apart from the CA 2016, SSM will also enforce the Interest Schemes Act 2016 from Jan 31, 2017.
The Interest Schemes Act regulates the offering of interest schemes as an alternative to fund raising activities for companies. The provisions in the Interest Schemes Act were previously contained in the Companies Act 1965.
Source:http://www.thestar.com.my/business/business-news/2017/02/01/phase-one-of-companies-act-2016-comes-into-effect/#d7gkrRTmf74xkXbD.99
A BIRD VIEW OF COMPANIES ACT 2016
OBJECTIVES OF REVISING THE COMPANIES ACT in Malaysia
1. To provide a regulatory framework to facilitate starting a business and reduce cost of doing business
2. Accord protection to corporate directors and other stakeholders of a company
3. Enhance internal control, corporate governance and corporate responsibility
4. Provides flexibility in managing affairs of companies
5. Simplification of compliance provisions
KEY EFFECTS OF THE MALAYSIA COMPANIES ACT 2016
1. Companies will no longer be required to state its authorised share capital
2. Simplify laws and procedures for companies, promoters may incorporate companies
3. Introduction of single member / director company
4. Company may adopt M&A and A&A after incorporation
5. Abolish requirement for private companies to hold Annual General Meeting
6. Power of members to require circulation of statements
7. Migration towards no par value regime
8. Introduction of members’ right for management review
9. Introduction of corporate rescue mechanism through Judicial Management & Corporate Voluntary Arrangement to rehabilitate companies
10. Reforming policies relating to share buyback and financial assistance via introduction of solvency test
11. Introduction of Business Review Report
12. Introducing alternative procedures for reduction of capital through solvency statements
13. Dividends can only be distributed out of profits and is only allowed if it meets solvency test
14. Remuneration of directors of public companies to be sanctioned
15. Abolish the maximum age for directorship
16. Statutory declaration by promoters / directors to be replaced with statement of compliance
17. 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
1. Single member company
Single member can also be the sole director
Public company must have at least 2 directors
2. 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
3. Effect of incorporation
Company is a body corporate with legal personality separate from its members
Has full capacity to undertake any business activities
4. Evidence of membership
Entry of names of members in the register of members
Share certificate is optional
5. Execution of documents
Use of common seal is optional
Document may be executed by authorized officers
6. Other requirements
i. Appointment of Company Secretary within 30 days after incorporation
ii. New requirement for all Company Secretaries to register with Registrar and once registered, a practicing certificate will be issued
iii. 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.
iv. Introduction of business review report (internal control and corporate responsibility report) to be part of directors’ report
v. Members must be given reasonable opportunity at meeting to question, discuss.
vi. The Registrar has power to exempt certain categories of private companies from having to appoint auditor
vii. No requirement to hold AGM for private companies and main method to make decision will be via written resolution.
viii. Meeting at multiple venues is allowed but main meeting venue shall be in Malaysia where the chairperson is present
ix. Share will be issued without par value and will be issued at a price.
x. Transitional period of 24 months will be given to companies to utilize the amount standing in credit in company’s share premium account.
xi. Annual return to be lodged within 30 days of anniversary of incorporation date
xii. De-coupling of requirement to lodge audited accounts and annual return
xiii. In case of private company, audited accounts to be lodged within 30 days from time circulated to members
1. To provide a regulatory framework to facilitate starting a business and reduce cost of doing business
2. Accord protection to corporate directors and other stakeholders of a company
3. Enhance internal control, corporate governance and corporate responsibility
4. Provides flexibility in managing affairs of companies
5. Simplification of compliance provisions
KEY EFFECTS OF THE MALAYSIA COMPANIES ACT 2016
1. Companies will no longer be required to state its authorised share capital
2. Simplify laws and procedures for companies, promoters may incorporate companies
3. Introduction of single member / director company
4. Company may adopt M&A and A&A after incorporation
5. Abolish requirement for private companies to hold Annual General Meeting
6. Power of members to require circulation of statements
7. Migration towards no par value regime
8. Introduction of members’ right for management review
9. Introduction of corporate rescue mechanism through Judicial Management & Corporate Voluntary Arrangement to rehabilitate companies
10. Reforming policies relating to share buyback and financial assistance via introduction of solvency test
11. Introduction of Business Review Report
12. Introducing alternative procedures for reduction of capital through solvency statements
13. Dividends can only be distributed out of profits and is only allowed if it meets solvency test
14. Remuneration of directors of public companies to be sanctioned
15. Abolish the maximum age for directorship
16. Statutory declaration by promoters / directors to be replaced with statement of compliance
17. 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
1. Single member company
Single member can also be the sole director
Public company must have at least 2 directors
2. 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
3. Effect of incorporation
Company is a body corporate with legal personality separate from its members
Has full capacity to undertake any business activities
4. Evidence of membership
Entry of names of members in the register of members
Share certificate is optional
5. Execution of documents
Use of common seal is optional
Document may be executed by authorized officers
6. Other requirements
i. Appointment of Company Secretary within 30 days after incorporation
ii. New requirement for all Company Secretaries to register with Registrar and once registered, a practicing certificate will be issued
iii. 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.
iv. Introduction of business review report (internal control and corporate responsibility report) to be part of directors’ report
v. Members must be given reasonable opportunity at meeting to question, discuss.
vi. The Registrar has power to exempt certain categories of private companies from having to appoint auditor
vii. No requirement to hold AGM for private companies and main method to make decision will be via written resolution.
viii. Meeting at multiple venues is allowed but main meeting venue shall be in Malaysia where the chairperson is present
ix. Share will be issued without par value and will be issued at a price.
x. Transitional period of 24 months will be given to companies to utilize the amount standing in credit in company’s share premium account.
xi. Annual return to be lodged within 30 days of anniversary of incorporation date
xii. De-coupling of requirement to lodge audited accounts and annual return
xiii. In case of private company, audited accounts to be lodged within 30 days from time circulated to members
Effects of Companies Act 2016
There are several effects of CA 2016, for example:
1. Incorporation of Companies
a. Easier process for companies to be incorporated
b. Introduction of single shareholder and single director companies
c. Common seal and share certificate becomes optional
d. Particulars required
e. Effect of CA 2016 on M&A (No more Memorandum and Articles of Association)
f. Effect of CA 2016 on Company Secretary at formation stage
g. No Annual General Meeting for private companies
h. Abolishing the unanimity rule for written shareholder resolutions
The above changes will reduce the administration cost incurred by the company.
2. Share Capital and No Par Value regime
a. CA 2016 impact on share capital
b. Introduction to No Par Value Regime
c. Implications on accounting
d. Double entry effects
e. Share premium account
3. Duties and responsibilities of Directors
a. Brief on Duties and responsibilities of Directors
b. Enhanced corporate governance requirements
c. Effects on audit
4. Impact on Accounting – Financial Statements and Report
a. Requirements on Approved Accounting Standards and its effect on Financial Statements
b. System of internal control
c. Disclosure requirements in financial statements
d. Contents of Directors’ Report
e. Time allowed for sending out copies of financial statements and reports
5. Impact on Auditors
a. Provisions relating to Private Company
b. Appointment of auditors
c. Terms of office
d. Provisions relating to Public Company
e. Appointment of auditors
f. Terms of office
g. Auditor’s remuneration
h. Procedure to appoint auditor
i. Removing auditor from office
j. Resignation of auditor (including rights of resigning auditor)
k. Attendance of auditors where financial statements are laid
l. Audit exemption clause in CA2016
1. Incorporation of Companies
a. Easier process for companies to be incorporated
b. Introduction of single shareholder and single director companies
c. Common seal and share certificate becomes optional
d. Particulars required
e. Effect of CA 2016 on M&A (No more Memorandum and Articles of Association)
f. Effect of CA 2016 on Company Secretary at formation stage
g. No Annual General Meeting for private companies
h. Abolishing the unanimity rule for written shareholder resolutions
The above changes will reduce the administration cost incurred by the company.
2. Share Capital and No Par Value regime
a. CA 2016 impact on share capital
b. Introduction to No Par Value Regime
c. Implications on accounting
d. Double entry effects
e. Share premium account
3. Duties and responsibilities of Directors
a. Brief on Duties and responsibilities of Directors
b. Enhanced corporate governance requirements
c. Effects on audit
4. Impact on Accounting – Financial Statements and Report
a. Requirements on Approved Accounting Standards and its effect on Financial Statements
b. System of internal control
c. Disclosure requirements in financial statements
d. Contents of Directors’ Report
e. Time allowed for sending out copies of financial statements and reports
5. Impact on Auditors
a. Provisions relating to Private Company
b. Appointment of auditors
c. Terms of office
d. Provisions relating to Public Company
e. Appointment of auditors
f. Terms of office
g. Auditor’s remuneration
h. Procedure to appoint auditor
i. Removing auditor from office
j. Resignation of auditor (including rights of resigning auditor)
k. Attendance of auditors where financial statements are laid
l. Audit exemption clause in CA2016
MALAYSIA COMPANIES ACT 2016
The Companies Act 2016 has come into operation with effect from 31 January 2017. You can follow the link for further information.
1. KERANGKA UNDANG-UNDANG /LEGAL FRAMEWORK
2. PENETAPAN TARIKH PERMULAAN KUAT KUASA/ APPOINTMENT OF DATE OF COMING INTO OPERATION
3. PERATURAN-PERATURAN SYARIKAT/COMPANIES REGULATIONS 2017
4. FREQUENTLY ASKED QUESTIONS
5. AKTA SYARIKAT 2016 / COMPANIES ACT 2016
6. SMALL SNAPSHOTS OF COMPANIES ACT 2016
1. KERANGKA UNDANG-UNDANG /LEGAL FRAMEWORK
2. PENETAPAN TARIKH PERMULAAN KUAT KUASA/ APPOINTMENT OF DATE OF COMING INTO OPERATION
3. PERATURAN-PERATURAN SYARIKAT/COMPANIES REGULATIONS 2017
4. FREQUENTLY ASKED QUESTIONS
5. AKTA SYARIKAT 2016 / COMPANIES ACT 2016
6. SMALL SNAPSHOTS OF COMPANIES ACT 2016
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