Chapter 1
Introduction
Madam Siti Amiroh Md Isa
Introduction
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Companies in Malaysia are those entities incorporated under the companies Act 2016 or under
previous companies act 1965.
An entity can be incorporated as a company under the companies act 2016 when one or more
persons register the company for any lawful purpose and comply with the registration
requirements of the CCM whose chief executive officer is Registrar
Main information required for incorporating a company are:
￮ Name of the company
￮ Status of company either private or public
￮ Nature of business
￮ Registered office
￮ In the case of company limited by shares, the details of class of shares and number of
shares held by each member
￮ In the case of company limited by guarantee, the amount the member undertakes to
contribute to the assets of the company in the event of it being wound up’; and
￮ Name, identification nationality and residence of every director.
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Classification of companies
COMPANIES LIMITED BY
SHARE
COMPANY LIMITED BY
GUARANTEE
UNLIMITED COMPANY
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Companies Limited By Share
 CL by shares can be public or private company.
 CLS means that its members’ obligation to the company is limited to the
amount, if any, unpaid on shares held by the members.
 Example : Ahmad (shareholders) subscribed for RM100,000 share capital and
had only paid RM80,000 so his liability is limited to the RM20,000 unpaid on his
shares. If the shares are fully paid up there is no further liability.
 In the event of liquidation of the company whose shares have been fully paid
up, the shareholder are not liable for the company’s debt, if there are any. In
other words, the personal assets of a shareholder such as his house, car and etc
cannot be taken by the company to settle its debt.
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Company Limited By Guarantee
A CL by guarantee has to be a public company.
 A company limited by guarantee means that the members’ liability is limited to such
amount as the members undertake to contribute in the event of the company being
wound up.
 Such a company can only be formed for the purpose of providing recreation or
amusement, promoting commerce and industry, or promoting art, science, religion,
charity or pension scheme or any activity that useful to the community.
 A company limited by guarantee is required to apply its profits to promote its object
and it cannot pay dividends to its members.
 It is not allowed to hold land unless a license has been obtained from the minister.
 In the event it is wound up, the company’s assets are to be transferred to another
body with similar objects. It can apply to minister for a licence to have the word
Berhd or Bhd omitted from its name.
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Unlimited Liability Company
 An unlimited company can be either a public or private company.
 A public company will have the word “Berhad” or Bhd as a part of and at
the end of its name; and a private company will be designated with the
words Sendirian Berhad or Sdn Bhd.
 Their liability is not limit to its shares of investment. Same as sole
proprietorship and unlimited partnership
 In the event it is wound up, and has insufficient assets to settle its debts,
the shareholders will be required to contribute to the assets of the
company to enable it to settle it debt.
 Example : razak's investment are RM50,000 so its liability can exceed the
amount of his investment which is more than RM50,000
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TYPES OF COMPANY
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Company can be grouped into:
 PUBLIC LIMITED
COMPANY
 PRIVATE COMPANY
 EXEMPT PRIVATE
COMPANY
 FOREIGN COMPANY
 GOVERNMENT-LINKED
COMPANY
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Public Company
 Public limited company is a company whose offered shares to the public and
the share capital is not less than a statutory minimum.
 There is no limit on the maximum number of shareholders.
 Anybody can be a part of shareholders in a public company.
 Need to have the word ‘Berhad (Bhd)’ at the end of its name.
 Public company can be limited by shares or guarantee. However a company
limited by guarantee has to be a public company.
 The reason companies go public is that a company can quickly raise capital to
enable growth and expansion.
 Only public company can offer its shares and debentures to the public and seek
a listing on a stock exchange.
￮ Example: sell securities in a public offerings
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Private Company
A private company is one:
￮ Whose liability is limited by shares
￮ Whose total number of members does not exceed 50
￮ Whose there is a restriction on transfer of shares
￮ Which should not offer to the public its shares or debenture, or
allot or agree to allot its share or debenture with a view to offer
such securities for sale to the public
￮ Which is prohibited from making any invitation to the public to
deposit money with the company
￮ Have ‘Sendirian Berhad (Sdn. Bhd.)’ at the end of their names
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Exempt Private Company
 An exempt Private Company is a private company that not more than 20
members.
 Besides that, their shares are not held directly or indirectly by any corporation
and it does not need any file such annual financial statements with the
Registrar of Companies for the information to the public.
 This company should provides company files a certificate, signed by a director
and secretary with the involvement of auditor of the company.
 It will stating that the company is able to meet their liabilities as and when
their fall due.
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Foreign Company
 A foreign company is:
 A company, corporation, society, association or other body
incorporated outside Malaysia; or
 An unincorporated body that can sue or be sued or hold
property with the following the rule of law of its place of origins.
 Instead of that, this company does not have head office or
principal place of business in Malaysia.
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Government-linked Companies
￮ GLCs are corporate entities in which the government owns some or all
of the share capital.
￮ These companies could be private or public (and listed) companies.
￮ The GLCs could be concentrated in specific industries to boost the
country’s economic development.
￮ At times the GLCs could be former government agencies such as Pos
Malaysia.
￮ Other example: PETRONAS, Malaysia Airlines System, Maybank, TNB,
Telekom and Keretapi Tanah Melayu.
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Company Formation
 Any person/s can submit an application for the incorporation of a proposed
company. The application shall contain the following information:
 Name of the proposed company
 Whether public or private
 Nature of business
 Address of registered office
 Biodata of each members and director of the proposed company
 Either company limited by guarantee/ shares the details required by the
Registrar must be provided.
 Two or more person can apply to form a company by subscribing their names to
memorandum and complying with the requirements as to registration of the
company.
Constitution of a Company
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A company may or may not have a constitution. Only company limited by
guarantee has to have a constitution.
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While company limited by shares does not have its own constitution, the
right, powers, duties and obligations of the company, each directors and
each member will be as set out in the provisions of the Companies Act 2016.
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However, where a company has a constitution, then such rights, powers,
duties and obligations are modified by the constitution of the company.
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Companies limited by guarantee must have a constitution. It has to be
lodged when the application for incorporation is made.
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Content of a Constitution
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The constitution of the company may include:
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Objects of the Company;
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The capacity, rights, powers or privileges of the company
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Matters addressed in the Companies Act 2016; and other matters as the
company wishes to include in its constitution.
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Memorandum and Articles
￮ The Memorandum and articles of association are the two most important
documents to be submitted to the ROC (Registrar of companies) for the purpose
of incorporation of a company.
￮ The Memorandum of Association is a document, which sets out the constitution
of the company.
￮ It contains the objects and the scope of activity of the company and also defines
the relationship of the company with the outside the world.
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Memorandum of Association
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Memorandum of association regulates the company’s relations with outside
person. Example, the external affairs of the business.
• Item found in the Memorandum of Association : Name of company
 Objects of company
 For limited liability company – share capital and the divisions into share and
state that the members is limited
 For unlimited company – state the liability of the members is unlimited.
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Differences between MOA and AOA
MOA
AOA
Charter of company
Regulation for internal management
Define the scope of the activities
Rules for carrying out the object of
company
Supreme document
Subordinate to memorandum
Must be registered of the time
incorporation
Company limited by shares need not have
it
Strict restrictions, alteration only with
sanction of gov.
Can be altered by special resolution
It define the relationship between the
company and the outsiders like banker
Define the relationship between company
and its staff and between members and
members interests
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Financial Reporting
Two main statutes governing financial reporting by companies :
- Companies Act 2016 – companies are regulated by the Companies Act 2016 as
to the accounting records to be kept, annual returns to be submitted to
authorities, financial reports and statements prepared by the directors and
managers, and other matters as to capital and borrowings
- The Financial Reporting Act 1997 – 2 independent bodies:
- Financial Reporting Foundation (FRF) - oversees the operating activities of the
Malaysian Accounting Standards Board (MASB)
- The Malaysian Accounting Standards Board (MASB) - functions: to issue new
standards, review, revise or adopt existing accounting standards, issue
statements of principles, develop conceptual framework
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Accounting and other records
￮ Section 243 to section 251 of the companies Act2016 covers matters pertaining to the
preparation and presentation of financial statements. The act requires FS to be prepared
and presented in accordance with all approved financial reporting standards in
compliance with the requirements of the Financial Reporting Act 1997.
￮ The Act states that every company and its directors and managers shall cause to be kept
such accounting and other records as will sufficiently explain the transactions and financial
position of the company and enable the preparation of financial statements and any
documents to be prepared from time to time which will be true and fair.
￮ All the transactions should be recorded within 60 days of occurrence of the transactions
and the company should retain the records for seven years.
￮ Companies also required to maintain other important books and registers which may be
made available for inspection on request.(mainly with shares and debentures of the
company)
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Financial Statements
￮ To be prepared at an interval of not more than 15 months.
￮ These FS are to be duly audited before their distribution to the members or before
the annual general meeting of the company.
￮ These FS should give a true and fair view of the:- Financial position of the company at the end of the financial year
- Financial performance of the company for the financial year
- These FS have to be approved by the board of directors and accompanied by a
statutory declaration made by a director or the person responsible for the financial
management of the company
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Directors’ Report
￮ Section 252: the companies act 2016 requires the directors’ report to be
attached to the FS of the company.
￮ The director report may contain a business review.
￮ The business review may contain :
- A fair review of the company’s business;
- Description of the company’s principal risks and uncertainties it is facing;
- Analysis of the company’s development and performance
- Key performance indicators and information about environmental issues, its
employees and social and community issues.
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Bursa Malaysia Securities Berhad (KL Stock Exchange)
requirements
￮ Listed companies have to make additional disclosures regarding the
performance of the company.
￮ They are required to make a preliminary statements of results within 6 months
following the end of the financial years.
￮ Also listed companies are to issue half-yearly reports regarding their
performance within the three months following the end of the half year
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Annual Report
￮ Sent to shareholder 14 day before annual general meeting.
￮ Contain with general information and financial document.
￮ Besides the audited financial statements, the directors’ report and the
auditors’ report are also to be presented to the shareholders.
￮ Annual report may comprise the following:
￮ Chairman’s statement
￮ Corporate governance statement
￮ Audit committee report
￮ Statement on internal control
￮ Social responsibility statement
￮ Financial statement
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Chairman statement
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The comments of the chairman are general comments about various
aspect of the company, highlighting positive features of the company’s
operation, development and future plans. Are covered by the
statement could include:
Present operations of the various divisions of the company
Dividends
Financial position (ex: liquidity of the company)
Employee
Future prospect
Major developments (acquisition)
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Corporate government statement
￮ Company must comply with the Malaysian Code of Corporate
Governance (THE CODE) that was issued by ministry of finance
￮ Director responsible for maintain a good corporate statement to given by
BOD with full information
￮ The information is given to board of director:1. Composition of the board
2. Accountability and audit
3. Number of board meeting and attendance of the directors
4. Directors’ training
5. Directors’ remuneration including fees paid , allowance etc
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Audit committee report
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Consists of director and independent senior management, provide
assistance to BOD to allow them to fulfill their responsibility relating to
corporate accounting and reporting.
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The report will state audit committee’s areas of responsibility and the
manner in which it has carried out its duties
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Statement of internal control
￮ The Malaysian Code of Corporate Governance requires listed companies
to maintain a sound system of internal control to safeguard the
shareholder investments and the group’s (or company) assets
￮ Bursa Malaysia requires listed company to issue a statement in their
annual reports about the state of their internal controls
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Social responsibility statement
￮ Some company make a statement on their workplace and their
commitment to society and environment.
￮ These are voluntary disclosure.
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Financial statement
Section of annual report
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Director report
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Auditors’ report
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Financial statements
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Thanks!
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