Consultation on Subsidiary Legislation of the Companies Act 2016November 2016
by , Loong Wai Teng
The Companies Commission of Malaysia (“CCM”) had recently issued drafts in relation to subsidiary legislations to complement the implementation of the Companies Act 2016 (“Act”) for public consultation.
A summary of the drafts for consultation are set out below:
Draft Companies Regulations 2017
The draft Companies Regulations 2017 are brief regulations which cover lodgments of documents under the Act, affidavit and statutory declaration on behalf of a company and practicing certificate of a secretary.
Unlike the Companies Regulation 1966, the draft Companies Regulations 2017 do not set out the prescribed forms required to be lodged under the Act. Instead, the draft Companies Regulations 2017 provide that any lodgment under the Act must be made in the forms provided by the Registrar in the electronic filing system. Lodgment must be done by a secretary of the company and accompanied by a prescribed fee. A company will be subject to penalties for failure to deliver documents to the Registrar within the prescribed time subject to the exceptions provided in the draft Companies Regulations 2017.
Under the draft Companies Regulations 2017, a practicing certificate issued by the Registrar to a company secretary under the Act will be valid for one year. The practicing certificate will be automatically revoked by the Registrar when a secretary has been removed from the register of secretaries kept by the Registrar or if it was not renewed.
Draft Guidelines on Company Names
The CCM proposes for the draft Guidelines on Company Names to apply to all applications for registration of name for incorporation of a company or change of name of a company. A confirmation of availability of the proposed name from the Registrar must first be obtained for the purposes of incorporating a company or changing a name of a company. A company name will not be available if the name is undesirable or unacceptable, identical to an existing business entities or a name reserved under the registers kept by the Registrar or a name of a kind that the Minister of the Ministry of Trade, Cooperatives and Consumerism (“Minister”) has directed not to accept for registration. An applicant or promoter of a company who is aggrieved with the decision of the Registrar in confirming the availability of a name, may appeal against such decision to the Minister by stating the grounds and justification for the use of name together with an application fee of RM300.
Draft Guidelines on Company Limited by Guarantee
A company limited by guarantee (“CLBG”) is a public company incorporated with the principle liability of its members limited by the constitution to such amount as the members undertake to contribute to the assets of the CLBG if the CLBG is wound up. A CLBG may only be formed with the object of providing recreation or amusement or promoting commerce, industry, science, religion, charity, pension or superannuation schemes or any other objects useful for the community or country such as environment, health, education, research, social or sports. No other type of company may be incorporated for such purposes.
Under the draft Guidelines on CLBG, a CLBG:
- which had been incorporated for three years and have a fund of RM1 million cash may apply to the Minister for a licence to omit the word “Berhad” or “Bhd” from its name.
- will be authorised to give a fixed salary and allowance to the directors which must be set out in the constitution.
- will be required to submit a segmental reporting together with its annual return.
- will require the prior approval of the Registrar for, amongst others, the following:
(a) Appointment of a director of a CLBG.
(b) Amendment to the constitution of a CLBG.
(c) Owning land and disposing of property.
(d) Using the profits and other income of the company for purposes other than as stated in the objects of the company.
(e) Establishing any subsidiaries or holding shares in other companies in excess of 49%.
(f) Getting all cash which has been pledged by potential contributors later than six (6) months after it is established.
Draft Practice Directive 1/2017 – Criteria for Audit Exemption for Private Companies
Pursuant to the draft Practice Directive, the Registrar exempts certain private companies which fall within the categories of “dormant companies”, “small companies” or “exempt private companies” from having to appoint an auditor for each financial year to audit their accounts pursuant to section 267(1) of the Act, subject to such companies meeting the criteria as set out in the draft Practice Directive. All companies that elect to be exempted from audit must lodge their financial statements with the Registrar.
Draft Best Business Practice Circular on Business Review Report: Guidance to Disclosure and Reporting
The Act has introduced a provision to strengthen the framework in promoting corporate responsibility disclosure in the form of a business review report which may be included in the directors’ report prepared pursuant to the Act. The business review report is introduced in response to the growing expectations for corporate disclosures and reporting specifically in areas that provide an understanding on business carried out by companies, their prospects and risks as well as information on the policies and practices of the companies relating to corporate responsibility issues.
This draft circular is issued to provide guidance to companies in preparing the business review report. The preparation and submission of a business review report is applicable to all types of companies and compliance is on a voluntary basis. The board of directors is responsible for the business review report. The main objectives of the business review report should consist of amongst others, a fair review of the company’s business, a description of the principal risks and uncertainties facing the company, likely future developments and particulars of important matters related to the company’s business that have occurred during the financial year. The draft circular provides a model template of business review report to assist the company when preparing a business review report.
Draft Guidelines on Application to Strike Off the Name of a Company under Section 550 of the Act
The draft guidelines are issued for the purposes of sections 549 and 550 of the Act. Under section 549 of the Act, the Registrar may exercise his discretionary power to strike a company off the register if he has reasonable cause to believe that the company is not carrying on business or the company is not in operation. Section 550 of the Act allows the Registrar to strike a company off the register either on his own motion or upon an application by a director, member or liquidator of the company. The draft guidelines set out the requirements and procedures for an application to strike off a company pursuant to section 550 of the Act.
Draft Guidelines on Application for Recognition as a Professional Body under Section 433(5) of the Act
Under section 433(5) of the Act, the Minister may, in consultation with the Minister charged with the responsibility for finance, prescribe a body to be a recognised professional body. The members of such recognised professional body may apply to the Minister charged with the responsibility for finance to be approved as a liquidator for the purposes of the Act. The draft guidelines set out the information and documents required to be submitted to the Registrar in an application for recognition as a professional body under section 433(5) of the Act.
The drafts are currently available on CCM’s website at http://www.ssm.com.my/en/node/25214.