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19 May, 2017
The Companies Act 2016 and Companies Regulations 2017 (“new Act”) have mostly come into force as of 31 January 2017. The new Act aims to reduce the cost of doing business in Malaysia while increasing protection for stakeholders of a company. As part of this objective, the incorporation process for Malaysian companies has been simplified allowing for significant savings in cost and time.
Key Snapshots
- Sole member / director permitted as long as he/she is a local resident;
- Company constitution (previously known as the M&A) is optional;
- Multiple incorporation forms are replaced with a ‘superform’ online;
- Processing time is fast-tracked – notice of registration is conclusive evidence;
- Shares are issued without par value, and at any price;
- Appointment of company secretary is still mandatory but can be postponed to 30 days after incorporation;
- Certain categories of companies to be exempted from having to appoint auditor.
Single member / director
Under the new Act, a single member / shareholder can also be the sole director of a private company.
A foreigner can form a private company as the sole member provided he/she:
- fulfils the requirement under section 196(4) of the new Act that he/she must ordinarily reside in Malaysia by having a principal place of residence in Malaysia; and
- is able to declare under oath that he/she is not a bankrupt, and has not been convicted for any of the offences prescribed under the new Act.
Optional constitution
A company (other than a company limited by guarantee) can now choose to operate without any constitution. In that case, the rights, powers, duties and obligations of the company, its director(s) and member(s) as set out the new Act automatically applies.
If a company chooses to have a constitution, this will consist of a single document. What was previously the ‘objects’ of a company limited by shares authorizing it to carry on certain businesses or activities is now an optional feature in a constitution. The constitution may be adopted by passing a special resolution post-registration and lodging it with the Companies Commission of Malaysia (“SSM”) within 30 days of adoption. However, anything in a constitution that contravenes or is inconsistent with the provisions of the new Act will be invalid.
Online submission, fee payments and fast-track processing
The new ‘superform’ accessible through SSM’s online MyCoID portal (https://mycoid2016.ssm.com.my/) is an electronic template which will replace the various forms previously required for incorporation (i.e. Form 6, Form 48A and M&A under the previous Companies Act 1965).
Section 14 of the new Act contains provisions regarding the incorporation process. Among other things, an application will be required to include the following information:
- name and proposed registered address of the company;
- whether the company is private or public;
- the nature of business of the company (notwithstanding, a company will not be limited to only this business);
- names, nationality and place of residence of the member(s), director(s) and secretary;
- in the case of a company limited by shares, the class(es) and number of shares taken by members;
- in the case of a company limited by guarantee, the amount up to which members undertake to contribute to the assets of the company in the event it is wound up.
Besides incorporation submissions, the MyCoID portal also provides services in relation to pre-incorporation steps such as searching for and reserving a company name.
The MyCoID service is expected to be available 7 days a week, 24 hours a day. For documents submitted between 12am to 12 noon on a business day, a user should get a notification and approval by 5pm that same day (provided all the required information has been completed correctly). For documents submitted from 12 noon to 11.59pm, the user should get a notification and approval by the next business day.
Payment of fees associated with incorporation can be made online at the time of submission. As set out on SSM’s MyCoID webpage, fees for:
- searching for an available company name are RM50.00 per name.
- applications to incorporate a company are RM1,000.00.
Once an application is approved, a notice of approval and registration will be sent to a user’s email. This ‘notice of registration’ will be conclusive evidence of incorporation, and there will not be a ‘certificate of incorporation’ issued unless this is applied for separately. A person who wishes to incorporate a company through MyCoID should note, however, that a one-time off verification as an Individual User or Professional User must be done personally over the nearest SSM counter, so this may not be practical for persons who are based overseas.
No par value regime
As of 31 January 2017, all shares of a company issued before or from that date will have no par value. Previously, under the Companies Act 1965, a company had to state its authorised share capital and the nominal/par (i.e. minimum) value for each share, and the total number of shares issued by the company must not exceed its authorised share capital.
Under the new Act:
- any issued shares will no longer be tied with the concept of a nominal/par value for each share;
- the company will no longer have to state its authorised share capital;
- a company may issue shares at any price depending on the factors affecting the current circumstances and needs of the company.
This change recognises that the actual value of the shares depends on the current situation faced by the company. The issued price of shares will be determined by the current value of the company, factors affecting its business and the capital the company is seeking to raise. As such, the concept of a nominal/par value of shares does not, on its own, protect shareholders. In determining share pricing, the board of directors must consider all issues and act in the best interest of the company.
In line with the no par value regime, the concept of shares issued at a discount, shares issued at a premium, and a share premium account have become redundant.
Company secretary’s appointment post incorporation
A company must have at least 1 secretary who shall be a natural person, 18 years of age and above, and a citizen / permanent resident of Malaysia, who shall ordinarily reside in Malaysia, and must be a member of a professional body set out in the Fourth Schedule or is duly licensed by the SSM.
A company secretary does not have to be appointed at incorporation, but has to be appointed within 30 days of the date of incorporation. A company must notify the Companies Registrar within 14 days of the date of appointment. There is no fee chargeable for the appointment of a first secretary but in the event of late notice of appointment, there will be a late lodgement fee.
Future exemption from appointing auditor
Under section 255(3) of the new Act, the Companies Registrar has the power to exempt certain categories of private companies from having to appoint an auditor for a financial year. However, the Registrar has yet to make use of this power and so for now, the audit requirement is still mandatory for all companies.
Also, the directors(s) of the company must prepare audited financial statements within 18 months of the date of incorporation and subsequently within 6 months of each financial year end.
Note: This article was written by Gwendoline Choy and was first published on Asia Law Network.
For further information, please contact:
Donovan Cheah, Partner, Donovan & Ho
donovan@dnh.com.my
