Professional Documents
Culture Documents
ii. Partnership
- Exist when two or more persons pool their skills, labor, capital and other resources together
to form a business jointly
- Under Partnership Act 1961
- Applied English Court decision
iii. Company
- A business organization of two or more individuals
- Registered under Company Act 1965
3. What are the comparison between company, partnership and sole proprietorship?
Company Partnership Sole
Proprietorship
a. Definition Body of person 2 or more 1 man business
combined for person business
common object
b. Formation Under CA 1965 Easier, Easier &
no formalities, economical,
registration fee No agreement
is cheaper necessary,
Registration fee
is also cheaper
c. Registration With Registrar Registration of Registration of
of The Business Act Business Act
Company 1956 1956
d. Special Law Companies Law Partnership Act No special Act
1965 1961
e. Separate entity Separate legal No separate No separate
entity entity, property entity
of members is
property of the
partnership as
well
f. Agency Act of SH not A partner is an Not agent to his
bind the co agent of the business
partnership (S7)
and binding the
firm
g. Transferability of Transferable Cannot transfer May transfer to
shares but for private without consent somebody else
co it is under of other
restrictions in partners
sec 15.
h. Management Managed by Every partner Manages
BOD entitled to take himself and can
part of the firm employ
employees to
manage for
him.
i. Number of members Pub- no limit Min 2 Max 20 Single person
Priv.-max 50
j. Liability of members Limited Unlimited Unlimited
k. Rule, procedure and Subjected to No provision No provision
information to public regulations by subjected subjected,
RoC, Court & accounts are
Department of never subject to
Trade & public scrutiny
Industry
l. Death & bankruptcy Does not affect Dissolves the Automatically
the co. partnership dissolves the
except business
agreement to
that contrary
m. Dissolution Formal Informal-Agree. Informal-own
WU&L
CHAPTER 2: CLASSIFICATION OF THE COMPANY
1. What are the types of company according to liability of members?
a. Company limited by share
- S4(1)
Liability of members limited to the memorandum to the amount, unpaid shares respectively
held by them
- S18(1)(c)
Required to state in its memorandum of Association the amount of its share capital and its
division into shares of a fixed amount, limited liability of members also must be stated
- S22(3)
Requires limited company to have the word Berhad as part of and at the end of its name
b. Company limited by guarantee
- S4(1)
A Company formed on the principle of having the liability of its members limited by the
memorandum to respective amount that the members undertake to contribute to the property
of the company in the event of its being wound up.
c. Company limited by both share and guarantee
- S214(4)
A member of such a company is liable to pay the amount, if any unpaid on any shares held by
him or her, in addition to meeting her or his guaranteed undertaking to contribute a specified
amount in the event the co. is wound up
d. Unlimited company
- S4(1)
A company formed on the principle of having no limit placed on the liability of its members
2. What are the differences and characteristics of private and public companies?
i) Private Company
- S4(1)
o A company incorporated as such by virtue of S15 or its predecessors which have retained its
private status
o Any company converted into private under S26(1)
- S26
o Allows a public company with a share capital to be incorporated as a private company.
o This means company limited by guarantee cannot be incorporated as a private company as it
has no share capital
- S15
o Restrict the right to transfer its shares
o Limit to 50 members, joint holder of shares counted as one person and any employees who are
members or past employees who continue to remain member are not counted
o Prohibit any invitation or offer to public to subscribe for share in or debenture of the co
o Prohibit any invitation or offer to public to deposit money with the company for fixed periods
or payable at call, whether bearing or not interest
- Therefore if a company does not impose on itself the restrictions and prohibitions of S15, it
must be a public company
3. Which sections allows conversion of public to a private company and vice versa?
- S26(1)
A public company having a share capital may convert to a private company by lodging with
the registrar a copy of a special resolution
- S26(2)
A private company may, subject to anything contained in its memorandum or articles,
convert to a public company by lodging with the registrar
- S26(3)
On compliance by a company with subsection (1) or (2) and on the issue of a certificate of
incorporation of the company altered accordingly the company shall be a private company or
public company
- S26(4)
A conversion of a company pursuant to subsection (1) or (2) shall not affect the identity of
the co or any rights or obligations of the co or render defective any legal proceedings by or
against the co.
7. What are the statutory exceptions to the separate legal entity principle?
I. Section 121(2)(c) when the name of the co does not appear in instrument issued by behalf
of the company
- When signing or authorizing certain documents like promissory notes, bill of exchange,
checks etc in which the name of the company is not stated properly
- If the company fails to honor such documents then the person who signs will be liable.
II. Section 303 (3) and 304(2)- when debts contracted at the time the co has no ability of
repayment
- When debts are contracted when there is no reasonable or probable expectations of these
debts being paid
- When debts are contracted, the officer must really find about the ability of the company to
repay debts
- If he knew or has reasons to believe that the company is not in a position to repay debts, but
still entered into the contract, he will be personally liable for the debts, if the co goes into
liquidation.
V. Section 48(4) minimum subscription is not received within 4 months of the issue of
prospectus
VI. Section 140(1) of the Income Tax Act avoiding of payment of tax
8. What are the judicial exceptions to the separate legal entity principles?
- In Malaysia, the court will lift the corporate veil when the justice of the case so requires
- Malaysian courts have in the past lifted the corporate veil in several circumstances such as
fraud, agency, and where corporations within the group essentially one
- Group Of Companies
o In certain situation, a group of companies may be treated as a single corporate entity, although
the general rule is that each company within a group is distinct entity. This is due to
commercial realities.
o Case: Hotel Jaya Puri Sdn Bhd V National Union Bar & Restaurant Workers
o Jaya Puri Chinese Garden Restaurant Sdn Bhd was closed down and workers were retrenched.
This company was wholly owned subsidiary of Hotel Jaya Puri Bhd whose premises the
restaurant was situated. The Union claimed that the actual employer was the hotel and the
hotel was still in business. Therefore the workers could not have been said to have being
retrenched on the closure of a business.The industrial court allowed this and made order of
compensation against the hotel. The hotel appeal to the High Court.
o Held: Although technically the restaurant and the hotel were separate legal entities, in reality,
the companies were functionally as one.
o Technically, a person working for the restaurant was an employee of the restaurant, the reality
was that the workers were employees of the hotel.
o The court ignored the separate identities of the restaurant and the Hotel and treated them as
one single entity.
CHAPTER 4: MOA & AOA
1. What are two types of companys constitutions?
a. MOA
- It sets out the essential details of the companys existence and governs the fundamental basis
on which the company operates.
- It defines the essential components of the structure of the company, partly for the
information of those who do business with it
- It concerns with the relationship between the company and outsider
- It sets out liability of its members and also defines objects and powers of the company
b. AOA
- It governs day-to-day administration of the company affairs.
- It is a code of internal regulations applicable to the company and its members in their
dealing with each other
b. First Director
- S122(3)-MOA also contained names of the first directors of the company
- S16(7)- The Registrar must not register a MOA/AOA unless it contain the names of at least
2 persons who are to be the first directors of the company
c. First Secretary
- S139(1A) the first secretary must also be named in either MOA/AOA
- However, if the first secretary is not named, the Act does not expressly provide that the
Registrar should not register the MOA/AOA
- S11(8)- It is suggested that the Registrar may request that the MOA/AOA be appropriately
amended and resubmitted
14.What are the powers of company under Section 19 of Company Act 1965?
a. Power to make donations for patriotic or for charitable purposes.
b. Power to transact any lawful business in aid of Malaysia in the prosecution of war
c. In the case of company with Berhad, the powers mentioned in Third Schedules unless
expressly excluded by MOA or AOA
d. In the case of company without Berhad, Third Schedule Power shall not apply unless
expressly included by MOA or AOA
c. Section 20
- In Malaysia, ultra vires doctrine has been modified by this section
- The effect is that if certain transaction is valid, the fact that the company did not have the
capacity to enter into it is immaterial
- The co. lack of capacity may only be relied in 3 situations:
a. Proceedings by any member or holder of floating charge to restrain the co from doing any
act, conveyance or transfer of property to or by the co.
b. Proceedings by the co. or member of the company against the present or former officer of the
co. and
c. Any petition by the minister to wind up the company
10. What duties included under duties of still, care and diligence?
- The rule is that the director not have to possess any skill for the job and the fact that he is
unskillful is not a breach of contract
- The director is under duty to exercise the power using the level of skill he has
- If he uses less than the level of skill that he has, he is in breach of this duty
- Case: RE City Equitable Fire Insurance Co Ltd
A director need not exhibit in the performance of his duties a greater degree than may be
reasonably be expected from a person of his knowledge and experience.
- A director owes duty of care to the company of which he is auditor and the standard is that
of reasonable care in that he must take care in the affairs of the company as he would
reasonably take in his own affairs
11. What sections related to duty of skill, care and diligence new amendments?
a. Section 132(1A)
b. Section 132(1B)
c. Section 132(1C)
d. Section 132(1D)
e. Section 132(1F)
f. Section 132(1G)
b. Chairman
- S147(1)-Any member present at the meeting may be elected to chair the meeting
- Chairman duties
a. to direct the meeting
b. preserve order
c. ensure that proceeding are conducted at proper manner
c. Voting
- The power to vote is not a fiduciary power and a shareholder owes no duty to anybody as to
how he or she will exercise their vote.
- Table A art 54 states that by providing a show of hands each member or representative of a
member has one vote.
- Case: Bin Hee Heng V Management Corp Strata Title No 647 was held that the term show
of hands included a voice vote
- S146(1)-Any provision in the articles excluding the rights is void
d. Proxies
- It is a person authorized to vote on behalf of the appointing member. It also describes the
instrument of appointment.
- S149(1)- The proxy need not be a member
- S149(2)- A member are entitled to appoint one or two proxies who need not be members
- S149(1)(a) A proxy has the same right to speak at a meeting as the appointing member,
but can only vote on poll, unless the articles allow the proxy to vote on show of hands
- Case: Ansett v Butler Air Transport Ltd
e. Motions
- It is a proposal which is being put forward at a meeting for discussion before it is formally
accepted, passed or adopted
- It is moved by a mover or proposer and unless it is a formal motion does not require a
seconder unless the Articles provide so.
- It is common for the Chairman to ask for a seconder to gauge whether or not there is support
for the motion
- If there is no seconder, it may imply that there is no support for the motion and the chairman
usually proceeds to the next business
- Manner in which motion may be adopted or rejected is by way of vote by common method
such as (i) by voice, (ii) by show of hands, (iii) by poll and (iv) by ballot
f. Resolution
- It is a motion or proposal that has been accepted or passed by the necessary majority at a
meeting duly convened and held
- Several aspects to consider to pass or adopt: (PC MPP)
a. Content and duration of any notice required to be given
b. Majority required for adopting the motion as a resolution
c. Persons affected by the resolution
d. Proper person having been in the chair
e. Presence of a quorum
- Ordinary resolution passed by a simple majority of those present and voting
- Special resolution are resolutions passed at meetings requiring
a. written notice at least 21 days
b. approval of of such members of the company present at the meeting
g. Minutes
- Minutes are records of proceedings and resolutions passed at the meetings
- The minutes that have been signed and entered in the record are conclusive evidence that a
meeting has been duly held and convened that all appointments of officers shall be deemed to
be valid and that all proceedings were duly conducted
- The minutes book shall be kept at the registered office and any member could inspect them
without charge.
CHAPTER 8: SHARES
1. What is share?
- S4(1) of CA 1965
Shares in the share capital of a corporation and includes stock except where a distinction
between stock and shares is expressed or implied
b. Preference Shares
- S4 Of CA1965
It is a share which does not entitle the holder thereof to vote at general meeting or to
participate beyond a specified amount in any distributions, whether by way of dividend or
redemption in a winding up or otherwise
- Also known as preferred shares
- Typically a higher ranking share than ordinary share
- May or may not carry voting right
- Will paid out in assets before the common stockholders after debt holders in winding up
c. Redeemable shares
- Are those shares that carry a right by the company to buyback the shares
7. What section described about the power of the company to alter its share capital?
- S62 of CA 1965
A company may alter its authorized capital in general meeting by the creation of new shares
or consolidated or divide all or any of its shares capital into shares of larger amount
- S62(1)(C) of CA 1965
Fully paid up shares may also be converted into stock. Stock unlike shares, it does not exist
as discrete unit but as fund
- S99(1) of CA 1965
Shares must be numbered but stock need not be
- S105(2) of CA 1965
The company and every officers in default commit an offence, it may also result in the right
to deny registration of to the transferee. (Case RE Swale Dale Cleaners Ltd (1968))
- Case Smith V Fawcetts
Smiths father owned 400 units of shares died in an event. Smith want to sought to be
registered as member of the company as an executor to his father assets. The D refused to
register except Smith transfer unless 200 units of the shares sold to certain director at a stated
price, in which case they would register a transfer of the remaining shares.
Held: The D only act bona fide on the interest of the company as seen by the court. The
applicant failed to show that D act mala fide or bad faith. The D has right to refuse new
membership.
- Charle Fort V Amanda
- In this case the director refused to register new member who oppose the company policy and
interest.
- Held: The D had properly exercised his discretion which is for the best interest of the
company. It is not wise to have such member who oppose the policy of the company.
- S181 enables members to apply for a remedy if failures to register constitute oppression
or conduct which is unfairly discriminatory against or otherwise prejudicial to the members.
May now enables members to obtain a remedy in cases such as Re Smith V Fawcett.
- Case: Gan Sin Tuan V Chew Kian Kor
In this case the Court of Appeal of Malaya held that a sale of shares without complying with
AOA restricting the right of transfer was void.
CHAPTER 9: DEBENTURES
1. What debenture is as defined under section 4 of CO Act?
- There is no precise legal meaning attached to the word debenture
- Chitty J said in Levy v Abercorris Slate & Slab Co:
.a debenture means a document which either creates a debt or acknowledges it, and any
document which fulfills either of those conditions is a debenture.
- S4(1)- The CA definition of debenture is singularly unhelpful debenture includes any
debenture stock, bonds, notes and any other securities of a corporation, whether constituting a
charge
4. What is charge?
- There are two types of charges:
a. Specific or fixed charge, or
It is one that attachs to a specified asset.
b. Floating charge
It is a charge that does not attach to any fixed asset, until it is crystallized.
- S108(1)&(2) Of CA 1965
Where a charge is created it need to be registered within 30 days after the date of creation
without prejudice to any contract or obligation for repayment if not it will become void
against liquidator and creditor of the company and when a charge becomes void the money
secured thereby shall immediately become payable.
- S109(1) Of CA 1965
The effect of failure to register the charge is that the charge, but no debt secured, becomes
void against the liquidator or any creditor of the company, the company is liable to a default
fine.
- S114 Of CA 1965
The court may sanction registration after the expiration of the 30days if an acceptable
explanation (the grounds are to be specified) is given.
It will fact do so even where the explanation is mere oversight but not where the omission
was a deliberate act of concealment
CHAPTER 10: WINDING UP
1. What is the definition of winding up?
- There are two types of winding up:
a. Compulsory Winding Up
It is a winding up by an order of the court which is initiated by the presentation of a petition
by a person who is entitled to do so.
b. Voluntary Winding
A voluntary winding up should commence where a provisional liquidator has been appointed
before the resolution for voluntary winding up was passed and in any other case, at the time
of passion of the resolution for voluntary winding up. S255(6)
3. What are two things that must be shown before the court make a winding up order on a
petition?
Two things to be shown before the court will make a winding up order on a petition are:
a. That the petitioner had the right to present the petition
b. That one of the grounds set out in the Acts as justifying a winding up has been made out.
5. Who are the parties who can apply for winding up of an company?
Section 27(1) of CA 1965 provides that the following persons may petition for the winding
up of a company:
a. The company itself
b. Any creditor, including a contingent or prospective creditor of the company
c. A contributor or any person who is the personal representative of a deceased contributory or
the trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory.
d. The liquidator
e. The minister pursuant to section 205 or on the ground specified in section 218(1)(d)
f. Bank Negara Malaysia
g. The registrar on the grounds specified in section 218(1)(m) or (n)
7. What are three types of application that commonly used for winding up?
a. Application by the company
- Section 217(1)(a)
Allows the company to apply to have itself compulsorily wound up. The general meeting is
the appropriate organ to determine that the company be wound up.
- Application by a company for its compulsory winding up is quite rare. Usually, if the
members wish to liquidate their company, they will do so by a voluntary winding up. A
voluntary winding up does not involve a court hearing and so is cheaper.
- On the other hand, a voluntary winding up can only be initiated by a special resolution
which requires 3 quarters majority, whereas under S217(1)(a), a compulsory winding up only
requires an ordinary resolution.
- In some circumstances, the members may desire to place the company into liquidation as
quickly as possible.
- If this is the case, a compulsory winding up may be preferred over a members winding up,
because meetings at which ordinary resolutions are to be proposed require less notice than
meetings at which it is proposed to pass special resolution