COMPANY LAW

2. 2
COMPANY LAW IN MALAYSIA
The Companies Act 1965 and the Companies
regulations 1966 form the core in the regulation of
companies in Malaysia.
The Act is modeled on the English Companies Act
1948 and the Australian Uniform Companies Act
1961.

3. MEANING AND DEFINITION OF A COMPANY
Sec 3 (1) of the companies act 1965 defines that “ a company means a
company formed and registered under this act or an existing company ”
A company refers to an “ association of many persons who contribute money
or moneys worth to a common stock and employ it in some trade or business
and who share the profit and loss arising there from ”
- Lord Justice Lindlay
Company is “ an incorporated association which is an artificial person created
by law, having separate legal entity with a perpetual succession and common
seal ”
- Henry

4. TYPE OF COMPANIES
Type of
companies
Unlimited
liability
Ex: Sole
proprietor and
partnership
Limited
liability
Private limited
company
Public limited
company

5. Types of Company
 Public quoted
• Share price quoted on a recognised stock exchange
• Must be limited by shares
 Public unquoted
• Limited by shares but unquoted

6. Types of Company
 Private-unlimited
 Private-limited by shares
 Private –limited by guarantee and having a share capital
 Private- limited by guarantee but no share capital

7. Public Companies
 A company is a public company if it satisfies the definition
 It is a company which is limited by shares
 Has at least two members
 The constitution states in is a public
 The name end with the words ‘public limited company’ or ‘plc’

8. Public Companies
 It has an allotted share capital not less than than RM
 …of which not less than 25% is credited as paid of…
 Any company which does not satisfy the definition is a private
company
 Although a public company exist from the date on its certificate of
incorporation, it cannot commence to trade until it acquires a trading
certificate.

9. Trading Certificates
 Public company cannot commence to trade until they have received
a trading certificate
 This is issued by a registrar following an application made by the
company
 The application states:
• That the nominal value of allotted shares is not less than RM
• The preliminary / formation expenses
• And to whom it has been paid

10. Trading Certificates
 The application must be accompanied by a statement of compliance
 If a public company fail to obtain a trading certificate within 12
months of in corporation the court on application may grant a
liquidation order against the company.

11. INCORPORATION AND ITS EFFECT
• What is certificate of incorporation (COI)?
A certificate that should be issued where the pre-registration
procedures have been complied with (Sec 16(4))
• What does COI serves?
It serve as conclusive evidence that a company has been duly
registered from the date mentioned in the certificate (Sec 361)

12. INCORPORATION AND ITS EFFECT
• What need to be stated in the COI?
a.Type of company registered
b Date of registration
• What is the effect of the company after registration?
- The law shall regard the company to be of a body corporate (Sec 16(5))
- The registered company is now a corporate personality
A fundamental concepts of corporate personality is that the corp. is in law a
separate legal entity distinct from its members and controllers

13. • The company is a legal person [artificial] having a distinct entity from
its members
• Cases:
Salamon v Salamon
Lee v Lee’s Air Farming
Hew Sook Ying v Hiw Tin Hee @ Hew Hee
People’s Insurance Co (M) Bhd
(1) Separate Legal Entity

14. • Facts: S owned a sole proprietorship. Later incorporated a company.
Business was transferred to the company. Shares were given to wife
and sons. Subsequently the company went into liquidation. There was
not enough assets to pay the unsecured creditors, thus the liquidator
sued Salamon.
Salamon v Salamon

15. • Trial court and COA:
• S was liable. Agency principle applied
• HOL : Incorporation of a company created a separate person.
• The company was not an agent or trustees for the members.
Members were not liable in respect of the company’s obligation.
Salamon v Salamon

16. • A company can own property in its own name
• Cases:
Macaura v Northen Assurance Co Ltd
Abdul Aziz b. Atan
(2) Ability to own property

17. • F: M was an owner of a land which produced timber. Sold all the
timber to a company incorporated by him. He took up an Insurance
for the timber in his own name. Later the timber was destroyed by
fire and Macaura claimed under the insurance policy.
• HOL: M had no insurable interest in the timber-belonged to the
company, not M.
Macaura v Northen Assurance

18. • Liability of a company is unlimited
• Liability of members is limited, depends to the type of company i.e.
limited by shares or limited by guarantee.
• Cases
• Re Application By Yee Yut Ee
• Salamon v Salamon
(3) Ability to incur its own liability

19. • F: Yee was a secretary of a company. The company retrenched its staff
and matters concerning retrenchment benefit was referred to
Industrial Arbitration Court, which had ordered an award.
Meanwhile, Yee was appointed as a director and when the company
failed to comply with the award, an action was made against Yee.
Re Application By Yee Yut Ee

20. • A company can sue and be sued in its own name
• Any wrong done to the company, only the company
can take action
(4) Ability to sue and be sued

21. • F: Shareholders of a company brought action against the company’s
directors-alleging misapplication of the company’s property.
• H: The injury was an injury to the company. In law, the company and
its members are separate entities. Thus, it was the company who
should take action/sue.
Foss v Harbottle

22. • A company shall exist until properly wound up or struck off from the
register.
• It’ s life span does not depend on the life of its members.
Cases:
• Real Neol Tedman
• Abd Aziz Atan
(5) Perpetual succession

23. • F: H & W were the only shareholders and directors of company-died.
Left an infant child.
• H: The personal representative of the deceased members should
appoint directors, so that the new directors could assent the transfer
of the shares to the beneficiary.
Re Neol Tedman Holdings Pty Ltd

24. Law Applied In Corporate
Veil Lifting Circumstances
 Misuse of Company Name.
 Section 121(2)(c)
 Signs or issues on its behalf on certain documents
 Wrongful Trading.
 Section 303(3) and 304(2)
 The company has become insolvent but still continues to contract
debts.
 Fraudulent Trading.
 Section 304(1)
 Company is carried for any fraudulent purposes
 Payment Of Dividends Out Of Capital.
 Section 365(2)
 Dividens are paid even though there are no available profits out of
which to pay.

25. Formation of a Company
Incorporation
Documents to be filed with the Registrar
1. Memorandum of Association
2. Articles of Association
3. Agreement if any for appointment of M.D
4. Statement of nominal capital
5. Address of the Registered Office
6. List of directors and sign
7. Undertaking in writing to take and pay for his qualification shares
8. Declaration

26. Memorandum of Association-MOA
It is document which sets out the constitution of the company and is the foundation of the
company. It contains the fundamental conditions upon which the company is allowed to be
incorporated
Various Clauses in MOA-
1. Name clause
2. Registered office clause
3. Objects clause
4. Liability clause
5. Capital clause

27. Alteration of MOA
1. Change of name
2. Change of Registered office
3. Change of Liability clause
4. Change in Capital clause
5. Change in Objects clause substantive limits
procedural limits
DOCTRINE OF ULTRA VIRES

28. Articles of Association-AOA
AOA refers to the rules and regulations of a company framed for the purpose of internal
management of its affairs.The AOA of a company are sub-ordinate to and are controlled by
the MOA.
Companies which must have their own articles-
1. Private companies limited by shares
2. Companies limited by guarantee
3. Unlimited companies

29. Contents of AOA
1. Number and value of shares
2. Allotment of shares
3. Calls on shares
4. Lien on shares
5. Transfer and transmission of
shares
6. Forfeiture of shares
7. Alteration of capital
8. Share certificates
9. Conversion of shares into stock
10. Voting rights and proxies
11. Meetings
12. Directors and their appointment
13. Borrowing powers
14. Dividends and reserves
15. Accounts and audit
16. Winding up

30. MOA & AOA distinguished
1. MOA is a charter of the company defines scope and activities
AOA regulates internal mgt
2. MOA defines relation to the outside world
AOA deals with rights of the members
3. MOA is the supreme document of the company
AOA is the subordinate to the memorandum
4. MOA is necessary for all the companies
AOA is not required for the company limited by shares
5. MOA cannot be altered except in the manner and extent provided by the Act
AOA can be altered through a special resolution