What is a company law and how useful is a company as a business structure

Type of business organization Sources of Law Classification of companies How to form a company Important terminologies

An Introduction to Company Law

(i) Sole proprietor To earn extra income, Pak Din decided to sell nasi lemak at a Pasar Malam three times a week. Pak Din spend about RM40-50 for the preparation of nasi lemak. He managed to sell about 80-100 packs per night.

Type of Business Organization

(ii) PartnershipPak Din’s cousin Pak Abu suggested that he should open a stall at the food court nearby. Pak Abu offered himself to be Pak Din’s partner, he contributed some money to rent the place and ran the stall DELI NASI LEMAK together. At the end of the month they share the profit.

(iii) CompanyAfter two years, Pak Din & Pak Abu decided to form a company ‘Deli Nasi Lemak Sdn Bhd’. Both of them have 30 % shares, 15 % shares each to their sons Amir & Aidit and 10 % to their friend Pak Ali. Pak Din, Pak Abu and Pak Ali were also directors of the company.

An artificial person created by the law.

To hold property and carry on business or other activity as an entity separate from the participants (investors, managers) in that business or activity.

What is company

Allowing a large number of people to pool their resources.

Limited liability – if a company is unable to pay its debt, then those participants who have invested money in the company are not liable to pay more than what they have agreed to pay.

Company is a separate legal entity.

How useful is a company as a business structure

Company Act 1965 (main statute) It is based on: Australia Uniform Co. Legislation 1961 UK Companies Regulation 1966 Case Laws Reception of English common law and

statutes- section 3 & 5 of the Civil Law Act1956

Sources of Law

Security Commission Act 1993 Capital Market and Services Act 2007 Bursa Malaysia Listing Requirements Code of Takeover & Mergers 2010 Code of Corporate Governance 2000

(regulates corporate transaction in public companies)

Other relevant statutes and codes

Companies Commission of Malaysia (Provide regulatory framework for corporate

& business affairs in Malaysia) Securities Commission Bursa Malaysia

Regulatory Bodies

Public Company Any member from

public Can be listed (sec

4 (1)) Can change from

private to public or public to private (sec 26)

Private Company Limited to certain

people Sec 4 (1), 15 (1) Has the word ‘Sdn”

Classification of Companies

Limited Company Limited by shares

or limited by guarantee

Has the word ‘Bhd’

Unlimited company Liability of member

is unlimited Very rare May convert to

limited

In relation to liabilities of members

Limited by shares Most common Liability of

members is limited to the amount of unpaid shares hold by them.

Limited by guarantee

Non-trading co. No share capital Non-profit

activities No shareholders Liability arise only

upon winding up

In relation to liabilities of members

Parent/Holding Company and Subsidiary Company

Sec 5: Control the composition of BOD Control more than half of voting power Control more than half issued share capital Refer to Secs 5A, 5B, 6.

Related Companies

Foreign Companies (secs 329-340)Formed outside MalaysiaHead office not in Malaysia

Investment Companies (secs 319-328)Declared by the minister as investment companyEngage in making investment in

marketable securities

Sec 14 (1)-2 or more persons may form a company.

Company’s name-lodge to the ROC Sec 22 (1)-must not be undesirable,

identical, related to state or country Reservation of name- 3 months, sec 22 (7) Submit the relevant documents-MOA, AOA,

other statutory declarations. Within 1 week the process could be completed-ROC issue certificate of incorporation

How to form a company?

Sec 14 (1)-2 or more persons may form a company.

Company’s name-lodge to the ROC Sec 22 (1)-must not be undesirable,

identical, related to state or country Reservation of name- 3 months, sec 22 (7) Submit the relevant documents-MOA, AOA,

other statutory declarations. Within 1 week the process could be completed-ROC issue certificate of incorporation

How to form a company?

Company and Corporation Share Equity capital Debt capital Member of company

Important terminologies

Company : a company incorporated pursuant to the Act or pursuant to any corresponding previous enactment

Corporation: Any body corporate formed and incorporated or existing within Malaysia or outside Malaysia and includes any foreign company

Important terminologies cont,

Share : An interest of a shareholder in the company measured by a sum of money for the purpose of liability in the first place and of interest in the second, but also consisting of mutual covenants entered into by all the shareholders (Borland’s Trustee v Steel Bros & Co Ltd)

Equity Capital: Capital contribute d by the members of the company.

Important terminologies cont,

A member of a company: People who have invested money with the company in the expectation that they will receive a return on their money if the company is successful.

Debt capital : Method of financing business e.g, loan, credit facilities etc.

Important terminologies cont,

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