KUALA LUMPUR: A company director who breaches the newly-implemented Companies Act 2016 will face a heavier fine of up to RM3mil and a maximum five-year term of imprisonment, or both, if found guilty.
The Companies Act 2016, which replaced the previous Companies Act 1965, came into effect in stages from Jan 31, 2017.
InCorp director, Kong Ming Enn, said a director who improperly used the company’s property, opportunities, information acquired by virtue of position, or engaged in business which was in competition with the company, would face the penalties mentioned above.
“The maximum of RM3mil fine is 100-fold increase from the RM30,000 under the previous law,” he told a media workshop on the Companies Act 2016 in Kuala Lumpur on Tuesday.
InCorp is a company secretarial services provider owned by Elegant Management Sdn Bhd.
Kong said any director who wilfully paid or authorised the payment of any improper or unlawful distribution, if found guilty, would also face a five-year jail term or a maximum RM3mil fine, or both.
“Under the new law, dividends are only paid out of profits if the company satisfies the solvency tests, which generally relate to its cash flow solvency and balance sheet solvency,” he said.
Kong said under the solvency test, a director has to ensure that the firm would be solvent immediately after the dividend was paid.
“For example, a company must be able to pay its debts as and when they are due within 12 months after the distribution of the dividend is made,” he said.
He said despite that annual general meetings were no longer be required for private companies under the new Act, they were still needed to circulate the audited accounts among the shareholders within six months of their financial year-end.
“Those who failed to do so faces a maximum RM500,000 fine, or a less than a year of jail term, or both, if found guilty,” he said.
Other penalties under new Act included a maximum RM500,000 fine, or a less than a year of jail term, or both, if a director was found guilty of failing to lodge the constitution with the registrar within 30 days from the adoption of the constitution.
Under the new law, a company could replace the memorandum and article of association (M & A) from the previous Act by the constitution.
Kong said with the heavier penalties introduced under the new company law, it would increase the awareness of the companies’ directors on their responsibilities and duties.
“This will help to make Malaysian companies more competitive,” he said.
Following the implementation of the new Act, which allowed a company to be incorporated by or have only one member, and that single member could also be the sole director of the company, Kong expected Incorp would register about 1,000 new start-up companies by year-end, up from 300 in previous year.
“We also foresee up to 30% of the sole proprietors will convert to private limited companies (Sdn Bhd) in the next two to three years,” he said.
Kong said under the new Act, a ‘Sdn Bhd’ company which registered a taxable income of over RM400,000 would be charged with 18% of company tax, whereares sole proprietor which earned the same amount of income would have to pay 26% of company tax. - Bernama