The Companies Act 1965 will soon be replaced, as a new, more modern set of legislation called the Companies Bill 2015 takes its place and puts an emphasis on better governance and improving internal controls in business operations. HO WAH FOON reports.
THE Companies Bill 2015, which is awaiting the Yang Di-Pertuan Agung to sign it into law, is likely to spur more young people to start new enterprises as it will simplify application procedures and lower the entry cost into business.
The bill, which is to replace the current Companies Act 1965, may also result in Malaysia having better managed companies as it also aims to improve internal controls, governance and corporate responsibility, thus raising the standard of professionalism expected of directors and top managers in listed and non-listed companies.
Under the new legislation, companies will have to comply with new rules for better business reporting, improved audit and accounting, strengthening of share and capital maintenance framework.
Described as “modern and dynamic”, the new legal framework will have an impact on all companies, shareholders, directors, as well as creditors.
At a seminar organised by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) on the new bill on Aug 16, companies were told by the Companies Commission of Malaysia (SSM in Malay abbreviation) to get familiar with the major sweeping changes made in line with international practices.
“The Companies Bill 2015 that was passed by Parliament on April 28 will usher in a new era of growth and prosperity for the corporate community of this nation,” said SSM chief executive officer Datuk Zahrah Abd Wahab Fenner in her opening speech for the seminar.
“The introduction of the new legislation will encourage more young entrepreneurs to start their own businesses as starting a business will be made simpler, with the removal of multiple forms and the introduction of a super-form,” she added.
Under the 2015 Bill, new set-ups will not be required to have the Memorandum and Articles of Association and common seal at the point of registration. A flat rate incorporation fee will be introduced, depending on the type of companies registered. This will translate into lower cost in starting a business.
The new legislation will also allow a single member to incorporate a company, and this person may choose to become the sole director of the firm.
“But the new legal framework also seeks to emphasise internal controls and calls for companies to conduct their business operations with higher standard of governance and enhanced transparency, as well as inculcating corporate sustainability practices,” stated the SSM chief.
At his welcoming speech, ACCCIM vice-president Datuk Liew Sew Yee noted that the new bill would do away with obsolete procedures and reduce the cost of compliance through the simplification of rules and deregulatory measures.
“This will create a conducive business environment for entrepreneurs,” he said.
He welcomed the new requirement of solvency statements for corporate exercises involving reduction of share capital, financial assistance, share buy-backs and payment of dividends.
Under the bill, the solvency test is used as a tool for capital maintenance much more widely than current law as a means to protect the interest of creditors.
According to lawyer Philip Koh Tong Ngee, a speaker at the seminar, the sections dealing with “Directors’ Duties and Responsibilities” under the bill would have an impact on the senior management of a company as “director” includes the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO) or any other person responsible for the management of the company.
For board meetings, new clauses in the bill include a presumption that directors have voted in favour of a resolution unless there is express dissent from or a vote to object to the resolution at the meeting.
And in cases of near-insolvency of a company, directors have “to be cognisant of duties to creditors” as there could be liability for unlawful trading and misfeasance.
Before ending his talk, Koh advised directors: “Act in the company’s best interest... Be honest, acting always in good faith, keeping in mind that the company’s assets and proprietary information belong to the company and not to you or any individual shareholders. When exercising power, ensure no collateral purpose.”
Lawyer Wong Tat Chung, another speaker, explained at length the migration to no-par-value regime (shares are issued at a price to be determined by the company) to protect shareholders’ and creditors’ rights.
Wong advised companies and their directors to start understanding the new bill, the need for new procedures, documentation and software.