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Issues 11



Majlis Berbuka Puasa
@ Hilton Kuala Lumpur


Companies Bill 2013 - Flexing way to do business?

With the Government’s effort to encourage the development of Small Medium Enterprises, the proposed amendment to the Companies Act seems to move into that direction. The Companies Bill 2013 flexes some rigid constraints in the existing provisions in the Companies Act 1965 although at the same time tightens some existing flexibility.

One of the most important proposed amendment is the relaxation of the mandatory requirement of at least two persons to form a company and two directors to ONLY ONE! It has always been an open secret the challenge to find the right person to build a business together. A lot need to be considered especially to find trustworthy business associates when money is the centre of the game! If the proposed amendment is passed, it will be easier for anyone to form a company similar to that of sole proprietorship albeit certain formalities required under the Companies Act. It is more so especially the Bill proposes new companies to dispense with common seal. It will open to the ONLY DIRECTOR to make any decisions and enter into written contract as long as signed by with another officer and attested by a witness. Imagine you will be in full control of the business as you wish it grow in your own way.

Another proposal in the Bill that only goes to prove that company is moving into the realm of full capacity of natural person is the proposed dispense of constructive notice. It seems to suggest that whatever dealings entered into with the company will bind regardless of company’s object clause?

It is interesting to see what limits will there be for company in view of the proposed amendment. Upon registration, a mere notice of registration is a conclusive evidence that the company has been registered. Let go of a certificate of incorporation unless you are happy to pay for it to paste on your office wall!
Business may kick off as soon as it is registered and interestingly Clause 20 of the Bill provides that a company has full capacity to enter into any business or transactions as long as lawful.

It is a departure from the existing provisions in the Companies Act for company to limit its capacity based on its object clause. This proposal seeks to further cloth the company with the full capacity of a natural person.

Besides the above proposal which seeks more flexibility in managing a company, efforts are also underway to make company more transparent. Clause 56 of the Bill seeks to enable the company to request any member to disclose whether the shares held under his name is held in his capacity as beneficial owner or as trustee. The company may also request the member to provide particulars sufficient to identify the beneficial owner and nature of his interest in the shares. Although similar present provision in Section 69 of the Companies Act, the proposed amendment will be wider in scope as the new requirement applies to all members as opposed to substantial shareholders only.

Another relaxation introduce in the Bill is on the filing of Annual Return containing among other general information of company’s ownership, address and types of business. Presently, it is mandatory to file Annual Return Forms for this purpose whether or not there is changes in the company. The Bill 2013 however, seeks to require a mere statement to certify if there is no changes from the previous filing of Annual Return. The Bill 2013 no doubt clearly makes it less burdensome so as to encourage creation of small and medium enterprises..

Note :  We at KIQ have from time to time provided consultation on doing business in Malaysia by local as well as foreign clienteles.