The Companies Bill 2013- Revamping the Companies Act · PDF fileThe Companies Bill 2013-...

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The Companies Bill 2013- Revamping the Companies Act 1965

17 December 2013 - LEE SHIH & SHEBA GUMIS

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STRUCTURE OF THE TALK

Malaysian Law Firm of the Year 2008, 2009, 2010, 2011 & 2013, Who’s Who Legal Awards

1. History of the Companies Bill

2. Incorporation Related Matters

3. Changes to Filing Requirements

4. Share Capital

5. Company Secretaries

6. Meetings and Written Resolutions

7. Directors & Auditors

8. Changes to Capital Reduction

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HISTORY OF THE COMPANIES BILL


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READING MATERIAL


• The CLRC Consultative Document (CD) –

CD1 - 12

• CLRC Final Report

• Companies Bill 2013

www.leeshih.com

http://www.leeshih.com/

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INCORPORATED RELATED MATTERS


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INCORPORATED RELATED MATTERS


• Summary:

• Formation by one member

• Constitution

• Capacity to carry on business

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FORMATION OF COMPANY BY SINGLE MEMBER

7

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FORMATION BY ONE MEMBER


Pre

vio

usly

Formation of a company

required two or more members

(Section 14 (1) CA)

Exception: wholly owned subsidiary

Needs two resident directors (Section 122

(1) CA)

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Now

Formation of a

company only needs one person

Can have only one resident director

Clause 13 of Companies Bill”(“CB”)

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Re

aso

ns

Spurs entrepreneurship

Compatible with practice of nominee shareholding by certain companies

Similar to:

-Australia

-UK

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Benefits

Easier to form company

Management of company can be

carried out by single person

Promotes companies as

compared to sole proprietorships

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M&A REPLACED BY CONSTITUTION

12

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M&A replaced by Constitution


• M&A will be replaced by a constitution • Constitution optional (save for company limited by guarantee)

(Clauses 30 (1) and Clause 37 (1) of the CB)

• If company elects not to adopt a constitution, CB applies. (Clause 30 (3) of the CB)

• If company adopts constitution- rights, powers, duties and obligations will be as set out in the CB save insofar as they are modified by the constitution. (Clause 30 (2) of the CB)

• Constitution has no effect to the extent that it contravenes/is inconsistent with the CB (Clause 31 (2) of the CB)

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Contents

(Clause 34 of CB)

Objects of Company

Capacity, Rights, Powers,

Privileges

Matters contemplated by CB to be

included

Any other matters

company wishes to include

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• Constitution

• May be altered/amended by special resolution

(Clause 35(1) of CB)

• Court may also alter/amend on application by

director/member (Clause 36 of CB)

• Court to be satisfied that it is not practicable to

alter/amend constitution in accordance with CB

(Clause 36 of CB)

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• Previously:

• M&A altered by special resolution (Sections 28 and 31

of CA)

• M&A can be altered by Court (Section 181 of CA)

• On application by member/debenture holder

in the case of an oppression

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CAPACITY OF A COMPANY

17

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Capacity of a Company


Previously

• Only undertake activities within:

• objects of M&A; and

• 3rd Schedule of CA

Now

• Unlimited capacity to carry on/undertake business activity UNLESS constitution specifies objects

• Then capacity restricted to objects.

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• Reasons for unlimited capacity:

• Cloaks the company with full capacity of natural person

• CRLC of view previous ultra vires regime too rigid

• Similar to:

• UK

• Singapore

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Capacity of a Company- Doctrine of Constructive Notice


Previously

• Public deemed to have notice of M&A

• Reason: publicly available for inspection at registered office and CCM

Now

• Doctrine abolished- Clause 38 of CB

• Reason: company has full capacity as a natural person

• Company with constitution- person dealing not deemed to have constructive notice of objects/provisions in constitution

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21

Existing Companies

M&A deemed as constitution

Will have unlimited capacity

Currently unclear if existing company will be bound by objects of M&A

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22 Malaysian Law Firm of the Year 2008, 2009, 2010, 2011 & 2013, Who’s Who Legal Awards

QUESTIONS

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CHANGES TO FILING REQUIREMENTS

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Filing and Disclosure Requirements


• Summary:

• Filing Requirements made simpler

• Disclosure Requirements

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FILING REQUIREMENTS

25

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Filing Requirements- Annual Return


NO CHANGES

• Lodge statement certifying no changes

• Clause 67(6) of CB

CHANGES

• File Annual Return as usual


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Filing Requirements- Incorporation


Name Reservation

• Now optional

• 30 days name reservation upon lodging of application

• Previously 3 months

Application

• To include statement by person desiring to form a company

• Particulars under Clause 13 (3) of CB

No more Form 48A

• Replaced by statement confirming: • consent to act as

promoter/ appointment as director

• not disqualified to act as such

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Filing Requirements- Incorporation


Notice of Registration

• Conclusive evidence that CB requirements in relation to registration complied with

Certificate of Incorporation

• Optional

• Can be issued upon application and payment of prescribed fee.

Common Seal

• Optional

• Execution: • 2 authorised

officers, 1 of which is a director;

• For sole director- by that director in presence of witness

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DISCLOSURE

29

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Disclosure-Members


Previously New Position

Disclosure of Shares held

in Trust

Only applicable to

substantial shareholder

(Section 69O of CA)

Applicable to all

shareholders


Particulars Only updated together

with Form of Annual

Return

To notify within 30 days:

• Change of prescribed

particulars;

• Becoming/ceasing to

be a member

• Information that

shares are held in trust


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QUESTIONS

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SHARE CAPITAL

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Share Capital


• Summary:

• Concept of no par value shares

• Rights attached to shares

• Share issuance process

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NO PAR VALUE!

34

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Concept of No Par Value


Cla

use 7

2 (

1)

Concept of par value/ nominal value removed

Applicable to all shares

Any amount in share premium account and capital redemption

reserve becomes part of share capital

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• REASONS:

• Par value = archaic concept

• Not relevant in this day and age.

• Voting rights attached to number of shares and not value of shares.

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Effects

No concept of share premium

Can subdivide or consolidate shares easily

No adverse effect on shareholders’ voting rights


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Exis

ting C

om

panie

s

ALL shares converted into no par value

regime

Amount in share premium account to be used in accordance with Clause 73 (3) of CB

Time limit: 24 months from commencement of Section

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Use of credit in share premium account (Clause 73 (3))

Pay for premium on

redemption of debentures or

RPS

Write off expenses

Pay for unissued

bonus shares

Pay for balance unpaid on

issued shares

Pay dividends which are

satisfied by issue of shares

• All these events must have occurred prior to commencement of Clause 72 of CB.

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Sim

ilar

to

New Zealand

Australia

Singapore

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RIGHTS ATTACHED TO SHARES

41

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Rights Attached to Shares


1 s

ha

re e

qu

als

1 vote on poll

An equal share on dividends

An equal share in distribution of surplus assets of company

Clause 68(2) of CB

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Rights Attached to Shares


• Effect: Rights attached to shares are now clearer

• Qualification:

Constitution

Negate/alter/ add rights to

dividends

Permit issuance of

RPS

Confer preferential

rights to distribution of

income

Confer special, limited or

conditional voting rights/ not confer

voting rights

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SHARE ISSUANCE PROCESS

44

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Share Issuance Process


Previously

• Directors can allot shares only with approval of company in general meeting

New Position

• General prohibition to issue shares- Clause 74 (1)

• Otherwise require company approval

• Exceptions- Clause 74 (2)

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Share Issuance Process- Power of directors to issue shares


Exceptions (Clause 74 (2))

Allotment of shares under offer to shareholders in

proportion to shareholdings

Allotment of shares on bonus issue of shares to shareholders in

proportion to shareholdings

Allotment of shares to promoter

Where shares are issued as

consideration for acquisition of

shares/assets of company

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Co

mp

an

y a

pp

rova

l Can be general approval

Expires on:

- Next AGM;

- Within period when next AGM is required to be held

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• Issuance after expiry of approval:

• Shares allotted/ rights granted under an agreement made before expiry of approval

• Approval allowed company to make/grant an agreement/option/offer after expiry of approval


• Must lodge company approval to issue shares with Registrar - Clause 75(6) of CB

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• Lodgement of return of allotment of shares

• Retained.

• Time frame reduced to 14 days

• Clause 77 of CB

• Details of allotment of shares to be entered within 14 days in register of members • Previously CA silent


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QUESTIONS

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THANK YOU


SHEBA GUMIS

[email protected]

mailto:[email protected]

The Companies Bill 2013- Revamping the Companies Act · PDF fileThe Companies Bill 2013-...

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