Back in April, The Dewan Rakyat approved the Companies Bill 2015 with some changes made to govern how private entities operate in Malaysia. The bill replaces the present law (Act 125) that is 50 years old (enforced in 1966 and regulated by the Companies Commission of Malaysia (SSM)) with some notable changes that will make life easier for a lot of company owner(s)/director(s).
Some of the notable changes:
1. The bill will allow private companies to have a single director and a single shareholder.
Under the present law, every company requires a minimum of two shareholders at incorporation and also a minimum of two directors.
2. Annual general meetings for private companies will also be abolished under the new law.
Companies will have flexibility in their daily operations without compromising internal controls and corporate governance practice. This is intended to help the business community, especially in the small and medium industry, to be more competitive.
3. Written resolutions for private companies can be passed easier.
As companies don't have to conduct a physical AGM, private entities will also find it easier to pass written shareholder(s) resolutions. A majority of shareholders can sign off on the written resolution to pass it instead of the need to have a unanimous written resolution.
4. No more memorandum and Articles of Association.
The updated bill will also do away with the memorandum and articles of association so that processes in operating a company be smoother. A constitution can still be created if the company want one.
5. Solvency test requirements to save guard suppliers/creditors.
To protect 3rd parties doing business with companies and where their rights as creditors will not be prejudiced. Where there is a breach of the solvency test, the director(s) will face personal liabilities and may face criminal sanctions where applicable. The most serious of infractions can result in a 5 year imprisonment and RM3 million fine or both, if there is criminal conviction.
6. Corporate rescue mechanism to help financialy distressed companies.
The aim is to allow the company to restructure their debts so that the business can still be operated as usual and to avoid closing.
a) Voluntary Arrangement Process
- Quick and cleaper process with minimal court involvement in which the company's management will have its debt restructuring process assessed by an independent insolvency practitioner. 75% in value of the company's creditors will have to vote and if passed, it will binds all the creditors. Also, the company must receive fair value in connection with the giving of the assistance.
b) Judicial management
- The management of the company itself is ceded over to an independent insolvency practitioner (example: a court appointed judicial manager). The company will have a wide moratorium which gives it protection from legal proceedings. This would help greatly as the company and judicial manager can have breathing space to formulate a restructuring plan and presents it to the creditors for their approval.
Some of the other changes also include the resignation of an auditor will be allowed to take effect 21 days after a written notice has been deposited at the company’s office, regardless of whether a new auditor has been appointed.Additionally, the bill now grants the auditor the right to require directors of a PLC to convene a general meeting so that it can explain the circumstances of its resignation. The auditor can also require the company’s directors to circulate a written statement setting out those circumstances to the shareholders prior to that general meeting.
The bill, which was passed by the Dewan Rakyat on April 4, is to be submitted to the Dewan Negara for approval at its next sitting. Once it is approved, new regulations, rules and guidelines for the new Act will need to be drawn up. For the amendments full bill, you can view/download here.
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