CRG660 Book - Guide To CSP

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© 2018 by Commerce Clearing House (Malaysia)

Sdn Bhd
Fourth
edition..................................................................2018
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permission of the publisher.
First
edition..................................................................2006
Second
edition..................................................................2012
Third
edition..................................................................2016
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ABOUT THE AUTHOR

Cheah Foo Seong has
worked until end October
2015, when he retired as
Chief Technical Officer of
Tricor Corporate Services
(M) Sdn Bhd (Tricor
Malaysia), a subsidiary of
the Tricor Group (Tricor).
Tricor has a growing
global presence and is
Asia’s leading provider of
integrated business,
corporate and investor
services. Cheah has had
more than 30 years’
experience in providing
corporate secretarial
services and advice
relating to corporate law
and practices, governance
and best practices, and
share registration services,
listing advisories on rules
and regulations to the
corporate portfolio of
clients of the company.
Cheah was the first Technical Director of the Malaysian Institute of
Chartered Secretaries and Administrators (MAICSA) where he
assisted in the development of the Research, Training and
Development Department. He also carried out research and training
in corporate secretarial and company law practices, and had
participated in law forums, seminars, workshops and conferences.
Prior to his tenure with MAICSA, he was a corporate secretarial
practitioner and business advisor for more than 20 years.
In 2012/2013, he had served as the President of the MAICSA, one of
the eight Divisions worldwide of the Institute of Chartered
Secretaries and Administrators, UK. He was also Hon Secretary of
the Corporate Secretaries International Association (CSIA),
representing MAICSA for 2013/2014. The CSIA is an international
body for company secretary bodies and institutions from the US, UK,
India, Pakistan, Hong Kong, Singapore, Malaysia, and Australia with
the objectives to champion good governance practices as well as
corporate secretarial practices having its headquarters in Geneva.
Cheah had authored the Directors Manual Malaysia that was
published by CCH Asia Pte Limited in 2000 and has also written
several booklets published by MAICSA, namely:
• Guide to Members’ Voluntary Winding Up
• MAICSA Best Practice Guide Series — Series No 1, Disclosures
under Securities Industry Act 1983
• MAICSA Best Practice Guide Series — The Company
Secretary, a Reference Kit
• MAICSA Best Practice Guide Series — A Guide to Annual
General Meetings, and
• Independent Directors — Principles and Best Practices.
He has also contributed numerous articles in Perspectives on

Corporate Governance & Management (Volumes I and II), which is a
compilation of selected articles published in the MAICSA Perspective
column in The Star from 1998 to 2002.
Cheah was a also a part-time lecturer on Company Law &
Secretarial Practice of the Faculty of Management, Multimedia
University (MMU) (Cyberjaya) and at the Faculty of Administrative
Science and Policies Studies of UiTM (Shah Alam). He had also
taught ICSA examination subjects in Corporate Administration,
Company Secretarial Practice as intensive revision course lecturer in
2005–2007 at Brickfields College.
Cheah is a Fellow of the Institute of Chartered Secretaries and
Administrators and a Member of the Malaysian Institute of the
Chartered Secretaries and Administrators. He is a Fellow of the
Institute of Public Accountants (IPA), Australia, and holds the
following degrees:
(a) Master of Business Administration (MBA) from Henley
Management, UK
(b) Master of Laws (LLM) from Staffordshire University, UK, and
(c) Doctor of Laws (LLD) from American Heritage University,
Southern California, USA.
FOREWORD
It gives me a great pleasure to write a few words about this updated
and revised version of the 4th Edition of Guide to Company Secretarial
Practice in Malaysia on the Companies Act 2016. Indeed the
Companies Act 2016 has herald a brand new set of Malaysian
company law so as to be in line with international regime. The
Companies Act 2016 has 620 sections and 13 Schedules, and can be
said to be the most significant revision of the company law in
Malaysia. This 4th Edition addresses many of the changes with regard
to company law practices because it recognises single director and
member companies with simple procedures and compliance
requirements for a private company as compared to a public
company. One can even incorporate a company with share capital
without having a constitution, because the Act has all the provisions
necessary for internal governance and administration of a share
capital company.
I wish to congratulate Commerce Clearing House (Malaysia) Sdn Bhd,
which is part of Wolters Kluwer, the leading global provider of
information, software and services for professionals in compliance
management, tax, finance, human resources, legal and risk practices,
for updating and revising the previous editions to this most up to date
company secretarial practice guide, which shall be invaluable for
professional practitioners and all staff who are involved in secretarial
practice matters affected by the changes promulgated in the
Companies Act 2016.
Finally, I wish this publication every success as it is a very useful
guide for new as well as experienced professional practitioners of
company law in Malaysia, as it provides a wide range of
comprehensive discussions, practices and practical knowledge on the
subject matter translated from statutory law. I am also delighted to see
the tremendous amount of work and effort put in to update and revise
this 4th edition, especially by our ex-colleague of Tricor Corporate
Services, Dr. Cheah, who served as Technical Officer for many years
with us in providing advisory services and training and development
activities, before he retired.
I trust this guide book will give many invaluable insights to the practice
of company law to those involved in the corporate and secretarial work
of companies and corporations.
Sincerely,
Yeap Kok Leong
CEO and Managing Director
TRICOR Malaysia
March 2018
FOREWORD FROM THE ACADEMIA

I am indeed very pleased to be given the opportunity to say a few
words on this admirable and timely 4th Edition of the Guide to
Company Secretarial Practice in Malaysia published by CCH
(Malaysia) Sdn. Bhd. under Wolters Kluwer, a leading global provider
of information, software and services for professionals in tax, human
resources, legal, risk and compliance management.
I have known Dr. Cheah Foo Seong as my senior colleague in Hew &
Co., an audit, tax and secretarial firm way back in the 1970s, when I
started my career as a young secretarial assistant. Dr. Cheah has
over the years acquired and developed a passionate disposition in the
practice of company law, which he has shown in updating and revising
this Guide to Company Secretarial Practice in Malaysia (4th Edition) so
as to be in line with the Companies Act 2016. This updated and
revised version of the first publication in 2006 covers the very
significant changes to the way company secretarial practices are
carried out under the Companies Act 2016 and the use of electronic
platform for lodgement of company documents with the Registrar of
Companies operating under the Companies Commission of Malaysia
or SSM.
From the academia point of view, the 4th Edition shall provide students
studying for the Bachelors of Law, Business Studies, Accountancy
and Corporate Administration or the professional examinations of the
Malaysian Institute of Chartered Secretaries and Administrators
(MAICSA) and the Malaysian Association of Company Secretaries
(MACS) a useful and comprehensive text book in preparing for the
company secretarial practice examination paper.
I congratulate the publisher, CCH (Malaysia) Sdn. Bhd. and Dr. Cheah
for his contribution in revising and updating the text of the 4th Edition,
and trust that readers will find it easy to read and understand the legal
jargon of the Companies Act 2016 translated into practical secretarial
practice in Malaysia.
Dr. Tan Hoi Piew, FCIS, FCCS
Associate Professor/Former Dean
Faculty of Accountancy and Management
Universiti Tunku Abdul Rahman
Sungai Long Campus, 43000 Kajang
Selangor D.E.
March 2018
PREFACE
This Fourth Edition of the Guide to Company Secretarial Practice in
Malaysia, incorporates the provisions of the Companies Act 2016 and
the Companies Regulations 2017, after their enforcement with effect
from 31 January 2017. This edition provides the most up-to-date
information on basic company law and company secretarial practices,
particularly with regard to the application and compliance work of a
company secretary. Undergraduate students studying for a Bachelor
degree in Law, Business and Corporate Administration, and
Accountancy will find this Fourth Edition very beneficial, as the book is
written from practical experience and knowledge of corporate law and
practices, in particular under the Companies Commission of Malaysia
(CCM)’s electronic filing platform known as MyCoID.
Over the years, there have been several books written on Company
Law and Secretarial Practice published locally for the needs of
professionals, academics and serious practitioners of company law;
however, not many of these books are catered specially for students
specialising in corporate administration, as well as directors and
corporate executives involved in corporate secretarial matters.
Company secretarial practice is an important subject-matter of
Corporate Administration and good governance practices, which is an
area of vital importance to learn, especially for students at institutions
of higher learning, such as private universities, who are studying
towards a degree in accountancy, business and corporate
administration. Company law may be studied from a legal perspective,
but for professional practitioners, it is the application and secretarial
practice perspective that are vital to ensure complete compliance of
the Companies Act 2016.
The way company law is applied in businesses and corporations is
very different from the study of company law per se. For students
studying accountancy, corporate administration and business studies,
it is the application and practices of company law that is most
important. It is hoped that this book will fulfil the aspirations of
students and other readers who may be directors or corporate
officials.
The responsibilities and duties of directors have become much more
demanding and the expectations of Regulators like the CCM, the
Securities Commission and Bursa Malaysia are high, particularly in
carrying out good governance practices and ensuring high compliance
requirements.
The Companies Act 2016 is now a reality and all companies must
comply with this Act, including the requirements of Companies
Regulations 2017, which has adopted the e-filing platform and put
company secretaries responsible for all lodgements of the e-forms
under MyCoID. Where relevant, the Capital Market and Services Act
2007, Securities Commission Act 1993 and other related Acts are
mentioned.
I would like to thank the editorial staff of Commerce Clearing House
(Malaysia) Sdn Bhd (a division of Wolters Kluwer) for their efficient
and professional work in ensuring the successful updating of this
book. Their helpful suggestions and comments are greatly
appreciated.
Cheah Foo Seong (Dr)
Kuala Lumpur
March 2018
CHAPTER 1: AN OVERVIEW OF
COMPANIES
Development of Malaysian company law ¶1-000
Nature of companies ¶1-100
Lifting of the corporate veil ¶1-200
Classification of companies ¶1-300
Foreign companies ¶1-400
Review questions ¶1-1000
Appendix 1.1: Thirteenth Schedule, CA 2016 ¶1-1001
DEVELOPMENT OF MALAYSIAN COMPANY

LAW
¶1-000 Overview of Companies Act
The new Companies Act 2016 (CA 2016) was passed by Parliament
on 28 April 2016, replacing the Companies Act 1965 (CA 1965). The
CA 2016 was enforced on 31 January 2017, along with the
Companies Regulations 2017. The CA 2016 contains changes to spur
entrepreneurship, allowing single director and member company with
share capital to be incorporated, making the corporate vehicle more
attractive for businesses, deregulating certain aspects of the corporate
processes and introduces the concept of corporate rescue for ailing
companies, in the forms of Voluntary Arrangement and Judicial
Management.
The Malaysian Companies Act is modelled on the United Kingdom
Companies Act 1948 and the Australian Uniform Companies Act
1961. Over the years, numerous amendments were incorporated to
ensure the Malaysian company legislation is compatible with the
changes in the business environment. The CA 1965 was augmented
by the Companies Regulations 1966 to execute the provisions set out
in the Act. In this regard, company secretarial practice became an
important component in the study of company law. In December 2003,
the Companies Commission of Malaysia (CCM)1 embarked on a
structured review of the Companies Act by establishing the Corporate
Law Reform Committee (CLRC). This resulted in the drafting of the
Companies Bill in 2015 for public review, and finally CA 2016 came
into force and became operational on 31 January 2017.
This central legislation on companies is further supplemented by other
laws like the Capital Markets and Services Act 2007 and the
Securities Industry (Central Depositories) Act 1991. All these laws
work in tandem to enhance the regulatory framework of public and
listed companies with the Malaysian exchange known as Bursa
Malaysia. The Malaysian Code on Take-overs and Mergers is
incorporated into the Securities Commission Act 1993, thus making it
a regulated code.
The administration of the Companies Act is carried out by CCM, a
statutory body established under the Companies Commission of
Malaysia Act 2001. In the CCM, the Chief Executive Officer acts as
the Registrar of Companies (“ROC” or “Registrar”).
In Malaysia, the minister charged with the responsibility for companies
is the Minister of Domestic Trade, Co-operatives and Consumerism.
Footnotes
1 In Bahasa Malaysia, Suruhanjaya Syarikat Malaysia (SSM).
¶1-010 Application of precedents from the UK and

Australia
Even though the sources of Malaysian company legislation are the UK
and Australia, the precedents from these two jurisdictions may not be
referred to indiscriminately. One reason for this is that company
legislation in Malaysia has developed on its own to such an extent that
it is now substantially different in detail (although the general
principles remain largely similar) from their UK and Australian
counterparts. Another reason is the UK’s entry into the European
Union (EU). Ever since the UK became a member of the EU, its
company law has polarised more towards the country’s functions and
needs in relation to the EU so much so that many areas of its
company legislation are no longer relevant to Malaysia. How the UK’s
companies legislation and case law will evolve with the UK’s exit from
the EU remains to be seen. Nevertheless, there are areas of the law
which are still governed by common law, eg the law in regard to
promoter’s duties.
¶1-020 Application of English law in commercial matters

In regard to filling gaps in the Malaysian Companies Act, the general
enabling power provided in s 5 of the Civil Law Act 1956 may be
applied.
Section 5 of the Malaysian Civil Law Act 1956 reads:
“(1) In all questions or issues which arise or which have to be
decided in the States of West Malaysia other than Malacca and
Penang with respect to the law of partnerships, corporations,
banks and banking, principals and agents, carriers by air, land
and sea, marine insurance, average, life and fire insurance, and
with respect to mercantile law generally, the law to be
administered shall be the same as would be administered in
England in the like case at the date of the coming into force of this
Act, if such question or issue had arisen or had to be decided in
England, unless in any case other provision is or shall be made
by any written law.
(2) In all questions or issues which arise or which have to be
decided in the States of Malacca, Penang, Sabah and Sarawak
with respect to the law concerning any of the matters referred to
in subsection (1), the law to be administered shall be the same as
would be administered in England in the like case at the
corresponding period, if such question or issue had arisen or had
to be decided in England, unless in any case other provision is or
shall be made by any written law.”
It would seem that the practice of the Malaysian courts in filling gaps
in the Malaysian Companies Act with English company law, especially
the UK Companies Act 1948, is acceptable (Re Low Nai Brothers &
Co; Sharikat Import Dan Export Timbering Sdn Bhd v Othman bin
Taib). However, the majority of the Malaysian court in Tan Mooi Liang
v Lim Soon Eng, however, did not favour this practice of filling gaps
with UK provisions. The case concerned a partnership but the
principle underlying the decision (obiter) may be used in relation to the
application of English company law whenever there are gaps found in
the Malaysian CA 1965. In that case, Suffian CJ, held that:
“Because of the many provisions relating to partnership in the
Contracts (Malay States) Ordinance, 1950, which in my opinion
constitute ’other provisions relating to partnership’ within the
meaning of the last few words in subsection (1) of section 5 of the
Civil Law Ordinance, 1956, the English law of partnership does
not apply to the matter in dispute here …”
Law: s 5 of the Civil Law Act 1956.
NATURE OF COMPANIES
¶1-100 Characteristics of a company
According to the Oxford English Dictionary, a “company” is a “body of

persons combined for a common (especially commercial) object”. It is
clear, therefore, that for a company to exist there must be:
• a group of persons, that is, there must be more than one person;2
and
• a common purpose among the members of the group which would

usually, but not necessarily, be commercial.
However, as we all know, there are other organisations that satisfy
these requirements but are not companies, eg sole proprietorships,
partnerships, societies, co-operatives and statutory bodies.
Accordingly, two further characteristics of a company should be noted:
• In law, a company has its own distinct and separate legal
personality from its members. Thus, a company can sue and be
sued and can own property in its own right and name. Indeed, it
can even sue and be sued by its own members. A company also
exists in perpetuity, if no action is taken to wind up or strike off the
company.
• Arising from the concept of separate personality mentioned above,

the members of a company enjoy limited liability from the
company’s debts and liabilities. This means that the shareholders
cannot be asked to contribute towards the company’s debts and
liabilities beyond the amounts of the shares each shareholder has
agreed to subscribe in the company.
The CA 2016 defines “company” to mean a company incorporated

under the Act or under any corresponding previous written law, and a
“company having a share capital” to include an unlimited company
with a share capital.
Footnotes
2 However, under CA 2016, a company can be incorporated
with a single member who can be either an individual or
another company. Further under CA 2016, so as not to be
deregistered by the ROC, a company must have at least
one director [s 209(5)] and one member (s 9), and must not
fail to lodge an annual return for three or more consecutive
years (s 68, CA 2016).
¶1-110 Separate legal entity

A company is an entity which is independent of the individuals who
constitute it. It is an artificially created person and it enjoys perpetual
succession. This separate personality of a company constitutes the
crucial and fundamental reason for its existence and it is this factor
that enables a group of persons to own and deal with the company’s
land together from time to time without having to suffer the trouble and
expense of a series of conveyances as the members change and
fluctuate from time to time.
The separation of the corporation from the owners was a point made
by the House of Lords in 1897 in the case of Salomon v Salomon &
Co Ltd. In that case, Salomon, a shoe manufacturer, had formed a
company and sold his shoe manufacturing business to it. In return, he
had received all the shares of the company (except six qualifying
shares issued to the members of his family) and a debenture for a
certain sum. Unhappily, the business floundered and Salomon sued
the company for the unpaid balance on the debenture as a secured
creditor. The action was contested by the other creditors on the
ground that the incorporation of the company was a mere sham
contrary to the then UK Companies Act which required seven (7)
shareholders. It was further argued by the creditors that in reality,
Salomon owned the business and was himself a debtor to the other
creditors.
The House of Lords disagreed. It said that Salomon had complied with
the requirements of the Act. The incorporation was not a sham and
Salomon was a secured creditor despite the fact that he was also the
owner of practically all the shares.
Primarily, what the House of Lords’ decision asserted was that the
debts of Salomon & Co Ltd were not the debts of Mr Salomon
because the company was a separate legal entity. Once the artificial
creation has been legally created, “it must be treated like any other
independent person with its rights and liabilities appropriate to itself”
(per Halsbury LC).
Section 20 of CA 2016 states that a company incorporated under this
Act is a body corporate and shall have legal personality separate from
that of its members; and continue in existence until it is removed from
the register. Under s 21, a company shall be capable of exercising all
the functions of a body corporate and have the full capacity to carry on
or undertake any business or activity including:
(a) To sue and be sued;
(b) To acquire, own, hold, develop or dispose of any property; and
(c) To do any act which it may do or, to enter into transactions.
A company shall have the full rights, powers and privileges for the
purposes mentioned above.
By virtue of this new provision in the Act, it appears that the case law
on Salomon v Salomon & Co Ltd, and other case law on separate
entity issues, may no longer be referred to in future.
To understand more clearly the essential characteristics of a
company, let us examine more closely the nature of non-corporate
organisations so as to distinguish them from one another.
Law: s 20 and 21 of CA 2016.
¶1-120 Partnerships
A partnership has been defined by the Malaysian Partnership Act
1961, s 3(1) and by the English Partnership Act 1890, s 1, as “the
relation which subsists between persons carrying on a business in
common with a view of profit”. Very broadly, in a partnership:
• the number of partners must not exceed 20;
• the partners cannot enjoy limited liability; and
• a partnership, like a sole proprietorship, does not constitute a

separate legal entity from the partners.
Note, however, that a partnership may not necessarily be limited to 20

persons. The Yang di Pertuan Agong of Malaysia may exempt a
partnership from the requirement to incorporate a company, and the
number of partners in such exempted partnerships is unlimited.
Characteristics of a limited company
(a) Limited liability of shareholders
The measure of a shareholder’s liability for the debts of the company
is related to the amount that the shareholder has subscribed in the
shares of the company. A shareholder can only be compelled to
contribute, on the winding up of the company, the amount which
remains unpaid on his shareholding for the payment of the company’s
debts. If the shares held by the shareholder are fully paid up, the
shareholder need not contribute further to the payment of the
company’s debts. By comparison, the partners are jointly and
severally liable for all the debts of the partnership.
(b) Perpetual succession
The existence of a corporation is ordinarily unlimited in time and is not
affected by the death of a shareholder. The element of perpetual
succession enables the company, for example, to hold properties
without the constant problems of transmitting it from one generation to
the next. “It is chiefly for the purpose of clothing bodies of men in
succession, with these qualities and capacities, that corporations were
invented and are now in use” (per Marshall CJ in Dartmouth College v
Woodward). With a partnership, the retirement or death of a partner
usually brings the partnership to an end (unless the partners have
agreed otherwise).
(c) Transferability of shares
A shareholder may (subject to restrictions in the company’s
constitution) sell or otherwise dispose of his shares at any time,
thereby bringing about his cessation from membership and the
introduction of a new member. Similarly, on the death of a
shareholder, his shares may pass by transmission to his legal
representative and later to his beneficiary. The legal operation of the
company itself will not be affected even with the death of a member. A
partnership interest, on the other hand, will generally not be capable of
assignment or transfer (unless the partners have agreed otherwise) of
a partner’s capital contribution in the event of death. The partnership
shall be frozen to determine the deceased partner’s share of the
partnership business.
(d) Control by shareholders
If the shares held by a shareholder are voting shares, he may
participate in the election of directors who are responsible for the day-
to-day management of the company. Accordingly, the shareholders,
with their collective right to elect the directors, have the ultimate
control of the company without being concerned in its day-to-day
management. In a partnership, both control and management are
vested in all the partners (subject to the partnership agreement) and
no partner can contract out of his responsibilities in this regard so far
as the public is concerned.
(e) No liability for acts of shareholders
As the company is a separate entity from its shareholders and
because management of the company is given to the company’s
board of directors, the power to bind the company and the authority to
deal with the company’s assets do not, in the normal course of events,
rest with the shareholders. Any partner, on the other hand, has
ostensible authority to commit the partnership and the other partners,
who shall be jointly and severally liable for the debts incurred by the
partnership business.
(f) Company may contract with shareholders
A shareholder may himself enter into a business relationship with the
company. He is not liable to account for any profit from that
relationship. This is unlike a partnership where the partnership has no
separate existence from the partners. In a partnership, a partner may
neither contract with nor sue the firm.
(g) Financing the business
Once the business of a company has been established, the company
may obtain additional capital by the issue of any unissued shares and
by the issue of debentures. Such facilities are not available to a
partnership. However, incorporation does not always make the raising
of finance easier. This is particularly so in a small private company
seeking overdraft facilities or such loans from a lending institution. The
lending institution is likely “to pierce the corporate veil” and require
personal guarantees from the major shareholders or directors.
Law: s 3(1) of the Partnership Act 1961.
¶1-130 Sole proprietorship

A sole proprietorship is an organisation formed essentially for
business purposes comprising one person. That person (the sole
proprietor) is entitled to all the profits of the sole proprietorship and is
liable for all its debts without limitation. This flows from the fact that in
law a sole proprietorship is not a separate legal entity from the sole
proprietor himself.
¶1-140 Co-operative societies

Co-operative societies unlike companies, are incorporated under the
Co-operative Societies Act to operate a business solely for the benefit
of its members. They treat each member equally regardless of the
number of shares the members have invested, and the co-operative’s
profits are ploughed back into the business and partly divided as
dividends for members.
¶1-150 Limited liability partnership

Limited Liability Partnerships (LLP) are regulated under the Limited
Liability Partnership Act 2012 (LLP Act). The LLP offers an alternative
business vehicle to carry out business which combines the
characteristics of a private company and a conventional partnership.
An LLP provides:
• limited liability status to its partners and offers the flexibility of
internal arrangement through an agreement between the
partners;
• entrepreneurs and businessmen a more structured business

vehicle compared to a sole proprietorship or a conventional
partnership;
• the flexibility of controlling the business operation in accordance
with the partnership agreement whilst enjoying the limited liability
status as compared to a company that is subject to strict
compliance requirements under the Companies Act in most of its
affairs.
The LLP business vehicle offers simpler and more flexible procedures
in terms of its formation, maintenance and termination while
simultaneously has the necessary dynamics and appeal to be able to
compete domestically and internationally.
There must be minimum two partners and no limit for maximum
number of partners. Individuals (natural persons) or bodies corporate
or a combination of both can be the partners in an LLP. For example,
two companies can form an LLP, which is the most common form of
joint-ventures.
The LLP business structure is designed for all lawful business
purposes with a view to make profit. An LLP may also be formed by
professionals such as lawyers, chartered accountants and company
secretaries for the purpose of carrying on their professional practice.
The LLP concept will also support start-ups and small and medium
enterprises to grow their businesses without having to worry too much
about their personal liabilities, personal assets and strict compliance
requirements.
Salient features
• An LLP is a body corporate and has a legal personality separate
from the partners (separate legal entity).
• An LLP has perpetual succession, ie its existence continues

despite the death, bankruptcy, insanity, change or exit from the
business of any partner, etc.
• An LLP has unlimited capability and is capable of suing and being

sued; it can acquire, own, hold and develop or dispose of
property.
• An LLP may do and suffer such other acts and things as bodies
corporate may lawfully do and suffer.
• The liabilities of the LLP shall be met out of the property of the
LLP. The partnership firm would be liable to the full extent of its
assets, while the partners would be liable only to the extent of
their agreed contribution.
• The partners in an LLP have a limited liability. Unlike in

partnership, where a partner is also liable for the acts of other
partners, in an LLP, a partner is not liable for another partner’s
act. No partner would be liable for independent or unauthorised
acts of the other partners or for their misconduct.
• The partners of the LLP will not be held personally liable for the
debts incurred by the LLP. Instead, it is the LLP that will be liable
if a partner of a LLP is liable to any person as a result of a
wrongful act or omission on his part in the course of the business
of the LLP or with its authority. A partner is not personally liable,
directly or indirectly for an obligation of LLP solely by reason of
being a partner of the LLP. However, the LLP is not bound by
what a partner has done in dealing with a person if:
– the partner acted without authority; or
– the person with whom the partner was dealing knows that the
partner acted without authority or does not know that he is a
partner of the LLP.
• The mutual rights and duties of the partners and the mutual rights
and duties of the LLP and its partners shall be determined on the
basis of LLP agreement between the partners, or between the
limited liability partnership and its partners.
Unlike a limited company, it is not mandatory for the LLP to have its
accounts audited, unless so provided for in the partnership agreement
(if one has been executed between the partners), or to hold Annual
General Meetings (AGMs). Though it need not file an annual return,
the LLP is required to lodge an Annual Declaration with the Registrar
of Limited Liability Partnerships stating whether the LLP is able or
unable to pay its debts.
The LLP must, however, have at least one Compliance Officer whom
shall be appointed from among the partners of the LLP, or a person
who is qualified to act as secretary under the Act, and this compliance
officer must be a citizen or a permanent resident of Malaysia and
he/she must ordinarily reside in Malaysia. The responsibilities of the
compliance officer shall include:
• registering any changes in registered particulars of the LLP;
• keeping and maintaining registers and records of the LLP; and
• ensuring publication of names of the LLP in accordance with the

provisions of the LLP Act.
A compliance officer is personally liable to all penalties including

administrative penalty imposed on the LLP unless he/she can prove
that he/she is not liable.
Under the LLP Act, a foreign LLP is allowed to carry on business in
Malaysia by registering with CCM and lodging the following
documents:
• certified copy of the certificate of registration in its place of
incorporation, establishment or origin; and
• certified copy of its charter or instrument defining its constitution, if

any.
Except for the compliance officer, partners of the LLP need not be
residents in Malaysia. The LLP can be dissolved by way of:
• court ordered winding up;
• voluntary winding up; and
• striking off by Registrar.
Registration of LLP can only be done by using MyLLP found in CCM’s

website. Before a person can use the MyLLP web pages, he/she must
be registered as Compliance Officer with CCM.
LIFTING OF THE CORPORATE VEIL

¶1-200 Reasons for lifting the corporate veil
Under certain circumstances, the corporate form will not always

prevail to protect shareholders, directors and others from responsibility
for acts done in the name of the company. The courts in these
instances stand ready to pull off the corporate mask. As Lord Denning
has put it, incorporation does not fully “cast a veil over the personality
of a limited company through which the courts cannot see”
(Littlewoods Mail Order Stores Ltd v McGregor).
It is not easy to classify the circumstances which give rise to a lifting of
the corporate veil, but perhaps the most typical example is the 1916
UK case where the court looked behind the facade of a company
incorporated in Great Britain to see who its real controllers were for
the purpose of a wartime UK Act called Trading with the Enemy Act
(Daimler Co v Continental Tyre and Rubber Co (Great Britain) Ltd).
Or again, when the court looked behind the apparent nature of a
transaction (the leasing of premises at an inflated rental by a
subsidiary to its parent company) to expose the reality of the situation
in relation to tax law (Littlewoods Mail Order Stores Ltd v McGregor).
In that case, the subsidiary was found not to be a separate legal
entity, but a creation of the parent company which had in fact obtained
the benefits which it sought (for tax purposes) to attribute to its
subsidiary.
Similarly, an American court in 1971 pierced a subsidiary’s corporate
veil and held that the parent company was liable for the unpaid wages
of the subsidiary’s employees. The court found that the 80% owned
subsidiary did not have a separately functioning board. It did not
control its own affairs (all major decisions being ruled upon by the
parent company’s board). The court therefore reasoned that
considerations of justice required that a controlling operation should
not be permitted to operate a business from which it stood to gain
whatever profit was made, to have the advantage of the labour of
those who served it, yet use the subsidiary’s corporate veil to insulate
it from the responsibility for paying for such services (Chatterly v
Omnico Inc).
¶1-210 Statutory lifting of the corporate veil

The principle enunciated in Salomon’s case that a company is distinct
from its members is now mandated by s 20 of CA 2016. The lifting of
the veil of incorporation, in future will have to take a different approach
like those mentioned below:
• If in the course of a winding up it appears that the business of a
company has been carried on with the intent to defraud creditors
or for any fraudulent purpose, the court, on the application of the
liquidator, may declare that any persons who were knowing
parties to the fraud are liable to make such contributions (if any)
to the company’s assets as the court thinks proper [s 540(1)];
• If in the course of a winding up, it appears that an officer of a

company who was party to the contracting of a debt had no
reasonable expectation that the company would be able to pay
the debt, the court may declare that the officer be liable for the
payment of the whole or part of the debt [s 540(2)];
• Every person who, is or was an officer or a contributory of a

company which is being wound up, commits an offence if he,
within 12 months before commencement of the winding up or at
any time after the commencement—
(a) has obtained on credit, for or on behalf of the company,
under the false pretence that the company is carrying on its
business, any property which the company has not
subsequently paid for, or
(b) has pawned, pledged or disposed of any property of the

company which has been obtained on credit and has not
been paid for, unless the pawning, pledging or disposing was
in the ordinary way of the business of the company [s 536(1)
(c)(vii) and (viii)];
• The corporate veil is consistently lifted in the area of taxation. For

example, on transactions that conceal the true nature of the
company’s affairs in order to alter the incidence of tax, hinder or
avoid any liability to tax, the Director General of Inland Revenue
has the power to disregard, vary the transaction and make
adjustments as he thinks fit.
Law: s 540(1) and (2), 536(1)(c)(vii) and (viii) of CA 2016; s 75A of the
Income Tax Act 1967.
¶1-220 Power of the court in lifting the corporate veil

In addition to the statutory exceptions to the principle in Salomon’s
case, there are cases which indicate that the doctrine laid down in
Salomon’s case has to be applied very carefully.
In cases where the courts exercise discretionary jurisdiction, the
courts have to take into account the fact that one company is under
the control or is the alter ego of another.
In other cases the courts have lifted the veil to look at the underlying
commercial reality in order to prevent evasion of taxing statutes, or
social or administrative legislation, or to identify enemy shareholders
wearing the corporate mask. The court will use its powers “to pierce
the corporate veil if it is necessary to achieve justice irrespective of the
legal efficacy of the corporate structure under consideration” (per
Cumming-Bruce LJ in Re a Company).
In the Malaysian case of Tiu Shi Kian & Anor v Red Rose Restaurant
Sdn Bhd, the High Court of Malaya held that the court must look at the
business realities of a situation and adopt the functional integrality
approach of lifting the corporate veil. In this case, the court discovered
that management-wise there had been unity as the directors of one
company were also the directors of another company. The court
decided to lift the corporate veil.
In another case, the High Court of Malaya held that where two
companies had been functionally and management-wise one integral
whole, the employees of one company may also be the employees of
the other (Hotel Jaya Puri Bhd v National Union of Hotel, Bar &
Restaurant Worker & Anor).
In the landmark case of Asparta Sdn Bhd & Ors v Bank Bumiputra
Bhd & Anor, the High Court had to lift the veil of each of the subsidiary
companies to see who were behind the companies that carried out
fraudulent borrowing of money, in the name of just and equitable
reasoning.
CLASSIFICATION OF COMPANIES
¶1-300 Four classes of companies based on the nature
of liability imposed
Companies may be classified in various ways. Section 10(1) of CA

2016 for example, distinguishes four classes of companies, based on
the nature of the liability imposed on the members. These classes are:
(a) a company limited by shares;
(b) a company limited by guarantee;
(c) an unlimited company.
Cutting across this classification is the equally important distinction

between public companies and private companies. A private company
can either be exempt or non-exempt. An exempt private company is
defined as a private company, the shares of which are not held
directly or indirectly by any corporation (ie another limited company)
and having not more than 20 shareholders. The Act also recognises
the existence of holding and subsidiary companies and the registration
of foreign companies. See ¶1-340 for more on “Exempt private
companies”.
Subsection (2) states that a company is limited by shares if the liability
of its members is limited to the amount, if any, unpaid on shares held
by the members.
Subsection (3) states that a company is limited by guarantee if the
liability of its members is limited to such amount as the members
undertake to contribute in the event of its being wound up.
Subsection (4) states that a company is an unlimited company if there
is no limit on the liability of its members.
Law: s 10 of CA 2016.
¶1-305 Company limited by shares

A company limited by shares is formed on the principle of having a
limit to the liability of its members. This limitation is stated in the
constitution, if the company has one, or by s 10(2) of CA 2016 so that
creditors of a company limited by shares have only a limited right to
recover from the shareholders in the event of the company going into
winding up. The creditors are, in a way, warned of this by the
requirement that a limited company shall have the word “Berhad” (or
the abbreviation “Bhd”) as part of its name. The liability of the
shareholder is thus extended to the unpaid portion of the nominal
value of the shares, if any. Once the shares are fully paid, the
shareholder is relieved of liability to contribute on a winding up.
Law: s 10(2) and 25 of CA 2016.
¶1-310 Company limited by guarantee

A company limited by guarantee is one formed on the principle of the
members’ liability for the company’s debts being limited to such
amount as they undertake to contribute in the event of a winding up. A
member of a company limited by guarantee is not required to pay any
capital while the company is a going concern.
The guarantee is set out in the constitution and usually reads:
“Every member of the company undertakes to contribute to the
assets of the company in the event of its being wound up while he
is a member or within one year afterwards for payment of debts
and liabilities of the company contracted before he ceases to be a
member … such amount as may be required not exceeding (state
the amount).”
This type of company is more commonly used for non-profit objectives
such as for carrying on research activities, welfare and charitable
purposes, trade association, chamber of commerce, educational
objectives or religious activities.
Furthermore, a company limited by guarantee shall not acquire any
land unless it applies to the Minister of Domestic Trade, Co-operatives
and Consumerism, who may by licence empower the company to hold
lands in such quantity and subject to such conditions as he thinks fit.
If a company limited by guarantee is incorporated with the word
“Berhad” (or “Bhd”) after its name and applies to become a company
which is for the purpose of providing recreation or amusement or
promoting commerce, industry, art, science, religion, charity, pension
or superannuation schemes or any other object useful to the
community, and will apply its profits (if any) or other income in
promoting its objects and will prohibit the payment of any dividend to
its members, the Minister may by licence direct that it be registered as
a company with limited liability without the addition of the word
“Berhad” to its name.
Thus, commercial and trading companies do not usually adopt the
guarantee form as the objectives as stated in their Memorandum of
Association are specified for non-commercial purposes.
Under CA 2016, s 12 states that no company shall be formed as, or
become, a company limited by guarantee with a share capital.
The CA 2016 also states that a company limited by guarantee shall
have a constitution pursuant to s 38 in the following manner:
Subsection (1) states that a company limited by guarantee shall have
a constitution.
Subsection (2) states that the constitution of a company limited by
guarantee shall be signed by the person intending to incorporate such
a company and lodged with the Registrar at the time the company is
incorporated.
Subsection (3) states that the constitution shall state—
(a) that the company is a company limited by guarantee;
(b) the objects of the company;
(c) the capacity, rights, powers and privileges of the company;
(d) the number of members with which the company proposed to be

incorporated;
(e) matters contemplated by this Act to be included in the

constitution; and
(f) any other matters as the company wishes to include in its

constitution.
Subsection (4) states that any provision in the constitution of a

company limited by guarantee that purports to divide the company’s
undertaking into shares or interests is a provision for a share capital
and shall be void.
Subsection (5) states that any provision in the constitution of a
company limited by guarantee that purports to give any person a right
to participate in the divisible profits of the company shall be void.
Subsection (6) states that a constitution lodged with the Registrar
under this section shall be binding on the company and its members
to the same extent as if it was signed by each member and contained
covenants on each member to observe all provisions in the
constitution.
Law: s 12 and 38 of CA 2016.
¶1-315 Company limited by guarantee without share

capital
A company which is limited by shares and guarantee without a share
capital is permissible in Malaysia, as the law was changed on 1
February 1986 to prohibit the incorporation of a company limited by
guarantee with a share capital. It follows, therefore, that this type of
company can no longer be formed in Malaysia.
The CA 2016 stipulates that any provision in the constitution of a
company limited by guarantee that purports to divide the company’s
undertaking into shares or interests is a provision for a share capital
and shall be void. Also, to incorporate a company limited by guarantee
without share capital, a company constitution that is acceptable by the
Registrar must accompany the application for registration under s
38(1).
Law: s 38(1) and 38(4) of CA 2016.
¶1-320 Unlimited company

An unlimited company is one formed on the principle that there is no
limit placed on the liability of its members. Companies of this type are
virtually partnerships with unlimited obligations placed on the
members to pay towards the assets of the company. The notion of
unlimited liability is used in relation to the “mutual fund” type of
corporation because it provides an easier means of redeeming
existing shares, or a profession that may allow it to be formed as an
unlimited company.
Law: s 10(4) of CA 2016.
¶1-330 Private companies

Section 42(1) of CA 2016 states that a company having a share
capital may be incorporated as a private company if stated as such in
the application for registration. A private company shall comply with s
42(1) as a company limited by shares having not more than 50
shareholders registered as a private company, and the following
requirements:
(a) restricts the right to transfer shares;
(b) limits its members to not more than 50 persons (counting joint-
holders of shares as one person and not counting employees and
ex-employees who became members while being employed);
(c) prohibits offer to the public of any shares or debentures of the

company;
(d) shall not allot or agree to allot any shares or debentures of the
company with a view to offer such securities to the public; or
(d) invites the public to deposit money with the company for fixed
periods or payable at call, whether bearing or not bearing interest.
By virtue of the abovementioned conditions, a private company shall

not register a prospectus before issuing and allotting shares.
A private company may alter the content of its restrictions such as pre-
emption rights on share transfers or membership but such provisions
must generally comply with s 85 of CA 2016. Any alteration to its
constitution may be effected by a special resolution.
Under CA 2016, a private company may be formed without a
constitution, have one single natural person shareholder and one
single director. Its annual compliance is simpler, as there is no
mandatory AGM required, except the circulation of the audited
financial statements to all shareholders within six months of its
financial year end, and after 30 days of circulation, lodge the financial
statement with the Registrar. A company shall lodge with the Registrar
an annual return for each calendar year not later than 30 days from
the anniversary of its incorporation date.
The requirement under sub-s (1) is not applicable to a company in the
calendar year which it is incorporated.
Law: s 42, 68, 85, 258, and 259 of CA 2016.
¶1-340 Exempt private companies

Within the class of companies known as private companies there is a
sub-category known as “exempt private companies”. This type of
company has all the characteristics of private companies but in
addition has to comply with the following:
• its shares must not be owned directly or indirectly by any
corporation; and
• it must not have more than 20 members.
The notice of registration of a private company will not reflect its

exempt status, which may need to be confirmed by the auditor,
director and secretary when an exempt private certificate is required to
be lodged in lieu of the audited financial statement and reports, after
the private company has circulated the said accounts and needs to file
it with the Registrar.
There are several advantages of being an exempt private company.
The first advantage is that an exempt private company does not have
to submit its reports and financial statements but will have to submit a
private exempt certificate together with its annual return after the
conclusion of its AGM. But this “exemption” can only take effect if the
auditors, a director and company secretary sign the certificate relating
to an exempt private company stating that:
(i) the company is an exempt private company;
(ii) the company had circulated its audited financial statement, and
lodged it with the Registrar within 30 days of its circulation; and
(iii) the audited financial statements and reports show that it is

solvent and is able to meet its debts.
Another advantage is that such companies can make loans to their

directors and to companies in which their directors have an interest or
have connections with.
Under s 258 of CA 2016, a private company shall lodge with the
Registrar for each financial year, the financial statements and reports,
within 30 days after they have been circulated to its members.
Pursuant to s 259(1)(b), a public company shall lodge with the
Registrar for each financial year the financial statements and reports
required under this Act within 30 days after its AGM.
Law: s 258 and 259(1) of CA 2016.
¶1-350 Public companies

A public company is defined as any company other than a private
company in s 2 of CA 2016. Unlike private companies which can
commence business once they receive their notice of registration from
the Registrar, public companies have to comply with s 190 as follows:
(a) Where a public company having a share capital has issued a
prospectus inviting the public to subscribe for its shares or has
issued a prospectus under the Capital Markets and Services Act
2007 in relation to its shares, the public company shall be entitled
to commence any business or exercise any borrowing powers, if
a statutory declaration was made by the secretary or one of the
directors of the company verifying that:
(i) no money is or may become liable to be repaid to applicants
for any shares or debentures offered for public subscription
by reason of any failure to apply for or obtain permission for
listing for quotation on any stock exchange;
(ii) minimum subscription is achieved and every director has

paid to the company on each of the shares taken or
contracted to be taken by the director, and for which the
director is liable to pay in cash, a proportion equal to the
proportion payable on application and allotment on the
shares offered for public subscription.
(b) Where a public company having a share capital has not issued a
prospectus inviting the public to subscribe for its shares or has
not issued a prospectus under the Capital Markets and Services
Act 2007, the public company shall be entitled to commence any
business or exercise any borrowing power if a statutory
declaration was made by the secretary or one of the directors of
the company verifying that:
(i) a statement in lieu of prospectus which complies with this
Act has been lodged with the Registrar; and
(ii) every director of the company has paid to the company on

each of the shares taken or contracted to be taken by the
director and for which the director is liable to pay in cash, a
proportion equal to the proportion payable on application and
allotment on the shares payable in cash.
Doing business in this context means borrowing money from a bank,

opening of a banking account and carrying out the business of trading.
Public companies are also subject to prospectus requirements when
they issue prospectuses inviting the public to purchase shares. Public
companies are generally subject to the provisions of the Capital
Markets and Services Act 2007 and the Securities Commission Act
1993. If they are listed with a Stock Exchange, they will be governed
by the Stock Exchange’s Rules.
¶1-360 Subsidiary and holding companies

Subsidiary company
Section 4(1) of CA 2016 provides that a company is deemed to be a
subsidiary of another company if:
(a) the other company:
• controls the composition of the board of directors of the
subsidiary;
• controls more than half of the voting power of the subsidiary

company; or
• holds more than half of the issued share capital, excluding

any part of the share capital which consists of preference
shares; or
(b) the company is a subsidiary of any company which is that other

company’s subsidiary.
Subsection (2) further clarifies that the composition of a corporation’s
board of directors shall be deemed to be controlled by another
corporation if that other corporation can appoint or remove all or a
majority of the directors and for the purposes of this provision, the
holding company shall be deemed to have the power to make such an
appointment if—
(a) a person cannot be appointed as a director without the exercise
of such a power in his favour by that other corporation; or
(b) a person’s appointment as a director follows necessarily from his

being a director or other officer of that other corporation.
In determining whether one corporation is a subsidiary of another

corporation—
(a) any shares held or power exercisable by that other corporation
in a fiduciary capacity shall be treated as not held or exercisable
by it;
(b) subject to para (c) and (d), any shares held or power exercisable
—
(i) by any person as a nominee for that other corporation,
except where that other corporation is concerned only in a
fiduciary capacity; or
(ii) by, or by a nominee for, a subsidiary of that other

corporation, not being a subsidiary which is concerned only
in a fiduciary capacity, shall be treated as held or exercisable
by that other corporation;
(c) any shares held or power exercisable by any person by virtue of

the provisions of any debentures of the corporation or of a trust
deed for securing any issue of such debentures shall be
disregarded; and
(d) any shares held or power exercisable by, or by a nominee for,

that other corporation or its subsidiary, not being held or
exercisable as mentioned in para (c), shall be treated as not held
or exercisable by that other corporation if the ordinary business of
that other corporation or its subsidiary, as the case may be,
includes the lending of money and the shares are held or power is
exercisable as aforesaid by way of security only for the purposes
of a transaction entered into in the ordinary course of that
business.
Holding company
A holding company is a company to which another company is
subsidiary. For example, company X is a holding company of
company Y if it holds more than half of the voting power of company
Y. In this case, company Y is a subsidiary of company X.
It is important to note that a subsidiary cannot be a shareholder of its
holding company and that the allotment or transfer of shares in the
holding company to the subsidiary is void.
The directors of a holding company must attach to every balance
sheet a report with respect to the state of affairs of the holding
company and all its subsidiaries.
In CA 2016, the definition of “subsidiary and holding company” is
stipulated in s 4 as follows:
Subsection (1) states that subject to sub-s (3), a corporation shall be
deemed to be a subsidiary of another corporation, but only if—
(a) the other corporation—
(i) controls the composition of the board of directors of the
corporation;
(ii) controls more than half of the voting power of the

corporation; or
(iii) holds more than half of the issued share capital of the
corporation, excluding any part of the share capital which
consists of preference shares; or
(b) the corporation is a subsidiary of any corporation which is that

other corporation’s subsidiary.
Subsection (2) states that for the purposes of sub-para (1)(a)(i), the
composition of a corporation’s board of directors shall be deemed to
be controlled by another corporation if that other corporation can
appoint or remove all or a majority of the directors and for the
purposes of this provision, the holding company shall be deemed to
have the power to make such an appointment if—
(a) a person cannot be appointed as a director without the exercise
in his favour by that other corporation of such a power; or
(b) a person’s appointment as a director follows necessarily from his

being a director or other officer of that other corporation.
Subsection (3) states that in determining whether one corporation is a

subsidiary of another corporation—
(a) any shares held or power exercisable by that other corporation
in a fiduciary capacity shall be treated as not held or exercisable
by it;
(b) subject to para (c) and (d), any shares held or power exercisable
—
(i) by any person as a nominee for that other corporation,
except where that other corporation is concerned only in a
fiduciary capacity; or
(ii) by, or by a nominee for, a subsidiary of that other

corporation, not being a subsidiary which is concerned only
in a fiduciary capacity,
shall be treated as held or exercisable by that other corporation;
(c) any shares held or power exercisable by any person by virtue of

the provisions of any debentures of the corporation or of a trust
deed for securing any issue of such debentures shall be
disregarded; and
(d) any shares held or power exercisable by, or by a nominee for,

that other corporation or its subsidiary, not being held or
exercisable as mentioned in para (c), shall be treated as not held
or exercisable by that other corporation if the ordinary business of
that other corporation or its subsidiary, as the case may be,
includes the lending of money and the shares are held or power is
exercisable as aforesaid by way of security only for the purposes
of a transaction entered into in the ordinary course of that
business.
Subsection (4) states that a reference in this Act to the holding

company of a company or other corporation shall be read as a
reference to a corporation of which that company or corporation is a
subsidiary.
Definition of “ultimate holding company”
Section 5 of CA 2016 states that a corporation shall be deemed to be
the ultimate holding company of another corporation if:
(a) the other corporation is a subsidiary of the corporation; and
(b) the corporation is not itself a subsidiary of any corporation.
Definition of “wholly-owned subsidiary”

Section 6 of CA 2016 states that a corporation is a “wholly-owned
subsidiary” of another corporation if it has no members except:
(a) that other corporation or its nominee; or
(b) a wholly-owned subsidiary of that other corporation or its

nominee.
When corporations deemed to be related to each other

Section 7 of CA 2016 states that a corporation is deemed to be related
to each other if:
(a) it is the holding company of another corporation;
(b) it is a subsidiary of another corporation; or
(c) it is a subsidiary of the holding company of another corporation.

Law: s 4, 5, 6, 7 and 259(1)(b) of CA 2016.
FOREIGN COMPANIES
¶1-400 Definition
Foreign company means:

(a) a company, corporation, society, association or other body
incorporated outside Malaysia; or
(b) an unincorporated society, association, or other body which

under the law of its place of origin may sue or be sued, or hold
property in the name of the secretary or other officer of the body
or association duly appointed for that purpose and which does not
have its head office or principal place of business in Malaysia.
The CA 2016 defines a “foreign company” in exactly the same way

described above in s 2(1).
Law: s 7 of CA 2016.
¶1-410 Registration of foreign companies
Every foreign company must register with the Registrar of Companies

before it establishes a place of business or carries on business in
Malaysia. A foreign company shall lodge an “Application for
registration of foreign company” by using the e-form available in
Schedule B of MyCoID3.
Section 562(1) of CA 2016 stipulates registration and information
required in the following manner:
Subsection (1) states that for the purpose of registration under this
Act, a foreign company shall provide to the Registrar the following
information—
(a) the name, identification, nationality and the ordinary place of
residence of every shareholder in Malaysia and, if any of these
persons is a body corporate, the corporate name, place of
incorporation, registration number and the registered office of the
body corporate;
(b) the name, identification, nationality and the ordinary place of

residence of every person who is appointed as a director of the
foreign company in Malaysia;
(c) the list of its shareholders or members at its place of origin;
(d) in the case of a foreign company with share capital, the details of
class and number of shares at its place of origin;
(e) in the case of a foreign company limited without share capital,

the amount up to which the member undertakes to contribute to
the assets of the foreign company at its place of origin in the
event of its being wound up;
(f) the name and address of a person who is a resident in Malaysia,

who is appointed by the foreign company as its agent under a
memorandum of appointment or power of attorney; and
(g) such other information that the Registrar may require.
Subsection (2) states that the application made under sub-s (1) shall
be accompanied with a statement by the agent of the foreign company
confirming his consent for the appointment.
Subsection (3) states that upon being satisfied that the requirements
of this Act have been complied with and on payment of the prescribed
fee, the Registrar shall—
(a) register the foreign company and allocate a registration number
for the foreign company; and
(b) issue a notification of registration in the form and manner as the

Registrar may determine and the notification shall be conclusive
evidence that the requirements as to registration have been
complied with.
Subsection (4) states that for the purposes of para (1)(c), “list of
shareholders or members” means a list of all of the shareholders or
members of the foreign company, provided that if the number of its
shareholders or members exceeds 500—
(a) a list of its 20 largest shareholders or members; and
(b) a certificate by the agent stating that the foreign company has
more than 500 shareholders or members and the full list of
shareholders or members is kept at the registered office of the
foreign company and also kept at the registered office of the
foreign company in Malaysia.
Law: s 562(1) of CA 2016.
Footnotes
3 MyCoID is the acronym for “Malaysia Corporate Identity
Number. It refers to the company incorporation number
which is used as a single source of reference for
registration and transaction purposes with other relevant
Government agencies. With MyCoID, the public can utilise
a single number derived from the incorporation number
assigned by the Companies Commission of Malaysia
(CCM; or in Bahasa Malaysia, Suruhanjaya Syarikat
Malaysia or “SSM”) for registration, reference and
transaction purposes with participating government
agencies. Incorporation of companies and simultaneous
registration with the participating government agencies can
be made via the electronic MyCoID gateway in the CCM’s
website.
¶1-420 Liability of agents
The agent of a foreign company is answerable for the doing of all acts,
matters and things which are required to be done by the foreign
company under CA 2016 and is personally liable for any penalties
imposed on the foreign company for any contravention of such
requirements.
Section 563(1) stipulates that a foreign company shall at all times
appoint an agent in Malaysia who, until he ceases to be an agent in
accordance with sub-s (5), shall—
(a) continue to be the agent of the foreign company;
(b) be answerable for all such acts, matters and things that are
required to be done by the foreign company under this Act; and
(c) be personally liable to all penalties imposed on the foreign

company for any contravention of this Act unless the agent
satisfies the court hearing the matter that the agent should not be
liable.
Subsection (2) states that for the purposes of sub-s (1), the foreign
company shall notify the Registrar of any changes relating to the
registered particulars of the agent within 14 days from the change.
Subsection (3) states that a foreign company or its agent shall lodge
with the Registrar a notice in writing stating that the agent has ceased
or will cease to be the agent on a date specified in the notice.
Subsection (4) states that the agent in respect of whom the notice has
been lodged shall cease to be an agent—
(a) on the expiry of 21 days from the date of lodgement of the notice
with the Registrar or on the date of lodgement of the
memorandum of appointment of another agent in accordance with
sub-s (5), whichever is the earlier; or
(b) if the notice states a date on which the agent is to cease and the
date is later than the expiration of that period, on that later date.
Subsection (5) states that if an agent ceases to be an agent and the

foreign company continues to carry on business or has a place of
business in Malaysia, the foreign company shall appoint another agent
within 21 days from the date the previous agent ceases to be an
agent.
Name of foreign company and its publication
Section 564 of CA 2016 provides:
(1) A foreign company shall be registered under the name as
registered in its place of origin subject to the name being
available under s 26 (“Availability of name”).
(2) Any change in the name of a foreign company shall not be

registered if the name is not available under s 26.
(3) No foreign company to which this Part (ie Pt V “Miscellaneous”)

applies shall use in Malaysia any name other than that under
which it is registered under this Division (ie Div 1 “Foreign
Companies”).
(4) The foreign company and every officer or agent who contravene
this section commit an offence and shall, on conviction, be liable
to a fine not exceeding RM10,000 and in the case of a continuing
offence, to a further fine not exceeding RM500 for each day
during which the offence continues after conviction.
¶1-430 Meaning of carrying on business in Malaysia

Section 561(3) of CA 2016 defines “carrying on business” as including
the following:
• establishing or using a share transfer or share registration office;
or
• administering, managing or otherwise dealing in property situated

in Malaysia as an agent, legal personal representative or trustee,
whether by servants or agents or otherwise.
The following English cases provide some guidance as to whether a

company is “carrying on business” or has a “place of business” in
Malaysia:
• The question to ask is whether the company has a “local habitation
of its own” (Lord Advocate v The Huron and Erie Savings
Company).
• The phrase “place of business” does not necessarily mean the

business premises. It may be a fixed place within the jurisdiction
from which the company has been carrying on its business for a
substantial period (Re Toverishestvo Manufactur Liudwig
Rabanek).
• The place from which the directors conduct the company’s

business may amount to “an established place of business” (Re
Oriel Ltd).
A foreign company would not be regarded as carrying on business in

Malaysia if it:
• is a party to any action or suit or effects any action or suit;
• holds meetings of its directors or shareholders or carries on other

activities concerning its internal affairs;
• maintains any bank account;
• effects any sale through an independent contractor;
• solicits or procures any order that becomes binding only if the

order is accepted outside Malaysia;
• creates evidence of any debt or creates a charge on movable or

immovable property;
• secures or collects any debt;
• conducts an isolated transaction that is completed within 31 days

but not being one of a number of similar transactions repeated
from time to time; and
• invests any of its funds or holds property.

A foreign company which imports goods on a temporary basis for the
purpose of display, exhibition or as trade samples with a view for
subsequent re-exportation within the period of three or within such
further period as the Director General of Customs and Excise may in
his discretion allow would not be regarded as carrying on business.
In CA 2016, a foreign company is prohibited on carrying on business
in Malaysia as stipulated in s 561 in the following manner:
Subsection (1) states that a foreign company shall not carry on a
business in Malaysia unless the foreign company is registered as a
foreign company under this Act.
Subsection (2) states that a foreign company shall not be regarded as
carrying on business in Malaysia for the reasons only that it carries on
activities as specified in Sch 13 of CA 2016 within Malaysia. Schedule
13 is reproduced in Appendix 1.1 at the end of this chapter.
Subsection (3) states that for the purposes of this section, “carrying on
business” includes establishing or using a share transfer or share
registration office or administering, managing or otherwise dealing
with property situated in Malaysia as an agent, legal personal
representative, or trustee, whether by servants or agents or otherwise.
Subsection (4) states that the foreign company and every officer who
contravene this section commit an offence.
Law: s 561 and Sch 13 of CA 2016.
¶1-440 Law governing foreign companies

Not all provisions in the Companies Act apply to foreign companies.
Only those which refer to a “corporation” apply. This is because the
word “company” in the Act is defined as a company incorporated in
Malaysia. “Corporation” includes a foreign company. So, for example,
sections governing winding up of a company do not apply to a foreign
company because these sections refer to “company” only. Other than
the sections in the Act which refer to “corporations” the rules
governing a foreign company would also include the law governing the
company at its place of incorporation.
Law: s 2(1) of CA 2016.
¶1-1000 Review Questions
1. What are the differences between a company incorporated under

Companies Act 2016 and a partnership?
2. What is “lifting of the corporate veil”? Give examples and explain

how the veil of incorporation could be lifted.
3. What are the different types of companies that can be

incorporated under Companies Act 2016?
4. What is an “exempt private company” and the benefits of being

an exempt private company?
¶1-1001 Appendix 1.1

Thirteenth Schedule
[Subsection 561(2)]
ACTIVITIES NOT REGARDED AS CARRYING ON BUSINESS IN
MALAYSIA
A foreign company shall not be regarded as carrying on business in
Malaysia for the reasons only that the company does the following
matters in Malaysia:
(a) is or becomes a party to any action or suit or any administrative
or arbitration proceeding or effects settlement of an action, suit or
proceeding or of any claim or dispute;
(b) holds meetings of its directors or shareholders or carries on

other activities concerning its internal affairs;
(c) maintains any bank account;
(d) effects any sale through an independent contractor;

(e) solicits or procures any order which becomes a binding contract
only if the order is accepted outside Malaysia;
(f) creates evidence of any debt, or creates a charge on movable or

immovable property;
(g) secures or collects any of its debts or enforces its rights in

regard to any securities relating to those debts;
(h) conducts an isolated transaction that is completed within a

period of 31 days, but not being one of a number of similar
transactions repeated from time to time;
(i) invests any of its funds or holds any property; or
(j) imports goods temporarily under the Customs Act 1967 [Act 235]
for the purpose of display, exhibition, demonstration or as trade
samples with a view to subsequent re-exportation within a period
of three months or within such further period as the Director
General of Customs and Excise may in his discretion allow.
CHAPTER 2: INCORPORATION
Formation of a new company ¶2-000
Commencement of business ¶2-100
Pre-incorporation contracts ¶2-200
Conversion of status ¶2-300
Company name ¶2-400
Company seal ¶2-500
FORMATION OF A NEW COMPANY

¶2-000 Incorporation
The Companies Act 2016 (CA 2016) sets out the necessary provisions
for incorporating a new company. Once the application for
incorporation under s 14 has been lodged, the Registrar of Companies
(the “Registrar” or “ROC”), if he is satisfied that the requirements of
the Act as to the application for incorporation are complied with and
upon payment of the prescribed registration fee according to the
Companies Regulations 2017, shall enter the particulars of the
company in the register at his office; assign a registration as the
company’s registration number; and issue a notice of registration in
the form and manner as he may determine. Under s 19, the notice of
registration (NOR), is conclusive evidence that the requirements of the
Companies Act in respect of registration and matters precedent and
incidental to such registration have been complied with and that the
company is duly registered under the Act. The application for
incorporation containing the particulars by every person who desires
to form a company are generally the same for the following types of
companies:
• Private company;
• Public company with share capital;
• Public company limited by guarantee; and
• Unlimited company.
¶2-010 Application for incorporation
If a company is the most appropriate vehicle for conducting an activity,

it will be necessary to go through the practicalities of forming one.
Section 14 of CA 2016 sets out the legislative framework governing
the procedures for incorporating companies.
A company is formed on the date of the NOR given by the Registrar in
the form and manner as the Registrar may determine (s 15). See ¶2-
080.
Upon an application by a company and on payment of a prescribed
fee, the Registrar may issue to the company a certificate of
incorporation in the form and manner as the Registrar may determine
(s 17).
¶2-020 Procedure and secretarial practice
The key players in an application to incorporate a company are the

entrepreneur and the company secretary. Under CA 2016, the basic
steps involved in incorporating a company are:
(1) Application for a name search to the ROC.
(2) Name is approved or rejected.
(3) Upon approval of name, within three months from the date of
approval, lodge the following documents with the ROC together
with prescribed fees:
• Submit the application for incorporation via e-form
(“Application for registration” in Schedule A of MyCoID1);
• Constitution (optional for share capital company, but

compulsory for a company limited by guarantee); and
• A statement by the promoters and directors of their consent

and that they are not disqualified to act.
(4) Payment of registration fee, which is prescribed by reg 8 of the

Companies Regulations 2017.
The requirements for an application for incorporation are stated in s 14

is as follows:
Subsection (1) states that a person who desires to form a company
shall apply for incorporation to the Registrar.
Subsection (2) states that a company shall not be formed for any
unlawful purpose.
Subsection (3) states that the application for incorporation under this
section shall include a statement by every person who desires to form
a company containing the following particulars—
(a) the name of the proposed company;
(b) the status of whether the company is private or public;
(c) the nature of business of the proposed company;
(d) the proposed address of the registered office of the proposed

company;
(e) the name, identification, nationality and the ordinary place of

residence of every person who is to be a member of the company
and, where any of these persons is a body corporate, the
corporate name, place of incorporation, registration number and
the registered office of the body corporate;
(f) the name, identification, nationality and the principal place of
residence of every person who is to be a director;
(g) the name, identification, nationality and the principal place of

residence of the secretary, if any;
(h) in the case of a company limited by shares, the details of class

and number of shares to be taken by a member;
(i) in the case of a company limited by guarantee, the amount up to

which the member undertakes to contribute to the assets of the
company in the event of its being wound up; and
(j) any other information that the Registrar may require.
Subsection (4) states that the application for incorporation shall be

accompanied by a statement from each promoter or director
confirming—
(a) his consent to act as a promoter or to his appointment as a
director, as the case may be; and
(b) that he is not disqualified under this Act to act as a promoter or a

director, as the case may be.
Law: s 14 of CA 2016.
Footnotes
website.
¶2-030 Application for company name
The first step towards incorporation is an application for the availability

and reservation of a name for the company. This is made in a
“Application and reservation for availability of names” form and paying
a search fee of RM50 for every 30 days or part thereof with a
maximum of 180 days in accordance with reg 8(3) of the Companies
Regulations 2017. The search of name will be considered under the
following factors:
• whether the proposed name closely resembles any companies
incorporated;
• whether the proposed name resembles a name that is already

approved and reserved by the Registrar pending incorporation;
• whether the name is undesirable or is categorised under the

names that the Minister has directed the Registrar not to accept
for registration;
• whether the proposed name is a trademark, or patent of a product

and if so, whether written consent has been obtained from the
owner.
Names gazetted by the Minister of Domestic Trade, Co-operatives

and Consumerism
The Minister has gazetted the following names that are not to be used
for an intended company, unless prior approval obtained from him:
(a) Names suggesting connection with a crown member of the
Royal Family or Royal patronage including names containing
such words as “Royal”, “King”, “Queen”, “Prince”, “Princess”,
“Regent” and “Imperial”;
(b) Names suggesting connection with a State or Federal

Government department, statutory body, authority or government
agency or any municipality or other local authority including
names containing such words as “Federal”, “State”, and
“National”;
(c) Names suggesting connection with any ASEAN, Commonwealth

or foreign government or with the United Nations or with any other
international organisation or cartel including names containing
such words as “ASEAN”, “UNESCO”, “NATO”, “EEC”, and
“OPEC”;
(d) Names suggesting connection with any police, party, society,

trade union, co-operative society or building society;
(e) Names including the following words or any word of like import:
“Bank”, “Banker”, “Banking”, “Bumiputra”, “Bureau”,
“Association”, “Congress”, “Club”, “Duty Free”, “Chamber of
Commerce and Industry”, “Chamber of Manufacturer”,
“Chartered”, “College”, “Consumer”, “Council”, “Credit”,
“Exchange”, “Executor”, “Fair Price”, “Finance”, “Foundation”,
“Fund”, “Guarantee”, “Institute”, “Insurance”, “Investment”,
“International”, “Leasing”, “Made in Malaysia”, “Pioneer”,
“Registry”, “Treasure”, “Trust”, “Unit Trust” and “University”;
(f) Names including proper name which is not the name of a

director;
(g) Names that are misleading as to the identity, nature, objects or

purpose of a company or in any other manner;
(h) Names that are blasphemous or likely to be offensive to

members of the public;
(i) Names which:

(i) are translations of a name of a company or foreign company
registered under the Companies Act; or
(ii) may resemble or be mistaken for a name of any other

company or foreign company registered under the
Companies Act; or
(iii) may resemble or be mistaken for a name that is being

reserved for the purpose of incorporation of a new company
or registration of a foreign company or for the purpose of a
change of name of a company or foreign company registered
under the Act.
For the word “Shipping”, the approval of the Marine Department of

Malaysia is required, and for words like “Insurance” and “Insurance
Broker” approval of the Director General of Insurance is required.
In CA 2016, the availability of name of a company is stipulated in s 26
in the following manner:
Subsection (1) states that a name is available if it is not—
(a) undesirable or unacceptable;
(b) identical to an existing company, corporation or business;
(c) identical to a name that is being reserved under the Companies

Act; or
(d) a name of a kind that the Minister has directed the Registrar not
to accept for registration.
Subsection (2) states that the Registrar shall have the power to
determine whether a name referred to in para (1)(a), (b) or (c) is
undesirable, unacceptable or identical, as the case may be.
Subsection (3) states that the Registrar shall publish in the Gazette
any direction referred to in para (1)(d).
Confirmation of availability and reservation of name
Confirmation of availability and reservation of name is stipulated in s
27 of CA 2016 in the following manner:
Subsection (1) states that a person shall apply to the Registrar to
confirm the availability of a proposed name.
Subsection (2) states that if the Registrar is satisfied that the proposed
name is a name which is not subject to sub-s 26(1), the Registrar shall
confirm the availability of the proposed name.
Subsection (3) states that if a person is aggrieved with the decision of
the Registrar under sub-s (2), he may, within 30 days from the date of
the decision of the Registrar, appeal to the Minister whose decision
shall be final.
Subsection (4) states that a person may apply to the Registrar for the
reservation of a name as—
(a) the name of the proposed company prior to its incorporation; or
(b) the name to which a company proposes to change its name

under s 28.
Subsection (5) states that upon being satisfied that the name is not
one which may be refused on any ground referred to in sub-s 26(1)
and upon payment of the prescribed fee, the Registrar may reserve
the name for a period of 30 days from the date of lodgement of the
application or such longer period as the Registrar may allow.
Subsection (6) states that the confirmation of availability of name or
the reservation of name under this section does not in itself entitle the
intended company, company or foreign company to be registered by
that name, either originally or on a change of name.
Subsection (7) states that subject to the Companies Act, the Registrar
shall not be liable for any loss or damage suffered by any person by
reason of error or omission of whatever nature or however arising, if
such error or omission was made in good faith and in the discharge of
duties under this section.
Law: s 26 and 27 of CA 2016; reg 8(3) of Companies Regulations
2017.
¶2-040 Upon approval of company name
Once a name is approved by the Registrar, it will automatically be

reserved for three months from the date of approval. The Registrar will
not register another company which has a name closely resembling
the reserved name during the period covered by the reservation.
During this time, the person assisting in the incorporation will need to
consult with the promoters, directors and subscribers to the company
on details and particulars in order to finalise and complete the
following documents:
• Whether a company constitution is required;
• List of particulars of persons who will be named as first directors,

and first company secretary, if necessary of the intended
company; and
• Preparation of a statement of declaration by a person before

appointment as director, or by a promoter before incorporation of
corporation, that he has given consent and is not disqualified to
act.
¶2-050 Constitution
The CA 2016 does not use the term Memorandum and Articles of
Association but instead uses the term “constitution of the company”.
Per s 31 and 35 of CA 2016, the constitution must contain the
following:
(a) the objects of the company;
(b) the capacity, rights, powers or privileges of the company if the

provision restricts such capacity, rights, powers or privileges;
(c) matters contemplated by the Companies Act to be included in

the constitution; and
(d) any other matters as the company wishes to include in its

constitution.
If the constitution sets out the objects of a company:

(a) the company shall be restricted from carrying on any business or
activity that is not within those objects; and
(b) the company shall have full capacity and powers to achieve such
objects, unless the constitution provides otherwise.
The constitution for a company limited by guarantee are more specific

because such a company is not for profit and every object clause
stated in the constitution must be related to the type of non-profit
objective like promoting research, charitable and scientific work or
other objectives as a trade association or chamber of commerce.
¶2-080 Notice of registration (NOR)

Under s 15 of CA 2016, if the Registrar of Companies is satisfied that
the requirements of the Companies Act as to the application for
incorporation are complied with and upon payment of the prescribed
fee, the Registrar shall:
(a) enter the particulars of the company in the register;
(b) assign a registration number to the company as its company

registration number; and
(c) issue a NOR in the form and manner as the Registrar may
determine.
Under s 19 of CA 2016, the NOR is a conclusive evidence that the

requirements of the Companies Act in respect of registration and
matters precedent and incidental to such registration have been
complied with and that the company is duly registered under this Act.
Law: s 15 and 19 CA 2016.
¶2-090 Why register a company?

The main advantage in registering a company is that the liabilities of
the shareholders are limited as compared with unlimited liabilities for
sole proprietorships and partnerships.
Another purpose of registering a company is to put on record
information on the company which will help members of the public
make an intelligent appraisal of the risks involved in dealing with the
company. Accordingly, the documents that have to be lodged with the
Registrar reflect the kind of information that will be most pertinent to
members of the public, particularly to those who may want to carry out
business transactions with the company, or for third parties
researching the company. The documents put on record at the CCM
registry would show:
• the issued capital of the company;
• the name under which it does business and its nature of business;
• the place of registered and business address;
• details of the constitution;
• the detailed particulars of the directors, shareholders, company

secretaries, auditors and managers of the company; and
• particulars of any debentures, loans and charges registered, etc.
COMMENCEMENT OF BUSINESS
¶2-100 Starting business
A private company can begin to trade from the first day of its
existence, ie the date of registration, as disclosed on the NOR.
However, a public company must submit other documents before it
can commence business and exercise their powers to borrow. The
documents are:
• a statement in lieu of prospectus for a public company not going
for listing under Capital Markets and Services Act 2007 (CMSA
2007), or prospectus issued under CMSA 2007; and
• a statutory declaration by a director or secretary in accordance

with s 190(2) verifying that the directors have paid for all shares
or debenture offered in prospectus, or every director has paid for
the share taken or contracted, if the company is nor listed under
CMSA 2007.
A public company with a share capital that does not issue a

prospectus at formation is prohibited from allotting any shares or
debentures unless a statement in lieu of prospectus has been lodged
at least three days before the first allotment of either shares or
debentures. If this requirement has not been complied with and the
company starts to borrow money, then the company and the officers
involved will be liable to a fine or a term of imprisonment.
Law: s 190(2) and (3) of CA 2016.
¶2-110 Statement in lieu of prospectus

The statement in lieu of prospectus must comply with certain
provisions of the Sch 2 of CA 2016 as follows:
• The statement must be signed by every person who is named in it
as a director or proposed director (or by his agent authorised in
writing).
• The statement must be in the form and state the matters specified
in Pt I, Sch 2 of CA 2016. Among the matters to be specified are
the nominal share capital of the company; the names of the
directors; particulars of any transaction relating to property; and
the names of the auditors.
• Part II, Sch 2 requires certain reports to be made by an approved

company auditor if the company proposes to acquire a business
or where it proposes to acquire shares in a corporation.
• If the person making the report specified in Pt II of the Schedule

finds that it is necessary to make adjustments to the figures of
any profits, losses, assets or liabilities of the company, he may
make the adjustments and indicate that adjustments have been
made. The statement in lieu of prospectus must contain as an
endorsement or attachment a written statement stating the
reasons for the adjustments and signed by the person setting out
the adjustments.
Law: s 190(2) and Sch 2 of CA 2016.
¶2-120 Statutory declaration by secretary or director
A statutory declaration, made in the prescribed form “Statutory

declaration of compliance by company that has not issued
prospectus”, should be made either by a director or the secretary of a
public company. It verifies that every director has paid for all the
shares he has contracted to take and for which he is liable to pay in
cash, an amount in the same proportion as is payable on application
and allotment on the shares payable in cash.
Once both the statement in lieu of prospectus and statutory
declaration have been submitted, the Registrar will issue the public
company with a certificate that the public company is entitled to
commence business. The public company can then commence
business and exercise its borrowing powers.
Law: s 190(2) of CA 2016.
¶2-130 Where a prospectus has already been issued

Section 190(1) of CA 2016 stipulates that where a public company
having a share capital has issued a prospectus inviting the public to
subscribe for its shares or has issued a prospectus under CMSA 2007
in relation to its shares, the public company shall be entitled to
commence any business or exercise any borrowing powers:
(a) if no money is or may become liable to be repaid to applicants
for any shares or debentures offered for public subscription by
reason of any failure to apply for or obtain permission for listing
for quotation on any stock exchange;
(b) if:
(i) the shares held subject to the payment of the whole amount
in cash have been allotted to an amount not less in the whole
than the minimum subscription; and
(ii) every director has paid to the company on each of the

shares taken or contracted to be taken by the director, and
for which the director is liable to pay in cash, a proportion
equal to the proportion payable on application and allotment
on the shares offered for public subscription.
Subsection (2) states that where a public company having a share

capital has not issued a prospectus inviting the public to subscribe for
its shares or has not issued a prospectus under CMSA 2007, the
public company shall be entitled to commence any business or
exercise any borrowing power if:
(a) a statement in lieu of prospectus which complies with this Act
has been lodged with the Registrar; and
(b) every director of the company has paid to the company on each
of the shares taken or contracted to be taken by the director and
for which the director is liable to pay in cash, a proportion equal to
the proportion payable on application and allotment on the shares
payable in cash.
Subsection (3) states that a company referred to in sub-s (1) or (2)

shall lodge with the Registrar a statutory declaration by the secretary
or one of the directors of the company verifying that para (1)(a) and
(b) or para (2)(a) and (b), as the case may be, have been complied
with, and the company shall become entitled to commence business
or exercise any borrowing powers from and after the lodgement of the
statutory declaration.
Subsection (4) states that the statutory declaration referred to in sub-s
(3) shall be supported with a statement containing the following
particulars—
(a) an abstract of receipts and payments relating to the shares and
debentures issued under the prospectus or statement in lieu of
prospectus and particulars concerning the balance remaining in
hand, and an account or estimate of the preliminary expenses;
(b) the particulars of any contract which is entered into by the

company before the commencement of business; and
(c) such other information as the Registrar may require.
Subsection (5) states that any contract made by a company before the
date on which it is entitled to commence business shall be provisional
only and shall only be binding on the company to commence
business.
Subsection (6) states that nothing in this section shall prevent the
receipt by the company of any money payable on application for the
debentures if shares and debentures are offered simultaneously by a
company for subscription.
Subsection (7) states that if any company commences business or
exercises borrowing powers in contravention of this section, every
person who is responsible for the contravention commits an offence
and shall, on conviction, be liable to a fine not exceeding RM20,000
and, in the case of a continuing offence, to a further fine not exceeding
RM500 for each day during which the offence continues after
conviction.
Subsection (8) states that the company and every officer who
contravene sub-s (3) commit an offence and shall, on conviction, be
liable to a fine not exceeding RM10,000 and, in the case of a
continuing offence, to a further fine not exceeding RM500 for each day
In a summary, a public company having a share capital that has
issued a prospectus inviting the public to subscribe for its shares shall
not commence business or exercise any borrowing powers:
• whilst there remains the possibility of money received from the
public on application of shares or debentures being returned
because of failure to apply for or receive Stock Exchange listing;
• unless shares, for which a cash subscription as to the full nominal
value is payable, have been allotted to an amount not less than
the minimum subscription;
• unless every director has paid cash for those shares for which he
is liable to pay cash, to the same proportion as is payable on
application and allotment on the shares offered for public
subscription; and
• unless a statutory declaration by the secretary or one of the

directors has complied with s 190(3) of the new CA.
Law: s 190(1), (3) to (8) of CA 2016.
¶2-140 Where a prospectus has not been issued

A public company having a share capital which has not issued a
prospectus may commence business or exercise borrowing powers
only when:
• it lodges a statement in lieu of prospectus with the Registrar;
• every director has paid cash for those shares for which he is liable
to pay cash, to the same proportion as is payable on application
and allotment; and
• statutory declaration in the prescribed form by the secretary or one

of the directors verifying that the above condition has been
complied with.
Law: s 190(2) and Sch 2 of CA 2016.
PRE-INCORPORATION CONTRACTS
¶2-200 Pre-incorporation contracts
A pre-incorporation contract may have been entered into by the

promoters of an intended company. Thus, it is important to know the
status of pre-incorporation contracts.
A pre-incorporation contract is described in s 65 of CA 2016 as
follows:
Subsection (1) states that a contract or transaction that purports to be
made by or on behalf of a company at a time when the company has
not been formed has effect as a contract or transaction made with the
person purporting to act for the company or as agent for it, and he is
personally liable on the contract or transaction accordingly.
Subsection (2) states that notwithstanding sub-s (1), a contract or
transaction referred to in that subsection may be ratified by the
company after its incorporation and the company shall be bound by
the contract or transaction as if the company had been in existence at
the date of the contract or transaction and had been a party to the
contract or transaction.
Law: s 65(1) and (2) of CA 2016.
¶2-210 Status of pre-incorporation contracts

A company’s existence begins on the date of the issue of the NOR (or
issuance of the certificate of incorporation under former Companies
Act 1965) by the ROC. It may be necessary to enter into contracts on
the company’s behalf prior to its incorporation, eg to effect preliminary
agreements for the purchase of a business or property. Further,
persons who formed the company may wish to recover expenses
incurred in the course of doing so.
A company cannot be bound by a contract made on its behalf prior to
incorporation as it is not yet in existence. Where a contract purports to
be made by a company, or by a person acting as agent for a
company, at a time when the company has not been formed, the
person purporting so to act is to be personally liable for the contract.
The Act states that a person contracting on behalf of a company prior
to incorporation is personally liable for the contract in the absence of
an express agreement to the contrary. However, the agent can avoid
liability if there was clear exclusion of personal liability when the
contract was signed.
The Act however provides for the ratification of contracts made prior to
incorporation and after that the company shall be bound by such
contracts as if the company had been in existence the day the
contract was entered into. Note that, in the first place, the contract
must have been purportedly entered into by the company or by any
person on behalf of it.
Where the name of the company in the contract is different from the
name of the company which is incorporated, the name of the
incorporators and the objects of the company have to be looked at for
an indication that it is the same company. The name of the company
is only one of the identifying factors (Saunderson v Griffiths).
Section 65 of CA 2016 describes a pre-incorporation contract — see
¶2-200.
Law: s 65 and 66 of CA 2016.
¶2-220 Express and implied ratification

A company can ratify a contract expressly or impliedly. The company
expressly ratifies a contract when, at the board of directors meeting or
the general meeting, the company passes a resolution to adopt the
contract.
It is implied ratification if the company does an act which will indicate
unequivocally that it considers the contract binding. A good example
of this is when the company uses goods ordered under the contract.
CONVERSION OF STATUS
¶2-300 Conversion of status
As companies can be formed to be a private, public or unlimited

company, their status, too, can be converted from one status to the
other and vice versa.
¶2-310 Conversion from public to private or private to

public
Section 41 of CA 2016 provides for the conversion from a public

company to a private company or a private company to a public
company:
Subsection (1) states that a public company having a share capital
may convert to a private company by passing a special resolution and
shall lodge with the Registrar a notice of conversion and specifying an
appropriate alteration to its name.
Subsection (2) states that a private company may convert to a public
company by a special resolution and shall lodge with the Registrar—
(a) a notice for conversion and specifying an appropriate alteration
to its name;
(b) a statement in lieu of prospectus; and
(c) a statutory declaration verifying that para 190(2)(b) has been

complied with.
Subsection (3) states that subject to this Act, upon the lodgement of
the notice for conversion, the Registrar shall—
(a) make such endorsements in or alterations to the register to
record the conversion; and
(b) issue to the company a notice of conversion and cancel the

previous NOR or certificate of incorporation of the company, as
the case may be.
Subsection (4) states that the conversion shall take effect on the issue
of the notice of conversion under para (3)(b).
Subsection (5) states that a conversion of a company under this
section shall not—
(a) affect the identity of the company or any rights or obligations of
the company; or
(b) render defective any legal proceedings by or against the
company.
Subsection (6) states that any legal proceedings that could have been
continued or commenced by or against the company prior to the
conversion may, notwithstanding any change in the company’s name
or capacity in consequence of the conversion, be continued or
commenced by or against the company after the conversion.
A private company is any company that is not a public company. It is
possible for a private company to convert its status so as to become a
public company. To achieve this, the company must be converted
under the procedure set out in the Companies Act.
Provided its constitution does not contain anything to the contrary, a
private company may convert to a public company by lodging with the
Registrar the following documents:
• a copy of a special resolution determining to convert to a public
company and specifying an appropriate alteration to its name (a
satisfactory resolution complying with this requirement might be):
“… that the company be converted to a public company and
that the name of the company be altered from ABC Sdn Bhd
to ABC Bhd”;
• a statement in lieu of prospectus; and
• a statutory declaration made under s 190(2)(b) — see ¶2-130 for

this provision.
A fee to be determined by the Registrar must accompany the

application for conversion.
Law: s 41 of CA 2016.
¶2-320 Notice of conversion to a public company

Once the ROC is satisfied with the application for conversion from a
private to public company, a notice of conversion will be issued and
the previous notice of registration or certificate of incorporation of the
company, as the case maybe, will be cancelled. The limitations,
restrictions and prohibitions imposed by the Companies Act as
embodied in the constitution (if any) of the private company will cease
to form part of the constitution. The CA 2016 provides that a company
having a share capital (other than a non-liability company) may be
incorporated as a private company, without a constitution, but it must
adhere to the following:
(a) restrict the right to transfer its shares [s 42(2)];
(b) limited to not more than 50 members (counting joint-holders of

shares as one person and not counting any person in the
employment of the company or its subsidiary or any person who
while previously in the employment of the company or of its
subsidiary was and thereafter has continued to be a member of
the company) [s 42(1), (3)(a) and (b)];
(c) prohibit any invitation to the public to subscribe for any shares in
or debentures of the company [s 43(1)(a)]; and
(d) prohibit any invitation to the public to deposit money with the
company for fixed periods or payable at call, whether bearing or
not bearing interest [s 43(1)(c)].
Thus, when a conversion takes place, all those restrictions required by

CA 2016 are deleted from the constitution, if there is one.
No change in legal identity
A private company which converts to a public company does not
change its basic identity. Certain characteristics of such a conversion
are:
• It does not affect the rights or obligations of the company.
• It does not render defective legal proceedings by or against the

company.
• Any legal proceedings that could have been continued or

commenced by or against the company prior to conversion may,
notwithstanding any change in the company’s name or capacity in
consequence of the conversion, be continued or commenced by
or against it after conversion.
Section 41(5) of CA 2016 states that a conversion of a company under

this section shall not:
the company; or

company.
conversion may, notwithstanding any change in the company’s name
or capacity in consequence of the conversion, be continued or
Law: s 41(5) and (6) of CA 2016.
¶2-330 Conversion from public to private

The conversion of a public company as a private company is provided
for under CA 2016 in s 41. A public company converts to a private
company by lodging with the Registrar a copy of a special resolution,
which must do two things:
• It must determine to convert the company to a private company in
a notice of conversion and specify an appropriate alteration to the
name.
• It must alter the constitution (if the company has one) so far as
necessary to impose the restrictions, limitations and prohibitions
of the Act as required.
A specimen resolution that would meet the statutory requirement is:

“That the company be converted to a private company and that
accordingly:
(a) the name of the company be altered from ABC Bhd to ABC
Sdn Bhd; and
(b) the constitution of the company be altered by the insertion

of the following new clause, stating:
‘(i) The directors may not in their absolute discretion
register any transfer of shares.
(b) The number of members (counting joint-holders of

shares as one person and not counting any person in
the employment of the company or of its subsidiary or
any person who while previously in the employment of
the company or of its subsidiary was and thereafter has
continued to be a member of the company) exceed 50.
(c) Any invitation to the public to subscribe to any shares in

or debentures of the company is permitted.
(d) Any invitation to the public to deposit money with the

company for fixed periods or payable at call, whether
bearing or not bearing interest, is permitted.’”
A copy of this special resolution must be lodged, signed by the

secretary or a director, within 14 days after the passing of the said
resolution. On compliance with the registration requirements, the ROC
will issue a notice of conversion that the company is converted to a
private company, and the previous notice of registration or certificate
of incorporation, as the case may be, will be cancelled.
No change in legal identity
As with a private company which converts to a public company, a
public company which converts to a private company does not change
its basic identity. The conversion does not affect or alter the rights or
obligations of the company nor does it render defective legal
proceedings by or against the company.
Law: s 41(1) of CA 2016.
COMPANY NAME
¶2-400 Refusal of Registrar to register name
The Registrar will refuse to register a name which does not conform to
the criteria set out in CA 2016. If a person is aggrieved by the
Registrar’s decision, he may apply to the High Court for a writ of
mandamus compelling the Registrar to register the name. However,
the courts have been very reluctant to interfere with the Registrar’s
decision. The courts will interfere only when it can be shown that the
Registrar has not exercised any discretion, or has exercised his
discretion on the wrong principle of law, or that he has acted upon an
extraneous consideration which should not have been taken into
account (R v Registrar of Companies).
The Registrar has the same powers to direct a company to change its
name. However, the direction to change a name will be given only if
the name is undesirable or that it is a name of a kind which the
Minister has directed the Registrar not to register.
Under s 29 of CA 2016, the Registrar has the power to direct a
company to change its name:
Subsection (1) states that if the Registrar believes on reasonable
grounds that a name under which a company is registered should not
have been registered, he shall serve a written notice to the company
to change its name within 60 days or a longer period as he deems fit.
Subsection (2) states that if a company fails to change its name within
the period as stated in the notice issued under sub-s (1), the Registrar
shall have the power to change the company’s name to its company
registration number or any such expression as assigned under sub-s
25(2) by altering the company’s registration details to reflect the
change.
contravene the direction of the Registrar under this section commit an
offence.
Law: s 26(2) and 29 (applies to foreign company) of CA 2016.
¶2-410 Common law remedy in name clashes
A company which is aggrieved at having its name copied, but which

cannot prompt the Registrar to order a change, may seek a court
order to restrain the new company from using the name. This is called
a “passing off” action. It is intended to prevent a company from
“passing off” its goods or services as those of another company under
Trade Mark or Patent Laws. It is necessary to show a real probability
of deception from use of the name, and damage to the originator of
the name from its exploitation by the new company. Although
fraudulent intent is not an essential element, the existence of it is a
factor in deciding whether or not the names are likely to deceive
others into thinking that the two companies are connected or related
(Ewing v Buttercup Margarine Co Ltd; Australian Guarantee Corp Ltd
v Sydney Guarantee Corp Ltd). It may also be possible to protect a
name by its use as a copyright.
¶2-420 Difference between change of name and change

of status
There is a difference between a change of name and a change of

status. A change of name is seen as the name of the company being
very different with its previous name. Sometimes, a change of name
and a change of status can occur at the same time.
For change of name, a search for the availability of name must be
carried out first, whereas if it is only a change of status, no search of
name is required.
For example:
(i) Change of name from “Dulang Mobility Sdn Bhd” to “Transmobile
Telephone Sdn Bhd”; and
(ii) Change of name and status: “Dulang Mobility Sdn Bhd” to

“Transmobile Telephone Bhd”.
The procedure for change of a company name is set out in CA 2016.

A special resolution must be passed. This is lodged with the ROC in a
prescribed form — “Notice of Resolution” within 30 days of it being
made. The name change is effected by special resolution, that is a
resolution that is passed by a majority of not less than three-fourths
(3/4) of such members as being entitled to do so, voting in person or,
when proxies are allowed, by proxy, at a general meeting of which not
less than 21 days’ notice specifying the intention to propose the
resolution as a special resolution has been duly given.
The procedure for change of name and status would involve the
passing of special resolution but in two areas, ie to change the name
and to change the status of the company. The general procedure is as
follows:
(i) Make a search for the availability of the new name in a
prescribed form to be determined by the Registrar.
(ii) Call for a general meeting of members and pass a special

resolution to change the name that has been approved by the
Registrar and a special resolution to change the status from “Sdn
Bhd” to “Bhd”.
(iii) Documents required to be lodged with the Registrar for change

of status:
(a) Special Resolution;
(b) A copy of the NOR or certificate of incorporation, as case

maybe;
(c) Original copy of Request for Availability of Name;
(d) A copy of the name search approval letter from the

Registrar;
(e) File a Statement in Lieu of a Prospectus;
(f) Lodge a Statutory Declaration stating that no prospectus had

been issued; and
(g) Processing fee as prescribed by Registrar.

The procedure for change of name only is as follows:
(i) Make a search for the availability of the new name in the
prescribed form.
(ii) Call for a general meeting and pass a special resolution to

change the name that has been approved by the Registrar.
(iii) Documents required to be lodged with the Registrar:

(a) Special Resolution;
(b) A copy of NOR or certificate of incorporation, as case

maybe;
(c) Original Copy of Search of Availability of name;
(d) A copy of the name search approval letter from Registrar;

and
(f) Processing fee of as determined by Registrar.
Law: s 28 and 41 of CA 2016.
¶2-430 Notice and resolution

The requirement that the notice of a general meeting specifying the
intention to change the company’s name must not be less than 21
days means that 21 clear days must elapse between the date of issue
of the notice and the date of the meeting. The form that the notice
might take is:
NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting of XYZ SDN

BHD will be held at the Registered Office at Suite A, 123 Jalan ABC, Petaling Jaya on
Monday, …………. at 11.00 am for the purpose, and if thought fit, passing the following
Special Resolution:
That the name of the company be changed from “XYZ SDN BHD” to “ABC SDN BHD”
taking effect upon the issuance of the certificate of change of name by the Registrar of
Companies.
By Order of the Board
Secretary Petaling Jaya
or
For and on behalf of the Board
(Name of Director)
Director
Petaling Jaya
Date:
Note: A proxy form is attached. A proxy need not be a member of the company but must
comply with s 334 and 335 of CA 2016.
Upon passing the special resolution, it must be filed with the ROC by
the secretary in the following relevant e-forms:
(a) “Application for change of name”; or
(b) “Notice of conversion from an unlimited company to a limited

company”; or
(c) “Notice of conversion from a public company to a private

company”; or
(d) “Notice of conversion from a private company to a public

company”,
in Schedule B of MyCoID.
¶2-440 Effect on identity
The change of a company’s name, made in accordance with the CA

2016, does not affect the identity of the company nor any of its rights
or obligations, nor does it render defective any legal proceedings by or
against the company. Any legal proceedings that might have been
continued or commenced by its former name may be continued or
commenced against it by its new name.
¶2-450 Disclosure of a company’s name

The name and company number of the company should be displayed
or affixed in a prominent position, romanised and in easily legible
letters on the outside of every one of its registered offices, every place
of business or every place where its books are kept [s 30(1)].
Although not specified in CA 2016, as a good practice, for the
registered office, the words “Pejabat Yang Didaftarkan” should also be
displayed or affixed in the same manner.
A company’s name and its company number must appear on all its
business letters, statements of account, invoices, official notices,
publications, bills of exchange, promissory notes, endorsements,
cheques, orders, receipts and letters of credit.
The company seal, official seal or share seal must also have on it the
company’s name and its company number in clear romanised letters.
In the case of a company having an official seal used as share seal, it
must also have the words “securities” engraved on the seal. If default
is made in complying with the abovementioned, the company shall be
guilty of an offence under CA 2016.
An officer of a company is liable to a fine or can be made personally
liable if he uses or authorises the use of the following instruments
where they do not bear the company’s name:
• any seal purporting to be the company seal; or
• any business letters, statement of account, invoice or official notice

or publication of the company; or
• any bill of exchange, promissory note, cheque, receipt or letter of

credit.
Where the company has changed its name, the former name shall
appear beneath its present name on all documents, business letters,
statements of account, invoices, official notices, publications, bills of
exchange, promissory notes, endorsements, cheques, orders, receipts
and letters of credit of, or purporting to be issued or signed by or on
behalf of, the company for a period of not less than 12 months from
the date of the change, and if default is made in complying, the
company shall be guilty of an offence under the Companies Act.
Section 30 of CA 2016, stipulates the publication of name in the
following manner:
Subsection (1) states that a company shall display its registered name
and company registration number at—
(a) its registered office;
(b) every place where its business is carried on; and
(c) every place where its books are kept.
Subsection (2) states that a company shall disclose its registered

name and company registration number on—
(a) its business letters, notices and other official publications,
including in electronic mediums;
(b) its websites;
(c) its bills of exchange, promissory notes, endorsements and order

forms;
(d) cheques purporting to be signed by or on behalf of the company;
(e) orders invoices and other demands for payment, receipts and
letters of credit purporting to be issued or signed by or on behalf
of the company; and
(f) all other forms of its business correspondence and

documentation.
Subsection (3) states that the Registrar shall determine the manner a
registered name is to be displayed or disclosed by a company.
Subsection (4) states that for the purposes of sub-s (2), where a
company changed its name under s 28 or s 29, the former name of
the company shall appear beneath its present registered name for a
period of not less than 12 months from the date of the change.
Law: s 30 of CA 2016.
COMPANY SEAL
¶2-500 Company seal
Under s 61 of CA 2016, a company may or may not have a common

seal. A company which has a common seal shall have its name and
registration number engraved in legible romanised characters on the
seal. The company and every officer who contravene this commit an
offence.
An officer of a company, or a person acting on behalf of a company,
commits an offence if he uses, or authorises the use of, a seal
purporting to be a seal of the company on which its name is not
engraved as required shall, on conviction, be liable to a fine not
exceeding RM50,000.
In common law, the common seal is usually taken to be the signature
of the company, as an entity for signing all legal documents such as
agreements, share certificates and debentures. As it is an important
instrument, it should be properly kept and used only when the board of
directors pass a resolution for the said use.
The law requires that the company’s name and its company number
appear in legible characters on the common seal. The CA 2016
provides formalities concerning the use of the common seal, and if a
company has a constitution it shall also provide for the use of common
seal. The CA 2016 prescribes that the common seal be affixed only in
accordance with a resolution of the board of directors authorising that
the affixing of the common seal be made in the presence of two
directors or a director and the secretary or another person nominated
by the directors. Note that a person cannot sign in the dual capacities
of director and secretary, even though the law allows a person to be
appointed to act as director and secretary at the same time.
¶2-510 Documents requiring sealing and types of seals
The sort of contracts which require sealing are:

• contracts without consideration, that is, deeds of gifts, leases
where the term exceeds three years;
• agency contracts where the agents have authority to bind the

principals by deed; and
• transfers of ships or transfers of shares in ships.
Contracts which can be made in writing or orally need not be made

under seal. The person making the contract on behalf of the company
must act under the express or implied authority of the company.
All share certificates issued by the company must be under the
company’s common seal. The company may have a share seal to
authenticate its shares if the constitution so allows. A share seal is a
facsimile of the common seal with the words “Share Seal”. The
company may also have an official seal for use abroad if the
constitution so allows. This seal is a replica of the common seal but
with the name and place where it is to be used added on its face. The
person affixing the seal will have to sign and certify on the instrument
to which the seal is affixed the date and the place at which the seal is
affixed. A company having an official seal for use outside Malaysia
may in writing under its common seal authorise any person appointed
for the purpose to affix the official seal to any deed or other document
to which the company is a party.
The provisions for company seals are stipulated in s 61 of CA 2016 as
follows:
Subsection (1) states that a company may, but does not need to, have
a common seal.
Subsection (2) states that a company which has a common seal shall
have its name and registration number engraved in legible romanised
characters on the seal.
contravene sub-s (2) commit an offence.
Subsection (4) states that an officer of a company, or a person acting
on behalf of a company, commits an offence if he uses, or authorises
the use of, a seal purporting to be a seal of the company on which its
name is not engraved as required by sub-s (2) and shall, on
conviction, be liable to a fine not exceeding RM50,000.
With regard to the official seal for use abroad, s 62 of CA 2016
stipulates the following:
Subsection (1) states that subject to the conditions or limitations in the
constitution, a company that has a common seal may have an official
seal for use outside Malaysia.
Subsection (2) states that the official seal shall be an exact copy of the
company’s common seal, with the addition on its face of the place
where it is to be used.
Subsection (3) states that the official seal when duly affixed to a
document has the same effect as the company’s common seal.
Subsection (4) states that a company having an official seal for use
outside Malaysia may in writing under its common seal authorise any
person appointed for the purpose to affix the official seal to any deed
or other document to which the company is a party.
Subsection (5) states that the person affixing the official seal shall
certify in writing on the deed or other document to which the seal is
affixed the date and place it is affixed.
Section 63 of CA 2016 provides for the use of a company’s official
seal for share certificates, etc:
Subsection (1) states that subject to the conditions or limitations in the
constitution, a company that has a common seal may have an official
seal to seal—
(a) securities issued by the company; or
(b) documents creating or evidencing securities so issued.
Subsection (2) states that the official seal—

(a) shall be an exact copy of the company’s common seal, with the
addition on its face of the word “Securities”; and
(b) when duly affixed to the document has the same effect as the
company’s common seal.
Law: s 61, 62 and 63 of CA 2016.
¶2-520 Share sealing register

The CA 2016 and constitution (if any) stipulate how the common seal
to be affixed, normally only in the presence of a director and a
secretary, or a director and some other person nominated by the
directors. This arrangement may cause some inconvenience because
members of the board of directors are not always available to pass a
resolution when needed to authorise the use of the common seal.
To solve this problem, many companies, in practice, keep a seal
register. The board first passes a resolution authorising the affixation
of the common seal on any document that requires the use of the seal
and for the particulars of that document to be properly entered in the
seal register. The officers of the company executing the document will
then initial the entries in the seal register. The register will be tabled
for the board’s confirmation at every subsequent board meeting.
1. Upon incorporation, the Registrar of Companies shall issue a

notice of registration. What is the significance of a notice of
registration?
2. Explain the status of pre-incorporation contracts.
3. Explain the procedure for converting a private company to a

public company with shares.
4. What is the difference between a change of name and a change

of status of a company?
5. What is the difference between a “common seal” and an “official
seal”?
CHAPTER 3: COMPANY’S
CONSTITUTION
Constitutional documents ¶3-000
Memorandum of association merged as constitution ¶3-100
Articles of association merged as constitution ¶3-200
Effect of constitution ¶3-300
Objects and powers ¶3-400
Alteration of constitution ¶3-500
Ultra vires ¶3-700
Indoor management rule ¶3-800
CONSTITUTIONAL DOCUMENTS
¶3-000 Introduction — the constitution (previously
known as Memorandum and Articles of Association)
Under the Companies Act 2016 (CA 2016), a private company may be
incorporated without a constitution. The term “Memorandum and
Articles of Association” is no longer used, but instead “constitution” is
used. The constitution shall contain provisions relating to:
(a) The objects of the company;
(b) The capacity, rights, powers or privileges of the company if the

provisions restricts such capacity, rights, powers or privileges;
(c) Matters contemplated by the Act to be included in the

constitution; and
(d) Any other matters as the company wishes to include in its

constitution.
Under CA 2016, the “Memorandum” is merged as constitution, which

sets out the essential details of the company’s existence and governs
the fundamental basis on which the company operates. The
constitution also contains the “Articles” that govern the day-to-day
administration of the company’s affairs for companies that adopt a
constitution. If a company does not have a constitution, the Act shall
govern the internal administration of the company.
The CA 2016 provides in Pt II (“Formation and Administration of
Companies”), under Div 5 (“Constitution of a Company”) the following
sections:
Section 31 of the Companies Act stipulates the constitution of a
company in the following manner:
Subsection (1) states that a company, other than company limited by
guarantee, may or may not have a constitution.
Subsection (2) states that if a company has a constitution, the
company, each director and each member of the company shall have
the rights, powers, duties and obligations set out in this Act, except to
the extent that such rights, powers, duties and obligations are
permitted to be modified in accordance with this Act, and are so
modified by the constitution of the company.
Subsection (3) states that if a company has no constitution, the
company, each director and each member of the company shall have
the rights, powers, duties and obligations as set out in this Act.
Section 32 of CA 2016 states that a company may adopt a
constitution:
Subsection (1) states that a company may adopt a constitution for the
company and the adoption shall be by way of special resolution.
Subsection (2) states that the constitution of a company has no effect
to the extent that it contravenes or is inconsistent with the provisions
of this Act.
Subsection (3) states that subject to the provisions of this Act, the
constitution adopted under sub-s (1) shall be binding on the company,
its directors and its members.
Subsection (4) states that the company shall lodge the constitution
with the Registrar of Companies (“ROC” or “Registrar”) within 30 days
from the adoption of a constitution under sub-s (1).
Section 33 of CA 2016 stipulates the effect of constitution as follows:
Subsection (1) states that the constitution shall, when adopted, bind
the company and the members to the same extent as if the
constitution had been signed and sealed by each member and
contained covenants on the part of each member to observe all the
provisions of the constitution.
Subsection (2) states that all money payable by any member to the
company under the constitution shall be a debt due from such
member to the company.
Law: s 31, 32 and 33 of CA 2016.
MEMORANDUM OF ASSOCIATION MERGED

AS CONSTITUTION
¶3-100 Contents of the constitution
In a conventional company’s constitution, the clauses that are

commonly found relate to the following:
• the name of the company;
• the objects of the company;

• the amount of the company’s share capital (unless the company is
an unlimited company) and the manner in which the share capital
is divided into shares of fixed amounts;
• that the liability of members is limited (if the company is one that is
limited by shares);
• that the liability of members is limited and the maximum amount

the members are called upon to individually contribute if the
company is wound up (if the company is a company limited by
guarantee);
• that the liability of the members is unlimited (if the company is an

unlimited company);
• the names, addresses and occupations of the subscribers; and
• that the subscribers “are desirous of being formed into a company

in pursuance of the constitution” and that they agree to take up
the number of shares set out opposite their respective names.
It is also a common practice that the constitution should be:

• printed;
• divided into numbered paragraphs;
• dated; and
• signed by the persons desiring the incorporation of the company,

and witnessed by the first company secretary.
Other clauses governing issues such as share transfer restrictions and

limitations on the number of members may be included.
The CA 2016 stipulates the contents of a company’s constitution
under s 35 as follows:
constitution of a company may contain provisions relating to—

(c) matters contemplated by this Act to be included in the

constitution; and

constitution.
Subsection (2) states that for the purposes of para (1)(a), if the
constitution sets out the objects of a company—
Law: s 35 of CA 2016.
ARTICLES OF ASSOCIATION MERGED AS

CONSTITUTION
¶3-200 Status of constitution
If a company has a constitution it shall rule the internal management

of a company. The force and effect of constitution can be summarised
as follows:
• They are part of CA 2016.
• If there is an inconsistency between the constitution of a company,

the provisions of CA 2016 shall prevail, unless provisions in the
Act allows differences. Where this occurs, the provision in the
constitution shall contain the words “subject to constitution” or “as
specified in the constitution”.
• When a constitution is adopted and registered, they bind the
company and the members as if they were a contract under seal.
• A company may sue a member and a member may sue the

company to enforce or restrain breaches of the constitution or CA
2016.
• When registered, the constitution binds each member of the

company to one another as if they were a contract under seal.
• The constitution cannot constitute a contract between the

company and an outsider, and of which that outsider can take
advantage.
• The constitution is a public document and everyone is regarded in

law as having notice of them (Griffith v Paget) and as having
understanding them (Oakbank Oil Co v Crum).
• The constitution should be regarded as a business document and

construed so as to give them reasonable business efficacy
(Holmes v Keyes).
¶3-210 Registration and adoption of constitution

Companies limited by guarantee must lodge their constitution with the
Registrar and the signatures of the subscribers must be witnessed by
the first company secretary.
Note that if a company limited by shares does not have a constitution,
the provisions of CA 2016 automatically apply. Where companies
limited by shares do adopt a constitution and register it with the
Registrar, the constitution shall apply insofar as it is not excluded or
modified by CA 2016.
For listed companies, the constitution must comply with the listing
requirements of Bursa Malaysia.
Law: s 31, 32, 33 and 35 of CA 2016.
¶3-220 Contents of the constitution
The CA 2016 does not prescribe a model of a share capital company’s

constitution. However, the Act does lay down the essential provisions
that should be covered, ie s 35 states:
constitution of a company may contain provisions relating to—

(c) matters contemplated by this Act to be included in the

constitution; and

constitution.
Subsection (2) states that for the purposes of para (1)(a), if the
constitution sets out the objects of a company—
It is up to a company to decide what to include in its constitution.

However, companies in Malaysia which are unlimited or limited by
guarantee or limited by shares must state the number of members
with which they propose to be registered. (Effective 1 February 1986,
a company limited by guarantee with a share capital can no longer be
formed in Malaysia.)
A company which is unlimited and has a share capital must state the
amount of share capital with which it proposes to be registered. It
must also state the division of the share capital into shares of a fixed
amount.
Generally, the constitution covers the following areas:
• share capital and the variation of rights;
• liens;
• forfeiture;
• calls and payment on shares;
• transfer, transmission and forfeiture of shares;
• conversion of shares into stock;
• alteration of capital;
• proxy and corporate representative;
• general meetings and proceedings at general meetings;
• written resolutions;
• appointment, powers, duties and proceedings of directors;
• appointment of managing directors, associate directors and

secretary;
• accounts, dividends and reserves;
• capitalisation of profits;
• notices;
• winding up; and
• indemnity.
The CA 2016 is silent, but it is best practice that the constitution be:
• printed;
• divided into numbered paragraphs; and
• signed by every subscriber to the constitution in the presence of a

witness.
It is good practice to include a subscribers’ signatory page in the

constitution so subscribers know that they are bound by the
constitution, which serves as a legal contract between the company
and the subscriber as well as future members/shareholders of the
company. If subscribers’ names are merely recorded in the Application
for Registration, such subscribers may not be aware that they are
members and are obliged to be governed by the constitution.
Law: s 35 and 36 of CA 2016.
¶3-230 Required contents for certain companies

The constitution of some companies must have certain matters
included:
• In a private company, the constitution must include:
(a) a restriction on the right to transfer shares;
(b) a limitation on the number of members; and
(c) a prohibition against invitations to the public to subscribe for

shares or debentures or to deposit money with the company.
• In an unlimited company (if the company has a share capital), the

constitution must state the amount of share capital with which the
company proposes to be registered and the division of it into
shares of a fixed amount.
• In a company with preference shareholders, the constitution must

set out, unless they are already included in the, constitution the
rights of the holders of preference shareholders with regard to the
repayment of capital, participation in surplus assets and profits,
cumulative or non-cumulative dividends, voting and priority of
payment of capital and dividends in relation to other shares or
other classes of preference shares.
• In a listed company, the constitution must not restrict free dealings

in its securities which are quoted or are to be quoted (except
when required by law). The constitution of any company seeking
listing for its securities must comply with the Bursa Malaysia
Listing Requirements.
Law: s 31, 32 and 34 of CA 2016.
¶3-240 Change of number of members

Unlimited companies, companies limited by guarantee and companies
limited both by shares and guarantee must inform the Registrar of any
increase in membership beyond the registered numbers within one
month after the increase was resolved. Failure to comply with this
requirement will result in a fine for the company and every officer of
the company responsible for the non-compliance.
EFFECT OF CONSTITUTION
¶3-300 Formation of contractual relationships
Under CA 2016, the constitution of a company has a legal impact

besides being a contract between:
• the company and each member; and
• each member with each other.
By virtue of s 33 of CA 2016, the effect of the constitution is clearly

stipulated as such:
Subsection (1) states that the constitution shall, when adopted, bind
the company and the members to the same extent as if the
constitution had been signed and sealed by each member and
contained covenants on the part of each member to observe all the
provisions of the constitution.
Subsection (2) states that all money payable by any member to the
company under the constitution shall be a debt due from such
member to the company.
The relationship is that each party to the constitution agrees to
observe and perform the provisions of the constitution, if existing and
adopted by the company; or under CA 2016, if a company has no
constitution as for the time being is in force so far as those provisions
are applicable to that person.
As for existing companies incorporated under the former Companies
Act 1965 (CA 1965), their memorandum and articles of association (M
& A) is the constitution of the company. Per s 34 and also s 619(3) of
the transitional provisions, the M & A shall be effected and adopted as
the constitution of the company, unless otherwise resolved by the
company, ie resolved by special resolution to revoke or abolish it as
the company’s constitution.
Law: s 33, 34 and 619(3) of CA 2016.
¶3-310 Contract between the company and each member

The CA 2016 provides that the constitution shall bind the company
and members as if they had been signed and sealed by each member
and contained covenants on the part of each member to observe all
provisions. According to the Act, the company is not deemed to have
signed or sealed the statutory contract, nor are there any covenants
on the part of the company to observe all the provisions in the
constitution. In spite of this, a member can still enjoin the company
and the directors from acting in breach of the constitution (Solmon v
Quin & Axtens Ltd).
The prevailing view of the courts in England is that:
• No Article can constitute a contract between the company and a
third person.
• No right given by an Article to a person in a capacity other than

that of a member can be enforced against the company.
Articles regulating the rights and obligations of members do create

rights and obligations between them and the company (Hickman v
Kent or Romney Marsh Breeders’ Association).
The above decisions were endorsed by the High Court and the
Federal Court in Singapore (Raffles Hotel v Malaysian Banking
Berhad (No 2)). However, the learned Judges’ approval of these
points can only be considered obiter since the case before them was
not concerned with the rights of a member conferred upon him by the
Articles of Association in some capacity other than as member, but
with the rights of outsiders in enforcing rights conferred by the Articles.
Law: s 33 of CA 2016.
¶3-320 Contract between members

The CA 2016 states that the constitution is a legally binding document
between a member and other members of the company ( Wood v
Odessa Waterworks Co). According to the Act, this contract is
deemed to contain covenants that each member will observe all
provisions of CA 2016 and the constitution, if a company has one. The
contract may be altered, subject to restrictions on the alteration of the
provisions of the constitution, by a vote of the majority of the members
holding more than 75% of total voting shares in the company.
Law: s 32 and 33 of CA 2016.
¶3-330 Enforcing members’ rights

A member has a right to have the provisions of the constitution
observed. He can enforce this right by asking the court for an
injunction. The action can be brought against the other members
directly. The company does not have to be a party to the action
(Rayfield v Hands).
It does not matter whether the constitution is fair or not in deciding its
enforceability. “It is purely a matter of contractual obligation …” (Wong
Kim Fatt v Leong & Co Sdn Bhd & Anor).
¶3-340 Effect on third party
Since the constitution constitute a contract among members of the

company, outsiders who are not privy to the contract cannot enforce
any rights conferred on them by the provisions of the constitution
[Hickman v Kentor Romney Marsh Sheep Breeders’ Association;
Raffles Hotel Ltd v Malayan Banking Bhd (No 2)].
¶3-350 Effect of alteration of constitution on existing

relationships
An existing relationship between the company and an outsider is not
affected by any amendments made to the constitution. This follows
from the principle that an outsider is not privy to the contract
constituted by the constitution. If there is a contract between the
company and an outsider, any alteration to the constitution will not
constitute a breach of that contract.
An outsider may have a contract with the company, expressly or
impliedly, incorporating the terms of the constitution. In this case, if
there are alterations to the constitution, the contract will be affected
only prospectively (British Equitable Assurance Co Ltd v Baily;
Swabey v Port Danvin Gold Mining Co).
OBJECTS AND POWERS

¶3-400 Objects clauses in the constitution
“Power” is a legal ability to do something. “Object” is the purpose for

which a company exists. Normally, however, the term “objects”
encompasses both “powers” and “objects” in the former CA 1965. The
CA 1965 required the constitution to contain a statement of the objects
of the company, and also a list of the powers which can be exercised
by the company in achieving those objects. The legal capacity of the
company to carry on any activity is derived from its objects and
powers contained in the constitution.
However, CA 2016 provides full power and capacity of a company
under s 21 as follows:
Subsection (1) states that a company shall be capable of exercising all
or undertake any business or activity including—
(a) to sue and be sued;
(b) to acquire, own, hold, develop or dispose of any property; and
(c) to do any act which it may do or, to enter into transactions.
Subsection (2) states that a company shall have the full rights, powers
and privileges for the purposes mentioned in sub-s (1).
Section 45 of CA 2016 is dedicated to a company limited by
guarantee. It states in sub-s (1) that no company other than a
company limited by guarantee shall be formed with the following
objects:
(a) providing recreation or amusement;
(b) promoting commerce and industry;
(c) promoting art;
(d) promoting science;
(e) promoting religion;
(f) promoting charity;
(g) promoting pension or superannuation schemes; or
(h) promoting any other object useful for the community or country.
Subsection (2) states that a company limited by guarantee shall—

(a) apply its profits or other income in achieving or promoting its
objects;
(b) prohibit the payment of any dividend to its members; and
(c) require all the assets that would otherwise be available to its
members generally be transferred on its winding up either—
(i) to another body with objects similar to its own; or
(ii) to another body the objects of which are the promotion of

charity and anything incidental or conducive to such objects.
Subsection (3) states that a company limited by guarantee may apply

to the Minister for a licence to omit the word “Berhad” or the
abbreviation “Bhd.” from its name.
Subsection (4) states that a company limited by guarantee shall not
hold land unless a licence has been obtained from the Minister.
Subsection (5) states that for the purposes of approving licences
under this section, the Minister may prescribe regulations or impose
any conditions as he thinks fit.
Law: s 21 and 45(1) of CA 2016.
¶3-410 Objects clauses in practice

Generally, drafters of constitution like to list out in detail all that a
company may do. It is up to the company to have as many objects
clauses as it desires and it is not unusual for companies to list as
much conceivable business as possible. However, this may no longer
be necessary as s 21 of CA 2016 gives a company full rights, powers
and privileges of exercising all the functions of a body corporate and
have the full capacity to carry on or undertake any business or activity
including:

Moreover, unlike CA 1965, CA 2016 no longer provides that an act or
transaction which is outside a company’s objects (ultra vires) is void
and that the objects are incapable of being changed.
It is possible to include in the constitution a general purpose objects
clause which enables the directors or members of the company to
allow the company to be engaged in any business which they think is
desirable. Thus, an objects clause which states:
“To carry on any other trade or business whatsoever which can,
in the opinion of the board of directors, be advantageously carried
on by the company in connection with or ancillary to … the
general business of the company …”
has been held to be valid (Bell Houses Ltd v City Wall Properties Ltd).
It is interesting to note that for purposes of taxation, the constitution of
a company need not be looked into in order to ascertain the intention
of the company with regard to particular transactions. This is because
for matters concerning the assessment to tax the question is not what
business the company professes to carry on, as stated in its
constitution, but what business it actually carried on (Re A Taxpayer).
Law: s 21 of CA 2016.
ALTERATION OF CONSTITUTION
¶3-500 Alteration of constitution
The CA 2016 does not impose any specific procedures and meeting
requirements as to the means by which changes may be effected.
This is because the changes to the constitution has no significant
impact on the existence of the company. Changes made to the
constitution may involve a change of name, an alteration to the main
objects of the company or other clauses in the contents of a
constitution.
Under s 194 of CA 2016, shareholders are not bound to acquire
additional shares by alteration to constitution. It stipulates that unless
a shareholder agrees in writing, the shareholder is not bound by an
alteration of the constitution of a company that:
(a) requires the shareholder to acquire or hold additional shares in
the company more than the number held on the date the
alteration is made; or
(b) increases the liability of the shareholder to the company.
Law: s 194 of CA 2016.
¶3-510 Altering or amending constitution
Section 36 of CA 2016 stipulates that a company may alter or amend

its constitution in the following manner:
Subsection (1) states that a company having a constitution may, by a
special resolution, alter or amend its constitution unless the
constitution itself prohibits the alteration or amendment.
Subsection (2) states that upon the date of the special resolution was
passed or a later date as specified in the resolution, any alteration or
amendment to the constitution shall bind the company and the
members accordingly.
Subsection (3) states that the company shall notify the Registrar of the
alteration or amendment of its constitution and lodge a copy of the
constitution as altered or amended within 30 days from the date the
special resolution was passed.
Conversion of status of a company under CA 2016 is stipulated under
separate provisions and not treated as an alteration or change of
constitution.
Law: s 36 of CA 2016.
¶3-520 Altering or changing of constitution
The CA 2016 does not stipulate specific change of object clause, but
change of constitution. Such an alteration must comply with the Act,
which requires:
• a special resolution;
• a written notice giving members 21 days’ notice of the intention to

propose a special resolution; and
• a notice of the meeting to be given to all members and to all

trustees for debenture holders.
After the special resolution is passed, an e-form (“Notification of

Alteration or Amendment to Constitution” in Schedule B of MyCoID1)
containing the special resolution should be filed with the Registrar.
However, if an application has been made to the court in accordance
with s 37 of CA 2016, the copy shall be lodged in an e-form
[“Notification of Alteration or Amendment to Constitution (Court
Order)” in Schedule B of MyCoID] with the Registrar together with an
office copy of the order of the court within 30 days after the application
has been determined by the court. On compliance by the company
with this requirement, the alteration (if any) of the constitution shall
take effect.
Subsection (2) of s 35 of CA 2016 states that for the purposes of para
(1)(a), if the constitution sets out the objects of a company—
The court may alter or amend constitution stated under s 37 of CA

2016 as follows:
Subsection (1) states that the court may, on the application of a
director or member of a company, if it is satisfied that it is not
practicable to alter or amend the constitution of the company using the
procedure set out in this Act or in the constitution itself, make an order
to alter and amend the constitution of a company on such terms and
conditions as it thinks fit.
Subsection (2) states that the company shall ensure that an office
copy of an order made under sub-s (1) together with a copy of the
constitution as altered or amended is lodged with the Registrar for
registration within 30 days from the date of the order.
The lodgement of e-forms under CA 2016 with the Registrar are as
follows:
(a) “Notification of Alteration or Amendment to Constitution”;
(b) “Notification of Alteration or Amendment to Constitution (Court

copy)”,
Law: s 35 and 37 of CA 2016.
Footnotes
website.
¶3-530 Intervention by the court
The court may dispense with the 21 days’ notice “in the case of any
person or class of persons for such reasons as to it seem sufficient”.
Members or debenture holders may apply to the court for an order
cancelling any alteration made to the objects clause. If the application
is made, the copy of the resolution must not be lodged with the
Registrar until the court determines the issue.
In deciding whether to cancel the alteration, the court will have to take
into consideration the rights and interests of the members and the
rights and interests of the creditors of the company. The court has the
option of making any of these three orders:
• cancel the alteration;
• confirm the alteration in part; or
• confirm the alteration.
Note that a confirmation by a court is subject to such terms and

conditions which the court deems fit to impose. Once the court has
made a decision, the resolution and order of the court must be lodged
with the Registrar within 14 days of the decision. The alteration, if it is
confirmed, will come into effect after the resolution has been lodged.
¶3-550 Conversion of unlimited company to limited

company
Section 40 of CA 2016 stipulates conversion from an unlimited

company to a limited company.
Subsection (1) states that subject to this section, an unlimited
company may convert to a limited company by passing a special
resolution and shall lodge with the Registrar a notice for conversion
and specifying an appropriate alteration to its name. This is effected
by filing an e-form (“Notice of conversion from an unlimited company
to a private company” in Schedule B of MyCoID).
Subsection (2) states that upon the lodgement of the notice for
conversion, the Registrar shall—
(a) make such endorsements in or alterations to the register to
record the conversion; and
(b) issue to the company a notice of conversion and cancel the

previous notice of registration or certificate of incorporation of the
company, as the case may be.
Subsection (3) states that upon the issuance of the notice of

conversion, the Registrar may notify the company in writing that it is
being dispensed from lodging any document that had been lodged at
the time of its incorporation as an unlimited company or subsequent to
it.
Subsection (4) states that the conversion shall take effect on the issue
of the notice of conversion under sub-s (2) and the constitution, if any,
shall thereupon be altered in accordance with the terms of the
resolution.
Subsection (5) states that a conversion of a company under this
section shall not—
the company; or

company.
conversion may, notwithstanding the conversion, be continued or
Note that there is no provision to convert a limited company to an
unlimited company.
Law: s 40 of CA 2016.
¶3-560 Alteration of share capital

Section 84(1) of CA 2016 states that unless otherwise provided in the
constitution, a company may alter its share capital in any one or more
of the following ways by passing a special resolution to—
(a) consolidate and divide all or any of its share capital, the
proportion between the amount paid and the amount, if any,
unpaid on each subdivided share shall be the same as it was in
the case of the share from which the subdivided share is derived;
(b) convert all or any of its paid-up shares into stock and may
reconvert that stock into paid-up shares; or
(c) subdivide its shares or any of the shares, whatever is in the

subdivision, the proportion between the amount paid and the
amount, if any, unpaid on each subdivided share shall be the
same as it was in the case of the share from which the subdivided
share is derived.
Subsection (2) states that the company shall lodge with the Registrar
the notice of any alteration referred to in sub-s (1) in the form and
manner as may be determined by the Registrar within 14 days from
the date of the alteration.
Subsection (3) states that in the case of the registration of an
unlimited company having a share capital as a limited company, the
unlimited company may pass a resolution—
(a) to increase the amount of its share capital subject to the
condition that no part of the increased capital shall be capable of
being called up except in the event and for the purposes of the
company being wound up; or
(b) to provide that a specified portion of its uncalled share capital
shall not be capable of being called up except in the event and for
the purposes of the company being wound up.
This is effect by filing the e-form “Notification of alteration of share

capital” in Schedule B of MyCoID.
Company secretarial procedure
• If the constitution allows, any of the alterations listed above may
be effected by the company at a general meeting of a public
company, or in the case of a private company, by way of a
members’ written resolution under s 297(1) of CA 2016.
• Concurrently, the share capital clause in the constitution, if any,

has to be amended by passing a special resolution at a general
meeting of a public company, or in the case of a private company,
by members’ written resolution.
Any alteration or change in the constitution will refer to CA 2016,

and/or the company’s constitution, as well as whether an ordinary
resolution or special resolution is required. Under CA 2016, the
relevant e-form (“Notification of alteration of share capital” in Schedule
B of MyCoID) must be lodged with the Registrar.
Law: s 84 and 297(1) CA 2016.
¶3-570 Reduction of share capital

Under s 115 of CA 2016, unless otherwise provided in the constitution,
a company may reduce its share capital by:
(a) a special resolution and confirmation by the court in accordance
with s 116; or
(b) a special resolution supported by a solvency statement in

accordance with s 117.
The reasons by which share capital is reduced are not limited but
three ways are specified under s 116 of CA 2016:
• extinguish or reduce the liability on any of its shares in respect of
share capital not paid up;
• cancel any paid-up capital which is lost or unrepresented by

available assets; or
• pay off any paid-up share capital which is in excess of the needs
of the company.
(A) Reduction of share capital by court

Section 116 of CA 2016 provides for the reduction of share capital by
the court, and stipulates as follows:
Subsection (1) states that subject to confirmation by the court, a
company may, by a special resolution, reduce the share capital of the
company in any way which includes all or any of the following—
(a) by extinguishing or reducing the liability on any of the shares of
the company in respect of unpaid share capital;
(b) by cancelling any paid-up share capital which is lost or

unrepresented by available assets; and
(c) by returning to the shareholders any paid-up share capital which

in excess of the needs of the company.
Creditor entitled to object

Subsection (2) states that where the proposed reduction of share
capital involves either diminution of liability in respect of unpaid share
capital or the payment to any shareholder of any paid-up share
capital, and in any other case if directed by the court—
(a) every creditor of the company who, at the date fixed by the
court, is entitled to any debt or claim which would be admissible in
proof against the company as if that date were the date of the
commencement of the winding up of the company shall be
entitled to object to the reduction of the share capital;
(b) the court shall settle a list of creditors who are entitled to object,
unless the court is satisfied on affidavit that there are no such
creditors shall ascertain as far as possible without requiring an
application from any creditor the names, the nature and the
amount of debts or claims of those creditors, and may publish
notices fixing a final day on or before which creditors not entered
in the list may claim to be so entered; and
(c) where a creditor entered in the list whose debt or claim is not
discharged or has not been determined does not consent to the
reduction, the court may dispense with the consent of that creditor
on the company securing payment of his debt or claim by
appropriating as the court directs—
(i) if the company admits the full amount of the debt or claim or
though not admitting it is willing to provide for it, the full
amount of the debt or claim; or
(ii) if the company does not admit and is not willing to provide
for the full amount of the debt or claim or if the amount is
contingent or not ascertained, an amount fixed by the court
after the similar inquiry and adjudication as if the company
were being wound up by the court.
Subsection (3) states that notwithstanding sub-s (2), the court may,
after considering any special circumstances of any case, direct that all
or any of the provisions of that subsection shall not apply with regards
to any class of creditors.
Subsection (4) states that the court may, on such terms and
conditions as the court thinks fit, make an order confirming the
reduction if the court is satisfied with respect to every creditor who
under sub-s (2) is entitled to object, that—
(a) his consent to the reduction has been obtained; or
(b) his debt or claim has been discharged, determined or secured.
Subsection (5) states that an order made under sub-s (4) shall specify
the following matters:
(a) the amount of the share capital of the company as altered by the
order;
(b) the number of shares into which the share is to be divided; and
(c) the amount, if any, deemed to be paid-up on each share at the

date of the order.
Subsection (6) states that the resolution for reducing share capital as
confirmed by the order of the court shall take effect upon lodgement of
such order with the Registrar.
Subsection (7) states that a notice confirming the reduction of share
capital issued by the Registrar shall be conclusive evidence that all
the requirements of this Act with respect to reduction of share capital
have been complied with and that the share capital of the company is
as stated in the order.
Subsection (8) states that upon the lodgement of the order of the
court, the particulars shown in the order under sub-s (5) shall be
deemed to substitute the corresponding particulars in the constitution,
if any, and such substitution and any addition ordered by the court to
be made to the name of the company shall be deemed to be
alterations of the constitution for the purposes of this Act for such
period as is specified in the order of the court.
Subsection (9) states that where the name of any creditor entitled to
object to the reduction is not entered in the list of creditors by reason
of his ignorance of the proceedings for reduction or the nature and
effect of the proceedings with respect to his claim and after the
reduction, the company is unable to pay the amount of his debt or
claim within the meaning of the provisions of this Act with respect to
winding up by the court—
(a) every person who was a member of the company at the date of
the lodging of the copy of the order for reduction shall be liable to
contribute for the payment of that debt or claim an amount not
exceeding the amount which he would have been liable to
contribute if the company had commenced to be wound up on the
day before the date of the lodging of the copy of the order for
reduction; and
(b) if the company is wound up, on the application of any such

creditor and proof of his ignorance of the proceedings for
reduction or the nature and effect of the proceedings with respect
to his claim, the court may, if it thinks fit—
(i) settle accordingly a list of persons liable to contribute; and
(ii) make and enforce calls and orders on the contributories

settled on the list as if the persons liable to contribute were
ordinary contributories in a winding up.
Subsection (10) states that the rights of the contributories shall not be
affected notwithstanding the reduction of the share capital under sub-s
(9).
Subsection (11) states that this section shall not apply to an unlimited
company, but nothing in this Act shall preclude an unlimited company
from reducing its share capital in any manner.
Subsection (12) states that every officer of the company who—
(a) wilfully conceals the name of any creditor entitled to object to the
reduction;
(b) wilfully misrepresents the nature of amount of the debt or claim

of any creditor; or
(c) aids, abets or is privy to any such concealment or

misrepresentation,
commits an offence and shall, on conviction, be liable to imprisonment

for a term not exceeding five years or to a fine not exceeding RM3
million or to both.
(B) Reduction of share capital by private or public company
Section 117 of CA 2016 stipulates reduction of share capital by private
or public company in the following manner:
Subsection (1) states that a company may reduce its share capital by
a special resolution if the company—
(a) sends a notice to the Director General of the Inland Revenue
Board referred to in s 134 of the Income Tax Act 1967 and the
Registrar within seven days of the date of the resolution and the
notice shall state that the resolution has been passed and contain
the text of the resolution and the resolution date; and
(b) meets the solvency requirements under sub-s (3).
Subsection (2) states that the resolution and the reduction of the share
capital shall take effect in accordance with s 119.
Subsection (3) states that the company meets the solvency
requirements if—
(a) all directors of the company make a solvency statement in
relation to the reduction of share capital;
(b) the statement is made—

(i) in the case of a private company, within the period of 14
days ending with the date of the resolution but shall be within
time to comply with sub-s (5); or
(ii) in the case of a public company, within the period of 21 days

ending with the date of the resolution but shall be within time
to comply with sub-s (6); and
(c) a copy of the solvency statement is lodged with the Registrar

together with the notice required to be lodged under para (1)(a).
Subsection (4) states that notwithstanding sub-s (1), a company need

not meet the solvency requirements if the reduction of share capital is
solely by way of cancellation of any paid-up share capital which is lost
or unrepresented by available assets.
Subsection (5) states that subject to sub-s (4), a private company shall
—
(a) if the resolution for reducing share capital is a special resolution
to be passed by a written resolution, ensure that every copy of the
resolution served is accompanied with a copy of the solvency
statement; or
(b) if the resolution for reducing share capital is a special resolution

to be passed in a general meeting, make the solvency statement
or a copy of the solvency statement available for inspection by the
members throughout that meeting; and
(c) make the solvency statement or a copy of the solvency

statement available at the company’s registered office for
inspection free of charge by any creditor of the company for a
period of six weeks from the date of the resolution.
Subsection (6) states that subject to sub-s (4), a public company shall
—
(a) make the solvency statement or a copy of the solvency
statement available for inspection by the members at the meeting
throughout the meeting at which the resolution is to be passed;
and
(b) make the solvency statement or a copy of the solvency

Subsection (7) states that every officer of the company who

contravenes sub-s (5) or sub-s (6) commits an offence.
Subsection (8) states that notwithstanding sub-s (7), the resolution
shall not become invalid by virtue only of a contravention of sub-s (5)
or sub-s (6).
Subsection (9) states that any requirement under para (3)(c), (5)(c) or
(6)(b) ceases to have effect if the resolution is revoked.
Subsection (10) states that a company shall advertise a notice of the
reduction of the share capital in one widely circulated newspaper in
Malaysia in the national language and one widely circulated
newspaper in Malaysia in the English language not later than seven
days from the date of the passing of the special resolution.
contravened sub-s (10) commit an offence.
Creditor’s right to object to the reduction of the share capital by
the company under s 118
Subsection (1) of s 118 states that this section shall apply to a
company which has passed a special resolution for reducing share
capital under s 117.
Subsection (2) states that any creditor of the company may apply to
the court for the resolution to be cancelled within six weeks from the
date of the resolution.
Subsection (3) states that sub-s (2) shall apply to a creditor of the
company who is entitled to any debt or claim which would be
admissible as proof against the company at the date of his application
to the court if such date were the commencement of the winding up of
the company.
Subsection (4) states that when an application is made under sub-s
(2)—
(a) the creditor shall as soon as possible serve the application on
the company; and
(b) the company shall as soon as possible give to the Registrar

notice of the application.
Position at the end of period for objection by creditor

Section 119 of CA 2016 stipulates as follows:
Subsection (1) states that if no application for cancellation of the
resolution is made under s 118(2) for the reduction of share capital to
take effect, the company shall lodge with the Registrar after the end of
six (6) weeks, and before the end of eight weeks, from the date of the
resolution—
(a) a copy of the resolution;
(b) a copy of the solvency statement under sub-s 117(3), if
applicable;
(c) a statement made by the directors confirming that the

requirements under sub-s 117(1) and the solvency requirements
under sub-s 117(3), if applicable, have been complied with, and
that no application for cancellation of the resolution has been
made; and
(d) a copy of the notice of the reduction of share capital referred to

in sub-s 117(10).
Subsection (2) states that if one or more applications for cancellation

of the resolution made under sub-s 118(2) are made for the reduction
of share capital to take effect, the proceedings for all the applications
shall have been brought to an end due to being dismissed, withdrawn
or brought to an end due to any reason as the Registrar may allow,
the company shall lodge with the Registrar within fourteen (14) days
beginning with the date on which the last such applications were
dismissed, withdrawn or otherwise brought to an end—
(a) a statement made by the directors confirming that the
requirements under sub-s 117(1), the solvency requirements
under sub-s 117(3), if applicable, and sub-s 117(5) or (6), as the
case may be, have been complied with, and that the application
were dismissed, withdrawn or brought to an end due to any
reason as the Registrar may allow or without determination;
(b) in relation to each such application which has been dismissed by

the court, a copy of the order of the court dismissing the
application; and
(c) a notice containing the information relating to the reduction of

share capital.
Subsection (3) states that the reduction of the share capital shall take
effect when the Registrar has recorded the information lodged with
him in the appropriate register.
Power of court in relation to objection by creditor
Section 120 of CA 2016 gives power to determine objection by
creditor if application is made by a creditor under s 118:
Subsection (1) states that an application by a creditor under s 118
shall be determined by the court in accordance with this section.
Subsection (2) states that the court shall make an order cancelling the
resolution if, at the time the application is considered, the resolution
has not been cancelled previously, any debt or claim on which the
application was based is outstanding and the court is satisfied that—
(a) the debt or claim has not been secured and the applicant does
not have other adequate safeguards for the debt or claim; and
(b) it is not the case that security or other safeguards are

unnecessary in view of the assets that the company would have
after the reduction.
Subsection (3) states that if the court is not satisfied to make an order
under sub-s (2), the court shall dismiss the application.
Subsection (4) states that where the court makes an order under sub-
s (2), the company shall lodge a copy of the order to the Registrar
within 14 days from the date the order is made.
Subsection (5) states that for the purposes of this section—
(a) a debt is outstanding if it has not been discharged; and
(b) a claim is outstanding if it has not been terminated.
Under s 121 of CA 2016, it is an offence for a director to make
groundless or false statements, by stating that a director making a
statement under para 119(2)(a) commits an offence if the statement—
(a) is false; or
(b) is not believed by him to be true,
and shall, on conviction, be liable to imprisonment for a term not

exceeding five years or to a fine not exceeding RM3 million or to both.
Liability of members on reduced shares
Section 122 of CA 2016 states that where the share capital of a
company is reduced under any provision of this Subdivision, a past or
present member of the company shall not be liable in respect of the
issue price of any share to any call or contribution greater in amount
than the difference, if any, between:
(a) the issue price of the share; and
(b) the aggregate of the amount paid up on the share, if any, and
the amount reduced on the share.
New company secretarial procedures

The capital reduction procedures under CA 2016 for a private and
public company are different. The procedures are stated under s 116
and 117, and involve the holding of a general meeting (usually an
extraordinary general meeting for a public company), or by members’
written resolution in the case of a private company under s 297(1), for
the passing of the special resolution to reduce capital and an
application to the court for approval. The role of the court is to make
certain that the interests of creditors and members are protected.
Capital reduction by application to the court is a more straight forward
process, as compared with the alternative method of passing the
solvency test and sending the notice to the Director-General of the
Inland Revenue within seven days of the resolution, and complying
with the provisions laid down.
The following e-forms, whichever is relevant shall be lodged with the
Registrar:
(a) E-form — “Notice of proposed reduction of share capital”;
(b) E-form — “Notice of reduction of share capital”;
(c) E-form — “Notice of reduction of share capital where objection

was dismissed or received”
After the capital reduction of a company has been sanctioned by the
court, the company, if required, should insert an announcement in the
newspapers informing the shareholders of the various procedures to
be taken with regard to their share certificates to be returned for
cancellation and for re-issue. Creditors are allowed to object the
capital reduction and the court has power to interpret the objections.
Law: s 116, 117, 118 and 119(1) and (2) of CA 2016.
¶3-580 Requirements as to alteration of constitution

A company may freely alter its constitution. Alteration of the
constitution must be made by special resolution. Such alterations are
valid “as if originally contained [in the constitution] and [are subject] in
like manner to alteration by special resolution”.
A company can never contract out of the ability to amend its
constitution in the future (Bushell v Faith). The power of alteration
conferred under the Companies Act is thus always available to a
company.
In voting to pass a special resolution to alter constitution, a member
must vote for the benefit of the company as a whole (Allen v Gold
Reefs of West Africa Ltd). This stipulation prevents the majority
shareholders from exercising their vote to alter the constitution to the
prejudice of a minority.
It is for the members to decide what is best for the company. The
court will not interfere unless the decision is not one that a reasonable
man could have made (Peter’s American Delicacy Co Ltd v Heath).
Note that a member’s right to be treated fairly must not be
contravened when the constitution is being altered.
¶3-590 Remedies under the Companies Act
A member or debenture holder who has been treated unfairly in the

alteration of constitution may obtain relief under CA 2016. The
member or debenture holder may apply to the court for an order when:
• the affairs of the company are being conducted in a manner
oppressive to one or more of the members or debenture holders;
• the powers of the directors are being exercised in disregard of the

interests of one or more of the members, shareholders or
debenture holders;
• some act of the company unfairly discriminates against one or

more of the members or debenture holders;
• some act of the company is prejudicial to one or more of the

members or debenture holders.
Under CA 2016, the following sections give remedies to shareholders

and debentures if they are unfairly treated:
(a) Section 346 for remedies for oppression;
(b) Section 347 for derivative proceedings;
(c) Section 348 gives the complainant 30 days’ notice in writing to

the directors of his intention to apply for the leave of court under s
347; and
(d) Section 350 gives power to court to grant an injunction, on such

terms as the court thinks appropriate.
Law: s 346, 347, 348 and 350 of CA 2016.
¶3-600 Orders of the court

If the court decides that there is oppression or discrimination it may
make such order which it thinks fit. The order may:
(a) direct or prohibit any act or cancel or vary any transaction or
resolution;
(b) regulate the conduct of the affairs of the company in future;
(c) provide for the purchase of the shares or debentures of the

company by other members or holders of debentures of the
company or by the company itself;
(d) in the case of a purchase of shares by the company, provide for

a reduction accordingly of the company’s capital; or
(e) provide that the company be wound up.
¶3-610 Role of case law

Case law from English and Australian authorities on the subject of
remedies in cases of oppression or injustice in the alteration of
constitution should be treated with caution. This is because CA 2016
has specific provisions on the subject — for instance, remedy in cases
of an oppression in s 346 — and the statutory provisions in England or
Australia are substantially different. English and Australian cases are,
therefore, only useful as analogies in interpreting the relevant
provision in the Act.
¶3-620 Restrictions on alteration of constitution

Under s 36(1) of CA 2016, a company having a constitution may, by a
special resolution, alter or amend its constitution unless the
constitution itself prohibits the alteration or amendment.
Section 37(1) further states that the court may, on the application of a
director or member of a company, if it is satisfied that it is not
practicable to alter or amend the constitution of the company using the
procedure set out in this Act or in the constitution itself, make an order
to alter and amend the constitution of a company on such terms and
conditions as it thinks fit.
Law: s 36 and 37 of CA 2016.
¶3-630 Provisions applying to private companies

In CA 2016, private companies must comply with s 42 as follows:
Subsection (1) states that a company limited by shares having not
more than 50 shareholders may—
(a) be registered as a private company;
(b) change its status into a private company; or
(c) remain registered as a private company.
Subsection (2) states that a private company shall restrict the transfer
of its shares.
Subsection (3) states that for the purposes of sub-s (1), in determining
the number of shareholders in a private company—
(a) joint holders of shares shall be considered as one person; and
(b) a shareholder who is or was an employee of the company or its

subsidiary when they became a shareholder shall not be counted.
Subsection (4) states where a private company—

(a) ceases to restrict the transfer of its shares;
(b) ceases to have a share capital; or
(c) has more than 50 shareholders,
the Registrar shall serve a notice to the company that on such date as
specified in the notice, the company ceased to be a private company.
Subsection (5) states that where, under this section, the Registrar
determines that a company has ceased to be a private company—
(a) the company shall be a public company and shall be deemed to
have been a public company on and from the date specified in the
notice;
(b) the company shall, on the date so specified be deemed to have

changed its name by the omission from the name of the word
“Sendirian” or the abbreviation “Sdn”, as the case requires; and
(c) the company shall, within 14 days from the date of the notice,
lodge with the Registrar—
(i) a statement in lieu of prospectus; and
(ii) a statutory declaration verifying that para 190(1)(b) has

been complied with.
Subsection (6) states that by virtue of a determination made under this

section, a company that has become a public company shall not
convert to a private company without the leave of the court.
contravene this section commit an offence and shall, on conviction, be
liable to a fine not exceeding RM50,000, and in the case of a
The CA 2016 prohibits private companies to offer shares or
debentures or invite to deposit money in s 43, stipulating as follows:
Subsection (1) states that a private company limited by shares shall
not—
(a) offer to the public any shares or debentures of the company;
(b) allot or agree to allot any shares or debentures of the company

with a view to offer such securities to the public; or
(c) invite the public to deposit money with the company for fixed
periods or payable at call, whether bearing or not bearing interest.
Subsection (2) states that unless the contrary is proved, an allotment

or agreement to allot shares or debentures is presumed to such
shares or debentures being offered to the public if an offer of the
shares or debentures, or any of the shares or debentures, to the
public is made—
(a) within six months after the allotment or agreement to allot; or
(b) before the receipt by the company of the whole of the

consideration to be received by it in respect of the shares or
debentures.
Subsection (3) states that a company does not contravene this section
if—
(a) it acts in good faith in accordance with the arrangements under
which it is to convert to a public company before the shares or
debentures are allotted;
(b) as part of the terms of the offer it undertakes to convert to a

public company within a specified period, and that undertaking is
complied with; or
(c) the offer is made in accordance with the arrangements as

prescribed by the Securities Commission to any person on a
stock market, derivatives market, exempt stock market or exempt
derivatives market that is approved, registered or regulated under
the Capital Markets and Services Act 2007.
Subsection (4) states that for the purposes of para (3)(b), the specified
period shall be—
(a) in the case where an offer is made on the same day, a period
ending not later than six months after the day on which the offer is
made; or
(b) in the case where an offer is made on different days, a period

ending not later than six months after the day on which the offer is
first made.
liable to imprisonment for a term not exceeding five years or to a fine
not exceeding RM3 million or to both.
In a summary, if a private company wishes to be registered with a
constitution, the constitution must contain these matters:
• a restriction on the transfer of shares;
• a limit to the number of members; and
• a prohibition against inviting the public to subscribe shares or

deposit money with the company, or issue debentures.
The company will, however, be limited to merely varying the

restrictions on the transfer of shares and the limit on the number of
members. A private company cannot do away with the three
restrictions altogether. The form of share transfer restriction may be
changed. The limit on the number of members may be increased or
lowered but it must never exceed 50. The restriction on inviting the
public to subscribe for shares and debentures in the company or to
deposit money with the company must not be removed at all.
Another way in which a private company may be restricted in the
alteration of constitution is when the shares of the company are
closely held. An alteration affecting members’ rights may not be
allowed if it is contrary to the understanding that prevailed when the
company was incorporated. For example, a proposed alteration to the
constitution will be null and void if it infringes on the rights and
privileges given to some individuals on the formation of the company
(Pang Ten Fatt v Tawau Transport Co Sdn Bhd). The company may
be wound up if the understanding that prevailed among the members
at the time of incorporation is breached (Tay Bok Choon v Tahansan
Sdn Bhd).
Law: s 42 and 43 of CA 2016.
ULTRA VIRES
¶3-700 Ultra vires doctrine
The ultra vires doctrine used to be strictly applied in the past (Asbury
Railway Carriage & Iron Co v Riche). At that time, the objects clause
was considered a vital part of the Memorandum, and companies are
regarded to be capable of carrying on those business activities set out
in the objects clause. Any act that is not specified in its objects or not
identical to their attainment was regarded to have been ultra vires.
The ultra vires doctrine was deemed important then because:
• it afforded shareholders protection because shareholders were
considered to have the right to know the nature of the company’s
business in which money had been invested; and
• it afforded creditors protection because it would ensure company

funds were applied only to the stated objects of which creditors
were aware.
The ultra vires doctrine is no longer important under CA 2016 because

the Act gives companies unlimited capacity and power to carry out all
acts or transactions under s 21.
¶3-710 Companies having full capacity
The CA 2016 gives companies unlimited capacity in s 21 by stipulating

as follows:
Subsection (1) states that a company shall be capable of exercising all
or undertake any business or activity including—
Subsection (2) states that a company shall have the full rights, powers
and privileges for the purposes mentioned in sub-s (1).
Law: s 21 of CA 2016.
INDOOR MANAGEMENT RULE

¶3-800 Effect of the rule
A person dealing with a company is not expected to inquire into the

procedural regularity of acts undertaken by agents of the company.
The person may assume the procedural regularity of the acts of the
agents, provided those acts are within the company’s powers. This
was held in Royal British Bank v Turquand; Baltic Orient Shipping Pte
Ltd v Sunseekers Pte Ltd.
This is known as “indoor management rule” or the “rule in Turquand’s
case”. The effect of this rule is to prevent a company from pleading
procedural irregularity as a ground for avoidance of an intra vires
transaction.
However, an innocent person may not always be successful in
invoking the indoor management rule. In Lim Tow Leong v Che Wan
Development Sdn Bhd, an individual bought property from a company
without knowing that the property was already charged to a bank. The
purchaser applied to court to restrain the company from disposing of
the property. The company argued that the security in favour of the
bank was void as it was effected by one of the company’s directors
without the concurrence of the other directors. The High Court ruled
that the company’s internal management problems and its problems
with the bank should not be burdened on the purchaser who was an
innocent party. The court, however, was of the view that the company
could not be restrained from disposing of the property as the property
had already been charged to the bank.
A company cannot seek to take advantage of the mistake of its own
officers to claim the benefit of the indoor management rule by
adversely affecting the rights of third parties (NM Superannuation Pty
Ltd v Hughes & Ors).
¶3-810 Limitations of the rule

In the past, the following were a few limitations on the application of
the indoor management rule:
• Persons who knew or ought to have known, by virtue of their
position in relation to the company of the abuse of internal
procedure cannot rely on the rule (Howard v Patent Ivory
Manufacturer Co);
• A contracting party cannot rely on the rule if inquiries he made

revealed the agent’s lack of authority (Progress Advertising (NZ)
Ltd v Auckland Licensed Victuallers Industrial Union of
Employers);
• The rule will not apply if there are circumstances that will put the
contracting party on inquiry (B Liggett (Liverpool) Ltd v Barclays
Bank Ltd);
• A contracting party cannot rely on the rule if an examination of the

Memorandum and Articles of Association revealed the agent’s
lack of authority (Irvine v Union Bank of Australia). The
contracting party cannot plead that he has not read the
documents since every person is deemed to have constructive
notice of them (Woodland Development Sdn Bhd v Chartered
Bank).
¶3-820 Doctrine of constructive notice
The CA 2016 stipulates the non-application of the doctrine of

constructive notice. Section 39 states that no person shall be deemed
to have notice or knowledge of the contents of the constitution or any
other document relating to a company, due to the fact:
(a) that the constitution or document has been registered by the
Registrar; or
(b) that it is available for inspection at the registered office of the

company,
with the exception of documents relating to instrument of charges.

Law: s 39 of CA 2016.
1. Explain what are the differences between a private company and

a public company with share capital.
2. Explain the legal effects of a company’s constitution with its

members.
3. Explain the provisions that affect a private company.
4. What are the objects of a company limited by guarantee?

CHAPTER 4: COMPANY’S
SHARES
Nature of shares ¶4-000
Classes of shares ¶4-100
Allotment and issue of shares ¶4-200
Payment for shares ¶4-300
Share certificates ¶4-500
Alteration of class rights ¶4-600
Transfer of shares ¶4-700
Dividends ¶4-800
Maintenance of capital ¶4-900
NATURE OF SHARES
¶4-000 Nature of shares
Shares are regarded as a property that can be owned by a person and
has a title that is transferable from one person to another. The
ownership of shares in a company therefore entitles several rights and
entitles the owner to take part in the affairs of a company that is
governed by Companies Act 2016 (CA 2016) and the company’s
constitution, if any. A shareholder is said to own that amount of shares
that he has subscribed in the company. Section 70 of CA 2016 states
that a share or other interest of a member in a company is personal
property and transferable in accordance with s 105.
¶4-010 Share capital structure
Shares and share capital are dealt with in Pt III (“Management of

Company”) Div 1 (“Share and Capital Maintenance”) of CA 2016. One
important change in CA 2016 concerning share capital is that the
shares have no par value. Section 74 states that all shares issued
before or upon the commencement of the Act shall have no par or
nominal value. The rights and obligations pertaining to the different
classes or types of shares are to some extent governed by that Part of
the Act unless stipulated by companies having their own constitution.
The main requirements on an issue of securities, including shares of a
listed company to the public are set out in the Bursa Malaysia Listing
Requirements (BMLR). In private companies, the rules are governed
by CA 2016 and the constitution, if the company has one.
Probably, the two most important reasons for the use of the company
as the vehicle for commercial enterprise are:
• the features of limited liability; and
• the ability of investors to purchase a unit of ownership and control.
The share capital is one method of attracting finance into the

company. The capital structure represents all the shares issued by the
company.
Unless it is an unlimited company, the constitution of a company must
contain a “capital clause”, stating that the shares have no par value,
and shareholders are limited to the shares they have paid up in full.
Note that a company limited by guarantee (CLBG) cannot be
registered with a share capital, and it is a public company whose
members guarantee the amount of subscription paid annually under
the terms and conditions of the constitution. A CLBG must be
incorporated with a constitution, unlike other companies limited by
shares which need not be incorporated with a constitution [s 31(1)].
Law: s 69, 70 and 74 of CA 2016.
¶4-020 Nominal capital and issued capital under no par
value
Since a share has no par value or nominal value, the value of share to
be issued will be based on the market value or value determined by
the financial position at the time of issue. A company may alter its
share capital by increasing and reducing its share capital.
The registration fees for lodgement of documents, applications and
certain appeals are stated in reg 8 of the Companies Regulations
2017.
The issued capital is the amount of share capital that has actually
been taken up and paid up fully by shareholders. These shareholders
have agreed to give consideration either in cash or in kind for the
shares issued to them. The minimum issued capital of a private
company is up to the board to determine.
Public companies can issue and allot their shares which have been
offered to the public, or which have been offered for subscription or
purchase, or where an invitation to subscribe or purchase shares is
made pursuant to a prospectus that is registered under the Securities
Commission Act 1993, provided:
• the minimum subscription has been subscribed; and
• the sum payable on application of the shares has been received;

and
• it has complied with the requirements under s 190 for a newly

incorporated public company wishing to offer its shares to the
public and be eligible to commence business and to exercise
borrowing powers.
The paid-up share capital is that amount of issued nominal share

capital actually paid to the company by shareholders. This sum
excludes sums due from the shareholders on the shares, and any
amount in excess of the nominal values contributed for shares.
Law: s 84 and 190 of CA 2016,
¶4-030 Definition of a share
A company limited by shares has a nominal capital which is divided

into shares of a fixed amount. A share is a right to a specified amount
of the share capital of the company. In other words, a share is a
fractional part of the capital. It confers upon its holders rights and
liabilities both during the period the company is a going concern and
upon its winding up. The Supreme Court of Victoria has held that it is
possible to issue shares with a nominal value of less than one cent
(Re Australian Pacific Technology Ltd).
Thus, it is common even for listed companies to issue and allot shares
of nominal value 0.10 sen per share.
Shares are a type of movable property and are not in the nature of
immovable property, but ownership may be transferred by signing the
instrument of transfer under s 105 of CA 2016. They are transferable
in the manner provided by the Act or constitution, if the company has
one. The laws applicable to personal property apply and equitable
interests may be created, dealt with and enforced. For example, a
valid equitable mortgage of shares may be effected by merely
depositing the certificate with the bank or other lenders (Deverges v
Sandeman, Clark & Co).
Farwell J, in Borland’s Trustee v Steel Bros & Co Ltd (1901) said:
“[a] share is the interest of a shareholder in the company
measured by a sum of money, for the purpose of liability in the
first place, and of interest in the second but also consisting of
mutual covenants entered into by all the shareholders inter se in
accordance with the contract contained in the articles of
association.”
The CA 2016 describes a share or other interest of a member in a
company as personal property and transferable in accordance with s
105. The term “share” means issued share capital of a corporation
and includes stock except where a distinction between stock and
shares is expressed or implied;
Law: s 70 and 105 of CA 2016.
¶4-040 Stock
A stock is considered as the part of the share capital expressed in

units of money that can be freely divided into amounts of different
value. Fully paid-up shares may be converted into stock. The
difference between stock and shares is that stock exists as a fund.
This means that while a stockholder may transfer 50 sen worth of
stock, a shareholder cannot transfer half a RM1.00 share. Another
difference between shares and stock is that shares must be numbered
but stock need not be. Stock cannot be issued directly and may only
be created by the conversion of fully paid up shares as stated in s 86
of CA 2016, which provides for the conversion of paid up shares into
stock and the re-conversion of stock into paid-up shares of any
denomination:
Subsection (1) of s 86 states that subject to the constitution, a
company may by resolution convert any paid-up shares into stock and
reconvert any stock into paid-up shares of any number.
Subsection (2) states that the stockholders may transfer the shares or
any part of the shares in the same manner as the transfer of shares
from which the stock arose may, before the conversion, have been
transferred or in the closest manner as the circumstances allow.
Subsection (3) states that the directors may fix the minimum amount
of stock transferable and may restrict or forbid the transfer of fractions
of that minimum.
Subsection (4) states that for the purposes of this section, any
reference in this Act applicable to paid-up shares shall apply to stock,
and the words “share” and “shareholder” shall include “stock” and
“stockholder” respectively.
Law: s 86 of CA 2015.
¶4-045 Rights and privileges of stockholders
Subsection (1) of s 87 states that the stockholders shall, according to

the amount of the stock held by the stockholders, have the same
rights, privileges and advantages with regards to dividends, voting at
meetings of the company and other matters as if the stockholders held
the shares from which the stock arose.
Subsection (2) of s 87 states that notwithstanding sub-s (1), no
privilege or advantage except participation in the dividends and profits
of the company and in the assets on winding up shall be conferred by
any such part of stock which would not, if existing shares have
conferred that privilege or advantage.
Law: s 87 of CA 2016.
¶4-050 Rights conferred on shareholders

Shares confer upon the holder a certain right to a proportional part of
the assets of the company whether by way of dividend or a distribution
of assets upon winding up. It forms a separate right of property. The
issued share capital is like a property of the company used to
generate income and pay liabilities. The issued shares, although a
fraction of the capital, is owned as a property of the shareholders.
Control of the company’s affairs rests ultimately with the shareholders,
who exercise votes in accordance with the status and number of
shares held, but management matters and business direction are the
responsibilities of the board of directors.
Pursuant to s 88 of CA 2016, a reference to the rights attached to a
share in a class of shares in a company is a reference to the rights of
the holder of that share as a member of the company.
Law: s 88 of CA 2016.
CLASSES OF SHARES
¶4-100 Classes of shares
A class refers to those persons whose rights attached to their shares

are not dissimilar as to make it impossible for them to consult together
with a view to their common interest, according to Bowen LJ in
Sovereign Life Assurance Co v Dodd (1892). The rights and interests
attached to these persons’ shares are known as class rights. Where
there is only one class of shares, the rights are simply called
shareholder rights rather than class rights because there is no other
class to compare.
Classes of shares
For the purposes of CA 2016, shares are in the same class if the
rights attached to the shares are identical in all respects. Subject to
the company’s constitution, the rights attached to shares are not to be
regarded as different from those attached to other shares in the same
class only because they do not carry the same rights to dividends in
the 12 months immediately following the allotment.
Description of different classes of shares
Section 90 of CA 2016 requires a company having different classes of
shares to state prominently in its constitution the following:
(a) that the company’s share capital is divided into different classes
of shares; and
(b) the voting rights attached to shares in each class.
If a company has a class of shares of which the holders are not

entitled to vote at general meetings of the company—
(a) the descriptive title of shares in the class shall include the words
“non-voting”; and
(b) the company shall ensure that those words appear legibly on
any share certificate, prospectus or directors’ report issued by the
company.
Note, however, that the above does not apply to preference shares.
No company shall allot any preference shares or convert any issued
shares into preference shares unless provided by the constitution and
the constitution shall set out the rights of the shareholders with respect
to repayment of capital, participation in surplus assets and profits,
cumulative or non-cumulative dividends, voting and priority of payment
of capital and dividend in relation to other shares or other classes of
preference shares.
The company and every officer who contravenes s 90 commit an
offence and shall, on conviction, be liable to a fine not exceeding
RM500,000.
Law: s 88 and 90 of CA 2016.
¶4-110 Class rights

A company may have different classes of shares which confer
different rights on their owners. The rights and obligations which
accrue to a particular class of shares may be provided for in the
company’s constitution. There is, however, no obligation on the
company to do so.
The significance of the different classes of shares lies in the rights
accruing to each class to vote, to receive dividends and to receive
capital in the event of a winding up. The variety of classes of shares is
infinitely varied, as the rights accorded to each are determined by
agreement between the company and the subscribers. However, it is
possible to identify the common classes of shares.
Description of shares of different classes are stipulated in s 90 — see
¶4-100.
¶4-120 Ordinary shares

Generally, the vast majority of shares issued are ordinary shares,
which are also called equity shares. This is the risk capital of the
company. Ordinary shareholders are entitled to their dividend after
preference shareholders. A full right to vote is usually given to ordinary
shareholders by the constitution, and the ordinary shareholders
usually exercise the biggest say in the control of the company. In the
event of a liquidation, ordinary shares rank after all other liabilities of
the company.
¶4-130 Preference shares

Preference shares confer some preferential rights on their holders.
Normally, that preferential right is the right to a fixed (and usually)
cumulative dividend which is payable out of profits in priority to
dividends on ordinary shares, and to a return of capital. Preference
shares may be preferred also as regards the distribution of assets
upon dissolution of the company. The CA 2016 regulates companies
that do not have a constitution but if a company has a constitution, the
constitution shall set out the rights of the holders of those shares
concerning:
• repayment of capital;
• participation in surplus assets and profits;
• cumulative or non-cumulative dividends;
• voting and priority of payment of capital; and
• dividend as compared with other shares.
Preference shares generally have no voting rights in a general

meeting. However, voting rights may be made contingent upon failure
to pay dividends on preference shares for a certain period.
The BMLR provides that a company’s constitution must restrict the
total nominal value of issued preference shares to an amount that
does not at any time exceed the total nominal value of issued ordinary
shares.
Law: s 72 of CA 2016.
¶4-132 Participating preference shares

Preference shares may carry the right not only to receive a dividend at
a specified rate but also to receive a further dividend if any surplus
profits remain after a dividend has been paid to ordinary shareholders.
These shares are known as participating preference shares.
¶4-134 Cumulative or non-cumulative preference shares

Cumulative preference shares entitle the shareholder to a dividend at
a fixed rate throughout the entire life of the company. If there is a fall
in the profits one year and the full rate of dividend cannot be paid, this
deficit is made up in later years.
Non-cumulative preference shares entitle the holder to a dividend at
the fixed rate only in the years in which the profits enable a dividend of
that rate to be paid. Failure, through a fall of profits in one year, to pay
the fixed rate of dividend does not carry the obligations to meet the
deficit in the next year.
¶4-136 Redeemable preference shares

Redeemable preference shares are those which either give the
holders of the shares the right to be repaid their capital at a specified
date or alternatively give the company the right to repay the capital
after a specified time or within a specified period. The general
principle that a company may not reduce its capital is not breached by
the redemption of redeemable preference shares because the
Companies Act states that such redemption shall not be taken as
reducing the amount of authorised share capital.
Redeemable preference shares may be redeemed out of the proceeds
of a fresh issue of shares. If the shares are not redeemed in this way,
a capital redemption reserve must be created. When the shares are
redeemed, a sum equal to the nominal amount of the shares
redeemed must be transferred to the capital redemption reserve out of
profits which would otherwise have been available for distribution as
dividend.
Law: s 72 of CA 2016.
¶4-138 Convertible preference shares

Preference shares which carry a right to be made convertible are
called convertible preference shares. They can be converted into
another class of shares, normally ordinary shares, at the option of the
holder.
Section 90(4) of CA 2016 states that no company shall allot any
preference shares or convert any issued shares into preference
shares unless provided by the constitution and the constitution shall
set out the rights of the shareholders with respect to repayment of
capital, participation in surplus assets and profits, cumulative or non-
cumulative dividends, voting and priority of payment of capital and
dividend in relation to other shares or other classes of preference
shares.
Law: s 90(4) of CA 2016.
¶4-150 Non-voting shares

Non-voting (or restricted voting) shares are shares with no (or very
limited) voting rights attached to them. As compensation for giving up
their voting rights, holders of non-voting shares usually get preferential
treatment regarding dividends (fixed dividend, increased dividend
compared to ordinary shareholders). Pursuant to s 90(2), non-voting
shares are not applicable for preference shares.
Section 90(2) states that if a company has a class of shares of which
the holders are not entitled to vote at general meetings of the
company—
(a) the descriptive title of shares in the class shall include the words
non-voting; and
(b) the company shall ensure that those words appear legibly on
any share certificate, prospectus or directors’ report issued by the
company.
Subsection (3) states that sub-s (2) shall not apply to shares that are
described as preference shares.
Law: s 90(2) and (3) of CA 2016.
¶4-155 Employees’ shares

Some company constitutions may provide for the issue of shares to
employees, generally known as employees’ shares. One of the
advantages of shares of this type is that the company may lend
money to employees without breaching the prohibition that a company
must not make loans on the security of its own shares. But such a
scheme must be approved by shareholders at a general meeting, thus
making it a scheme approved by the shareholders. The directors must
also obtain the shareholders’ approval of the By-laws of the scheme.
¶4-160 Variation of class rights
Company law gives a certain degree of protection to the holders of

classes of shares against variation of their rights without their consent.
For example, if a company has issued various classes of shares, each
of these classes may have different rights as to voting, dividends,
priority of repayment of capital and other rights. It is necessary to
protect the rights of holders of particular classes of shares against
attempts by holders of other classes of shares to vary those rights. A
company’s constitution often sets out the manner in which the rights of
particular classes are to be protected. For example, s 91 of CA 2016
requires a 75% majority of holders of the issued shares of that class to
consent in writing, or pass a special resolution at a separate general
meeting of holders of that class of shares, to approve a variation of
their rights:
Section 91(1) states that without prejudice to any other restrictions on
the variation of the rights, the rights attached to shares in a class of
shares in a company may be varied only—
(a) in accordance with the constitution for the variation of those
rights; or
(b) if there are no such provisions, with the consent of shareholders

in that class given in accordance with this section.
Subsection (2) states that for the purposes of para (1)(b), the consent
of the shareholders required for the purposes of this section shall be—
(a) a written consent representing not less than 75% of the total
voting rights of the shareholders in the class; or
(b) a special resolution passed by shareholders in the class
sanctioning the variation.
Subsection (3) states that a variation of class rights takes effect—

(a) if no application is made under s 93 for it to be disallowed, at the
expiration of the period in which applications may be made under
that section; or
(b) if an application is made within that period, at the time the

application is finally determined, unless the variation is
disallowed.
Subsection (4) states that if an application is withdrawn before the

expiry of the period referred to in sub-s 93(2), the variation shall only
take effect at the expiry of such period.
Subsection (5) states that the issue by a company of preference
shares ranking equally with existing preference shares issued by the
company shall be deemed to be a variation of the rights attached to
those existing preference shares unless the issue of the preference
shares was authorised by the terms of issue of the existing preference
shares or by the constitution of the company in force at the time the
existing preference shares were issued.
Notifying shareholders of variation is required under s 92 in the
following manner:
Subsection (1) states that if the rights attached to shares in any class
of shares in a company are varied, the company shall give written
notice of the variation to each shareholder in that class within 14 days
from the date on which the variation is made.
liable to a fine not exceeding RM500,000.
Law: s 91 and 92 of CA 2016.
ALLOTMENT AND ISSUE OF SHARES

¶4-200 Allotment and issue of shares
Terminologies
The meaning of “issue” is akin to an offering of shares to the
shareholders or investors, where an invitation is made by the
company for the subscription of the shares offered at a pre-
determined price. The persons intending to subscribe for the shares
must then complete an application form and return it together with the
remittance for the board of directors to allot the shares.
As for the term “allotment”, this is the actual allocation of the number
of shares paid for by the investor, as approved by a board’s resolution.
Section 78 of CA 2016 states that when an allotment is made, a return
of allotment must be made with the Registrar of Companies (“ROC” or
“Registrar”). See also ¶4-210.
Allotment of shares or grant of rights
The CA 2016 stipulates that allotment of shares or grant of rights
needs company’s approval. Before a share can be subscribed, the
board of directors, must first obtain the shareholders’ approval by
passing a resolution to authorise them to offer the shares for
subscription. In this context, the process is seen as an offering of the
shares to be subscribed by investors, especially since under CA 2016,
shares are not issued out of authorised capital (the concept of
authorised capital is abolished under CA 2016 since shares no longer
have par value).
Once authorisation is obtained from a shareholders’ resolution to
empower the board to “allot” (similar to offering the shares for
subscription), a notification via e-form (“Notice of approval for
allotment of shares or grant of rights” in Schedule B of MyCoID1) must
be lodged for filing with the Registrar (s 76).
Both s 75 and 76 are overall approvals by members to empower and
authorise directors to offer shares for subscription:
• Section 75 prescribes the types of offerings to be made under the
various circumstances described that require members’ approval
by way of resolution.
• Section 76 prescribes the period of validity of the resolution once
passed by members and notifications to be made to the Registrar.
At these stages, the provisions are meant for what we used to
understand as the “offering and issuance” of shares, even before
application forms have been sent out.
Section 75 of CA 2016 seems to treat “allotment” and “issue” as

synonymous in regard to the restriction of powers of directors to issue
shares that require the prior approval of a resolution by the company.
However, it must be borne in mind that the process behind these
words is significantly different (see ¶4-210). Section 75 limits the
exercise of power of directors to allot shares or grant rights:
Subsection (1) states that unless the prior approval by way of
resolution by the company has been obtained, the directors of a
company shall not exercise any power—
(a) to allot shares in the company;
(b) to grant rights to subscribe for shares in the company;
(c) to convert any security into shares in the company; or
(d) to allot shares under an agreement or option or offer.
Subsection (2) states that sub-s (1) shall not apply to—
(a) an allotment of shares, or grant of rights, under an offer made to
the members of the company in proportion to the members’
shareholdings;
(b) an allotment of shares, or grant of rights, on a bonus issue of

shares to the members of the company in proportion to the
members’ shareholdings;
(c) an allotment of shares to a promoter of a company that the

promoter has agreed to take; or
(d) shares which are to be issued as consideration or part

consideration for the acquisition of shares or assets by the
company and members of the company have been notified of the
intention to issue the shares at least 14 days before the date of
issue of the shares.
Subsection (3) states that for the purposes of para (2)(d), members of
the company are deemed to have been notified of the intention to
issue shares of the company if—
(a) a copy of the statement explaining the purpose of the intended
issue of shares has been sent to every member at his last known
address according to the register of members; and
(b) the copy of the statement has been advertised in one widely
circulated newspaper in Malaysia in the national language and
one widely circulated newspaper in Malaysian in the English
language.
Subsection (4) states that any issue of shares made by a company in

contravention of this section shall be void and consideration given for
the shares shall be recoverable accordingly.
Subsection (5) states that any director who knowingly contravenes, or
permits or authorises the contravention of, or fails to take all
reasonable steps to prevent the contravention of this section with
respect to any issue of shares commits an offence and shall be liable
to compensate the company and the person to whom the shares were
issued for any loss, damages or costs which the company or that
person may have sustained or incurred.
Subsection (6) states that notwithstanding the Limitation Act 1953, no
proceedings to recover any such loss, damages or costs shall be
commenced after the expiration of three years from the date of the
issue.
In practice, public listed companies normally include the approval
pursuant to s 75(1) as one of the ordinary business to be approved by
shareholders at the AGM, regardless whether there will be any
allotment of shares. The reason is, in the event the public company
decides on an allotment of shares after the AGM and before the next
AGM, there would be no need to purposely call for an EGM just to
obtain the approval to allot shares pursuant to s 75(1) and (3) of CA
2016. Furthermore, convening an EGM could be costly, time-
consuming and burdensome.
Section 76(1) states that for the purposes of sub-s 75(1), approval
may be confined to a particular exercise of that power or may apply to
the exercise of that power generally and any such approval may be
unconditional or subject to conditions.
Subsection (2) states that an approval made under sub-s (1) shall be
lodged with the Registrar within 14 days from the date of the approval.
Subsection (3) states that an approval expires—
(a) in the case where a company is required to hold an annual
general meeting (AGM)—
(i) at the conclusion of the AGM held next after the approval
was given; or
(ii) at the expiry of the period within which the next AGM is
required to be held after the approval was given,
whichever is the earlier; or
(b) in the case where the company is not required to hold an AGM,
not more than 12 months after the approval was given.
Subsection (4) states that notwithstanding sub-s (3), an approval may

be revoked or varied at any time by a resolution of the company.
Subsection (5) states that the directors may allot shares or grant rights
after an approval has expired if—
(a) the shares are allotted, or the rights are granted, under an
agreement, option or offer made or granted by the company
before the approval expires; and
(b) the approval allowed the company to make or grant an

agreement, option or offer that would or might require shares to
be allotted, or rights to be granted, after the approval expires.
continuing offence, to a further fine not exceeding RM1,000 for each
day during which the offence continues after conviction.
Return of allotment and subsequent allotments
Upon allotment, company law requires the lodgement of e-form
(“Return of allotment of shares” in Schedule A of MyCoID) to the
Registrar within 14 days, confirming the particulars of the allottees and
the number of shares allotted [s 78(1), CA 2016].
It should be noted that after the approval has been obtained,
subsequent allotments of shares by the company do not require any
approval, as the approval will continue in force until the periods as
mentioned in s 76(3) and (5) above. The company is only required to
lodge the allotment in e-form (“Return of allotment of shares” in
Schedule A of MyCoID) with the Registrar whenever there is any
subsequent allotment, within 14 days from an allotment of shares
approved by the board of directors.
Law: s 75, 76, 77 and 78 of CA 2016.
Footnotes
website.
¶4-210 The meaning of “allotment”
Legally, the terms “allotment” of shares and “issue” of shares are not
interchangeable. “Allotment” is the formal act of appropriation by the
company of its unissued shares; it is an appropriation of a specific
number of shares (Re Florence Land and Public Works Co [Nicol’s
case]). “Issue” imports that some act has been done after allotment to
make the title of the allottee complete (per Cockburn LCJ in Re
Ambrose Lake Tin and Copper Co Ltd [Clarke’s case]).
The act of allotment is carried out when the company (ie the board or
a committee of the board) appropriates or assigns a certain number of
its unissued shares to a specified person. However, the allotment in
itself does not make that person a member from that moment. The
allotment constitutes a binding contract under which the company
must make a complete allotment of the specified number of shares,
and under which the person who had made the offer and is now
bound by the acceptance, is bound to take that particular number of
shares (per Chitty J in Re Florence Land and Public Works Co). Once
acceptance has taken place, the next step is to issue the shares. This
involves providing the shareholder with complete control over the
shares (per Dixon J in Central Piggery Co Ltd v McNicoll). The House
of Lords has held that the allotment and registration of shares are
distinct procedures and that shares are issued only when they are
registered (National Westminster Bank Plc & Anor v Inland Revenue
Commissioners; Barclays Bank Plc & Anor v Inland Revenue
Commissioners).
Author’s note:
In s 76 and 78 of CA 2016, the same word, “allotment”, is used to refer to two different
matters:
• In s 76, the word “allotment” refers to obtaining approval from the company, ie
passing of a members’ resolution authorising the directors to exercise their powers
in allotting shares, granting rights to subscribe, to convert securities into shares
and to allot shares under an agreement or option or offer. The e-form to be used
for this is the “Notice of approval for allotment of shares or grant of rights” in
Schedule B of MyCoID.
• In s 78, the word “allotment” refers to the actual allocation of shares paid for by the
shareholders subscribing for the shares they have applied for, and duly approved
by the board of directors’ resolution. The e-form to be used for this is the “Return
for allotment of shares” in Schedule A of MyCoID.
¶4-220 Contract arising from application for shares
The usual way for a person to become a shareholder of a company,

apart from the transfer of shares from another person already a
shareholder, is by contract with the company arising from an
application to the company for shares. The application for shares is
the offer, and the notice to the applicant of the acceptance of this
application is the acceptance. The ordinary rules of offer and
acceptance apply here. For example, withdrawal of an offer (that is,
the application) before communication to the applicant of allotment
means that the applicant is not bound [Re National Savings Bank
Association (Hebb’s case)].
Where posting is clearly the method intended by the parties to be the
means of communicating acceptance, then the date on which the
allotment letter is posted is the relevant date. A withdrawal of an
application after the posting to the applicant of a letter of allotment is
ineffective (Household Fire Insurance Co Ltd v Grant). The terms of
the contract depend upon the conditions stipulated in the application
form.
¶4-230 Effect of allotment
Upon notification of the allotment being effected, the applicant

(allottee):
• becomes a member of the company;
• is bound by its constitution; and

• is liable to pay any balance of the nominal value of the shares
allotted to him.
In practice, before allotment of shares, the company secretary

(especially external company secretary) will request for the proposed
allottee to bank in to the company’s bank account, the full application
monies in which the allottee proposes to apply for the shares. A copy
of the bank-in slip will be forwarded to the company secretary as
evidence that the full subscription amount has been paid. The
company secretary will then prepare all the necessary documents for
the allotment of shares to the proposed allottee for signing and
thereafter lodged with the Registrar of Companies (“ROC” or
“Registrar”). The date of the allotment should be on or after the date of
the bank-in slip.
Note that the promoters of a company become members by the act of
subscribing at the time of incorporation.
Section 78(8) states that any shares issued to any person without
formal allotment for the purpose of incorporation of a company shall
be deemed to have been allotted on the date of the incorporation.
Law: s 78(8) of CA 2016.
¶4-240 Option to take up shares

A public company may issue options to any person allowing him to
take up unissued shares in the company at some future date if he
chooses, within a period of ten years. However, this cannot apply in
cases where the holders of debentures have an option to take up
shares by way of redemption of the debentures.
If an option holder is not a registered shareholder, the following
conditions shall apply:
• He must take up the shares and pay for the sum fixed by the price,
and be subject to the terms and conditions of the option therein;
• An option to take up unissued shares in a public company after a

period of five years has elapsed from the date on which the option
was granted shall be void.
Section 128(1) of CA 2016 states that a public company may grant an

option to any person to take up unissued shares for a period of not
more than ten years from the date on which the option was granted.
Subsection (2) states that sub-s (1) shall not apply in any case where
the debenture holders have an option to take up shares of the
company by way of redemption of the debentures.
Law: s 128 of CA 2016.
¶4-250 Restrictions as to allotment by public company

The following restrictions apply where an issue of shares is made to
the public:
• No allotment of shares may be made pursuant to a prospectus that
is registered under the Securities Commission Act 1993 until a
minimum subscription has been subscribed and the amount
payable on application has been received.
• The minimum subscription shall be calculated on the nominal

value of each share, and where the shares are issued at a
premium, on the nominal value of and the amount of the premium
payable on each share. The minimum subscription shall also be
reckoned exclusively of any amount payable otherwise than in
cash.
• Payment of the amount payable on application pursuant to a

prospectus that is registered under the Securities Commission
Act 1993 (which must be at least 5% of the nominal amount of
each share) must be made in cash (which does not mean by
cheque since payment made by cheque is not regarded as
payment until the cheque is cleared).
If the conditions stated above are not met on the expiration of four
months after the first issue of the prospectus, all money received from
the applicants for shares shall be forthwith repaid to them without
interest, and if any such money is not repaid within five months after
the issue of the prospectus, the directors of the company shall be
jointly and severally liable to repay that money with interest at the rate
of 10% per annum from the expiration of the period of five months but
a director shall not be so liable if he proves that the default in the
repayment of the money was not due to any misconduct or negligence
on his part.
All application and other moneys paid prior to allotment by any
applicant on account of shares or debentures offered to the public for
which a prospectus is required under the Securities Commission Act
1993 shall until the allotment be held by the company upon trust for
the applicant.
If a prospectus has not been issued, no shares may be allotted unless
a statement in lieu of prospectus has been lodged with the Registrar
three days before the first allotment.
A return of allotment must be lodged with the Registrar within 14 days
after the shares are allotted or deemed allotted.
Section 2 of CA 2016 defines “minimum subscription” as follows:
(a) in relation to any shares of an unlisted recreational club which
are offered to the public for subscription, means the amount
stated in the prospectus relating to the offer as stated in Sch 1;
(b) in relation to any issue of, offer for subscription or purchase of,
or invitation to subscribe for or purchase, shares made under the
Capital Markets and Services Act 2007, means the amount stated
in the prospectus relating to the issue, offer or invitation in
accordance with the requirements of the Securities Commission
relating to contents of prospectuses,
as the minimum amount which in the opinion of the directors must be

raised by the issue of the shares so offered.
Prohibition of allotment unless minimum subscription received is
stipulated by s 186 of CA 2016:
Subsection (1) states that no allotment shall be made of any shares of
a company offered to the public or offered for subscription or purchase
or where an invitation to subscribe for or purchase shares is made
under a prospectus that is registered under the Capital Markets and
Services Act 2007 unless—
(a) the minimum subscription has been subscribed; and
(b) the amount payable on application for the shares so subscribed

has been received by the company,
but if a cheque for the sum payable has been received by the
company, the sum shall be deemed not to have been received by the
company until the cheque is paid by the bank on which the cheque is
drawn.
Subsection (2) states that the minimum subscription shall be—
(a) calculated on the offer price of each share; and
(b) reckoned exclusively of any amount payable otherwise than in

cash.
Subsection (3) states that the amount payable on application on each

share offered to the public or offered under a prospectus that is
registered under the Capital Markets and Services Act 2007 shall not
be less than 5% of the offer price of the share.
Subsection (4) states that if the conditions referred to in para (1)(a)
and (b) have not been satisfied on the expiration of four months after
the first issue of the prospectus—
(a) all moneys received from applicants for shares shall be forthwith
refunded to the applicants without interest or returns; and
(b) if such money is not refunded within five months after the issue
of the prospectus, the directors of the company shall be jointly
and severally liable to refund that money with interest or returns
at the rate of 10% per annum from the expiration of the period of
five months, but a director shall not be liable if the directors
proves that the default in the repayment of the money was not
due to any misconduct or negligence on his part.
Subsection (5) states that notwithstanding that the company is in the
course of being wound up, an allotment made by a company to an
applicant in contravention of this section or sub-s 188(1) shall be
voidable at the option of the applicant which may be exercised by a
written notice served on the company not later 30 days from the date
of the allotment.
Subsection (6) states that any condition requiring or binding any
applicant for shares to waive compliance with any requirements of this
section shall be void.
Subsection (7) states that if an allotment of—
(a) shares or debentures is made on the basis of a prospectus after
the expiration of six months or such longer period as the Registrar
may allow from the date of issue of the prospectus; or
(b) securities is made on the basis of a prospectus that is registered

under the Capital Markets and Services Act 2007 later than the
period after the date of issue of the prospectus as the Securities
Commission may specify,
the allotment shall not by reason only of that fact be voidable or void.
Subsection (8) states that a company, officer or promoter of that
company or a proposed company shall not authorise or permit an
allotment of—
(a) any shares or debentures to the public on the basis of a
prospectus after the expiration of six months or such longer
period as the Registrar may allow from the date of issue of the
prospectus; or
(b) any securities as defined in the Capital Markets and Services

Act 2007 on the basis of a prospectus that is registered under that
Act later than the period after the date of issue of the prospectus
as the Securities Commission may specify.
Subsection (9) states that the company and every officer or any
promoter of a company or a proposed company who contravene sub-s
(7) commit an offence and shall, on conviction, be liable—
(a) in the case of the company, to a fine not exceeding RM5 million;
and
(b) in the case of the officer or promoter of a company or a

proposed company, to imprisonment for a term not exceeding five
years or to a fine not exceeding RM5 million or to both.
Subsection (10) states that every director of a company who

knowingly contravenes or permits or authorises the contravention of
this section or sub-s 190(1) shall, on conviction, be liable to
imprisonment for a term not exceeding five years or to a fine not
exceeding RM1 million or to both and, in addition, shall be liable to
compensate the company and the allottee respectively for any loss,
damages or costs which the company or the allottee has sustained or
incurred but no proceedings for the recovery of any such
compensation shall be commenced after the expiration of two years
from the date of the allotment.
Law: s 2, 186 and 187 of CA 2016.
PAYMENT FOR SHARES

¶4-300 Payment for shares and the register of options
Unless the offer is under seal, there must be valuable consideration

passing to the company for the grant of the option. The form of options
of listed companies is regulated by the BMLR.
Under s 128(1) of CA 2016, a public company may grant an option to
any person to take up unissued shares for a period of not more than
ten years from the date on which the option was granted. Subsection
(2) states sub-s (1) shall not apply in any case where the debenture
holders have an option to take up shares of the company by way of
redemption of the debentures.
In light of the above, s 129 requires a public company to keep a
register of options granted to persons entitled to take up the unissued
shares in the company, and the company is required within 14 days of
a grant of an option to enter in the register the following particulars:
• the name, address and number of the identity card issued under
the National Registration Act 1959, or the passport number or
other identification number, and the nationality of the holder of the
option;
• the date on which the option was granted;
• the number and description of the shares in respect of which the

option was granted;
• the period during which the time at which or the occurrence upon
the happening of which the option may be exercised;
• the consideration, if any, for the grant of the option;
• the consideration, if any, for the exercise of the option or the

manner in which that consideration is to be ascertained or
determined; and
• such other particulars as may be determined by the Registrar.
In the circumstance, the register of options shall be kept as if the

register was the register of members. In other words, s 50 to s 55
which are applicable to a register of members, will apply to a register
of options, ie the company is required:
(a) to keep a register of options;
(b) to notify of particulars and changes in the register;
(c) to have an index of option holders if necessary for more than 50

option holders;
(d) to keep a branch register of option holders;
(e) to keep the register of option holders and index at the registered
office of the company; and
(f) to keep the register of options and index open for inspection, and
to adhere to the closure requirements as provided in s 55(3) and
(4).
The following e-forms for lodgement for filing with the Registrar shall
be used:
(a) “Notification where branch register is kept or change in the
address”;
(b) “Notice of close register of members/option holders”,
Section 129(4) states that a company shall maintain a copy of every
instrument by which an option to take up shares in the company is
granted at the place where the register under this section is kept and
such records shall be deemed to be part of the register.
Section 129(5) states that the rights in respect of the option shall not
be affected by failure of the company to comply with this section.
If there is a contravention of s 129, the company and any officer, on
conviction, shall be liable to a fine of RM500,000, and in the case of a
Law: s 128 and 129 of CA 2016.
¶4-320 Consideration as payment for subscription

shares
Normally, shares are paid for in cash but it is not uncommon for
shares to be issued for a non-cash consideration, also called
“otherwise than in cash”. For example, on the incorporation of a
company to the takeover an existing business of a sole proprietor, the
assets and undertakings are exchanged by the proprietor for shares in
the company. The Act recognises the use of non-cash consideration in
the issuance and allotment of shares, which requires the filing of e-
form (“Return for allotment of shares” in Schedule A of MyCoID) with a
statement containing particulars of the shares allotted otherwise than
for cash.
Law: s 77 and 78 of CA 2016.
¶4-330 Shares at market or current price

Since the change to no par value shares under CA 2016, shares are
to be offered at market or current price. As for market price, shares
and securities can be priced according to the stock market price of a
listed company’s shares or securities, which is available during the
market days. However, in the case of private companies, the value of
the shares may be determined according to the balance sheet at a
particular financial period as determined by the board of directors. The
share valuation shall be determined by the accounting standards as
prescribed by the Approved Accounting Standards.
¶4-335 General prohibition of commissions, discounts

and allowances
Section 79(1) of CA 2016 states that a company shall not apply any of
its shares or cash, either directly or indirectly, in payment of any
commission, discount or allowance to a person in consideration of the
person—
(a) subscribing or agreeing to subscribe, whether absolutely or
conditionally, for shares in the company; or
(b) procuring or agreeing to procure subscriptions, whether

absolutely or conditionally, for shares in the company.
Subsection (2) states that for the purposes of sub-s (1), it is immaterial
how the shares or cash are applied, whether by being added to the
purchase money of property acquired by the company or to the
contract price of work to be executed for the company, or being paid
out of the nominal purchase money or contract price, or otherwise.
Law: s 79 of CA 2016.
¶4-340 Existing share premium account

Before CA 2016 was enforced on 31 January 2017, if the sum paid or
the value of assets contributed for shares by subscribers exceeded
the nominal value or par value of the shares, this difference is termed
a “premium”. A company may issue shares at a premium but all the
moneys received by way of premium must be paid to a “share
premium account” which is disclosed separately from the share capital
in the company’s balance sheet. With the enforcement of CA 2016, a
company having a share premium account may comply with s 618(2),
which states that upon the commencement of s 74 (“No par value
shares”), any amount standing to the credit of a company’s share
premium account and capital redemption reserve shall become part of
the company’s share capital.
If an existing company has a share premium account and wishes to
comply with s 618(2), the board of directors may pass a resolution to
transfer all the amount standing to the credit of the company’s share
premium account to the company’s share capital account.
Law: s 618(2) of CA 2016.
¶4-350 Alternative treatment of share premium accounts

Under the former CA 1965, a share premium account was to be
treated as though it was share capital except that it may be applied
only for:
• paying up unissued shares to be issued to members as fully paid
bonus shares;
• paying up in whole or in part the balance unpaid on members’

shares previously issued;
• writing off preliminary expenses or the expenses of and
commission brokerage discount on any duty, fee or tax payable
on or in connection with any issue of shares;
• providing for the premium payable on redemption of redeemable

preference shares;
• transferring an amount to any statutory fund established and

maintained under insurance legislation;
• payment of dividends if such dividends are satisfied by the issue of

shares to members of the company.
Note that share premiums are not divisible profits and cannot be used
to pay cumulative preferential dividend (Re Hume Industries (Far
East) Ltd).
Section 618(3) of CA 2016 provides that notwithstanding s 618(2), a
company may, within 24 months upon the commencement of s 74
(“No par value shares”), use the amount standing to the credit of its
share premium account to—
(a) provide for the premium payable on redemption of debentures or
redeemable preference shares issued before the commencement
of s 74;
(b) write off—

(i) the preliminary expenses of the company incurred before the
commencement of s 74; or
(ii) expenses incurred, or commissions or brokerages paid or

discounts allowed, before or upon the commencement of s
74, for any duty, fee or tax payable on or in connection with
any issue of shares of the company;
(c) pay up, under an agreement made before the commencement of

s 74, shares which were unissued before that date and which are
to be issued upon that date to members of the company as fully
paid bonus shares;
(d) pay up in whole or in part the balance unpaid on shares issued
before the commencement of s 74 to members of the company;
or
(e) pay dividends declared before the commencement of s 74, if

such dividends are satisfied by the issue of shares to members of
the company.
Section 618(4) states that notwithstanding s 618(2), a company may,

within 24 months upon the commencement of s 74, use the amount
standing to the credit of its capital redemption reserve account to pay
up shares which were unissued before that date and which are to be
issued to members of the company as fully paid bonus shares.
Section 618(5) states that notwithstanding s 618(2), any company
carrying out the business of insurance or takaful in Malaysia
immediately before the commencement of s 74, may apply the amount
standing to the credit of its share premium account immediately before
such date by appropriation or transfer to any fund established and
maintained under the Financial Services Act 2013 or Islamic Financial
Services Act 2013.
Law: s 618 of CA 2016.
¶4-360 Calls on shares
A company may take payment for shares in instalments if so

authorised by its constitution. A company may allot shares for which
not all the consideration has been received. The shares are then
termed “partly paid”. The balance can be requested (“called”) from the
shareholders at any time unless the shareholders decide by special
resolution that the money is not to be called up except on the winding
up of the company.
It is usual for a deposit to be paid on the application for shares, with
the balance falling due on allotment. This practice is more convenient
since it reduces the need for a company to make calls on shares.
The company’s constitution may provide that calls on different classes
of partly paid up shares be made at different times. If the constitution
does not have such a provision, the calls must be made equally on
holders of all classes of shares.
Section 82(1) of CA 2016 provides that the directors may make calls
upon the shareholders in respect of any money unpaid on the shares
of the shareholders and not by the conditions of allotment of shares
made payable at fixed date.
Subsection (2) states that a sum which, by the terms of issue of a
share, becomes payable on allotment or at any fixed date shall be
deemed to be a call duly made and payable on the date on which by
the terms of issue the shares becomes payable and in the case of
non-payment, all the relevant provisions of CA 2016 as to payment of
interest and expenses, forfeiture or otherwise shall apply as if the sum
had become payable by virtue of a call duly made and notified.
Subsection (3) states that subject to the company’s constitution—
(a) no call shall exceed one-fourth (1/4) of the issued price of the
share or be payable at less than 30 days from the date fixed for
the payment of the last preceding call; and
(b) each member shall, subject to receiving at least 14 days’ notice

specifying the date, time and place of payment, pay to the
company the amount called on his shares.
Subsection (4) states that a call shall be deemed to have been made
at the time when the resolution of the directors authorising the call was
passed and such resolution may authorise the call to be paid by
instalments.
Subsection (5) states that the joint holders of a share shall be jointly
and severally liable to pay all calls in respect of their shares.
Subsection (6) states that if a sum called in respect of a share is not
paid before or on the day appointed for payment of the sum, the
person from whom the sum is due shall not be required to pay any
interest or compensation on that sum unless stated in the constitution
of the company.
Subsection (7) states that for the purposes of sub-s (6), the rate stated
in the constitution shall not exceed 8% per annum from the day
appointed for the payment of the sum to the time of actual payment as
the directors may determine.
Subsection (8) states that the directors may waive payment of the
interest due wholly or in part from the person referred to in sub-s (6).
Subsection (9) states that a call may be revoked or postponed as the
directors may determine.
Law: s 82 of CA 2016.
¶4-370 Lien on shares

Generally, a lien is a right to retain possession of a thing until a claim
is satisfied. Most companies, under their constitution, have an
equitable charge or mortgage, called a lien on shares, in respect of all
calls or other moneys due to the company. This lien on shares is
different from the normal lien because it takes effect as an equitable
charge upon shares. It does not depend on the actual possession or
retention of the scrip.
The constitution of most companies also provide for the company to
have a first and paramount lien over its shares in respect of unpaid
calls and in respect of all money presently payable by a shareholder to
the company. This lien may also extend to dividends payable on the
shares. The CA 2016 requires that a 14-day notice of demand of
payment be given to the registered holder before the power of sale
can be exercised.
Since a lien on shares is an equitable interest, the interests of a bona
fide purchaser for value of the legal interest in shares who has taken
the shares without notice of the company’s lien takes precedence over
its interest in the shares.
A company may by special resolution alter its constitution to extend its
lien to fully paid shares. Such an extension will be effective against
shareholders holding fully paid shares even before the resolution is
passed (Allen v Gold Reefs of West Africa).
Section 111(1) of CA 2016 states that unless provided otherwise in
the constitution, a company shall be entitled to a lien, in priority to any
other claim, over—
(a) a partly paid issued share; and
(b) any dividend payment on the share,

for all money due by the shareholder to the company by way of
money called or payable at a fixed date.
Subsection (2) states that a company may sell any share over which
the company has a lien in a manner as the directors consider
appropriate.
Subsection (3) states that the sale of any shares by a company
referred to in sub-s (2) shall not be made unless—
(a) a sum in respect of which the lien exists is presently payable;
and
(b) until the expiry of 14 days from a written notice, stating and
demanding payment of such part of the amount in respect of
which the privilege or lien exists as is presently payable has been
given to the registered holder for the time of the share, or the
person entitled to the share by reason of the death or bankruptcy
of the registered holder.
Subsection (4) states that for the purposes of giving effect to any sale
under sub-s (2), the directors may authorise a person to transfer the
shares sold to the purchaser of the shares who shall be registered as
the shareholder comprised in any such transfer and the directors shall
not be bound to see to the application of the purchase money.
Subsection (5) states that the title of the purchaser to the share sold
under sub-s (2) shall not be affected by any irregularity or invalidity in
the proceedings relating to the sale.
Subsection (6) states that the proceeds of the sale shall be received
by the company and applied in payment of such part of the amount in
respect of which the lien exists as is presently payable, and any
residue shall be paid to the person entitled to the share at the date of
the sale, subject to a similar lien for sums not presently payable which
exists over the shares before the sale.
Subsection (7) states that the directors may decline to register the
transfer of a share over which the company has a lien, unless
otherwise provided in the constitution.
Law: s 111 of CA 2016.
¶4-380 Forfeiture of shares
As an alternative to a lien, the company may seek to recover call

money which is due by forfeiture. A company may not forfeit for any
other reason than this because it is against the provision prohibiting
unauthorised reduction of capital.
The CA 2016 provides for forfeiture and the constitution may provide
that the directors may forfeit shares by a resolution to that effect. The
power arises only after:
• a member has failed to pay a call;
• a notice requiring payment of the call has been sent; and
• the member has failed to comply with that notice.
The constitution may provide that the forfeited shares be sold or

otherwise disposed of on such terms and in such manner as the
directors think fit. At any time before the sale or disposition the
directors may cancel the forfeiture on such terms as they think fit.
The shareholder whose shares are to be forfeited must be given
proper notice of it, for example, in a notice to a general meeting (First
Nominee (Pte) Ltd v New Kok Ann Realty Sdn Bhd & Anor).
Forfeiture of shares is stipulated under s 83 of CA 2016:
Subsection (1) of s 83 states that if a shareholder fails to pay any call
or instalment of a call within the stipulated time, the directors may
serve a notice on the shareholder requiring payment of the amount
unpaid together with any interest or compensation which may have
accrued.
Subsection (2) states that the notice in sub-s (1) shall—
(a) specify a date on or before which the payment is required to be
made; and
(b) state that in the event of non-payment on or before the specified

date, the shares in respect of which the call was made is liable to
be forfeited.
Subsection (3) states that upon failure to comply with the notice
served under sub-s (1), the share in respect of which the notice has
been given shall be forfeited by a resolution of the directors unless the
payment as required by the notice has been made before such
resolution.
Subsection (4) states that for the purposes of sub-s (3), the forfeiture
shall include all dividends declared in respect of the forfeited shares
and not actually paid before the forfeiture.
Subsection (5) states that a person whose shares have been forfeited
under sub-s (3) shall cease to be a member in respect of the forfeited
shares.
Subsection (6) states that notwithstanding sub-s (5), the person shall
remain liable to pay to the company all money which at the date of
forfeiture was payable by him to the company in respect of the shares
together with interest or compensation at the rate of 8% per annum
from the date of the forfeiture on the money for the time being unpaid
if the directors think fit to enforce payment of the interest or
compensation, and the liability shall cease if and when the company
receives payment in full of all such money in respect of the shares.
Subsection (7) states that a statutory declaration in writing by a
director or secretary that a share in the company has been duly
forfeited on a date stated in the declaration shall be conclusive
evidence of the facts stated in the declaration against all persons
claiming to be entitled to the share.
Subsection (8) states that a forfeited share may be sold or otherwise
disposed of on such terms and in such manner as the directors think
fit.
Subsection (9) states that the company may receive the consideration,
if any, given for a forfeited share on any sale or disposition of the
share and may execute a transfer of the share in favour of the person
to whom the share is sold or disposed of and such person shall—
(a) be registered as the shareholder; and
(b) not have his title to the share be affected by any irregularity or
invalidity in the proceedings in reference to the forfeiture, sale or
disposal of the share.
Subsection (10) states that the forfeiture may be cancelled on such

terms as the directors think fit at any time before a sale or disposition
of the forfeited shares.
Subsection (11) states that this section shall apply in the case of non-
payment of any sum which, by the terms of issue of a share, becomes
payable to the company at a fixed date, as if the shares had been
payable by virtue of a call duly made and notified.
Law: s 83 of CA 2016.
¶4-390 Financial assistance not exceeding 10% of

shareholders’ funds
The CA 2016 provides that a company may, by a special resolution,
give financial assistance for the purpose of the acquisition of a share
in the company or its holding company or for the purpose of reducing
or discharging a liability incurred under the following conditions:
(a) the directors resolve, before the assistance is given;
(b) the giving of the assistance is in the best interest of the

company; and
(c) the terms and conditions under which the assistance is to be

given are just and reasonable to the company.
The procedure and other terms are as follows:

(a) On the same day that the directors passed the resolution, the
directors who voted in favour of the resolution make a solvency
statement that complies with provisions in relation to the giving of
the assistance.
(b) The aggregate amount of the assistance and any other financial
assistance given under this section that has not been repaid does
not exceed 10% of the aggregate amount received by the
company in respect of the issue of shares and the reserves of the
company, as such aggregate amount is disclosed in the most
recent audited financial statements of the company.
(c) The company receives fair value in connection with the giving of
the assistance.
(d) The assistance is given not more than 12 months after the day
on which the solvency statement is made under (a) above.
(e) The resolution of the directors under (a) shall set out in full the
grounds for the conclusions of the directors made under that
paragraph.
(f) A reference in to any other financial assistance given under this

provision that has not been repaid includes the amount of any
financial assistance given in the form of a guarantee or security
for which the company remains liable at the time the financial
assistance in question is given.
(g) Within 14 days from giving financial assistance under this

section, the company shall send to each member of the company
a copy of the solvency statement and a notice containing the
following information:
(i) the class and number of shares in respect of which the
assistance was given;
(ii) the consideration paid or payable for those shares;
(iii) the name of the person receiving the assistance and, if a

different person, the name of the beneficial owner of those
shares;
(iv) the nature, the terms and, if quantifiable, the amount of the
assistance.
The company and every officer who contravene this section commit
an offence and shall, on conviction, be liable to a fine not exceeding
RM3 million or imprisonment not exceeding five years or to both and,
in the case of a continuing offence, to a further fine not exceeding
RM1,000 for each day during which the offence continues after
conviction.
This provision shall not apply to a company whose shares are quoted
on a stock exchange.
Law: s 126 of CA 2016.
¶4-400 Financial assistance by a company in dealing

with its own shares
Section 123 of CA 2016 stipulates the financial assistance by a
company in dealings in its shares, etc:
Subsection (1) states that unless otherwise provided in this Act, a
company shall not give any financial assistance, whether directly or
indirectly and whether by means of a loan, guarantee or the provision
of security or otherwise, for the purpose of or in connection with a
purchase or subscription made or to be made by any person of or for
—
(a) any shares in the company; or
(b) in the case where the company is a subsidiary, any shares in its
holding company, or in any way purchase, deal in or lend money
on its own shares.
company shall not give financial assistance directly or indirectly for the
purpose of reducing or discharging the liability, if—
(a) a person has acquired shares in the company or its holding
company; and
(b) the liability has been incurred by any person for the purpose of
the acquisition of the shares.
Subsection (3) states that any officer of the company who contravenes
sub-s (1) or (2) commits an offence and shall, on conviction, be liable
to a fine not exceeding RM3 million or to imprisonment for a term not
exceeding five years or to both.
Subsection (4) states that where a person is convicted of an offence
under this section and the court, by which the person is convicted is
satisfied that the company or another person has suffered loss or
damage as a result of the contravention that constituted the offence,
the court may, in addition to imposing a penalty under sub-s (3), order
the convicted person to pay compensation to the company or the
person, as the case may be, such amount as the court may specify,
and such order may be enforced as if it were a judgement of the court.
Subsection (5) states that nothing in this section shall operate to
prevent the company or any person recovering the amount of any loan
made in contravention of this section or any amount for which it
becomes liable either on account of any financial assistance given or
under any guarantee entered into or in respect of any security
provided in contravention of this section.
The CA 2016 also provides for the consequences of failing to comply
with this Subdivision.
Section 124 states that if a company gives financial assistance in
contravention of this Subdivision, the validity of the financial
assistance and of any contract or transaction connected with the
financial assistance is not affected only because of the contravention.
Law: s 123 and 124 of CA 2016.
¶4-410 Purchase of its own shares by listed company
Companies listed on Bursa Malaysia are permitted to purchase back

their own shares from the stock brokers, but they must fulfil the
following conditions:
• the listed company must be solvent at the date of the purchase
and will not become insolvent by incurring the debts involved in
the obligation to pay for the shares so purchased;
• the purchase is made in good faith and in the interests of the

company; and
• the purchase must be made through the Stock Exchange on which

the shares of the company are quoted and in accordance with the
relevant rules of the Stock Exchange.
The directors of the companies that bought back the shares may
resolve to:
• cancel the shares so purchased;
• retain the shares so purchased in treasury (referred to as “treasury

shares” in CA 2016); or
• retain part of the shares so purchased as treasury shares and

cancel the remainder.
The directors may at a later date:

• distribute the treasury shares as dividends to shareholders (such
dividends are known as “share dividends”); or
• resell the treasury shares on the market of the stock exchange on

which the shares are quoted, in accordance with the relevant
rules of the stock exchange.
The properties of the treasury shares are:

• the rights attached to them as to voting, dividends and
participation in other distribution are suspended;
• they shall not be taken into account in calculating the number or

percentage of shares or of a class of shares in the company with
regard to substantial shareholding, takeovers, notices, the
requisitioning of meetings, the quorum for a meeting and the
result of a vote on a resolution at a meeting.
Section 127 of CA 2016 stipulates purchase by a company of its own

shares, etc:
Subsection (1) states that notwithstanding s 123, a company whose
shares are quoted on a stock exchange may purchase its own shares
if so authorised by its constitution.
Subsection (2) states that a company shall not purchase its own
shares unless—
(a) the company is solvent at the date of the purchase and will not
become insolvent by incurring the debts involved in the obligation
to pay for the shares so purchased;
(b) the purchase is made through the stock exchange on which the
shares of the company are quoted and in accordance with the
relevant rules of the stock exchange; and
(c) the purchase is made in good faith and in the interests of the
company.
Subsection (3) states that notwithstanding para 2(b), a company may

purchase its own shares otherwise than through a stock exchange if
the purchase is—
(a) permitted under the relevant rules of the stock exchange; and
(b) made in accordance with such requirements as may be

determined by the stock exchange.
Subsection (4) states that where a company has purchased its own
shares, the directors of the company may resolve—
(a) to cancel the shares so purchased;
(b) to retain the shares so purchased in treasury which is referred to

as ‘treasury shares’ in this Act; or
(c) to retain part of the shares so purchased as treasury shares and

cancel the remainder of the shares.
Subsection (5) states that shares that are purchased by a company

under this section, unless held in treasury, shall be deemed to be
cancelled immediately on purchase.
Subsection (6) states that where shares are held as treasury shares,
the company shall hold such shares in a securities account in
accordance with the relevant rules of the stock exchange or the
central depository as defined in s 146, as the case may be.
Subsection (7) states that where such shares are held as treasury
shares, the directors of the company may—
(a) distribute the treasury shares as dividends to shareholders, such
dividends to be known as “share dividends”;
(b) resell the treasury shares or any of the treasury shares in

accordance with the relevant rules of the stock exchange;
(c) transfer the shares, or any of the shares for the purposes of or
under an employees’ share scheme;
(d) transfer the shares, or any of the shares as purchase

consideration;
(e) cancel the shares or any of the shares; or
(f) sell, transfer or otherwise use the treasury shares for such other
purposes as the Minister may by order prescribe.
Section (8) states that the holder of treasury shares which are held
under sub-s (5) shall not confer—
(a) the right to attend or vote at meetings and any purported
exercise of such rights is void; and
(b) the right to receive dividends or other distribution, whether cash

or otherwise, of the company’s assets including any distribution of
assets upon winding up of the company.
Subsection (9) states that while the shares are held as treasury
shares, the treasury shares shall not be taken into account in
calculating the number or percentage of shares or of a class of shares
in the company for any purposes including, without limiting the
generality of this provision, the provisions of any law or requirements
of the constitution of the company or the listing requirements of a
stock exchange on substantial shareholding, takeovers, notices, the
requisitioning of meetings, the quorum for a meeting and the result of
a vote on a resolution at a meeting.
Subsection (10) states that where the directors decide to distribute the
treasury shares as share dividends, the costs of the shares on the
original purchase shall be applied in the reduction of the funds
otherwise available for distribution as dividends.
Subsection (11) states that this section shall not be taken to prevent—
(a) an allotment of shares as fully paid bonus shares in respect of
the treasury shares; or
(b) the subdivision of any treasury shares into treasury shares of a

larger number, or consolidation of any treasury shares into
treasury shares of a smaller number.
Subsection (12) states that in the circumstances in which sub-s (2)

applies, any shares allotted as fully paid bonus shares in respect of
the treasury shares shall, for the purposes of CA 2016, be treated as if
the shares were purchased by the company at the time the shares
were allotted.
Subsection (13) states that where the directors resolve to cancel the
shares so purchased or to cancel any treasury shares, the costs of the
shares shall be applied in the reduction of the profits otherwise
available for distribution as dividends.
Subsection (14) states that where the directors resolve to cancel the
shares so purchased, or cancel any treasury shares, the issued
capital of the company shall be diminished by the shares so cancelled.
Subsection (15) states that a cancellation of shares made under para
(4)(a) or para (7)(e) shall not be deemed to be a reduction of share
capital within the meaning of CA 2016.
Subsection (16) states that a company shall lodge with the Registrar
and the stock exchange a notice of the purchase of the shares in a
manner to be determined by the Registrar within 14 days from the
purchase of the shares.
Subsection (17) states that the company, every officer and any other
person or individual who contravene sub-s (2) commit an offence and
shall, on conviction, be liable to a fine not exceeding RM500,000 or to
imprisonment for a term not exceeding five years or to both.
Law: s 124 and 127 of CA 2016.
¶4-420 Effect of cancellation of share “buy back”
When the directors resolve to cancel the shares bought back, or

cancel any treasury shares, the issued capital of the company shall be
diminished by the shares so cancelled and the amounts by which the
company’s issued capital is diminished shall be transferred to the
capital redemption reserve. The capital redemption reserve may be
applied in paying up unissued shares of the company to be issued to
members of the company as fully paid bonus shares.
A cancellation of shares made from a share buy back shall not be
deemed to be a reduction of share capital within the meaning of CA
2016. The company must, within 14 days after the shares are bought
back, lodge with the Registrar and the stock exchange a notice of
share buyback by a company. The e-form to be used is “Notice of
share buyback by a company (to make a declaration of solvency
under s 113(5)” in Schedule B of MyCoID.
Under s 127(14) of CA 2016, where the directors resolve to cancel the
shares so purchased, or cancel any treasury shares, the issued
capital of the company shall be diminished by the shares so cancelled,
and under sub-s (15), a cancellation of shares made under para (4)(a)
or para (7)(e) shall not be deemed to be a reduction of share capital
within the meaning of this Act. It is stated under sub-s (16) that a
company shall lodge with the Registrar and the stock exchange a
notice of the purchase of the shares in a manner to be determined by
the Registrar within 14 days from the purchase of the shares. The e-
form to be used is “Notice of sale or cancellation of treasury shares” in
Schedule B of MyCoID. Note that this e-form includes the sale of
treasury shares as permitted by s 127(7)(b).
Law: s 127(14), (15) and (16) of CA 2016.
¶4-430 Underwriting an initial public offer

In preparing for an initial public offer of shares, it is common for a
company to guarantee that all shares offered for sale will be taken.
This can be done by entering into an underwriting contract. By this
agreement, the underwriter agrees to take up those shares which are
not otherwise subscribed for. In exchange for his promise, the
underwriter is paid a commission, which is usually a fixed percentage
of the total offer price of the shares. The conditions attaching to this
right are:
• the payment must be authorised by the constitution;
• the commission must not be more than 10% of the price of issued
shares or the amount authorised by the constitution, whichever is
the less;
• the amount of commission must be disclosed in the prospectus (in

the case of shares offered to the public);
• the amount of commission must be disclosed in the statement in
lieu of prospectus and lodged with the Registrar (in the case of
shares not offered to the public);
• the amount of commission must be disclosed in a circular or notice

(where a circular, not being a prospectus, is issued); and
• the number of shares which persons have agreed for a

commission to subscribe absolutely must be disclosed in a
prospectus (where shares are offered to the public), a statement
in lieu of prospectus (where shares are not offered to the public)
or a circular or notice (where a circular, not being a prospectus, is
issued).
It is possible that a company will receive less than the nominal value
of the shares issued because the commission is paid out of
subscription money.
It is permissible for a company to pay a commission (termed
“brokerage”) to persons who introduce potential applicants to the
company.
SHARE CERTIFICATES
¶4-500 Share certificates
A share certificate is prima facie evidence of ownership of shares

issued by a company with share capital. The named person is the
owner of the shares. The content and wordings to be printed in the
share certificate must comply with the Act.
¶4-510 Issuance of share certificates
The issuance of share certificate is provided in s 97 of CA 2016:

Subsection (1) of s 97 states that a company shall not be required to
issue a share certificate unless an application by a shareholder for a
certificate relating to the shareholder’s shares in a company has been
received or otherwise provided by its constitution.
Subsection (2) states that any share certificate issued by a company
shall be issued in accordance with this Subdivision.
However, an application for issuance of share certificate is stipulated
in s 98 as follows:
Subsection (1) of s 98 states that a company shall, within 60 days
from receipt of an application under sub-s 97(1), send a share
certificate to the shareholder stating—
(a) the name of the company;
(b) the class of shares held by that person; and
(c) the number of shares held by that person.
The CA 2016 stipulates the delivery of share certificate in s 99:

Subsection (1) of s 99 states that if a company fails to deliver share
certificate in accordance with s 98, a person entitled to the share
certificate may serve a notice on the company requiring the company
to deliver the certificate to the person within 14 days from the service
of such notice.
Subsection (2) states that if a company contravenes sub-s (1), the
person may apply to the court for an order directing the company and
any officer of the company to deliver the certificate to the person
within the period specified in the order.
Subsection (3) states that the order may provide that all costs of and
incidental to the application are to be borne by the company or by any
officer who fails to deliver the certificate to the person within the period
specified in the order.
Public listed companies do not issue share certificates since all
securities transaction are carried out scripless through the Central
Depository System (CDS) of Bursa Malaysia.
Note that companies are prohibited from issuing share warrants which
state that the bearer of the warrant is entitled to shares specified and
which enable those shares to be transferred by delivery of the warrant.
Law: s 97, 98 and 99 of CA 2016.
¶4-520 Numbering of shares
Each share must be numbered. However, shares need not have a

distinguishing number if:
• at any time all the issued shares (or all issued shares of a class)
are fully paid up and rank equally for all purposes, so long as they
remain fully paid up and of equal rank; or
• all the issued shares are evidenced by certificates in accordance

with the Companies Act and each certificate is distinguished by
an appropriate number.
The CA 2016 stipulates the numbering of shares in s 100:

Subsection (1) of s 100 states that where a company issues share
certificates, each share shall be distinguished by an appropriate
number, except as provided by sub-s (2) or (3).
Subsection (2) states that if—
(a) all the issued shares in a company are fully paid up and rank
equally for all purposes; or
(b) all the issued shares of a particular class in a company are fully
paid up and rank equally for all purposes,
none of those shares is required to have a distinguishing number as

long as it remains fully paid up and ranks equally for all purposes with
all shares of the same class issued and fully paid up.
Subsection (3) states that if new shares are issued by a company on
the terms that, within a period not exceeding 12 months, the new
shares will rank equally for all purposes with all the existing shares or
with all the existing shares of a particular class, in the company,
neither the new shares nor the existing shares are required to have
distinguishing numbers as long as all of the shares are fully paid up
and rank equally for all purposes.
Law: s 100 of CA 2016.
¶4-530 Contents of share certificates
The CA 2016 does not state the contents of share certificate but s 98
merely states that the share certificate shall have the following:
(a) the name of the company;
(b) the class of shares held by that person; and
(c) the number of shares held by that person.
As best practice, the following information should be contained in a

share certificate under the common seal or official seal of the
company specifying:
• the shares held by the member;
• the name of the company and authority under which the company
is constituted;
• the registered office address in Malaysia, or, if issued by a branch

office, the address of the branch office; and
• the nominal value and the class of shares and extent to which the
shares are paid up.
The company, in issuing a share certificate, asserts the truth of the

above statements. It is estopped from denying the statements as
against anyone who has been affected by his reliance on the
statements (Bloomenthal v Ford).
Law: s 98 of CA 2016.
¶4-540 Estoppel effect of share certificates

If a share certificate states that the shares have been fully paid up
when they are actually not, the company is estopped from denying
that the shares have not been fully paid up. The company is also
estopped from making calls on a subsequent purchaser of those
shares. The subsequent purchaser will not be able to take advantage
of the estoppel if he:
• is not misled by the contents of the share certificate;
• has knowledge that he has no title to the shares; and
• did not rely upon the statements in the share certificates when he
purchased the shares.
(Re Ottos Kopje Diamond Mines Ltd; Balkis Consolidated Co v

Tomkinson; Re Bahia & San Francisco Railway Co).
When a share certificate is forged, the person relying on the share
certificate cannot take advantage of the estoppel since there is no
actual representation made by the company (Ruben v Great Fingall
Consolidated).
Section 101 of CA 2016 stipulates that the registration of members
constitutes evidence of legal title:
Subsection (1) states that in absence of evidence to the contrary, the
entry of the name of a person in the register of members as
shareholder is prima facie evidence that legal title to the share is
vested in that person.
Subsection (2) states that subject to s 147, a company may treat the
registered shareholder as the only person entitled to—
(a) exercise the right to vote attaching to the share;
(b) receive notices;
(c) receive a distribution in respect of the share, if any; and
(d) exercise the other rights and powers attaching to the share.
Law: s 101 of CA 2016.

¶4-545 Prohibition to issue bearer’s share warrants
The CA 2016 prohibits the issue of bearer’s share warrants under s

73:
Subsection (1) states that no company shall have the power to issue a
bearer’s share warrant.
Subsection (2) states that a bearer of share warrant shall surrender
the warrant for cancellation to have the bearer’s name entered in the
register of members of the company within 12 months upon the
commencement of this Act.
Subsection (3) states that notwithstanding sub-s (2), a bearer of share
warrant may apply to the court for an order to have his name entered
in the register of members of the company.
Subsection (4) states that the company shall be responsible for any
loss incurred by any person by reason of the company entering in the
register of members, the name of a bearer of a share warrant issued
without the warrant being surrendered and cancelled.
Law: s 73 of CA 2016.
ALTERATION OF CLASS RIGHTS

¶4-600 When class rights may be altered
The alteration of class rights depends on whether the class rights are
contained in the company’s constitution or in a resolution authorising
the issue of shares of that particular class. If class rights are contained
in the constitution, they cannot be altered because:
• the Act does not provide for alteration of class rights which are
contained in the constitution; and
• the constitution cannot be altered except if the company, by

special resolution, alter the constitution by altering or deleting the
provision, unless the constitution itself prohibits the alteration or
deletion of that provision.
If class rights are provided for in the constitution, then they may be
altered by altering the constitution. When class rights are found in a
resolution of the company, they may be varied by altering the
resolution.
¶4-610 Minority protection in variation of class rights

The CA 2016 provides for the protection of a minority of any class
affected by the variation or abrogation of rights attaching to a class of
shares. It allows the holders (being persons who did not consent to or
vote in favour of the resolution to vary or abrogate) of an aggregate of
not less than 10% of the shares of the class concerned to apply to the
court to have the variation or abrogation cancelled. If such an
application is made, the abrogation or variation will have no effect until
confirmed by the court. An order made in pursuance of such an
application must be lodged with the Registrar within 14 days of the
making of the order.
The issue of preference shares ranking in pari passu with the existing
preference shares issued by the company is deemed to be a variation
of the rights attaching to those preference shares for the purposes of s
91 of CA 2016 (see ¶4-160). Therefore, it may give rise to a right to
apply to the court for a cancellation unless the second issue is
authorised by the terms of the existing preference shares or by the
company’s constitution.
The CA 2016 provides the following protection to minorities with
regards to variation of class rights. Section 93 stipulates as follows:
of shares in a company are varied, the shareholders representing at
least 10% of the total voting rights in the class may apply to the court
to have the variation disallowed.
Subsection (2) states that an application under sub-s (1)—
(a) shall be made within 30 days from the date on which the
variation is made; and
(b) may be made on behalf of the shareholders by any shareholder

appointed in writing by all shareholders in that class.
Subsection (3) states that the court shall, upon hearing of the
application made under sub-s (1), make the following order:
(a) if the court is satisfied that the variation would unfairly prejudice
the shareholders represented by the applicant, disallow the
variation; or
(b) if the court is satisfied that the variation would not unfairly
prejudice the shareholders, confirm the variation.
Section 94 requires the delivery of the court order to Registrar as

follows:
Subsection (1) states that the company shall lodge a copy of the order
made under sub-s 93(3) with the Registrar within 14 days from the
making of the order by the court.
Section 95 requires notifying Registrar of variation in the following:
of shares in a company are varied, the company shall lodge with the
Registrar, within 30 days from the date on which the variation takes
effect—
(a) a copy of the resolution or other document that authorised the
variation; and
(b) a notice as may be determined by the Registrar including a

statement of capital, as at the date on which the variation takes
effect.
Subsection (2) states that para (1)(a) does not apply if the company is
required to lodge a copy of the resolution or other document with the
Registrar under another provision of this Act.
Subsection (3) states the company and every officer who contravene
this section commit an offence and shall, on conviction, be liable to a
fine not exceeding RM10,000 and, in the case of a continuing offence,
to a further fine not exceeding RM500 for each day during which the
offence continues after conviction.
Section 96 stipulates that a variation includes abrogation as follows:
Subsection (1) states that a reference to a variation of class rights
under this Division or the company’s constitution includes an
abrogation of those rights.
Subsection (2) states that this section shall not operate so as to limit
or derogate from the rights of shareholders in that class to obtain relief
under any remedy in cases of oppression.
Law: s 93, 94, 95 and 96 of CA 2016
TRANSFER OF SHARES
¶4-700 Right to transfer
The way in which a person disposes of the legal title in his shares is
by transfer. The right to transfer shares is a right which is incidental to
the ownership of those shares and the right of a shareholder to make
and have registered a bona fide transfer is unrestricted — unless the
constitution or a statute prohibit or regulate that transfer.
A company is not, however, bound to register a transfer that:
• is not bona fide (Re Balhannah Mining Co Ltd; Re Petition of
Dalwood);
• is entered into for an unlawful purpose or to achieve an unlawful

end (Suntoso Jacob v Kong Miao Ming);
• does not bear the correct stamp duty (if such duty be payable)
(Maynard v Consolidated Kent Collieries Corporation).
The constitution of many companies gives the directors the right to
refuse to approve a transfer either generally or on specific grounds.
However, a total prohibition against transfer seems unlikely to be
upheld by the court, though stringent conditions are allowed.
Section 106 of CA 2016 stipulates the registration of transfer or refusal
of registration:
Subsection (1) states that a company shall enter or cause to be
entered the name of the transferee in the register of members as
shareholder within 30 days from the receipt of the instrument of
transfer under sub-s 105(1) unless—
(a) the CA 2016 or the constitution of the company expressly
permits the directors to refuse or delay registration for the
reasons stated;
(b) the directors passed a resolution to refuse or delay the

registration of the transfer within 30 days from the receipt of the
instrument of transfer and the resolution sets out in full the
reasons for refusing or delaying the registration; and
(c) the notice of the resolution, and in the case of a public company
including the reasons referred to in para (b) is sent to the
transferor and to the transferee within seven days of the
resolution being passed.
Subsection (2) states that subject to the constitution, the directors may
refuse or delay the registration of a transfer of shares under sub-s (1)
where the shareholder fails to pay the company an amount due in
respect of those shares, whether by way of consideration for the issue
of the shares or in respect of the sums payable by the shareholder in
accordance with the constitution.
Law: s 106 of CA 2016.
¶4-710 Restrictions on transfer of shares
Shares are movable property and are not in the nature of immovable
property. Shares are regarded as the type of movable property called
“chose in action”. Chose in action refers to intangible property
represented by a bundle of legally enforceable rights and obligations.
In the absence of restrictions in a company’s constitution, a
shareholder has, by virtue of CA 2016, the right to transfer his shares
in the manner provided by the Act. This right may be exercised in a
transfer to anybody, if there is no restriction by the Act and provided
the transaction is one of good faith. It must be an outright disposal of
the shares without the transferor retaining any interest in those
shares, that is, a transfer by which “the transferor bona fide divests
himself of both the benefit and the burden” [Re Discoveries Finance
Corporation (Lindlar’s case)].
¶4-720 Restrictions imposed by the constitution

The constitution must not prohibit the transfer of shares absolutely.
Short of that, there is no limit to the type of restriction that may be
imposed on the transfer of shares. The nature of the restriction on the
share transfer must be fully set out. It is not sufficient for the
constitution to state that the transfer of shares is restricted. Normally,
the courts will not construe a restriction clause too strictly.
Normally, the restrictions concern the director’s right to refuse
registration. Note that:
• In exercising such a power, the directors must act in good faith in
the interests of the company and with due regard to the
shareholder’s right to transfer his shares (Re Bell Bros Ltd).
• The directors must fairly consider the transferee’s fitness at a

board meeting (Re Bell Bros Ltd).
• If the directors do give reasons for their refusal, it is open to the

court to determine whether those reasons are reasonable (Re
Bede Steam Shipping Co). The directors may refuse a transfer
when the transferee:
(a) is a trade rival (In re Australian Mont de Piete Loan and
Deposit Co Ltd, Ex parte Alexander);
(b) will obtain too great a control in the affairs of the company
(Re Smith & Fawcett Ltd);
(c) is an infant [In re Asiatic Banking Corporation (Symon’s

case)].
• The directors, or a director, may not refuse to attend a board

meeting in order to prevent a share transfer being approved (In re
Copal Varnish Co Ltd).
The CA 2016 stipulates that all limitations, restrictions and provisions

of the Subdivision relating to the right to transfer and the registration of
transfers of shares or debentures referred to in an arms-length
transfer shall be applicable to any notice or transfer as if the death or
bankruptcy of the shareholder or debenture holder had not occurred
and the notice or transfer were signed by that shareholder or
debenture holder.
¶4-730 Instruments of transfer
A shareholder may transfer his shares by a proper instrument of

transfer in the prescribed form of transfer of securities in writing and
delivered to the company, usually subject to the board of directors’
approval. To satisfy the Stamp Act 1949, the prescribed form must be
duly stamped before the transfer is effected. The instrument is then
registered and the name of the transferee is entered in the register of
members in respect of the shares.
For assessment of stamp duty for transfer of shares, below are the
documents required to be scanned to the Stamping Office:
(a) If the company is incorporated less than 18 months:
(i) Instrument of Transfer;
(ii) Form PDS 1 (this is a prescribed form from Stamping

Office);
(iii) A copy of Certificate of Incorporation.
(b) If the company is incorporated more than 18 months:

(i) Instrument of Transfer;
(ii) Form PDS 1;
(iii) A copy of Certificate of Incorporation or Notice of

Registration issued by the Registrar;
(iv) Relevant pages of the latest audited financial statements, ie

income statement, balance sheet, cash flow, etc.
(v) To fill in some information relating to the particulars of the

company, shares, transferor and transferee as prescribed in
the form (in the website) by Stamping Office.
Note:
The Stamping Office does not accept documents lodged by hand;
documents are to be scanned to the Office through their website.
In order for scanning of documents and to provide the information
as mentioned in item (v) above, the company secretary has to
register with the Stamping Office first and obtain approval. After
approval has been given, the company secretary can log on to
the Stamping Office website with the relevant password and
identification number.
Upon receiving the above documents, if the Stamping Office is

satisfied with all the documents and information scanned to them, they
will give a notice informing the amount of stamp duty required to be
paid together with an adjudication number within seven market days.
After receiving the notice, the company secretary will send the
Instrument of Transfer attached together with a copy of the said notice
to the Stamping Office for stamping.
A company shall not register a transfer of shares unless a proper
instrument of transfer has been delivered to it. This is to prevent a
company from allowing any form of automatic transfer on, for
example, the death of a shareholder.
The CA 2016 stipulates the requirement for instrument of transfer in s
105:
Subsection (1) states that subject to other written laws, any
shareholder or debenture holder may transfer all or any of his shares
or debentures in the company by a duly executed and stamped
instrument of transfer and shall lodge the transfer with the company.
Subsection (2) states that sub-s (1) shall not apply to a transfer of
securities in a company that has been removed from the official list of
a stock exchange from the central depository as defined in s 146 to
the persons named in the record of depositors referred to in sub-s
147(1), provided that such transfer is effected in accordance with the
rules of the central depository as defined in s 146.
Subsection (3) states that for the purpose of effecting the transfer of
shares or debentures, the company shall enter the name of the
transferee in the register of members or register of debenture holders
in accordance with this section.
Subsection (4) states that sub-s (1) shall not affect any power of a
company to register a person as a shareholder or debenture holder to
whom the right to shares or debentures has been transmitted by
operation of law.
Subsection (5) states that for the purposes of this section, “instrument
of transfer” includes a written application for transmission of a share,
debenture or other interest to a personal representative.
Law: s 105 of CA 2016.
¶4-740 Registration and certification of share transfers
A share transfer is only completed when it is registered by the

company. An unregistered transfer gives the purchaser only an
equitable interest in the shares. A company is exempted from having
notice of such transfers.
Where share certificates are deposited with partly completed transfers
(called “blank transfers”), the only interest that passes is equitable.
Legal interest passes only when the transfers are completed and
registered (Seah Eng Lim v P&O Banking Corp Ltd). A transfer form
was declared valid even though it was not signed on the date shown
in the transfer (Robert Tan v Tommy Tan).
The directors may refuse to register any transfer of shares:
• to any person that they do not approve of (where the shares are
not fully paid); and
• where the company has a lien over the shares.
In Malaysia, a refusal to register a transfer is valid if it is made for the

sole purpose of endorsing the government’s policy to encourage
active Bumiputera participation in private business (Mohan a/l
Paramsivam v Sepang Omnibus Company Sdn Bhd).
Where a company refuses to register a transfer, it has to send a notice
of that refusal to the transferor and transferee within one month from
the date the transfer is lodged. The directors’ option to refuse
registration ceases to be available if they do not exercise it within one
month from the date the transfer was lodged. If the directors wish to
refuse registration, they must exercise their veto power positively. The
directors cannot simply fail to approve the transfer (Royal Trust
Nominees Ltd v Sri Hartamas Development Sdn Bhd).
Procedure
Registration of a share may be made upon the request of the
transferee or transferor. If the transferor sells only a portion of his
shares in a certificate, he will usually lodge the certificate with the
company. The company will then certify the transfer of the particular
portion of shares. It will also certify that the certificate has been lodged
within the requirements of CA 2016.
¶4-750 Notice of refusal

If the company refuses to register a transfer of shares, it must send
notice of that refusal to the transferor and transferee. This notice must
be sent within one month after the date the transfer was lodged with
the company. In a situation where the company had failed to
communicate refusal to register in time and the person entitled to
receive notice of it made a second request for registration, that person
would be deemed to have waived his right to receive notice of the first
refusal (Allied Properties Sdn Bhd v Semua Holdings Sdn Bhd & Ors).
Private companies in particular, quite often impose in their constitution
restrictions on the right to transfer.
Law: s 106 of CA 2016.
¶4-760 Stop-notice and charging order

A stop-notice is a device used to protect beneficial owners of shares.
Anyone who claims to have a beneficial interest in the shares and who
wishes to be notified of any proposed transfer or payment affecting the
relevant shares can make use of the procedure. The company may
not register a transfer or make any payment of interest or dividend
without first informing the stop-notice applicant of the request of
transfer or payment.
A person who has an interest in shares registered in someone else’s
name may file a notice of charging order. The company is then obliged
to give that person prior notice before registering any transfer of the
relevant shares.
Section 107 of CA 2016 provides for an Order of Court for registration
of share transfer:
Subsection (1) states that if a company refuses to register a transfer,
the transferee or the transferor may apply to the court for an order
under this section.
Subsection (2) states that on an application under sub-s (1), the court
may order the company to register the transfer, if the Court is satisfied
that the application is well-founded.
Law: O 50, rr 2, 10 and 11 of the Rules of the High Court 1980; s 107
of the CA 2016.
¶4-770 Effect of certification

When a company certifies a transfer it is actually making a
representation to anyone acting on the faith of the certification that the
share certificates have been produced to the company. The company
is therefore estopped from denying that share certificates have been
lodged (Kleinwort v Associated Automatic Machine Corp Ltd). It
cannot refuse to register a person who presents the certified transfer.
However, note that the certification of a transfer does not amount to a
representation by the company that the transferor has any title to the
shares.
¶4-780 Loss or destruction of share certificates

Section 104 of CA 2016 stipulates the loss or destruction of
certificates:
Subsection (1) states that where a certificate or other document of title
to shares or debentures is lost or destroyed, the company shall, on
payment of a fee not exceeding RM5, issue a duplicate certificate or
document to the owner on his application.
Subsection (2) states that where the value of the debentures
represented by the certificate or document is greater than RM500, the
directors of the company may, before accepting an application for the
issue of a duplicate certificate or document, require the applicant—
(a) to cause an advertisement to be inserted in a newspaper
circulating in a place specified by the directors stating that the
certificate or document has been lost or destroyed and that the
owner intends after the expiration of 14 days after the publication
of the advertisement to apply to the company for a duplicate; or
(b) to furnish a bond for an amount equal to at least the current
market value of the debentures indemnifying the company against
loss following on the production of the original certificate or
document,
or may require the applicant to do both of those things.
Law: s 104 and 107 of CA 2016.
DIVIDENDS
¶4-800 Dividends generally
The payment of dividends and the entitlement to dividends are to a

large extent governed by the constitution of a company. The Act
merely provides that any amounts recommended by the directors
should be paid by way of dividends and that dividends must be paid
only out of profits. The Act is silent with respect to the other aspects of
dividends, such as naming the dividends. In practice companies name
dividends as “Special Dividend”, “Interim Dividend”, “Final Dividend”,
etc.
Profit may be held in reserve in order to strengthen the company’s
financial position or it may be distributed among the shareholders.
This distribution usually takes the form of a dividend, which is a share
of the profits whether at a fixed rate or otherwise, allocated to the
shareholders of the company. This is how shareholders participate in
the profits of the company, and dividends can be distributed at any
time the company deems fit under the single-tier system, as long as
there is sufficient surplus for distribution.
Section 131 of CA 2016 stipulates that distribution of dividend shall be
out of profit:
Subsection (1) states that subject to s 132, a company may only make
a distribution to the shareholders out of profits of the company
available if the company is solvent.
Subsection (2) states that the company, every officer and any other
person or individual who contravene this section commits an offence
and shall, on conviction, be liable to imprisonment for a term not
exceeding five years or to a fine not exceeding RM3 million or to both.
Furthermore, s 132 of CA 2016 states that distribution can be done
only if company is solvent:
Subsection (1) states that before a distribution is made by a company
to any shareholder, such distribution shall be authorised by the
directors of the company.
Subsection (2) states that the directors may authorise a distribution at
such time and in such amount as the directors consider appropriate, if
the directors are satisfied that the company will be solvent
immediately after the distribution is made.
Subsection (3) states that for the purposes of this section, the
company is regarded as solvent if the company is able to pay its debts
as and when the debts become due within 12 months immediately
after the distribution is made.
Subsection (4) states that if, after a distribution is authorised and
before it is made, the directors cease to be satisfied on reasonable
grounds that the company will be solvent immediately after the
distribution is made, the directors shall take all necessary steps to
prevent the distribution from being made.
Subsection (5) states that without prejudice to any other liability, every
director or officer of the company who wilfully pays or permits to be
paid or authorises the payment of any improper or unlawful distribution
shall, on conviction, be liable to imprisonment for a term not exceeding
five years or a fine not exceeding RM3 million or to both.
The CA 2016 further stipulates the recovery of distribution under s
133:
Subsection (1) states that the company may recover from a
shareholder any amount of distribution paid to the shareholder which
exceeds the value of any distribution that could properly have been
made, unless the shareholder—
(a) has received the distribution in good faith; and
(b) has no knowledge that the company did not satisfy the solvency
test required under sub-s 132(3).
Subsection (2) states that every director or manager of a company

who wilfully pays or permits to be paid any dividend in contravention of
s 131 or 132, which he knows from his knowledge is not profits shall
also be liable to the company to the extent of the amount exceeded
the value of any distribution of dividends that could properly have
been made.
Subsection (3) states that if the whole amount is recovered from one
director or manager, the director or manager may recover contribution
against any other person liable who has directed or consented to the
payment.
Subsection (4) states that the liability imposed on any person under
this section shall not extend or pass to his executors, administrators or
the estate of such person upon his death.
Law: s 131, 132 and 133 of CA 2016.
¶4-810 Entitlement to dividends

The general entitlement to dividends depends upon the constitution,
which normally provides that dividends are to be declared and paid
according to the amount paid up on each share. The overriding rule is
that the court will not interfere with the internal management of a
company (per Lord Davey in Burland v Earle) and, as the courts see it,
the division of a company’s profits amongst shareholders raises
internal management questions which shareholders must decide for
themselves. The court has no jurisdiction to control or review their
decision, or to say what is a fair or reasonable sum to retain
undivided, or what reserve fund may be properly required. These are
questions for the shareholders to decide, subject to any restrictions or
directions contained in the company’s constitution.
¶4-820 Forms of payment

Dividends may be paid in cash or in forms other than cash. For
example, shares which are fully paid up in cash or otherwise than in
cash, may be allotted to shareholders.
An interim dividend can be described as a dividend paid out in
between the previous AGM and the next AGM, however, it cannot be
effected by distribution in specie.
Although most constitutions allow a distribution in specie, note that in
the absence of an express authority in the constitution, a company
must pay dividends in cash. Without the authority of the constitution, a
company may not, for example, pay dividends by distribution of shares
or debentures in another company (Wood v Odessa Waterworks Co).
¶4-830 The constitution and dividends

The method of payment of dividends, which is contained in the
constitution, may vary from one company to another. Normally, the
constitution provides that the directors may recommend a particular
rate of dividend. Prior to CA 2016, the declaration of final dividend by
the board of directors of a public company required the approval of
members, and therefore at the public company’s AGM, the approval of
final dividend by members would be one of the agenda items.
However, this in no longer required under CA 2016, which provides in
s 131 and 132 that the board of directors may approve the distribution
of dividends subject to the following requirements:
(a) there is profit available for distributions; and
(b) that a solvency test is carried out to show that the company,
after payment of dividends, shall be solvent for the next 12
months.
Interim and final dividends

The CA 2016 does not distinguish between interim and final dividend
declarations. Hence, the question of calling such dividend payments
has no significance in law.
Listed companies have to notify the Stock Exchange when they
recommend or declare a dividend.
When the directors resolve to pay dividend, they must be satisfied that
the company’s profits justify it; that is, they must satisfy themselves
that there are profits to divide (Lucas v Fitzgerald; Towers v African
Tug Co). It is not necessary for any preparation of formal audited
accounts, rather their decision is made more upon estimates and
opinions (per Lord Alverstone CJ in Lucas v Fitzgerald). However, the
company must ensure that it is solvent and has the cash flow for a
distribution.
If after the directors have resolved to pay an interim dividend, but
before it is actually paid, they conclude that there are no profits and
that it is not prudent to pay an interim dividend they may rescind their
decision (Lagunas Nitrate Co Ltd v Schroeder & Co and Schmidt).
Law: s 131 and 132 of CA 2016.
¶4-840 Payment of dividend from profits available

Dividends are declared only when profit is available. The question as
to what are profits has often been referred to the courts. Since the
former CA 1965 provided no guidelines as to when a profit is
available, the courts have developed several principles concerning the
payment of dividends:
• The profits to be used for paying the dividend must be the profit of
the company declaring the dividend (Industrial Equity Ltd v
Blackburn).
• Dividends may be paid even though the total assets of the

company are less than the original capital subscribed by the
shareholders (Marra Developments Ltd v BW Rofe Pty Ltd). Note
that the company’s income must still exceed its outgoings.
• Lost capital need not be replaced before revenue profits are

distributed as dividends (Lee v Neuchatel Asphalte Co).
• Dividends need not be paid out from profits in the year the profits
are earned. Unless the constitution provides otherwise, dividends
may be carried forward or transferred to a reserve (Re Hume
Industries (Far East) Ltd). The profits may even be used to
replace lost capital or to write off an asset previously appearing in
the accounts (Marra Developments Ltd v BW Rofe Pty Ltd).
However, where the profits have not been treated in the above
manner, they must be used for payment of dividends (Re Hume
Industries (Far East) Ltd).
• Dividends may be paid out of capital profits even though there are
no revenue profits [Re Hume Industries (Far East) Ltd]. Note that
there must, in the first place, be an increase in the capital of the
company (Marra Developments Ltd v BW Rofe Pty Ltd). This
would mean that the company had reserves and premium
accounts for distribution.
• A surplus caused by the revaluation of assets may be distributed

as dividends [Dimbula Valley (Ceylon) Tea Co Ltd v Laurie].
• The Articles of Association of a company incorporated under the

old Act may restrict the type of profit to be paid out as dividends
(Marra Developments Ltd v BW Rofe Pty Ltd).
The CA 2016 in stipulating that distribution must be out of profits of the

company available if the company is solvent seems to clarify much
ambiguities.
MAINTENANCE OF CAPITAL
¶4-900 Unlisted company dealing in its own shares
It is a general rule that companies cannot deal in their own shares.

Except in cases where the court orders it to do so, a company may not
buy its own shares because such a transaction is a form of illicit
reduction of capital (Trevor v Whitworth). The reason for this rule is
that persons who deal with a limited liability company that owes
money to its creditors rely upon the fact that the company is trading
with a certain amount of capital already paid up as well as the
responsibility of the members for the capital remaining at call. Those
creditors are entitled to assume that no part of that capital has been
paid out except in the legitimate course of business (Trevor v
Whitworth).
¶4-910 General principles

There are five general principles to follow in the maintenance of
capital. A company may not:
(1) lend money on the security of its own shares;
(2) purchase or acquire its own shares, unless permitted by the Act;
(3) pay dividends if there are no profits;
(4) lend money or give any financial assistance to a person to

purchase shares in the company; and
(5) return assets and reduce capital in a manner contravening the

Act.
¶4-920 What is financial assistance?

Generally, financial assistance takes the form of a loan given by the
company to a person who later uses it to purchase shares in the
company. Most of the time, the financial assistance is camouflaged by
a series of transactions that would confuse the true purpose of the
loan.
A bank has not been allowed to claim repayment of a loan and to
enforce the charges securing a loan where the loan was extended to a
company to buy shares in a hotel on the security of the hotel’s land.
This is because any financial assistance given by a company, directly
or indirectly, with the object of dealing in the shares of a company or
its holding company is prohibited by the Companies Act. The loans
made to the company were clearly a contravention of the Act (Chung
Khiaw Bank Limited v Hotel Rasa Sayang Sdn Bhd & Anor; Chung
Khiaw Bank Limited v Ow Chor Seng & Ors; Chung Khiaw Bank
Limited v Hotel Rasa Sayang Sdn Bhd).
Another way of giving financial assistance is through a guarantee or
security given by the company for a loan made to a third person so
that the third person can acquire shares in the company. It is financial
assistance when the company later releases the debt and causes a
reduction on the price payable for the shares (EH Dey Pty Ltd v Dey).
In this way, the company is in effect lending money to the third party
on the security of the company’s shares.
The Supreme Court of Malaysia has held that a company had assisted
in the purchase of its own shares where the company’s shareholders
transferred their shares to a developer in return for a number of
houses the developer was planning to build using funds obtained on
security of the company’s land (KL Sdn Bhd & Anor v LGH & Ors;
ALLS v LGH & Ors).
A company need not suffer any “impoverishment” to be found guilty of
giving financial assistance to purchase its own shares (Dempster v
National Companies & Securities Commission).
The CA 2016 stipulates that financial assistance by a company in
dealings in its shares, etc, shall be subject to s 123:
company shall not give any financial assistance, whether directly or
indirectly and whether by means of a loan, guarantee or the provision
of security or otherwise, for the purpose of or in connection with a
purchase or subscription made or to be made by any person of or for
—
(a) any shares in the company; or
(b) in the case where the company is a subsidiary, any shares in its
holding company, or in any way purchase, deal in or lend money
on its own shares.

company shall not give financial assistance directly or indirectly for the
purpose of reducing or discharging the liability, if—
(a) a person has acquired shares in the company or its holding
company; and
(b) the liability has been incurred by any person for the purpose of
the acquisition of the shares.
Subsection (3) states that any officer of the company who contravenes
sub-s (1) or (2) commits an offence and shall, on conviction, be liable
to a fine not exceeding RM3 million or to imprisonment for a term not
exceeding five years or to both.
Subsection (4) states that where a person is convicted of an offence
under this section and the court, by which the person is convicted is
satisfied that the company or another person has suffered loss or
damage as a result of the contravention that constituted the offence,
the court may, in addition to imposing a penalty under sub-s (3), order
the convicted person to pay compensation to the company or the
person, as the case may be, such amount as the court may specify,
and such order may be enforced as if it were a judgment of the court.
prevent the company or any person recovering the amount of any loan
made in contravention of this section or any amount for which it
becomes liable either on account of any financial assistance given or
Exceptions
However, there are general exceptions of the abovementioned
prohibitions in s 125.
Section 123 shall not prohibit—
(a) the lending of money by the company in the ordinary course of
its business if the lending of money is part of the ordinary
business of a company;
(b) the provision by a company, in accordance with any scheme for

the time being in force, of money for the purchase of or
subscription for fully-paid shares in the company or its holding
company, being a purchase or subscription by trustees of or for
shares to be held by or for the benefit of employees of the
company or a subsidiary of the company, including any director
holding a salaried employment or office in the company or a
subsidiary of the company;
(c) the giving of financial assistance by a company to persons, other

than directors, bona fide in the employment of the company or of
a subsidiary of the company with a view to enabling those
persons to purchase fully-paid shares in the company or its
holding company to be held by such persons by way of beneficial
ownership; or
(d) the making of a loan or the giving of a guarantee or the provision

of security in connection with one or more loans made by one or
more other persons by a company in the ordinary course of its
business where the activities of that company are regulated by
any written law relating to banking, insurance or takaful or which
are subject to the supervision of the Securities Commission and
where—
(i) the lending of money or the giving of guarantees or the
provision of security in connection with loans made by other
persons, is done in the course of such activities; and
(ii) the loan that is made by the company, or, where the
guarantee is given or the security is provided in respect of a
loan, such loan is made on ordinary commercial terms as to
the rate of interest or returns, the terms of repayment of
principal and payment of the interest or returns.
Financial assistance not exceeding 10% of shareholders’ funds

Pursuant to s 126 of CA 2016, financial assistance not exceeding 10%
of shareholders’ funds shall not apply to listed companies on an
exchange:
Subsection (1) states that this section shall not apply to a company
whose shares are quoted on a stock exchange.
Subsection (2) states that a company may, by a special resolution,
give financial assistance for the purpose of the acquisition of a share
in the company or its holding company or for the purpose of reducing
or discharging a liability incurred for such an acquisition if—
(a) the directors resolve, before the assistance is given, that—
(i) the company may give the assistance;
(ii) the giving of the assistance is in the best interest of the

company; and
(iii) the terms and conditions under which the assistance is to

be given are just and reasonable to the company;
(b) on the same day that the directors passed the resolution, the
directors who voted in favour of the resolution make a solvency
statement that complies with provisions in relation to the giving of
the assistance;
(c) the aggregate amount of the assistance and any other financial
assistance given under this section that has not been repaid does
not exceed 10% of the aggregate amount received by the
company in respect of the issue of shares and the reserves of the
company, as such aggregate amount is disclosed in the most
recent audited financial statements of the company;
(d) the company receives fair value in connection with the giving of
the assistance; and
(e) the assistance is given not more than 12 months after the day on
which the solvency statement is made under para (b).
Subsection (3) states that the resolution of the directors under para (2)
(a) shall set out in full the grounds for the conclusions of the directors
made under that paragraph.
Subsection (4) states that a reference in para (2)(c) to any other
financial assistance given under this section that has not been repaid
includes the amount of any financial assistance given in the form of a
guarantee or security for which the company remains liable at the time
the financial assistance in question is given.
Subsection (5) states that within 14 days from giving financial
assistance under this section, the company shall send to each
member of the company a copy of the solvency statement made
under para (2)(b) and a notice containing the following information:
(a) the class and number of shares in respect of which the
assistance was given;
(b) the consideration paid or payable for those shares;
(c) the name of the person receiving the assistance and, if a

different person, the name of the beneficial owner of those
shares;
(d) the nature, the terms and, if quantifiable, the amount of the
assistance.
liable to a fine not exceeding RM3 million or imprisonment not
exceeding five years or to both and, in the case of a continuing
offence, to a further fine not exceeding RM1,000 for each day during
which the offence continues after conviction.
Law: s 123, 125 and 126 of CA 2016.
¶4-930 Reduction of capital and return of assets

A company is not allowed to return assets to its members, unless they
are surplus in the event of a winding up of the company. A return of
capital will reduce the assets available for distribution to creditors. A
company may not refund to its members the money they had paid for
their shares in the course of carrying on its ordinary business (N
Sinnasamy v Hup Aik Omnibus Co). The company will need leave
from the court to reduce its capital in order to refund that money.
However, a company may reduce issued and paid up capital, share
premium account and the capital redemption reserve in the manner
prescribed by the old Act.
Officers of the company shall commit a breach of duty if they
contravene the restrictions imposed upon the reduction of capital.
They may be ordered to repay the money if they had misapplied it (Re
National Funds Assurance).
The CA 2016 stipulates that a company may reduce its share capital
under s 115, unless otherwise provided in the constitution, by—
(a) a special resolution and confirmation by the court in accordance
with s 116; or
(b) a special resolution supported by a solvency statement in

Section 117 of CA 2016 stipulates reduction of share capital by private

or public company:
Subsection (1) states that a company may reduce its share capital by
a special resolution if the company—
(a) sends a notice to the Director General of the Inland Revenue
Board referred to in s 134 of the Income Tax Act 1967 and the
Registrar within seven days of the date of the resolution and the
notice shall state that the resolution has been passed and contain
the text of the resolution and the resolution date; and
(b) meets the solvency requirements under sub-s (3).
Subsection (2) states that the resolution and the reduction of the share
capital shall take effect in accordance with s 119.
Subsection (3) states that the company meets the solvency
requirements if—
(a) all directors of the company make a solvency statement in
relation to the reduction of share capital;
(b) the statement is made—

(i) in the case of a private company, within the period of 14
days ending with the date of the resolution but shall be within
time to comply with sub-s (5); or
(ii) in the case of a public company, within the period of 21 days

ending with the date of the resolution but shall be within time
to comply with sub-s (6); and
(c) a copy of the solvency statement is lodged with the Registrar

together with the notice required to be lodged under para (1)(a).
Subsection (4) states that notwithstanding sub-s (1), a company need

not meet the solvency requirements if the reduction of share capital is
solely by way of cancellation of any paid-up share capital which is lost
or unrepresented by available assets.
Subsection (5) states that subject to sub-s (4), a private company shall
—
(a) if the resolution for reducing share capital is a special resolution
to be passed by a written resolution, ensure that every copy of the
resolution served is accompanied with a copy of the solvency
statement; or
(b) if the resolution for reducing share capital is a special resolution

to be passed in a general meeting, make the solvency statement
or a copy of the solvency statement available for inspection by the
members throughout that meeting; and
(c) make the solvency statement or a copy of the solvency

Subsection (6) states that subject to sub-s (4), a public company shall
—
(a) make the solvency statement or a copy of the solvency
statement available for inspection by the members at the meeting
throughout the meeting at which the resolution is to be passed;
and
(b) make the solvency statement or a copy of the solvency

Subsection (7) states that every officer of the company who

contravenes sub-s (5) or (6) commits an offence.
Subsection (8) states that notwithstanding sub-s (7), the resolution
shall not become invalid by virtue only of a contravention of sub-s (5)
or (6).
Subsection (9) states that any requirement under para (3)(c), (5)(c) or
(6)(b) ceases to have effect if the resolution is revoked.
Subsection (10) states that a company shall advertise a notice of the
reduction of the share capital in one widely circulated newspaper in
newspaper in Malaysia in the English language not later than seven
days from the date of the passing of the special resolution.
Law: s 115 and 117 of CA 2016.
¶4-940 Reductions of capital without court order

There are certain reductions which are exempt from the general rule
against the reduction of capital that requires a court order. They are as
follows:
• the cancellation of shares which have not been taken up;
• the use of the share premium account in writing off preliminary

expenses of the company, during a moratorium period;
• the use of the existing share premium account during the

moratorium period of 24 months in paying for the premium
payable on redemption of debentures or when redeeming
redeemable preference shares issued before the commencement
of s 74;
• the cancellation of shares caused by the purchase of those shares

by virtue of a court order; and
• share “buyback” by a listed company through the stock market.
¶4-950 Confirmation by the court
In deciding whether or not to confirm a reduction of capital, the court

will have to look at the interests of the creditors first. It must be
satisfied that all creditors, who are entitled to object, have either
consented to the reduction, or have had their claims discharged or
secured.
Other factors which the court has to examine before confirming the
reduction of capital are:
• whether the proposed reduction will affect all the members equally;
or
• whether the members who are treated differently oppose the

reduction; and
• whether the members were informed of the reasons for the

reduction to enable them to make an informed choice (Re Jupiter
House Investments (Cambridge) Ltd).
Apart from protecting the interests of creditors, the court will also look
to the interests of the shareholders. Any scheme that does not provide
for uniform treatment of shareholders whose rights are similar, will be
scrutinised (per Herschell LJ in British and American Trustee and
Finance Corporation v Couper).
The court should only confirm a reduction if it is satisfied that:
• the proposed reduction affects all members equally and those who
are treated differently have consented to such treatment; and
• the reason behind the reduction of capital was fairly put to the
members so that they could exercise an informed choice (per
Harman J in Re Jupiter House Investments (Cambridge) Ltd).
Procedure
The company must call for an extraordinary general meeting to pass a
special resolution to reduce the capital and state the purpose of the
capital reduction. The company will then apply to the court accordingly
stating the reasons for the reduction.
By virtue of s 116(3), the court may, after considering any special
circumstances of any case, direct that all or any of the provisions of
that subsection shall not apply with regards to any class of creditors.
The court may, on such terms and conditions as the court thinks fit,
make an order confirming the reduction if the court is satisfied with
respect to every creditor who is entitled to object, that—
(a) his consent to the reduction has been obtained; or
(b) his debt or claim has been discharged, determined or secured.
An order made under this provision shall specify the following matters:
(a) the amount of the share capital of the company as altered by the
order;
(b) the number of shares into which the share is to be divided; and
(c) the amount, if any, deemed to be paid-up on each share at the

date of the order.
The resolution for reducing share capital as confirmed by the order of

the court shall take effect upon lodgement of such order with the
Registrar.
A notice confirming the reduction of share capital issued by the
Registrar shall be conclusive evidence that all the requirements of this
Act with respect to reduction of share capital have been complied with
and that the share capital of the company is as stated in the order.
Law: s 116 of CA 2016.
¶4-960 Creditors entitled to object to reduction
Every creditor of the company who is entitled to any debt or claim that
would be admissible in proof against the company in a winding up is
entitled to object to the reduction of capital. The Act provides that the
objection may be raised where the reduction involves either diminution
of liability in respect of unpaid share capital, or the payment to any
shareholder of any paid up share capital. It is also open to be raised in
any other case if the court so directs.
The court also takes into consideration those members of the public
who may be induced to take up shares in the company and the
question as to whether the reduction is fair and equitable as between
the different classes of shareholders (Re Old Silkstone Collieries Ltd).
Section 118 of CA 2016 stipulates creditor’s right to object to the
reduction of the share capital by the company:
Subsection (1) states that this section shall apply to a company which
has passed a special resolution for reducing share capital under s
117.
Subsection (2) states that any creditor of the company may apply to
the court for the resolution to be cancelled within six weeks from the
date of the resolution.
Subsection (3) states that sub-s (2) shall apply to a creditor of the
company who is entitled to any debt or claim which would be
admissible as proof against the company at the date of his application
to the court if such date were the commencement of the winding up of
the company.
Subsection (4) states that when an application is made under sub-s
(2)—
(a) the creditor shall as soon as possible serve the application on
the company; and
(b) the company shall as soon as possible give to the Registrar

notice of the application.
The CA 2016 also stipulates the position at end of period for objection
by creditor under s 119.
Subsection (1) states that if no application for cancellation of the
resolution is made under sub-s 118(2) for the reduction of share
capital to take effect, the company shall lodge with the Registrar after
the end of six weeks, and before the end of eight weeks, from the date
of the resolution—

applicable;

made; and

in sub-s 117(10).
Subsection (2) states that if one or more applications for cancellation

of the resolution made under sub-s 118(2) are made for the reduction
of share capital to take effect, the proceedings for all the applications
the company shall lodge with the Registrar within fourteen days
beginning with the date on which the last such applications were
dismissed, withdrawn or otherwise brought to an end—

the Court, a copy of the order of the Court dismissing the
application; and

share capital.
Subsection (4) stated that a notice confirming the reduction of share
Under s 117, the e-form to be lodged with the Registrar is “Notice of
proposed reduction of share capital” in Schedule B of MyCoID.
Capital reduction by special resolution and solvency
requirements
Under this alternative method of capital reduction where the court is
not involved, s 119(1) provides that if no application for cancellation of
the resolution is made under sub-s 118(2) for the reduction of share
capital to take effect, the company shall lodge with the Registrar after
the end of six weeks, and before the end of eight weeks, from the date
of the resolution—

applicable;

made; and

in sub-s 117(10).
Subsection (2) states if one or more applications for cancellation of the

resolution made under sub-s 118(2) are made for the reduction of
share capital to take effect, the proceedings for all the applications
the company shall lodge with the Registrar within 14 days beginning
with the date on which the last such applications were dismissed,
withdrawn or otherwise brought to an end—

the court, a copy of the order of the court dismissing the
application; and

share capital.
Under this method there are two types of e-forms to be lodged,
namely:
(a) “Notice of reduction of share capital”;
(b) “Notice of reduction of share capital where objection was

dismissed or received”
Law: s 118 and 119 of CA 2016.
¶4-970 Liability of members on reduced shares
Section 122 of CA 2016 stipulates that where the share capital of a

company is reduced under any provision of this Subdivision, a past or
present member of the company shall not be liable in respect of the
issue price of any share to any call or contribution greater in amount
than the difference, if any, between—
(a) the issue price of the share; and
(b) the aggregate of the amount paid up on the share, if any, and
the amount reduced on the share.
Law: s 122 of CA 2016.
1. Explain the nature of a share in the capital of a company.
2. Describe the different types of shares that a company may issue

and the meaning of “no par value shares”.
3. What are the different types of preference shares that can be

issued by a company?
4. Explain the meaning of financial assistance.
5. What are the statutory requirements for issuing a share certificate

and the contents that must be shown on a share certificate, if a
shareholder applies for one?
6. Explain how ownership of shares may be transferred from one

party to another.
7. What is transmission of shares?

CHAPTER 5: DIRECTORS’
APPOINTMENT, REMOVAL AND
RESIGNATION
Who are company officers? ¶5-000
Appointment of directors ¶5-100
Retirement, re-election and vacation of office of
director ¶5-200
Payments to directors for loss of office ¶5-300
Disqualification of directors ¶5-400
Review Questions ¶5-1000
WHO ARE COMPANY OFFICERS?

¶5-000 Identification in CA 2016
In Div 2 of Pt III of the Companies Act 2016 (CA 2016), Subdiv 2
stipulates “Directors” from s 196 to s 209. Then Subdiv 3 stipulates
“Directors’ Duties and Responsibilities” from s 210 to s 234. Under CA
2016, the term “company officer” generally includes a director,
secretary, and anybody employed in an executive capacity. A receiver
and manager of a corporation and a liquidator appointed in a voluntary
winding up are also officers of a corporation. To establish the nature
and extent of an individual’s duties to his company, it is necessary to
identify the office he holds.
The term “managing director” (used in Sch 3 of CA 2016 or the
company’s constitution, if the company has one) is taken to mean that
the person is an employee director under a contract of service for a
period of three years, normally. A managing director is, firstly, a
director of the company, and secondly, an employee with authority to
exercise any or all of the board’s management powers. Thus, a
service contract is usually entered into between him and the company.
It is the view of the Registrar of Companies (“ROC” or “Registrar”) that
the managing director of a company should be named in the column
“Manager” of the prescribed form e-form (“Notification of change in the
register of directors, managers and secretaries” of MyCoID1), which
indicates that he is a chief executive with management powers.
Another term is “associate director” found in Sch 3 or the company’s
constitution. Some companies adopt the practice of appointing senior
executives as associate directors to increase the status and allowing
them to give advice because of their expertise. The constitution will
usually limit the powers of an associate director but he is regarded as
an officer of the company and subject to the same duties as the other
officers. Paragraphs 26 and 27 of Sch 3 prescribe as follows:
“Associate Directors
26. The Board may, from time to time, appoint any person to be
an associate director and may from time to time revoke any such
appointment.
27. The Board may fix, determine and vary the powers, duties
and remuneration of any person so appointed, but a person so
appointed shall not have any right to attend or vote at any
meeting of the Board except by the invitation and with the consent
of the Board.”
Law: Div 2 of Pt III, Subdiv 2 and 3 of CA 2016.
Footnotes
website.
¶5-010 Directors
Section 2(1) of CA 2016 defines “director” to include any person

occupying the position of director of a corporation by whatever name
called and includes a person in accordance with whose directions or
instructions the majority of directors of a corporation are accustomed
to act and an alternate or substitute director.
With regard to the duties and responsibilities of a director, the position
is extended in s 210 on interpretation of “director” as follows:
“Interpretation
210. For the purposes of this Subdivision 3, in sections 213, 214,
215, 216, 217, 218, 223 and 228, in addition to the definition of
“director” in section 2, “director” includes chief executive officer,
chief financial officer, chief operating officer or any other person
primarily responsible for the management of the company.”
Sections 213–218, 223 and 228 are summarised below:
Section
213 Where a director must exercise his power according with
CA 2016, for a proper purpose and in good faith;
exercise reasonable care, skill and diligence with the
knowledge, skill and experience reasonably expected
including his additional knowledge, skills and experience
which he in fact has.
214 A director making a business judgement for proper
purpose and in good faith, where he has no personal
material interest, is well informed on the subject matter
and believes he makes a decision for the best interest of
the company.
215 A director relies on information provided by others like
any officer, person’s professional or expert competence;
another director or committee of the board.
216 Where directors have delegated any power, they are still
held responsible for the decisions of the delegatee,
unless the directors have made proper inquiry on the
capabilities of the delegatees that they are reliable and
competent, and have delegated the matter in good faith
knowing that the delegatees will carry out what the board
has in mind.
217 Nominee director’s responsibilities to the company when
in conflict with the nominator’s interest.
218 Prohibition against improper use of property and position
as a fiduciary person.
223 Directors needing approval of company for acquiring or
disposing company’s undertaking or property of a
substantial value, and a portion of the company’s
undertaking or property shall be considered to be
substantial portion if:
(a) its value exceeds 25% of the total assets of the
company;
(b) the net profits, after deducting all charges except
taxation and excluding extraordinary items, attributed
to it amounts to more than 25% of the total net profit
of the company; or
(c) its value exceeds 25% of the issued share capital of
the company,
whichever is the highest.
228 Prohibition of transaction with directors, substantial
shareholders or connected persons to enter or carry into
effect any arrangement or transaction to acquire shares
or non-cash assets of a requisite value, unless prior
approval obtained from shareholders at a general
meeting
Under the Capital Market and Services Act 2007 (CMSA 2007), a
“director” has the meaning assigned to it in CA 2016, which includes a
reference to—
(a) a person occupying or acting in the position of director of a
corporation, by whatever name called and whether or not validly
appointed to occupy, or duly authorised to act in, the position;
(b) a person in accordance with whose directions or instructions the

directors of a corporation are accustomed to act;
(c) an alternate or substitute director; or
(d) in the case of a corporation formed or incorporated or existing

outside Malaysia—
(i) a member of the corporation’s board of directors or
governing body;
(ii) a person occupying or acting in the position of a member of

the corporation’s board, by whatever name called and
whether or not validly appointed to occupy, or duly authorised
to act in the position; or
(iii) a person in accordance with whose directions or

instructions the members of the corporation’s board are
accustomed to act.
In real life, a director is someone appointed to carry out the day-to-day

running of the business and control of a company. The test which
determines whether a person is a director is one of function and not of
name. Therefore, anybody who functions as a director by directing
and instructing the board, which obeys and carries out these
instructions, will be vested with the duties and liabilities of a director
even though he may not be officially appointed to the office of director.
The concept of someone not on the board yet controlling and directing
the company has reached the point where the role of a “shadow
director” has been acknowledged in the legislation. A shadow director
is a person in accordance with whose directions and instructions the
board of directors are accustomed to act. However, a person is not a
shadow director merely because the directors of a company receive
advice from him which is given as part of his professional service.
Hence, a lawyer who advises directors in his professional capacity will
not be deemed a director of the company.
Directors are charged with onerous duties, and carry a fiduciary duty
besides the duty of care and skills and loaded with many statutory
duties to comply.
Law: s 2(1) of CA 2016; s 2 of CMSA 2007.
¶5-020 Nominee directors

Sometimes a director is appointed to represent the interests of a major
shareholder or creditors on the board of directors. This then becomes
a difficult area of law to reconcile between the duty of a director and
his duty to represent the interests of those who appointed him and his
duty to act in the interest of the company as a whole. Some cases
seem to indicate that a nominee director may properly act in the
interests of those who appointed him, provided he honestly believes
that the interests of his appointors and the company are identical (Re
Broadcasting Station 2GB Pty Ltd [1964–1965] NSWR 1648).
Nominee directors may breach their duties if they act in a way which is
not in the best interests of the company. This conclusion is not lightly
reached. It is also unrealistic to expect nominee directors not to regard
the interest of their nominators (Levin v Clark [1962] NSWR 686).
The case of Whitehouse v Carlton Hotel Pty Ltd (1987) seems to
indicate that a company which appointed nominee directors may draft
its Articles so as to modify their fiduciary duties. Thus with
appropriately drafted constitutions, nominee directors may act in the
interests of their appointer without breaching their duty to act in the
interests of the company as a whole.
Section 217 of CA 2016 stipulates the responsibility of a nominee
director as follows:
Subsection (1) states that a director who was appointed by virtue of
his position as an employee of a company, or who was appointed by
or as a representative of a member, employer or debenture holder,
shall act in the best interest of the company and in the event of any
conflict between his duty to act in the best interest of the company and
his duty to his nominator, he shall not subordinate his duty to act in the
best interest of the company to his nominator.
Subsection (2) states that a director who contravenes this section
for a term not exceeding five years or a fine not exceeding RM3
million or to both.
¶5-030 Alternate directors (substitute directors)

It is common for a director to appoint another person to act on his
behalf in his absence. Under the company’s constitution a director
may, with the approval of the board, appoint another to be an alternate
(substitute) director in his place during such period as is thought fit.
The appointment of an alternate director however, does not increase
the number of directors, although he is within the definition of
“director”. It does not constitute an assignment of the office of director,
and has the following deficiencies to the principal director:
• He acts only in the absence of the principal director who appointed
him;
• He is not paid a director’s fee which is paid to the principal

directors;
• He is not counted as an additional number in the board; and
• He is expected to act as directed by the principal director
Furthermore, under s 196(4) of CA 2016, for the purposes of directors

of a company, the minimum number of directors—
(a) shall ordinarily reside in Malaysia by having a principal place of
residence in Malaysia; and
(b) shall not include an alternate or substitute director.
See ¶5-120 for appointment of alternate or substitute directors.
¶5-040 Managers
A manager is a person to whom supervisory control over the daily
business affairs of the company is delegated. He is described in CA
2016 to be the principal executive officer ‘by whatever name called’
and irrespective of whether he is also a director. He is effectively
involved in the management of the company’s affairs. A manager’s
duties are similar to those of a director but are usually more onerous
than those of an employee because he is involved full-time in the daily
operations of the business. A managing director is seen as such a
person and so is a chief executive officer. Section 2 of CA 2016
defines “manager” in relation to a company, to mean the principal
executive officer of the company for the time being by whatever name
called and whether or not he is a director.
¶5-050 Company secretary

Every company is required to appoint one or more company
secretaries. The focal point of a secretary’s activities is, above all, his
role as executive officer to the board. A director may also hold office
as company secretary. However, where a matter is required to be
done by both a director and secretary, it must not be done by the
same person acting in his dual capacity as both director and
secretary.
Regarding the electronic filing of documents, applications and appeals
via the Companies Commission of Malaysia (CCM)’s electronic filing
platform, MyCoID, reg 6 of the Companies Regulations 2017 provides:
“Access to electronic filing system
6.(1) … for the purposes of lodgement of any document, or
making an application or appeal referred to in regulation 3 or
4, as the case may be, through the electronic filing system,
the Registrar may give one or more secretaries of the
company access to the electronic filing system.
(2) The secretary of the company who is given access to the

electronic filing system under subregulation (1) shall lodge the
document, or make the application or appeal, on behalf of the
company or directors of the company.”
Section 235(1) of CA 2016 states that a company shall have at least

one secretary who shall be—
(a) a natural person;
(b) 18 years of age and above; and
(c) a citizen or permanent resident of Malaysia, who shall ordinarily

reside in Malaysia by having a principal place of residence in
Malaysia.
Subsection (2) states that a secretary shall be—

(a) a member of a body as set out in Sch 4; or
(b) a person licensed by the Commission under s 20G of the

Companies Commission of Malaysia Act 2001.
Subsection (3) states that for the purposes of para (2)(a), the Minister
may prescribe any professional body or any other body by notification
in the Gazette and may impose any term and condition as he thinks fit.
Subsection (4) states that the company and every director who
Appointment of a secretary
Section 236(1) of CA 2016 states that the company’s board shall
appoint a secretary and determine the terms and conditions of such
appointment.
Subsection (2) states that notwithstanding sub-s (1), the appointment
of the first secretary shall be made within 30 days from the date of
incorporation of a company.
Subsection (3) states that no person shall be appointed as a secretary
unless—
(a) he has consented in writing to be appointed as a secretary;
(b) he is qualified under sub-s 235(2); and
(c) he is not disqualified under s 238.
Subsection (4) states that the company and every person who
Resignation of a secretary
Section 237(1) of CA 2016 stipulates that subject to the constitution or
the terms of appointment, a secretary may resign from his office by
giving a notice to the Board.
Subsection (2) states that if none of the directors of the company can
be communicated with at the last known residential address, the
secretary may, notwithstanding sub-s 235(1), notify the Registrar of
that fact and of his intention to resign from the office.
Subsection (3) states that the secretary shall cease to be the
secretary of the company—
(a) on the expiry of 30 days from the date of the notice lodged under
sub-s (1) or the period specified in the constitution or the terms of
appointment, as the case may be; or
(b) on the expiry of 30 days from the date of the notice to the
Registrar under sub-s (2).
Subsection (4) states that nothing in sub-s (1) and (2) shall relieve the
secretary from liability for any act or omission done before the
secretary vacated that office.
Disqualification to act as a secretary
Section 238(1) of CA 2016 stipulates that a person shall be
disqualified to act as a secretary if—
(a) he is an undischarged bankrupt;
(b) he is convicted whether in or outside Malaysia of any offence

referred to in s 198; or
(c) he ceases to be a holder of a practicing certificate issued by the

Registrar under s 241.
Subsection (2) states that notwithstanding sub-s (1), if the Registrar is

of the opinion that a person has failed to act honestly or use
reasonable diligence in the discharge of his duties as a secretary, the
Registrar may require the person to show cause why his practising
certificate should not be revoked or why he should not be disqualified
from acting as a secretary of a company.
Subsection (3) states that if a person continues to act as a secretary
for a company after the person is disqualified under this section
without leave of the court, the secretary and every director who
knowingly permits the person to act in that capacity commit an
offence.
Removal of a secretary
Section 239 of CA 2016 stipulates that the Board may remove a
secretary from his office in accordance with the terms of appointment
or the constitution.
Office of secretary shall not be left vacant
Section 240 of CA 2016 stipulates that the office of the secretary of a
company shall not be left vacant for more than 30 days at any one
time.
Requirement to register with Registrar
Section 241(1) stipulates that any person who is qualified to act as a
secretary and who desires to act as a secretary shall be registered
under this section before he can act as a secretary.
Subsection (2) states that the Registrar shall cause a register of
secretaries to be kept and shall cause to be entered in the register in
relation to a secretary—
(a) the name of the secretary;
(b) the residential address and business address of the secretary;
(c) the details of the qualifications referred to in sub-s 235(2); and
(d) such other information as the Registrar may require.
Subsection (3) states that the Registrar, before registering such

person, may—
(a) require him to produce any evidence to his satisfaction of the
qualification as stated under sub-s 235(2); or
(b) impose any other conditions that he deems fit.
Subsection (4) states that if the requirements under sub-s (3) are
satisfied, the Registrar shall—
(a) enter the particulars in the register of secretaries; and
(b) issue a practising certificate in such form as the Registrar may

determine.
Subsection (5) states that on or after the commencement of CA 2016,

a person who is a secretary of a company and who is not registered
under sub-s (1) may continue to act as a secretary to the company for
a period of not more than 12 months or any longer period as the
Registrar may allow.
Subsection (6) states that after the expiry of the period referred to in
sub-s (5), a person who fails to comply with the requirement to register
shall be deemed to have not been registered under this section.
Subsection (7) states that the Minister shall have the power to make
regulations on any matters relating to any practicing certificate issued
under this section.
Subsection (8) states that any person who contravenes sub-s (1)
commits an offence.
Prohibition to act in dual capacity
Section 242 of CA 2016 stipulates that a person is prohibited to act in
a dual capacity as both a director and a secretary in a situation that
requires or authorises anything to be done by a director and a
secretary.
Law: s 235–242 of CA 2016.
¶5-060 Register of directors, managers and secretaries

Every company is required to maintain at its registered office a
register of its directors, managers and secretaries. The register must
be open for inspection to shareholders or to any other persons.
Persons other than shareholders are charged inspection fees.
Section 57 of CA 2016 provides for the register of directors, managers
and secretaries:
Subsection (1) states that every company shall keep at its registered
office a register of its directors, managers and secretaries containing,
but not limited to, the following particulars:
(a) in respect of a director—
(i) his name, residential address, service address, date of birth,
business occupation and identification; and
(ii) particulars of any other directorships of public companies or

companies which are subsidiaries of public companies held
by the director, but it shall not be necessary for the register to
contain particulars of directorships held by a director in a
company that by virtue of s 7 is deemed to be related to that
company;
(b) in respect of a manager and secretary, his full name,

identification and residential address, business address, if any,
and other occupation.
Subsection (2) states that for the purposes of para (1)(a), if a person is
a director in one or more subsidiaries of the same holding company, it
shall be sufficient if it is disclosed that the person is the holder of one
or more directorships in that group of companies and the group may
be described by the name of the holding company with the addition of
the word “Group”.
Subsection (3) states that the register shall be open for inspection of
any member of the company without charge and of any other person
on payment of RM10, or such lesser sum as the company requires, for
each inspection.
Subsection (4) states that if there is any change in the particulars of a
director, manager or secretary the company shall effect the change in
the register within 14 days from the change.
Subsection (5) states that a certificate of the Registrar stating that
from any return lodged with the Registrar under this section it appears
that at any time specified in the certificate any person was a director,
manager or secretary of a specified company shall be admissible in
evidence in any proceedings and shall be prima facie evidence of the
facts stated in the certificate.
Subsection (7) states that in this section,
• “identification” means, in the case of any person issued with an
identity card, the number of the identity card, in the case of a
person not issued with an identity card, particulars of passport or
such other similar evidence of identification as is available;
• “director” includes an alternate, substitute or local director.
Duty to notify of particulars and changes of director, manager

and secretary
Section 58(1) of CA 2016 stipulates that a company shall notify the
Registrar within 14 days from the date—
(a) after its incorporation, the particulars required to be specified
under s 57;
(b) of any change in the name, residential address and other

prescribed particulars of any director, manager or secretary or the
service address of any director;
(c) after a person ceases to be, or becomes, a director of the

company, the particulars required to be specified in the register
required under s 57;
(d) after a person becomes a manager or secretary of the company,

specifying the full name, address and other occupation, if any, of
that person; and
(e) after a person ceases to be a manager or secretary of the

company.
Subsection (2) states that the Registrar shall determine the form,
manner and extent of the information to be lodged under sub-s (1).
Subsection (3) states that notice of a person having become a director
of the company shall—
(a) contain a statement of the particulars of the new director as set
out in para 57(1)(a); and
(b) be accompanied with a consent to act in that capacity by that

person.
liable to a fine not exceeding RM50,000 and in the case of a
Law: s 57 and 58 of CA 2016.
¶5-061 Register of directors’ shareholdings, etc

Section 59(1) of CA 2016 stipulates that a company shall keep a
register showing with respect to each director of the company
particulars of—
(a) shares in the company or in a related corporation being shares
in which the director has an interest and the nature and extent of
that interest;
(b) debentures of or participatory interests made available by the

company or a related corporation being debentures or
participatory interests in which the director has an interest and the
nature and extent of that interest;
(c) rights or options of the director or of the director and other

person in respect of the acquisition or disposal of shares in,
debentures of or participatory interests made available by the
company or a related corporation; and
(d) contracts to which the director is a party or under which he is

entitled to a benefit being contracts under which a person has a
right to call for or to make delivery of shares in, debentures of or
participatory interests made available by the company or a related
corporation.
Subsection (2) states that a company need not disclose in its register
any particulars of shares of director’s interest in a wholly owned
subsidiary of a company which is deemed to be a related corporation
under s 7.
Subsection (3) states that a wholly-owned subsidiary company shall
be deemed to have complied with this section in relation to its director
if the particulars required by this section are shown in the register of
the holding company.
Subsection (4) states that a company shall enter in its register in
relation to the director the particulars referred to in sub-s (1) including
the number and description of shares, debentures, participatory
interests, rights, options and contracts to which the notice relates and
in respect of shares, debentures, participatory interests, rights or
options acquired or contracts entered into after he became a director
within three days after receiving notice from a director under para
219(1)(a)—
(a) the price or other consideration for the transaction by reason of
which an entry is required to be made under this section; and
(b) the date of—

(i) the agreement for the transaction or if it is later, the
completion of the transaction; or
(ii) where there was no transaction, the occurrence of the event

by reason of which an entry is required to be made under this
section.
Subsection (5) states that a company shall enter in its register the
particulars of the change referred to in the notice under para 219(1)(b)
within three days after receiving the notice from the director.
Subsection (6) states that a company is not deemed to have notice of
or to be put upon inquiry as to the right of a person to or in relation to,
a share in, debenture of or participatory interest made available by the
company.
Subsection (7) states that the register shall be open for inspection by
a member of the company without charge and by any other person on
payment of RM20 or such lesser amount as the company requires.
Subsection (8) states that any person may request a company to
furnish him with a copy of its register or any part of its register on
payment of RM20 and the company shall send the copy to that person
within 21 days or such longer period as the Registrar thinks fit from
the day on which the request is received by the company.
Subsection (9) states that the Registrar may, at any time in writing,
require a company to furnish him with a copy of its register or any part
of its register and the company shall furnish the copy within seven
days from the day on which the requirement is received by the
company.
Subsection (10) states that a public company shall produce its register
to all persons attending the meeting at the commencement of each
annual general meeting (AGM) of the company and keep it open and
accessible during the meeting.
Subsection (11) states that in this section—
(a) a reference to a participatory interest is a reference to an interest
within the meaning of the Interest Schemes Act 2016;
(b) a reference to a person who holds or acquires shares,

debentures or participatory interests or an interest in shares,
debentures or participatory interests includes a reference to a
person who under an option holds or acquires a right to acquire or
dispose of a share, debenture or participatory interest or an
interest in a share, debenture or participatory interest; and
(c) a reference to a director shall include the spouse of a director

who is not a director of the company and a child of a director,
including adopted child or stepchild who is not a director of the
company and the interest of the spouse or child shall be treated
as the interest of the director in the shares or debentures of the
company after the relevant facts have come to the director’s
knowledge.
Subsection (12) states that s 8, except for sub-s (1) and (3), has effect
in determining whether a person has an interest in a debenture or
participatory interest and in applying those provisions, a reference to a
share shall be read as a reference to a debenture or participatory
interest.
liable to a fine not exceeding RM500,000 or to imprisonment for a
term not exceeding ten years, or to both and, in the case of a
Law: s 59 of CA 2016.
¶5-070 Duties and powers of officers
A significant body of case law has developed over the issue of

directors’ duties and powers. Managers have duties correlative with
their seniority and the trust reposed in them. The company secretary
fulfils an administrative role in a company and must accept fiduciary
responsibilities and constraints at least in respect of the administrative
side of the company’s affairs.
¶5-080 Liability of company for acts of officers

The liability of a company for the acts of its directors, managers and
secretary is determined by agency principles. Whilst it is possible for
the company to invest managers and the secretary with a significant
measure of apparent and actual authority, the usual authority of these
officers is often less than that of the directors.
APPOINTMENT OF DIRECTORS
¶5-100 Appointment of directors
Under CA 2016, a private company may have one director at any one
time, except for a public company which must have at least two
directors and shall not include alternate or substitute director in
determining the minimum number of directors. The directors must be
resident principally in Malaysia, have given consent to act and declare
in a written statement that he is not disqualified to act a director.
Further, a director’s resignation from office will be invalid unless there
are at least two directors remaining in office for a public company, and
in the case of a sole director, the sole director being replaced by
another.
Under CA 2016, all directors have to be natural persons of at least 18
years of age. The constitution of most companies would also provide
that a director’s office is vacated if he becomes of unsound mind.
People who deal with companies through the company’s directors
enjoy a degree of protection against the possibility that the directors’
appointment might have been in some way defective. The outsider is
assured of being able to rely on the effectiveness and enforceability of
his dealings with a director of a company even if it is later discovered
that the director was not properly appointed and therefore had no
authority to conduct the dealings. Such a defect might occur through,
for example, the absence of a quorum at the meeting where the
director was appointed.
Section 204 of CA 2016 expressly states that the acts of a director are
valid notwithstanding any defect which may later be discovered in his
appointment or qualification.
Before the provision can be availed of, the act in question must have
been done before the defect was discovered (Harben v Phillips). The
parties must also have acted in good faith (Channel Collieries Trust
Ltd v Dover, St Margaret’s and Martin Mill Light Rail Co). What the
provision cannot do is to cure a situation where there has been a total
absence of appointment or failure to appoint as opposed to a mere
slip or irregularity in appointment. A good illustration of such an
absence is afforded by the case of Morris v Kanssen where two
supposed directors purported to appoint a third person to the board of
directors. Of the two supposed directors, one’s appointment had
lapsed and the other had been appointed by the first “director” without
proper authority. The court ruled that the English equivalent provision
could not cure defective acts by the third “director” because the
provision did not cover the case where there had been a total absence
of appointment or a fraudulent usurpation of authority.
At any rate, before the appointment of a person as director, he must
make a statement that he consents to act and is not disqualified to act
as director of the company in an e-form (“Declaration by person before
appointment as director”). The board of directors will normally pass a
resolution to appoint the person, but subject to the date of the
declaration.
Law: s 201, 202, 203 and 204 of CA 2016.
¶5-110 Deem first directors on application for

incorporation
On the application for incorporation of a company, a statement must
be delivered to the Registrar containing the names and relevant
particulars of the persons who are to be the directors of the company
in the e-form “Application for registration” in Schedule A of MyCoID.
Section 202(1) of CA 2016 states that a person named as a director in
an application for incorporation of a company shall hold office as a
director from the date of incorporation until that person ceases to hold
office as a director in accordance with CA 2016.
First directors usually retire from office at the first AGM of the public
company, in accordance with s 205(3). But in the case of a private
company, s 205(2) states unless there is specific provision in the
company’s constitution or the term of appointment regarding
retirement of directors, a private company may pass a written
resolution in accordance with s 297 to determine the retirement of a
director.
Law: s 202 and 205 of CA 2016.
¶5-120 Alternate or substitute directors

The constitution of a company often provides for the appointment of
alternate or substitute directors. Alternate directors are persons to
whom some temporary delegation of authority is made by the principal
director appointing the alternate director to act in his absence at board
meetings. The constitution providing for the appointment of an
alternate director usually states that a director may, with the approval
of the other directors, appoint an alternate director for a period that he
thinks suitable. The appointment may be terminated at any time by
notice in writing from the appointer, but until that happens, the
alternate director is entitled to notices of meetings and to attend and
vote at these meetings and to exercise all the powers of the appointor
in his place. The alternate director vacates office if the appointer
vacates office as a director. Where a company has only two directors,
neither of them may be an alternate director.
The mere appointment of an alternate director is not sufficient to
render that person liable for insolvent trading when the company is
wound up if he has never exercised his powers (Playcorp Pty Ltd v
Shaw & Ors).
Section 2(1) provides that a “director” includes any person occupying
the position of director of a corporation by whatever name called and
includes a person in accordance with whose directions or instructions
the majority of directors of a corporation are accustomed to act and an
alternate or substitute director.
See also ¶5-030.
Law: s 2(1) of CA 2016.
¶5-130 Appointment of directors of public companies

A motion for the appointment of two or more directors in public
companies must be voted on individually in a general meeting by a
single resolution unless it has been resolved without dissent to vote on
them together (s 203). This means that prior to the passing of the
motion for appointing the directors, there must first be a preliminary
resolution passed unanimously that decides to move a resolution for
the appointment of the directors in one resolution. If this preliminary
procedure is not complied with, a resolution purportedly appointing the
directors in one resolution will be void and no one named in that
resolution will in fact have been appointed. The purpose of this
resolution is to allow shareholders to consider each candidate
separately and it does not prevent the election of two or more
directors by poll.
Note that this requirement only applies to public companies and only
where the directors are appointed by the company in general meeting.
Law: s 203 of CA 2016.
¶5-140 Persons connected with directors

Section 197(1) states a person shall be deemed to be connected with
a director if the person is—
(a) a member of the director’s family;
(b) a body corporate which is associated with that director;
(c) a trustee of a trust, other than a trustee for an employee share

scheme or pension scheme, under which that director or a
member of the director’s family is a beneficiary; or
(d) a partner of that director or a partner of a person connected with

that director.

(a) “a member of the director’s family” means the director’s spouse,
parent, child, including adopted child and stepchild, brother, sister
and the spouse of the director’s child, brother or sister;
(b) a body corporate is associated with a director if—

(i) the body corporate is accustomed or is under an obligation,
whether formal or informal, or the majority of directors of the
body corporate is accustomed, to act in accordance with the
directions, instructions or wishes of that director;
(ii) that director has a controlling interest in the body corporate;

or
(iii) that director, or persons connected with that director, or that

director and persons connected with him, are entitled to
exercise, or control the exercise of, not less than 20% of the
votes attached to voting shares in the body corporate.
¶5-141 Persons disqualified from being a director
Section 198(1) states a person shall not hold office as a director of a

company or whether directly or indirectly be concerned with or takes
part in the management of a company, if the person—
(a) is an undischarged bankrupt;
(b) has been convicted of an offence relating to the promotion,

formation or management of a corporation;
(c) has been convicted of an offence involving bribery, fraud or

dishonesty;
(d) has been convicted of an offence under s 213, 217, 218, 228
and 539; or
(e) has been disqualified by the court under s 199.
Subsection (2) states that the circumstances referred to in paras (1)

(a), (b), (c) and (d) shall be applicable to circumstances in or outside
Malaysia.
Subsection (3) states that notwithstanding sub-s (1), a person who
has been disqualified under para (1)(a) may be appointed or hold
office as a director with the leave of—
(a) the Official Receiver; or
(b) the court provided that a notice of intention to apply for leave has
been served on the Official Receiver and the Official Receiver is
heard on the application.
Subsection (4) states that notwithstanding sub-s (1), a person who

has been disqualified under para (1)(b), (c), (d) or (e) may be re-
appointed or hold office as a director with the leave of the court.
Subsection (5) states that a person intending to apply for a leave of
the court under para (3)(b) or sub-s (4) shall—
(a) give the Registrar a notice of not less than 14 days of the
person’s intention to do so; and
(b) make the Registrar a party to the proceedings under sub-s (3).
Subsection (6) states that for the purposes of sub-s (5), any person
referred to in para (1)(b), (c), (d) or (e) shall not be required to obtain a
leave from court after the expiry of five years calculated from the date
he is convicted or if he is sentenced to imprisonment, from the date of
his release from prison.
Subsection (7) states that any person who contravenes this section
million or to both.
¶5-142 Statement by director

Section 201 of CA 2016 provides that a person shall not be appointed
as a director of a company unless he has consented in writing to be a
director and make a declaration that he is not disqualified from being
appointed or holding office as a director of a company under CA 2016.
Law: s 201 of CA 2016.
¶5-150 Shareholding qualification
There is no statutory requirement for a director to hold shares in the

company unless the constitution so requires. The shareholding
qualification for directors may also be fixed by the company in general
meeting. If this is the case, then a person appointed as a director who
does not already hold the required number of shares has to acquire
the shares within the time period stipulated after his appointment. The
constitution may, however, fix a shorter period for the appointed
person to obtain the shares. The qualification must be held by the
director alone and not jointly with any one else unless this is permitted
by the constitution. A director who does not obtain the shares in time
has to vacate his office and he commits an offence if he does not do
so. Upon vacation, he cannot be re-appointed as director until he has
obtained his qualification.
RETIREMENT, RE-ELECTION AND VACATION

OF OFFICE OF DIRECTOR
¶5-200 Retirement, re-election and vacation
Retirement is a process by which the directors shall retire by rotation

annually as fixed by CA 2016 or the constitution. The CA 2016
requires directors of public companies to retire. This is to allow
shareholders the opportunity to decide whether to re-elect the retiring
directors who have opted for re-election at an AGM of a public
company.
Section 205 of CA 2016 provides for the retirement of directors:
Subsection (1) states that the provision under this section shall apply
with regards to the retirement of directors unless there is specific
provision in the company’s constitution or the term of appointment
regarding retirement of directors.
Subsection (2) states that notwithstanding sub-s (1), a private
company may pass a written resolution in accordance with s 297 to
determine the retirement of a director.
Subsection (3) states that the directors shall retire as follows:
(a) at the first AGM of a public company, all directors shall retire
from office at the conclusion of the meeting; and
(b) at the AGM in every subsequent year, one-third (1/3) of the

directors for the time being, or, if their number is not three or a
multiple of three, then the number nearest to one-third (1/3), shall
retire from office at the conclusion of the meeting.
Subsection (4) states that the directors to retire in every year shall be
the directors who have been longest in office since the director’ last
election, but as between persons who became directors on the same
day, the directors to retire shall be determined by lot, unless they
otherwise agreed among themselves.
Subsection (5) states that a retiring director shall be eligible for re-
election as if he is not disqualified under CA 2016.
Subsection (6) states that unless otherwise provided in the
constitution, the company may appoint any person who is not
disqualified under CA 2016 to fill in the vacancy at the AGM at which a
director so retires, and if no appointment was made to fill the vacancy,
the retiring director shall, if he offers himself for re-election, be
deemed to have been re-elected, unless—
(a) at that meeting the company expressly resolved not to fill the
vacated office; or
(b) a resolution for the re-election of the director is put to the

meeting and lost.
Law: s 205 of CA 2016.
¶5-210 Rules for retirement and re-election

Section 205 of CA 2016 sets out the following rules concerning the
retirement and re-election of directors of public companies:
• All the directors of a public company are to retire at the first AGM
and to seek re-election. Thereafter, one-third of the elected
directors have to retire at the general meeting of every
subsequent year. Retiring directors are eligible to be re-elected if
not disqualified. The number of directors may be increased or
reduced at the option of the company by passing an ordinary
resolution at a general meeting to that effect. The company may
similarly decide the order in which the directors are to leave
office.
• In the case of a private company, it may pass a written resolution

in accordance with s 297 to determine the retirement of a director.
• Directors are empowered to appoint any person to fill a casual

vacancy as director or as an addition to the existing directors. The
new director will hold office only until the next AGM and will then
be eligible for re-election. He will not be taken into account in
determining the directors who are to retire.
In a case law, the terms of directors are governed by the company’s

Articles of Association and may come to an end while a winding-up
order is in effect (McAusland v Deputy Federal Commissioner of
Taxation; Antlers Pty Ltd v The Official Trustee in Bankruptcy).
Law: s 205 of CA 2016.
¶5-220 Vacation of office

The vacation of office by directors if governed by a company’s
constitution may include the following situations where a director:
• ceases to be a director by virtue of CA 2016;
• becomes bankrupt;
• is disqualified from being a director;
• becomes of unsound mind;
• resigns from his office by notice in writing (this does not apply if
the number of directors is reduced to below the minimum number
required by CA 2016);
• is absent from directors’ meeting consecutively for more than six

months without the permission of the other directors;
• without the consent of the company in general meeting holds any

other office of profit under the company except that of managing
director or manager;
• holds an undisclosed interest in a contract with the company.
For a company without a constitution, s 208 on vacation of office of

director stipulates as follows:
Subsection (1) states that the office of a director of a company shall
be vacated if the person holding that office—
(a) resigns in accordance with sub-s (2);
(b) has retired in accordance with CA 2016 or the company’s

constitution, but is not re-elected;
(c) is removed from office in accordance with CA 2016 or the

company’s constitution;
(d) becomes disqualified from being a director under s 198 or 199;
(e) becomes of unsound mind or a person whose person or estate

is liable to be dealt with in any way under the Mental Health Act
2001;
(f) dies; or
(g) otherwise vacates his office in accordance with the company’s

constitution.
Subsection (2) states that subject to sub-s 196(3) and s 209, a director
may resign his office by giving a written notice to the company at its
registered office.
Subsection (3) states that a notice under sub-s (2) shall be effective
when it is delivered at the address of the registered office or at a later
date specified in the notice.
Subsection (4) states that if a vacancy is created resulting from
circumstances referred to in sub-s (1), the board shall have the power,
at any time, to appoint any person to be a director to fill such casual
vacancy and the director so appointed shall hold office—
(a) in the case of a public company, until the next AGM; or
(b) in the case of a private company, in accordance with the terms

of appointment.
¶5-221 Sole director of a company
Since CA 2016 permits a single director company to be registered, the

resignation, vacation or death of sole director or last remaining
director is provided under s 209 as follows:
Subsection (1) states that subject to sub-s 196(3), where a company
has only one director or the last remaining director, that director shall
not resign office until that director has called a meeting of members to
receive the notice of the resignation and to appoint one or more new
directors.
Subsection (2) states that sub-s (1) is also applicable to a company
whose sole director is also the sole shareholder.
Subsection (3) states that for the purpose of appointing a new director,
in the event of the office of a sole director or the last remaining
director of the company being vacated due to the circumstances
referred to in para 208(1)(d), (e), (f) or (g), the secretary shall, as soon
as practicable, call a meeting of the next of kin, other personal
representatives or a meeting of members, as the case may be.
Subsection (4) states that the secretary shall be entitled to be
indemnified by the company in relation to any reasonable costs and
expenses of the meeting convened under sub-s (3).
Subsection (5) states that where the next of kin, personal
representatives or members fail to appoint a director within six months
of the death of the last director, the Registrar may direct the company
to be struck off in accordance with Subdiv 1 of Div 4 of Pt IV.
Subsection (6) states that where a sole director who is also the sole
shareholder of a company is unable to manage the affairs of the
company by reason of his mental incapacity, the committee appointed
under the Mental Health Act 2001 to manage his estate may appoint a
person as a director.
Law: s 208 and 209 of CA 2016.
¶5-230 Removal of directors of public companies

Public companies wishing to remove their directors have to comply
with a specific procedure. The procedure is as follows:
• removal either by ordinary resolution or by lodgement of a special
notice with the company (see ¶5-232);
• holding an extraordinary general meeting to pass an ordinary

resolution of removal;
• the right of director to be heard (see ¶5-240); and
• filling of vacancy (see ¶5-260).
¶5-232 Removal by ordinary resolution or by special

notice
A public company may remove a director by ordinary resolution before
the expiration of his term of office. This power exists by virtue of the
Companies Act and operates notwithstanding anything in the
constitution or any agreement between the director and the company.
If the director who is being removed was appointed to represent the
interests of a specific class of shareholders or debenture holders, the
resolution to remove him will not be effective until a successor has
been appointed. A Special Notice of the resolution to remove a
director is required — that is, not less than 28 days’ notice to the
company before the meeting at which the motion is moved. However,
if a company adopts a constitution similar to Table A of the former
Companies Act 1965 (CA 1965), then the director may,
notwithstanding the provisions of CA 2016, be removed from office
before the expiry of his term via an ordinary resolution without special
notice (Solaiappan & Ors v Lim Yoke Fan & Ors).
The company is, however, under no obligation to call a meeting
(Pedley v Inland Waterways Association Ltd). If a company is unwilling
to call a meeting, the proposer of the resolution will fail in his bid to
oust the director unless he has 10% of the voting rights in the
company, or can muster support from members with equivalent voting
power. This will enable him to have a meeting convened under s 311
and 312 of CA 2016.
A director of a public company cannot be removed by a resolution of
the other directors. Despite being removed before the expiration of his
term of office, the director may still claim any compensation or
damages due to him on termination of his appointment.
Section 206 of CA 2016 provides for removal of directors:
Subsection (1) states that a director may be removed before the
expiration of the director’s period of office as follows:
(a) subject to the constitution, in the case of a private company, by
ordinary resolution; or
(b) in the case of a public company, in accordance with this section.
Subsection (2) states that notwithstanding anything in the constitution

or any agreement between a public company and a director, the
company may by ordinary resolution at a meeting remove the director
before the expiration of the director’s tenure of office.
Subsection (3) states that special notice is required of a resolution to
remove a director under this section or to appoint another person
instead of the director at the same meeting.
Subsection (4) states that notwithstanding para (1)(b), if a director of a
public company was appointed to represent the interests of any
particular class of shareholders or debenture holders, the resolution to
remove the director shall not take effect until the director’s successor
has been appointed.
Subsection (5) states that a person appointed as director in place of a
person removed under this section shall be treated, for the purpose of
determining the time at which he or any other director is to retire, as if
he had become a director on the day on which the person in whose
place he is appointed was last appointed a director.
Law: s 206 of CA 2016.
¶5-240 Right of directors to be heard

The director who is being removed has an opportunity to defend
himself. He is entitled to be heard on the resolution at the members’
meeting and to make written representations to the company and
request the company to send copies of the representations to every
member of the company notified of the meeting. If copies of the
representations are not sent out because they were received too late,
the director may ask for them to be read out at the meeting without
affecting his right to be heard orally.
The director’s right to be heard, however, is not absolute. He cannot
use his right to attract publicity for defamatory matters. If a director
does that, the company or any affected person may apply to court to
stop him from sending or reading out the representations at the
meeting.
In practice, it will usually be easier to proceed under the constitution of
the company rather than under the statutory procedure. A company
constitution usually provides that the company may by resolution
remove a director before his term expires. An ordinary resolution
pursuant to such a constitution is sufficient to remove the director and
special notice is unnecessary (Holmes v Life Funds of Australia Ltd).
Proceedings under the constitution will also deprive the director the
statutory right to make representations. That right only arises when
special notice is given under CA 2016’s procedure.
Section 207 of CA 2016 provides for the right of directors of public
companies to be heard against their removal:
Subsection (1) states that on receipt of special notice for a resolution
to remove a director under sub-s 206(3), the company shall forthwith
send to the director a copy of the special notice.
Subsection (2) states that the director shall be given the right to make
oral representation or written representation not exceeding a
reasonable length on the resolution to remove him.
Subsection (3) states that where the director makes written
representation and requests the written representation be notified to
the members, the company shall, unless the representation is
received too late for the company to do so—
(a) state the fact of the representation having been made in the
notice of the resolution given to members of the company; and
(b) send a copy of the representation to every member of the

company to whom the notice of the meeting is sent.
Subsection (4) states that if a copy of the representations is not sent

as required under sub-s (3) due to the representations received too
late by the company or due to the default of the company, the director
may, without prejudice to his right to be heard orally, require that the
representations shall be read out at the meeting.
Subsection (5) states that copies of the representations need not be
sent out and the representations need not be read out at the meeting
if, on the application either of the company or of any other person who
claims to be aggrieved, the court is satisfied that the rights conferred
by this section are being abused.
Subsection (6) states that the court may order the company’s costs on
an application under sub-s (5) to be paid in whole or in part by the
director, notwithstanding that he is not a party to the application.
Subsection (7) states that the constitution of a private company may
provide the rights accorded under this section to its directors.
Law: s 207 of CA 2016.
¶5-250 Obstacles to removal of directors
The purpose of the statutory provisions for removal of public

company’s directors is to ensure that ultimate control over the
directors is in the hands of the shareholders. In practice, however,
there are a number of ways in which directors might be able to
frustrate this objective.
One way to circumvent the removal provisions is to provide for
weighted voting rights in the constitution. In Bushell v Faith, one of the
Articles of the company provided that, on a resolution to remove a
director, his shares would carry three votes each. The result was that
a director who held one-third of the shares was able to defeat a
resolution for his removal even though the owners of two-thirds of the
capital had voted to oust him. The House of Lords ruled that the
Article was valid and did not infringe the UK’s equivalent of the
provision on removal of directors. The UK’s equivalent provision
applies both to private and public companies. The decision has been
criticised and could well be confined to public companies which are
small and closely knit. A similar blocking devise could be an Article to
the effect that a general meeting is without a quorum if a resolution is
moved to dismiss a director in the absence of that director.
Another way in which a director may make it difficult for members to
remove him is to ensure that he has a contract of service for a fixed
term. If there is such a contract, the company will be able to remove
him only at the risk of being liable to pay compensation. In Southern
Foundries Ltd v Shirlaw, Shirlaw had a ten-year service contract with
his company as managing director. He was dismissed after four years
of service. The House of Lords by majority held that he was entitled to
sue the company for damages for wrongful dismissal. Lord Porter
observed that while a company cannot be precluded from altering its
Articles so as to enable a director to be dismissed, it may nevertheless
be liable for breach of contract if it acts contrary to a stipulation in the
original agreement.
¶5-260 Filling of vacancy

The vacancy resulting from the removal of a director may be filled as a
casual vacancy. For purposes of retirement, the term of office of the
director appointed starts at the time the replaced director was last
appointed as director.
If a vacancy is created resulting from circumstances referred to in para
¶5-220 above, the board shall have the power, at any time, to appoint
any person to be a director to fill such casual vacancy and the director
so appointed shall hold office—
(a) in the case of a public company, until the next AGM; or
(b) in the case of a private company, in accordance with the terms

of appointment [s 208(4)].
Law: s 208(4) of CA 2016.
¶5-270 Removal of directors of private companies
The power to remove a director of a private company may be

governed by the company’s constitution. A company’s constitution will
usually provide that a private company may by ordinary resolution
remove a director before the expiration of his period of service. In the
absence of such clause in the constitution, a director whose term of
office is specified in the constitution may not be removed before the
expiration of that term until the constitution is altered appropriately
(Imperial Hydropathic Hotel Co; Blackpool v Hampson).
Notwithstanding that a company’s Articles (ie “constitution” under CA
2016) usually refers to the removal of “a” director or of “any” director, it
has been held that such an article authorises a resolution to
simultaneously remove all the directors. Separate resolutions for the
removal of each director are not required (Claremont Petroleum NL v
Indosuez Nominees Pty Ltd & Anor). To meet the objection that such
a course might result in a moment in time when, prior to the election of
new directors to replace those removed, there could be a
contravention of the Companies Act through the company having no
directors at all, it was suggested that the resolutions to remove the
existing directors and to replace them with new ones be drawn up so
that the removal takes effect only on the election of the successors
(per Connolly J in Claremont Petroleum NL v Indosuez Nominees Pty
Ltd & Anor).
When a director is threatened with dismissal, the threat of a petition to
wind up the company may secure his position from attack. In Ebrahimi
v Westbourne Galleries, a successful petition was presented by
Ebrahimi who, with Nazar, had carried on a business first as a
partnership and then as a small private company. After incorporation,
Nazar’s son was admitted as a member and director. The two Nazars
had a majority of the shares and votes. They voted to remove
Ebrahimi from office. The House of Lords held unanimously that
Ebrahimi was entitled to an order to wind up the company. The
company had been established on the basis that the incorporators
could participate in the management of the company. The Nazars in
excluding Ebrahimi had destroyed that basis. Ebrahimi was therefore
entitled to an order to wind up the company on the ground that it was
just and equitable to do so.
Section 206 of CA 2016 provides for the removal of directors — see
¶5-232.
Law: s 206 and 207 of CA 2016.
PAYMENTS TO DIRECTORS FOR LOSS OF

OFFICE
¶5-300 Disclosure to and approval of members
Companies are prohibited from giving benefits to their directors for

loss of office or in relation to their retirement without disclosing details
of the benefit to the shareholders and obtaining their approval in
general meeting. The director holds any such payment to him in trust
for the company if the payment is not disclosed to and approved by
the company. A “director” includes anyone who has at any time been
a director of the company or of a corporation deemed to be related to
the company. Payments made to directors in relation to take-over
transactions have to comply with the same stipulations. The rationale
for this prohibition is that shareholder approval should be obtained for
such benefits to preclude opportunities for abuse by those who control
the company.
In the case of Britannia Brands (Singapore) Pte Ltd v Sushil
Premchand, the High Court of Singapore is in the opinion that as s
168 (Singapore Act) refers to “compensation for loss of office as an
officer of the company”, it is not limited only to compensation for loss
of office as a director but also to loss of office as an officer. Directors
whose services are terminated are also included in the section, and
their severance package must first be approved by the shareholders in
a general meeting.
Regarding payment to directors for loss of office, etc, s 227(1) of CA
2016 provides that it shall not be lawful:
(a) for a company to make to any director any payment by way of
compensation for loss of office as an officer of that company or of
a subsidiary of that company or as consideration for or in
connection with his retirement from any such office; or
(b) for any payment to be made to any director of a company in

connection with the transfer of the whole or any part of the
undertaking or property of the company, unless particulars with
respect to the proposed payment including the amount, have
been disclosed to the members of the company and the
resolution for the proposal has been approved by the members
and when any such payment has been unlawfully made the
amount received by the director shall be deemed to have been
received by him in trust for the company.
Law: s 227 of CA 2016; s 168 Singapore Companies Act.
¶5-310 Payments not requiring approval

Although payments for loss of office cannot be made unless disclosed
to and approved by a company in general meeting, the following
payments are some exceptions to the general rule and do not require
general meeting approval. Section 227(5) of CA 2016 states that any
reference to payments to any director of a company by way of
compensation for loss of office or as consideration for or in connection
with his retirement from office shall not include the following:
• payments made under any agreement entered into before the
commencement of the relevant repealed written laws;
• payments made under any agreement which has been disclosed

and approved by special resolution of the company;
• bona fide payments being damages for breach of contract;
• bona fide pensions or lump sum payments for past services to the
company including any superannuation or retiring allowance,
superannuation gratuity or similar payment, but the payment must
not exceed the total emoluments of the director in the three years
immediately before his retirement or death; and
• payments to a director under an agreement between the company

and the director before his appointment which secures his
services as director.
Law: s 227(5) of CA 2016.
DISQUALIFICATION OF DIRECTORS
¶5-400 Statutory framework for disqualification
The CA 2016 contains various provisions for the disqualification of

directors. These provisions relate to:
(a) undischarged bankrupts (see ¶5-410);
(b) has been convicted of an offence related to the promotion,

formation of management or a corporation;
(c) has been convicted of an offence involving bribery, fraud or

dishonesty (see ¶5-430);
(d) has been convicted of an offence related to: duties and

responsibilities of directors; responsibility as nominee director;
improper use of position, company’s property, etc; transactions
with directors, substantial shareholders or connected persons; or,
not keeping proper accounts of company; or
(e) disqualified by court from acting as director or promoter.
The circumstances referred to in (a), (b), (c) and (d) are applicable to
circumstances in or outside Malaysia.
Section 198 of CA 2016 stipulates the list of circumstances that
prohibit a person from acting as a director of a company — see ¶5-
141.
Law: s 198 of CA 2016.
¶5-410 Undischarged bankrupts
An undischarged bankrupt will be guilty of an offence if he acts as a

director of a corporation, or is concerned in the management of a
corporation whether directly or indirectly, without the leave of the
court. The person who acted as a director will be equally disqualified
whether he is adjudged a bankrupt by a local or a foreign court having
jurisdiction in bankruptcy. The bankrupt may nonetheless apply to
court for permission to direct or manage a corporation.
The purpose of the ban on bankrupts from taking part in the company
management has been described as not to punish the person
concerned, but to protect the public from imprudent actions on his part
that could cause financial loss to the public (Poyser v CCA). In
determining whether leave should be granted, the critical question is
whether it is in the interest of the public, investors, shareholders,
creditors and those dealing with the company that the leave should be
granted (Re Alford & Anor). Presumably, leave will be given if the
court is sufficiently satisfied that the bankrupt is likely to be trustworthy
enough to manage and direct the funds of a corporation. An
undischarged bankrupt will cease to be disqualified when he has
discharged all his debts.
Law: s 198(1)(a) of CA 2016.
¶5-420 Unfit directors of insolvent companies

Under some circumstances, directors of a company can be barred
from taking part in the management of companies. The ROC or the
Official Receiver may apply to court to bar directors from acting if the
following conditions are met:
(a) the person is or has been a director of a company which has
gone into liquidation and was insolvent at the time of application;
and
(b) the person is or has been a director of another company which

has gone into liquidation within five years after the company
mentioned in (a) (above) went into liquidation; and
(c) the person’s conduct as director of the above-mentioned

companies makes him unfit to be connected with the
management of a company.
The court will order that the person shall not, without the leave of the
court, be a director of or in any way, whether directly or indirectly, be
concerned or take part in the management of a company for such
period beginning on the date of the order and not exceeding five years
as may be specified in the order.
Factors to be considered by the court
It can be assumed that the factors for the court’s consideration before
a director is disqualified generally relate to that person’s responsibility
for the insolvency of the company he served. Some of the
considerations are:
• whether there was any breach of duty by the director in the
company;
• whether the director should account for any money or property of

the company; and
• the extent of the director’s responsibility for the cause of the

company’s insolvency.
The CA is silent as to the factors which can be considered by the court

in deciding whether or not a person’s conduct makes it unfit for him to
be concerned with the management of a company.
Application to court by Registrar
Section 199(1) states the court may, on an application by the
Registrar, make an order to disqualify any person from acting or
holding office as a director or promoter of a company, or be concerned
with or taking part in the management of a company whether directly
or indirectly, if—
(a) within the last five years, the person has been a director of two
or more companies which went into liquidation resulting from the
company being insolvent due to his conduct as a director which
contributed wholly or partly to the liquidation;
(b) due to his contravention of the duties of a director; or (c) due to

his habitual contravention of CA 2016.
Subsection (2) states that an application arising from the

circumstances referred to in para (1)(a) may be made by the Official
Receiver and the Registrar shall be made a party to the proceedings.
Subsection (3) states that before making an order under sub-s (1), the
court may require any person—
(a) to furnish the court with such information with respect to the
company’s affairs; and
(b) to produce and permit inspection of such books or documents

relevant to the company.
Subsection (4) states that after considering the application and the
additional information and documents received under sub-s (3), if any,
the court may make an order to disqualify the person from acting or
or indirectly for such period not exceeding five years commencing
from the date of the order.
Subsection (5) states that the Registrar or the Official Receiver shall
give notice of not less than 14 days to the person referred to in sub-s
(1) notifying his intention to apply for an order under this section.
Law: s 199 of CA 2016.
¶5-430 Conviction for certain offences

A person who is convicted of various specified offences involving
bribery, fraud and dishonesty cannot take part in the direction and
management of a company within five years from conviction or in a
case where a prison sentence was imposed, from release from prison.
Conviction of any one of these offences results in the automatic
disqualification from office of the director. The prohibition is directed
against persons who are likely to use the corporate structure to the
financial detriment of investors and persons dealing with the
corporation (Re Magna Alloys & Research Pty Ltd). The prohibition
has also been described as being for the protection of the public,
shareholders, creditors and others having dealings with limited liability
companies (per Lord Diplock in Quek Leng Chye & Anor v Attorney-
General).
Law: s 198(1)(c) of CA 2016.
¶5-440 Types of offences

A person is liable to be disqualified if he is convicted of any of the
following types of offences:
• offences in connection with the promotion, formation or
management of a corporation;
• offences involving fraud and dishonesty punishable with

imprisonment for at least three months;
• offences under s 213, 217, 218, 228 and 539 of CA 2016 which
relate to a director’s duty to act with honesty and diligence in the
discharge of his duties and to keep proper accounts.
A person who acts as a director within five years of his conviction is

guilty of an offence.
Law: s 198(1)(d) of CA 2016.
¶5-450 Relief from disqualification

A disqualified director may apply to court for leave to take part in the
management of a corporation and shall give the Registrar not less
than ten days’ notice of his intention to apply and the Registrar may
oppose to the granting of the application. In exercising its discretion,
the court takes into account:
• the nature of the offence committed;
• the nature of the director’s involvement;
• the general character of the director;
• the interests of the shareholders, creditors and employees;
• risks to the public should the director resume a management

position (Re Magna Alloys & Research Pty Ltd).
It is for the director to satisfy the court that he has a high degree of
commercial integrity which those exercising influential managing
functions in limited liability companies should be endowed with (per
Lord Diplock in Quek Leng Chye & Anor v Attorney-General).
Section 198 of CA 2016 provides of persons disqualified from being a
director — see ¶5-141.
Section 199 gives power to the court to disqualify persons from acting
as director or promoter by stipulating as follows:
Subsection (1) states that the court may, on an application by the
Registrar, make an order to disqualify any person from acting or
or indirectly, if—
(a) within the last five years, the person has been a director of two
or more companies which went into liquidation resulting from the
company being insolvent due to his conduct as a director which
contributed wholly or partly to the liquidation;
(b) due to his contravention of the duties of a director; or
(c) due to his habitual contravention of CA 2016.
Subsection (2) states that an application arising from the

circumstances referred to in para (1)(a) may be made by the Official
Receiver and the Registrar shall be made a party to the proceedings.
Subsection (3) states that before making an order under sub-s (1), the
court may require any person—
(a) to furnish the court with such information with respect to the
company’s affairs; and
(b) to produce and permit inspection of such books or documents

relevant to the company.
Subsection (4) states that after considering the application and the
additional information and documents received under sub-s (3), if any,
the court may make an order to disqualify the person from acting or
or indirectly for such period not exceeding five years commencing
from the date of the order.
Subsection (5) states that the Registrar or the Official Receiver shall
give notice of not less than 14 days to the person referred to in sub-s
(1) notifying his intention to apply for an order under this section.
In s 200, the Registrar has power to remove name of disqualified
director stating that notwithstanding any provision in CA 2016 or the
constitution of a company, the Registrar shall have the power to
remove the name of a director who has been disqualified under s 198
or 199 from the register kept by the Registrar for that purpose.
Law: s 198, 199 and 200 of CA 2016.

1. Explain who is a director as defined by the Companies Act 2016.
2. Explain the statutory requirements for appointing a director and

the procedure and steps of appointing a director of a company.
3. Explain the rules relating to the disqualification of a person from

acting as director of a company.
4. Explain what is a/an:
(i) alternate director;
(ii) nominee director;
(iii) executive director; and
(iv) independent non-executive director.
5. Explain the procedure and steps required under the law for
removing a director of a public and private company.
6. Explain the procedure for the re-election of directors who

retirement by rotation at every AGM for a public company.
CHAPTER 6: DIRECTORS’
DUTIES AND LIABILITIES
Duties owed by directors ¶6-000
Remedies for director’s breach of duty ¶6-100
Relief from liability for breach of duty ¶6-200
Disclosure requirements ¶6-300
Directors and shares ¶6-400
Directors’ remuneration ¶6-500
Loans to directors and connected persons ¶6-600
Property arrangements between directors and their
companies ¶6-700
Public company director’s service contract ¶6-800
Contract of a one director company ¶6-900
DUTIES OWED BY DIRECTORS

¶6-000 Duties owed by directors
The duties owed by directors to a company comprise those at
common law and those stipulated in the Companies Act 2016 (CA
2016). It is specifically stated in s 210 of CA 2016 that in addition to
the definition of “director” in s 2, “director” includes chief executive
officer, chief financial officer, chief operating officer and any other
person primarily responsible for the management of the company, in
particularly in relation to the responsibilities stated in s 213, 214, 215,
216, 217, 218, 223 and 228 of CA 2016.
Generally, directors’ duties span over three areas. These are:
• a statutory duty (see ¶6-010);
• a duty of care (see ¶6-020); and
• a fiduciary duty (see ¶6-030 to ¶6-040).
Directors’ duties and responsibilities in managing companies are wide

in scope, involving legal aspects, common law cases and statutory
offences.
Section 213 provides for the duties and responsibilities of directors:
Subsection (1) states that a director of a company shall at all times
exercise his powers in accordance with CA 2016, for a proper purpose
and in good faith in the best interest of the company.
Subsection (2) states that a director of a company shall exercise
reasonable care, skill and diligence with—
(a) the knowledge, skill and experience which may reasonably be
expected of a director having the same responsibilities; and
(b) any additional knowledge, skill and experience which the director
in fact has.
Subsection (3) A director who contravenes this section commits an

offence and shall, on conviction, be liable to imprisonment for a term
not exceeding five years or to a fine not exceeding RM3 million or to
both.
Law: s 210 and 213 of CA 2016.
¶6-010 Director’s statutory duty

Every director owes a duty to his company to use reasonable
diligence and to act honestly in the discharge of his duties. Failure to
do so amounts to a breach of his duty and would give rise to an action
by the company for damages against him. The breach of duty may
also amount to a criminal offence.
A director must not make improper use of any information acquired by
him by virtue of his position in the company to gain an advantage for
himself or any person or to cause detriment to the company. In
relation to this, directors must also not commit any insider trading
offences. A director who does not act diligently and honestly, or
misuses information to his advantage will be liable to the company for
any profit made by him or for any damage suffered by the company as
a result of the breach of duty.
As a general principle, CA 2016 seeks to preserve the integrity of the
corporate structure and to save it from abuse and exploitation by
officers, particularly directors of companies. In this regard, the Act
provides that it is an offence for anyone who, while an officer of a
company, has deceitfully, fraudulently or dishonestly induced any
person to give credit to the company. The provision aims to prevent
directors and other officers of companies clearly becoming insolvent
from procuring credit for the companies at the expense of the
creditors. It is the temptation to exploit the company structure and to
flaunt the privilege of limited liability that the Act tries to prevent.
Perhaps the severity of the offence is best understood by looking at
the penalties on conviction of an offence prescribed against errant
officers under the respective provisions of CA 2016:
1 Procedural Aspects:
Provision Nature of offence Penalty
(a) s 222 Interested director not to Imprisonment for a term
participate or vote not exceeding five years
or to a fine not
exceeding RM3 million
or to both
(b) s 223 Disposal or acquisition of Imprisonment for a term
undertaking or property not exceeding five years
without approval of or to a fine not
company exceeding RM3 million
or to both
(c) s 224 Authorising and making of Imprisonment for a term
loan to director of not exceeding five years
company deemed related or to a fine not
company or entering into exceeding RM3 million
any guarantee or provide or to both
security in connection
with the loan made to
such a director or any
other person
(d) s 225 Prohibition of loans to Imprisonment for a term
persons connected with not exceeding five years
director or of its holding or to a fine not
company or enter into exceeding RM3 million
guarantee or provide or to both
security
2 Administrative Aspects:
Provision Nature of offence Penalty
(a) s 47 Keeping documents at A fine not exceeding
registered office RM10,000 and, in the
case of a continuing
offence, to a further fine
not exceeding RM500
for each day during the
offence continues after
conviction
(b) s 50 Not keeping register of A fine not exceeding
members RM10,000 and, in the
not exceeding RM500
conviction
(c) s 51 Duty to notify particulars A fine not exceeding
and changes in register of RM20,000 and, in the
members case of a continuing
not exceeding RM500
conviction
(d) s 58 Duty to notify particulars A fine not exceeding

and changes of director, RM50,000 and, in the
manager and secretary case of a continuing
not exceeding RM500
conviction
(e) s 59 Failure to keep register of A fine not exceeding
directors’ shareholdings, RM500,000 or
etc imprisonment for a term
not exceeding 10 years,
or to both and, in the
not exceeding RM1,000
conviction
The above are just a few examples of the various penalties of varying
degree of the amount of fines and punishments levied on how serious
the provisions affecting the responsibilities of the company and
officers of a company that commits the defaults.
¶6-020 Director’s duty of care

In recognising that directors may be concerned with a wide range of
practical considerations, the court has taken the view that the
judgment of directors, if exercised in good faith and not for irrelevant
purposes, is not open to review by the courts (Harlowe’s Nominees
Pty Ltd v Woodside (Lakes Entrance) Oil Co NL). In the late 19th and
20th centuries, English cases have even held that so long as directors
act honestly, they are not liable in damages unless guilty of gross
negligence (Re Brazilian Rubber Plantations and Estates Ltd). This
was due to the fact that at that time, the boards were largely
comprised of part-time non-executive directors who were regarded as
figure heads.
The director’s duty of care and skill was comprehensively examined
by Romer J in Re City Equitable Fire Insurance Co Ltd. The
statements of the law draw on previous authorities and run as follows:
• A director need not exhibit in the performance of his duties a
greater degree of skill than may reasonably be expected from a
person of his knowledge and experience. If directors act within
their powers, if they act with such care as is reasonably to be
expected from them, having regard to their knowledge and
experience, and if they act honestly for the benefit of the company
they represent, they discharge both their equitable as well as their
legal duty to the company. It is perhaps only another way of
stating the same proposition to say that directors are not liable for
errors of judgment.
• A director is not bound to give continuous attention to the affairs of

his company. He is not bound to attend all such meetings, though
he ought to attend whenever, in the circumstances, he is
reasonably able to do so. In the Marquis of Bute’s case, the
Marquis who had been appointed to the board of the bank,
attended one board meeting in 38 years. He was held not liable in
negligence for mismanagement that had occurred.
• In respect of all duties that, having regard to the exigencies of

business and the company’s constitution, may be properly left to
some other official, a director is, in the absence of grounds for
suspicion, justified in trusting that official to perform such duties
honestly. For example, a director who signs cheques that appear
to be drawn for legitimate purposes is not responsible for seeing
that the money is in fact required for those purposes or that the
money is subsequently applied for those purposes. This is
provided the cheques come before the director for signature in
the regular way having regard to the company’s practice.
Otherwise, it would be impossible for a large company to carry on
business.
These were the guidelines for establishing whether or not a director

has fulfilled his duty of care to the company. If he is found to have
acted within these parameters, there is no liability for negligence.
However, a higher standard of care is expected from a professional
person who occupies the office of director than from a person with
little or no business experience [Dorchester Finance v Stebbing
(unreported)].
The New South Wales Supreme Court specifically drew a distinction
between the standard of care owed by executive and non-executive
directors. In AWA Ltd v Daniels, Rogers CJ accepted that in the Re
City Equitable case, a subjective test was applied to non-executive
directors, but held that objective standards should be applied to
AWA’s chairman Hooke, who was also the chief executive officer.
Generally the chief executive is a director to whom the board of
directors had delegated its powers of management of the
corporation’s business. The degree of skill and care to be expected of
an executive director is measured objectively. It was held that AWA’s
chief executive officer had been negligent and he was ordered to
make a contribution to the losses caused by currency fluctuations in
foreign exchange dealings. Rogers CJ in his judgment said:
“A director in AWA is obliged to obtain at least a general
understanding of the business of the company and the effect that
a changing economy may have on that business. Directors should
bring an informed and independent judgment to bear on the
various matters that come to the board for decision.”
Section 214 provides for the business judgment rule as follows:
Subsection (1) states that a director who makes a business judgment
is deemed to meet the requirements of the duty under sub-s 213(2)
and the equivalent duties under the common law and in equity if the
director—
(a) makes the business judgment for a proper purpose and in good
faith;
(b) does not have a material personal interest in the subject matter
of the business judgment;
(c) is informed about the subject matter of the business judgment to

the extent the director reasonably believes to be appropriate
under the circumstances; and
(d) reasonably believes that the business judgment is in the best

interest of the company.
Subsection (2) states that for the purposes of this section, “business
judgment” means any decision on whether or not to take action in
respect of a matter relevant to the business of the company.
Per s 215, reliance on information provided by others is another
important factor in relation to his exercising his duties as a director:
Subsection (1) states that a director in exercising his duties as a
director may rely on information, professional or expert advice,
opinions, reports or statements including financial statements and
other financial data, prepared, presented or made by—
(a) any officer of the company whom the director believes on
reasonable grounds to be reliable and competent on the matters
concerned;
(b) as to matters involving skills or expertise, any other person

retained by the company in relation to matters that the director
believes on reasonable grounds to be within the person’s
professional or expert competence;
(c) another director in relation to matters within the director’s

authority; or
(d) any committee to the board of directors on which the director did
not serve in relation to matters within the committee’s authority.
Subsection (2) states that the director’s reliance made under sub-s (1)
is deemed to be made on reasonable grounds if it was made—
(a) in good faith; and
(b) after making an independent assessment of the information or

advice, opinions, reports or statements, including financial
statements and other financial data, having regard to the
director’s knowledge of the company and the complexity of the
structure and operation of the company.
Right to recover from directors

A company can waive the right to recover from directors for negligent
acts, by subsequent adoption of those acts (Multinational Gas and
Petrochemical Co v Multinational Gas and Petrochemical Services
Ltd). The directors’ acts then become acts of the company itself. Even
if an attempt to recover from the directors were to be made, it is the
company itself who must sue, under the rule in Foss v Harbottle.
However, if the refusal by the company to pursue the claim amounts
to unfairly prejudicial conduct on minority shareholders, a remedy will
lie under the Act.
Where the directors’ negligent acts (as opposed to acts they
negligently caused the company to do) have caused loss to the
shareholders, the shareholders may recover from the said negligent
directors if a duty of care and causation can be established (Heron
International v Lord Grade).
¶6-030 Director’s fiduciary duty

The fact that directors are placed in a position of trust and
responsibility has resulted in the imposition of fiduciary duties upon
them. It is important to establish:
• to whom the duties are owed (¶6-035); and
• the nature and extent of those duties (¶6-040).
¶6-035 To whom the fiduciary duty is owed

In the normal course of governing the company’s affairs, the fiduciary
duties of the directors are owed to the company alone. This refers to
the company as a separate legal entity, not the shareholders. Thus, in
Percival v Wright when the directors were asked to purchase shares
from the shareholders, the directors were under no obligation to
disclose to the vendor shareholders an anticipated sale of part of the
company’s undertaking. However, it is possible for the directors to
accept an obligation to fairly represent the interests of shareholders.
This could apply, for example, when the shareholders undertake a
particular course of action on the advice of the directors (Allen v
Hyatt).
Creation of a collateral duty to shareholders will depend on the facts
and circumstances of a particular case. If, for example, shareholder
directors are considering the merits of the terms of rival take-over
bids, they would be obliged to advise the other shareholders as to the
best bid reasonably obtainable (Heron International v Lord Grade). In
a New Zealand case, shareholders in a family company looked to the
directors for guidance in relation to a take-over bid by one of the
directors. The directors recommended to the shareholders that they
accept the offer but failed to inform them that the company’s assets
were worth more than the value disclosed in the company’s books.
The court found that the directors owed a fiduciary duty to the
shareholders to disclose such information. The director concerned
was accordingly ordered to distribute among the shareholders the
profit on the sale of those assets following the take-over (Coleman v
Myers). The directors should also remain impartial as between
different groups of shareholders in the same company (Mills v Mills).
However, the directors cannot place the interests of the group of
which their company is a member, above those of the company itself
(Bell v Lever Bros Ltd).
Directors do not owe strictly defined fiduciary duties to the company’s
creditors (Multinational Gas and Petrochemical Co v Multinational Gas
and Petrochemical Services Ltd). The duty of directors to take into
account the interests of creditors is indirectly enforced through the
provisions of the Act which impose personal liability for fraudulent
trading immediately prior to liquidation. The provisions apply if, in the
course of the winding up of a company it appears that any business of
the company had been carried on with intent to defraud creditors of
the company or any other person, or for any fraudulent purpose. In
such circumstances, the court may declare that any persons who were
knowing parties to the carrying on of the business in that manner are
liable to make such contributions to the company’s assets as it thinks
proper without any limitation of liability.
The duty owed to employees would be rather difficult to enforce under
company law, but directors and management are under legal
obligations of employment law and other subsidiary laws relating to
employment.
Law: s 213 and 214 of CA 2016.
¶6-040 Nature of the fiduciary duty

The nature of directors’ fiduciary duty has many facets and is rather
wide in scope. It is fundamental that directors should act bona fide in
the interests of the company, and not for any collateral purpose for
personal gains and profits. There is scope for subjectivity in the
fulfilment of this duty.
Directors must exercise their discretion bona fide in what they
consider, not what a court may consider, is in the interests of the
company (per Greene MR, in Re Smith and Fawcett).
The courts are reluctant to interfere with the honest exercise of
directors’ discretion. Even if the directors had decided to take on the
worthless debt of another company, when they sincerely believed that
the other company could be revived, the court would not interfere with
their discretion as it was exercised bona fide (Intraco Ltd v Multi-Pak
Singapore Pte Ltd).
Although directors owe no direct fiduciary duty to shareholders
(Percival v Wright) the interests of the company are identified as those
of the members as a whole, and not to a single isolated shareholder’s
interest. This embraces both current and future members, and
necessitates the balancing of current and future benefits to the
company.
The duty of good faith
A director of a company is required to act bona fide in the interests of
the company. The duty is a subjective one so that the directors must
exercise their discretion in what they consider, and not what the court
considers, is in the interests of the company (Re Smith & Fawcett Ltd).
However, where self-interest of the directors is involved, they will not
be allowed to assert that their action was bona fide in the best
interests of the company.
The duty of good faith demands more than an absence of self-interest.
The directors will be liable to the company if they have acted in the
interests of a third party without considering the interests of the
company. In Re W&M Roith Ltd, a service agreement with a director
providing for a pension to his widow was held not binding on the
company. The court found that the agreement was not made bona fide
for the benefit of the company but solely for the benefit of the widow.
The agreement was entered into when the director was in failing
health, and the pension was not intended to be consideration for
services rendered by the director. The court conceded, however, that
in general a widow’s pension is an acceptable way of remunerating a
director.
Directors should not consider the interests of employees except in so
far as they have a bearing on the interests of the company. Thus
where the directors of a company which had sold its newspapers
decided to distribute the proceeds of sale amongst employees who
were going to be made redundant, a minority shareholder obtained an
injunction to prevent the proposal from being implemented. The court
rejected the directors’ arguments that they were entitled to take into
account the interests of the employees. Since the company did not
intend to continue publishing newspapers, there was no question of
the proposal being justified on the basis that, by improving industrial
relations, the company would gain future benefits (Parke v Daily News
Ltd). However, directors will not be in breach of their duty if an action
intended primarily to benefit a legitimate outside interest might also
confer a spin-off benefit for the company (Evans v Brunner, Mond &
Co). Examples of legitimate outside interests are gifts to charity and
donations for research.
Exercise of powers for proper purposes
The use of powers for a “proper purpose” means utilisation of powers
conferred under CA 2016 and the company’s constitution for purposes
for which they were intended. Examples of abuse of such powers are:
• the issue of shares to maintain control of the board and not to
raise capital (Piercy v S Mills & Co);
• the issue of shares by directors with the immediate object of

gaining control of the company. It was held that this was not a fair
and bona fide exercise of the power (Punt v Symonds & Co Ltd);
• the issue of shares for the purpose of diluting an existing majority

shareholding. In Howard Smith Ltd v Ampol Petroleum Ltd, a
company was the target for many take-over bids. Ampol
controlled 55% of the target company’s shares, but the directors
of the company favoured Howard Smith’s offer. Their preference
was founded upon legitimate commercial reasons. Thus, the
target company’s directors engineered a share issue to Howard
Smith. The target company was in need of cash, and its directors
sought to justify their acts by reference to this fact. Lord
Wilberforce explained that the exercise of powers by directors,
conferred upon them under the company’s Articles, would clearly
not be in the interests of the company if the directors thereby
served their own interests. However, absence of self-interest did
not necessarily mean the directors’ acts were in accordance with
the purposes for which the powers were conferred. Self-interest is
only one example of improper motive. The directors were found to
have exercised the powers wrongly and the share issue to
Howard Smith was accordingly invalid;
• an issue of shares made to forestall a take-over bid despite the
fact that the directors had acted in an honest belief that they were
doing what was good for the company (Hogg v Cramphorn Ltd).
Section 213(1) stipulates that a director of a company shall at all times

exercise his powers in accordance with the Act, for a proper purpose
and in good faith in the best interest of the company. This indicates
that a subjective rule by the Court has now become a legal
requirement under law.
Duty to retain discretion
Directors are bound to exercise their powers for the benefit of the
company. No constraints should be imposed on a director’s discretion
so as to influence and constrict his decision-making. As a general rule,
directors must not fetter their discretion, for example, by contracting
with an outsider to vote in a particular way at board meetings (Boulting
v ACTAT). However, if directors enter into a valid contract on behalf of
the company, they may agree to vote in favour of any necessary
subsequent action. Therefore, the court did not think it was improper
where directors, who were also shareholders of a company, agreed
with prospective shareholders to alter the company’s Articles and
provide for the issue of new shares (Thorby v Goldberg).
Profiting from the position of director
An important consequence of a director’s fiduciary duty to his
company is the prohibition placed upon him from profiting from this
position. In cases where the courts have found the director to have
done so, he has been made liable to account for the gains made.
However, it is possible for the company to agree to a director profiting
from his position. Such an agreement will be effective only if made
after full disclosure to the company of the terms of the proposed
transaction. The following cases illustrate a director’s liability to
account, and the power to exonerate a director from this duty:
• In Regal (Hastings) Ltd v Gulliver, Regal had incorporated a
subsidiary (Amalgamated) to lease two cinemas, but needed to
increase the issued share capital of Amalgamated to exploit this
opportunity. Regal itself was unable to provide the necessary
finance. Thus, directors of Regal, the company secretary, and
some outside parties, subscribed for the shares in Amalgamated.
The shares in both companies were then sold. The shareholders
in Amalgamated realised a profit on the share sale. The
purchasers of the Regal shares caused Regal to apply to the
court for recovery of the profit. The House of Lords explained that
directors’ liability to account for profits made in the course of their
office arises from the mere fact of a profit having, in the stated
circumstances, been made. The profiteers, however honest and
well-intentioned, cannot escape the risk of being called upon to
account. The directors were therefore required to repay their profit
to Regal. The company solicitor was not held liable to account, as
he was not a director. An important lesson to be learned from this
case is that, had the company consented to the directors making
a profit by shareholder approval in general meeting, the directors
could not have been forced to account.
• In New Zealand Netherlands Society v Kuys, Kuys worked as the

secretary of the Society. He agreed to publish a newspaper
independently to which the Society would subscribe, for
distribution to its members. Kuys left the Society, and the Society
introduced a new, competitor newspaper with the same name.
Kuys successfully applied for an injunction, restraining the Society
from producing the new magazine. It was alleged that Kuys
acquired ownership of the newspaper as a consequence of his
fiduciary relationship with the Society and was therefore in a
position of trust. It was admitted that the Society could release
Kuys from accountability, and allow him to retain ownership, but
only by ‘an arrangement, freely arrived at, after disclosure of all
the relevant matters’. However, there was no agreement that the
newspaper should revert to the Society. Further, the only possible
conclusion from the facts was that ownership should remain with
Kuys. The House of Lords therefore decided that, in the
circumstances, the agreement between the parties had displaced
any potential fiduciary obligation, and that the injunction should
stand.
Duty to avoid conflict of interest
Directors must be careful to avoid conflicts of interest with the
company. This could arise where, for example, a director concludes a
contract with the company. In such circumstances, the temptation for
the director may be to place his personal interests above those of the
company, and if this does occur, the company may have the contract
set aside if the interest is not disclosed (Aberdeen Railway Co v
Blaikie Bros).
See further ¶6-330. This principle does not impose an absolute
prohibition on contracts between a company and its directors, but
such transactions must comply with the rules on contracts with
directors (see ¶6-310) and company approval should be secured
(Movitex Ltd v Bulfield & Ors). A conflict of interest was also found to
have arisen where a director of a company was appointed as one of
the liquidators of the company (Chua Boon Chin v JM McCormack &
Ors). The director was removed as liquidator of the company by an
order of the High Court of Singapore.
Bribes and other undisclosed benefits
When a director accepts a bribe or secret commission in order to
procure a particular course of action by the company or to influence
the director in a particular way, it is also another example of a breach
of fiduciary duty.
This was held in Boston Deep Sea Fishing & Ice Co v Ansell, where
Ansell was the managing director who organised the construction of
fishing boats on behalf of the company. He was paid a commission by
the shipbuilders without the knowledge of the company. Ansell was
also a shareholder of an ice-supplying company and a fish-carrying
company. The court found Ansell’s personal interests had conflicted
with his fiduciary duty to Boston in respect of the receiving of
commission from the shipbuilders as well as bonuses received from
the two companies of which he was a shareholder.
In Furs Ltd v Tomkies, the court ruled that a director could not obtain
personal profit in regards to a transaction which he is negotiating for
the company, unless he has disclosed all the material facts to the
shareholders and by resolution a general meeting approves of his
profiting from the transaction or all the shareholders acquiesce. The
court further held that undisclosed profit which a director derives from
the execution of his fiduciary duties belongs in equity to the company
and this is so, even if the profit is one which the company itself could
not obtain, or if no loss was incurred by the company by the gain of
the director.
In Malaysia, the case of Mahesan v Malaysian Government Officers
Co-operative Housing Society Ltd clearly held that the director,
Mahesan, had breached his fiduciary duty when he plotted with the
seller of a piece of land that incorporated a commission for him in the
sale price of the land which the co-operative bought.
Misuse of company’s funds
Directors are under the duty to act for the company’s interests with
respect to the use of the company’s funds, and not to mix their
personal funds with that of the company’s. This may amount to theft or
embezzlement (Totex-Adon Pty Ltd v Marco).
Taking up corporate opportunity
Another aspect of breach of fiduciary duty is where a director makes a
profit from taking up an opportunity which should be taken up by the
company (Cook v Deeks).
Using confidential information
A director is not permitted to use for his own benefit property or
information entrusted to him for use on behalf of the company. This
principle includes misuse of trade secrets, lists of customers for the
use of competitors and other confidential information. This duty
overlaps in many instances with the duty not to take up corporate
opportunity and the duty of not to compete with the company (Thomas
Marshall (Exporters) Ltd v Guinle).
Fiduciary duties of senior officers
The principles discussed in the cases on fiduciary duties of directors
are equally applicable to senior officers of companies who manage the
company and are authorised to act on behalf of the company.
Breaches of fiduciary duty occur where directors of a company set up
a rival firm which competes with the company for contracts. In Avel
Consultants Sdn Bhd & Anor v Mohamed Zain Yusof & Ors, three
directors of Avel formed a company carrying on the same business as
Avel. The firm canvassed established clients of the company for work
and were appointed in place of the company for a particular project.
The judge found that the directors had committed a breach of their
fiduciary duties. The directors were made to account to the company
for all profits received by them over a period of three months.
In a similar vein, in Canadian Aero Service v O’Malley, the president
and vice-president of a company were held to have breached their
fiduciary duties, where having negotiated on behalf of the company for
a contract, they resigned from the company, set up their own company
and acquired the same contract for their new company. It was said
that the officers’ fiduciary duties continued even after resignation
where the resignation could be said to have been prompted by the
wish to obtain for themselves the opportunity sought by their (former)
company, or where it was their position in their (former) company
which led them to the opportunity they later acquired. However, the
court will not hold that an ex-director is competing with the company if
there is no evidence that the ex-director’s new business venture has,
in any way, undercut or undermined the commercial interest of the
company (Poon Huat Seng & Anor v Goh Cheng Chua).
Responsibility for actions of delegatee
Section 216 stipulates a director’s responsibility for actions of
delegated powers:
Subsection (1) states that except as is otherwise provided by CA
2016, the constitution or any resolution of the board or members of the
company, the directors may delegate any power of the board to any
committee of the board, director, officer, employee, expert or any
other person.
Subsection (2) states that where the directors have delegated any
power, the directors are responsible for the exercise of the power by
the delegatee as if the power had been exercised by the directors
themselves.
Subsection (3) states that the directors are not responsible under sub-
s (2) if—
(a) the directors believed on reasonable grounds at all times that the
delegatee would exercise the power in conformity with the duties
imposed on the directors under CA 2016 and the constitution of
the company, if any; and
(b) the directors believed on reasonable grounds, in good faith and

after making a proper inquiry, if the circumstances indicated the
need for the inquiry that the delegatee was reliable and
competent in relation to the power delegated.
¶6-045 Insider trading by listed company director

Directors of listed companies are exposed to privileged and market
sensitive confidential information. As such, they are considered a
potential “insider” who possess inside information which could be used
to directly or indirectly benefit themselves. Section 188(1) of the
Capital Markets and Services Act 2007 (CMSA 2007) provides for the
conduct of person in possession of inside information, and stipulates
in sub-s (1) that a person is an “insider” if that person—
(a) possesses information that is not generally available which on
becoming generally available a reasonable person would expect it
to have a material effect on the price or the value of securities;
and
(b) knows or ought reasonably to know that the information is not

generally available.
Subsection (2) states that an insider shall not, whether as principal or

agent, in respect of any securities to which information in sub-s (1)
relates—
(a) acquire or dispose of, or enter into an agreement for or with a
view to the acquisition or disposal of such securities; or
(b) procure, directly or indirectly, an acquisition or disposal of, or the

entering into an agreement for or with a view to the acquisition or
disposal of such securities.
Subsection (3) states that where trading in the securities to which the
information in sub-s (1) relates is permitted on a stock market of a
stock exchange, the insider shall not, directly or indirectly,
communicate the information referred to in sub-s (1), or cause such
information to be communicated, to another person, if the insider
knows, or ought reasonably to know, that the other person would or
would tend to—
(a) acquire, dispose of, or enter into an agreement with a view to the
acquisition or disposal of, any securities to which the information
in sub-s (1) relates; or
(b) procure a third person to acquire, dispose of or enter into an

agreement with a view to the acquisition or disposal of, any
securities to which the information in sub-s (1) relates.
Subsection (4) states that a person who contravenes sub-s (2) or (3)
commits an offence and shall be punished on conviction to
imprisonment for a term not exceeding ten years and to a fine of not
less than RM1 million.
Subsection (5) states that the minister may make regulations in
respect of any particular class, category or description of persons or
any particular class, category or description of transactions, relating to
securities, to whom or which this section does not apply.
Law: s 188 of CMSA 2007.
REMEDIES FOR DIRECTOR’S BREACH OF

DUTY
¶6-100 Remedies for director’s breach of duty
The CA 2016 provides remedies for breach of the statutory obligations

owed by directors to their companies (see ¶6-010). The company
may, however, resort to various other remedies for breach of directors’
duties.
¶6-110 Injunction
Based on the principle that prevention is better than cure, the
company may obtain an injunction to restrain a director from
committing a breach of duty. Only the company has standing to obtain
an injunction, except in those cases where the court allows minority
shareholders to bring a derivative action or where the breach of duty
also constitutes an invasion of a shareholder’s personal rights.
¶6-120 Restoration of company property

The company may recover property which is rightfully its own from
directors and from those who are not innocent purchasers from
directors. This is only possible if the property can be traced. However,
restitution does not render the misappropriation lawful. The director
may still be convicted for the offence (Morgan v Flavel). Further, if
directors allot shares in breach of their duties, the allotment may be
set aside unless the allottee had no notice of the breach (Howard
Smith Ltd v Ampol Petroleum Ltd).
¶6-130 Rescission of contracts
The company may rescind a contract with a director unless the

company has given its consent in general meeting to continue with the
contract despite the director’s breach of duty.
¶6-140 Account of profits

The company is entitled to recover any profit derived by a director
from a breach of duty, for example, through turning corporate
opportunity or information to his own advantage. Where
misappropriated company funds are pooled with other moneys, the
account for profits may extend to the whole of the profits without any
proportionate allowance for the other moneys pooled [Paul A Davies
(Australia) Pty Ltd (in liq) v PA Davies & Anor].
¶6-150 Damages
Where a company has suffered loss through a director’s breach, for

example, through a director’s negligence, the company may sue the
director for damages. Any person who knowingly participates in a
director’s dishonest and fraudulent scheme will also be liable for any
loss sustained by the company even though none of the company’s
property came into his hands. Note that there must be actual
dishonesty on the person’s part (Belmont Finance Corp v Williams
Furniture Ltd (No 1)).
RELIEF FROM LIABILITY FOR BREACH OF

DUTY
¶6-200 Relief from liability for breach of duty
A director who has breached his duties towards his company, may, in
some circumstances extricate himself from liability. The CA 2016
provides for specific situations where a director will not be liable for
breach of duty. At common law, an errant director will not be liable if
the company ratifies his actions in general meeting.
¶6-210 Statutory relief
A director or other officer of a corporation who is in breach of his

duties may nevertheless be relieved from liability if it appears to the
court that he has acted honestly and reasonably and the court is of the
view that he ought fairly to be excused. Such a director need not wait
until proceedings are taken against him. He may apply to court for
relief on his own volition if he feels that action will be taken against
him for the breach of his duty. Such an application must not be
decided summarily as it is a question of fact what “honestly and
reasonably” means (Yeng Hing Enterprise Sdn Bhd v Datuk Dr Ong
Poh Kah).
It is not clear whether s 354 of CA 2016 applies to criminal offences
(Re Project Aqua Culture & Trading Co Pte Ltd) but it would appear
that it does not, as the equivalent provision in the Australian
Companies (Victoria) Code has been held not to apply to proceedings
for offences under that Code (Lawson v Mitchell).
The business judgment rule spelt out in s 214 of CA 2016 is a
statutory relief for directors’ actions if they had followed the law in
making a decision that is purely a business judgment — see ¶6-020.
Law: s 214 of CA 2016.
¶6-220 Ratification
The company in general meeting may, in some circumstances,
condone a breach of duty by the directors or allow them to do
something which would otherwise amount to a breach of duty. The
general meeting can:
• validate acts of the directors defective on account of procedural
irregularities (Bamford v Bamford) provided the acts are not
beyond the powers of the company itself (Quin & Axtens Ltd v
Salmon);
• ratify, prospectively and retrospectively, an exercise of the

directors’ powers for a collateral purpose. A collateral purpose in
this context refers to a purpose other than that for which the
power was conferred by the company’s Articles. It does not refer
to dishonesty (Bamford v Bamford);
• permit the directors to enter into transactions with the company

provided the terms and conditions of the contract are fair (Burland
v Earle; Clarkson v Davies);
• retrospectively, but not prospectively, ratify an act by the directors

that is beyond the powers conferred on them by the Articles but
within the capacity of the general meeting (Grant v United
Kingdom Switchback Railways Co; Irvine v Union Bank of
Australia);
• release directors from liability for breach of the common law duties
of care and skill where the directors have derived no profit from
the breach at the expense of the company (Pavlides v Jensen;
Daniels v Daniels).
The Privy Council has ruled that directors cannot misappropriate

company property and then use their voting powers as shareholders in
general meeting to ratify what they have done (Cook v Deeks). The
general rule is that only the company in general meeting can condone
a breach of duty or ratify an act beyond the directors’ powers.
Approval by co-directors is not enough (Furs Ltd v Tomkies).
However, there will be no conflict of interest and therefore no breach
of duty calling for ratification if an independent board of directors gives
its fully informed consent to the director using corporate information or
opportunity (Queensland Mines Ltd v Hudson).
A formally convened extraordinary general meeting is not required so
long as what takes place can legitimately be regarded as a general
meeting of the company at which the shareholders ratify the act or
conduct in question (Russell Kinsela Pty Ltd (in liq) v Kinsela & Anor).
Consent in a formal general meeting is not necessary if all the
shareholders acquiesce (Re Duomatic Ltd). Acquiescence of all the
shareholders is, however, impossible to prove in large public
companies.
DISCLOSURE REQUIREMENTS
¶6-300 Disclosure requirements
Disclosure requirements should be considered from different angles

by directors of a private company and by directors of a listed
company. The requirement for disclosure is not only required under
CA 2016 but also under other laws like the CMSA 2007, Securities
Commission Act 1993, etc. Disclosure requirements are therefore
quite wide in scope. The disclosures requirements that are explained
below are mainly taken from CA 2016 and the Bursa Malaysia Listing
Rules (BMLR).
¶6-310 Disclosure of contracts with the company
A general rule has developed under the common law that a director is
prohibited from entering into contracts where there is a possible
conflict between his interest and his duty as a director. However, if a
director can show that there was no possibility of conflict whether by
evidence or by company approval in general meeting of the company,
the transaction will stand (Movitex Ltd v Bulfield & Ors). The CA 2016
regulates transactions between directors and their companies, but
such regulation should be considered against the background of the
common law position. The Act itself provides that it is in addition to
and not in derogation of the operation of any rule of law or any
provisions in the company’s constitution restricting a director from
having any interest in contracts with the company or from holding
offices involving interests in conflict with his duties as a director.
Section 221(1) states that subject to this section, every director of a
company who is in any way, whether directly or indirectly, interested in
a contract or proposed contract with the company shall, as soon as
practicable after the relevant facts have come to the director’s
knowledge, declare the nature of his interest at a meeting of the board
of directors.
Subsection (2) states that the requirements of sub-s (1) shall not apply
in the case where the interest of the director being a member or
creditor of a corporation interested in a contract or proposed contract
with the first mentioned company if the interest of the director may be
regarded as not being a material interest.
Then in sub-s (4), it says that for the purposes of sub-s (1), a general
notice given to the board of directors by a director to the effect that the
director is an officer or member of a specified corporation or a
member of a specified firm and is to be regarded as interested in any
contract which may, after the date of the notice, be made with that
corporation or firm shall be deemed to be a sufficient declaration of
interest in relation to any contract made if the notice specifies the
nature and extent of the director’s interest in the specified corporation
or firm and the interest is not different in nature or greater in extent
than the nature and extent so specified in the general notice at the
time any contract is so made.
Subsection (5) states that the notice referred to in sub-s (4) shall be of
no effect unless the notice is given at a meeting of the directors or the
director takes reasonable steps to ensure that the notice is brought up
and read at the next meeting of the directors after it is given.
Subsection (6) states that every director of a company who holds any
office or possesses any property where duties or interests may be
created in conflict with his duties or interests as director shall declare
the fact and the nature, character and extent of the conflict at a
meeting of the directors of the company.
Subsection (7) states that the declaration shall be made at the first
meeting of the directors held—
(a) after he becomes a director; or
(b) if already a director, after he commenced to hold the office or to

possess the property, as the case requires.
Subsection (8) states that the secretary of the company shall record
every declaration made under this section in the minutes of the
meeting at which the declaration was made.
Subsection (9) states that for the purposes of this section, an interest
in the shares or debenture of a company—
(a) the spouse of a director who is not a director of the company; or
(b) a child, including adopted child or stepchild, of a director of a

company who is not a director of the company, shall be treated as
an interest in the contract and proposed contract.
Law: s 221 of CA 2016.
¶6-320 Statutory obligations

A director who is in any way, directly or indirectly, interested in a
contract or proposed contract with the company is bound to declare
the nature of his interest. He must do so at a board meeting as soon
as practicable after he becomes aware of the relevant facts. To
declare his interest, it will be sufficient if the director gives a general
notice to the other directors at a directors’ meeting specifying the
nature and extent of his interest.
There are two exceptions to this general rule:
• If the director’s interest consists only of his being a member or
creditor of the corporation interested in a contract with the
company, failure to disclose may not be an offence provided the
interest in question “may properly be regarded as not being a
material interest”. The CA 2016, however, does not help in
deciding what a material interest is. In Lim Foo Yong v Public
Prosecutor, a director of a company held 0.03% of the shares in
another company. The two companies entered into a contract.
The director did not notify the company of his interest in the other
company and was charged for failing to disclose to his company
his interest in a contract with the company. The director argued
that the size of his shareholding in the other company was
insufficient to impose on him the obligation to declare his interest
in it. The judge said that the de minimis rule did not apply on the
facts of the case. He did not however, indicate when and in what
circumstances the de minimis rule would apply.
• Disclosure is also not necessary if the director’s interest is only as

a guarantor of a loan to the company or as a director of a related
company with which his company has a contract.
The company secretary is obliged to record every declaration by a

director of his interest in contracts or transactions with the company in
the minutes of the meeting of the board of directors at which the
declaration is made.
Law: s 221(8) of CA 2016.
¶6-330 Disclosure of conflicting of interest, proposed

contracts and property
Every director of a company who is in any way, whether directly or
indirectly, interested in a contract or proposed contract with the
company shall, as soon as practicable after the relevant facts have
come to the director’s knowledge, declare the nature of his interest at
a meeting of the board of directors.
A director of a company shall not be deemed to be interested or to
have been at any time interested in any contract or proposed contract
by reason only—
(a) in a case where the contract or proposed contract relates to any
loan to the company that the director has guaranteed or joined in
guaranteeing the repayment of the loan or any part of the loan; or
(b) in the case where the contract or proposed contract has been or
will be made with or for the benefit of or on behalf of a corporation
which by virtue of s 7 is deemed to be related to the company that
he is the director of that corporation, and this subsection shall
have effect not only for the purposes of CA 2016 but also for the
purposes of other written laws, but this subsection shall not affect
the operation of any provision in the constitution of the company.
The declaration shall be made at the first meeting of the directors held
—
(a) after he becomes a director; or
(b) if already a director, after he commenced to hold the office or to

possess the property, as the case requires.
The secretary of the company shall record every declaration made

under this section in the minutes of the meeting at which the
declaration was made.
For the purposes of this provision, an interest in the shares or
debenture of a company—
(a) of the spouse of a director who is not a director of the company;
or
(b) of a child, including adopted child or stepchild, of a director of a

company who is not a director of the company,
shall be treated as an interest in the contract and proposed contract.
Law: s 221 of CA 2016.
¶6-340 Disclosure of information on dealings in shares

Directors of listed companies are required by the BMLR and CMSA
2007 to disclose information relating to dealing in securities, whether
or not dealing was carried out on another person’s behalf. The
following information is to be disclosed:
• name and identity of person from whom, through whom or on
whose behalf the securities were dealt with;
• the nature of the instructions given to that person in relation to the

dealing in securities;
• particulars of the securities, consideration given or received; and
• any other information in the possession of the person as the

Securities Commission may require.
¶6-350 Effect of non-disclosure of conflict of interest

A director who does not declare his interests which conflict with his
duties as a director will be guilty of an offence. No provision is made
for civil remedies in CA 2016. However, as the common law principles
are preserved by s 221(11), common law civil remedies will be
available to the company. The contract will be voidable at the option of
the company. However, the contract will stand if:
• it is not possible to restore the asset or cash passed under the
contract to the company;
• the company has been indemnified against any loss;
• a third party has acquired rights for value without notice of the
prohibited contract, and would suffer by the avoidance.
Similarly, if the company has affirmed the contract at a general

meeting or has not rescinded the contract within a reasonable time,
the contract will stand (Hely-Hutchinson v Brayhead Ltd). In addition to
setting aside the contract, the company may call upon the director to
account for the profits made and to indemnify the company for any
loss suffered.
DIRECTORS AND SHARES

¶6-400 Register of directors’ shareholdings
Every company is obliged to keep a register of directors’

shareholdings in the company and in any related company. The
particulars to be entered in the register relate to:
• shares in the company or in a related corporation in which the
director has an interest;
• debentures or interests of the company or a related corporation in

which he has an interest;
• rights or options of the director in relation to the acquisition or

disposal of shares, debentures or interests of the company;
• contracts giving the right to call for or make delivery of shares,

debentures or interests of the company, and to which the director
is a party or under which he is entitled to a benefit.
A company must enter the required information and any changes to

the information into the register within three days after receiving it from
the director. The particulars of the interests which must be disclosed
include the number and description of shares, etc. If the interests were
acquired after he became director, he must in addition, disclose the
price paid and the date of the transaction whereby he acquired them.
The disclosure requirements are relaxed for wholly-owned
subsidiaries. A company need not show in its register a director’s
shares in a related company which is a wholly-owned subsidiary of the
company. Where a holding company and a wholly-owned subsidiary
have a common director, it is enough for the director to disclose his
shareholdings to the holding company only.
The register is to be kept at the registered office of the company and
should be open for inspection by all members of the company without
charge. Any other person who wishes to inspect it may be charged a
fee.
Section 59 provides for the keeping of a register of directors’
shareholdings, etc:
Subsection (1) states that a company shall keep a register showing
with respect to each director of the company particulars of—
(a) shares in the company or in a related corporation being shares
in which the director has an interest and the nature and extent of
that interest;
(b) debentures of or participatory interests made available by the

company or a related corporation being debentures or
participatory interests in which the director has an interest and the
nature and extent of that interest;
(c) rights or options of the director or of the director and other

person in respect of the acquisition or disposal of shares in,
debentures of or participatory interests made available by the
company or a related corporation; and
(d) contracts to which the director is a party or under which he is

entitled to a benefit being contracts under which a person has a
right to call for or to make delivery of shares in, debentures of or
participatory interests made available by the company or a related
corporation.
Subsection (2) states that a company need not disclose in its register
any particulars of shares of director’s interest in a wholly owned
subsidiary of a company which is deemed to be a related corporation
under s 7.
Subsection (3) states that a wholly-owned subsidiary company shall
be deemed to have complied with this section in relation to its director
if the particulars required by this section are shown in the register of
the holding company.
Subsection (4) states that a company shall enter in its register in
relation to the director the particulars referred to in sub-s (1) including
the number and description of shares, debentures, participatory
interests, rights, options and contracts to which the notice relates and
in respect of shares, debentures, participatory interests, rights or
options acquired or contracts entered into after he became a director
within three days after receiving notice from a director under para
219(1)(a)—
(a) the price or other consideration for the transaction by reason of
which an entry is required to be made under this section; and
(b) the date of—

(i) the agreement for the transaction or if it is later, the
completion of the transaction; or
(ii) where there was no transaction, the occurrence of the event

by reason of which an entry is required to be made under this
section.
Subsection (5) states that a company shall enter in its register the
particulars of the change referred to in the notice under para 219(1)(b)
within three days after receiving the notice from the director.
Subsection (6) states that a company is not deemed to have notice of
or to be put upon inquiry as to the right of a person to or in relation to,
a share in, debenture of or participatory interest made available by the
company.
Subsection (7) states that the register shall be open for inspection by
a member of the company without charge and by any other person on
payment of RM20 or such lesser amount as the company requires.
Subsection (8) states that any person may request a company to
furnish him with a copy of its register or any part of its register on
payment of RM20 and the company shall send the copy to that person
within 21 days or such longer period as the Registrar of Companies
(“ROC” or “Registrar”) thinks fit from the day on which the request is
received by the company.
Subsection (9) states that the Registrar may, at any time in writing,
require a company to furnish him with a copy of its register or any part
of its register and the company shall furnish the copy within seven
days from the day on which the requirement is received by the
company.
Subsection (10) states that a public company shall produce its register
to all persons attending the meeting at the commencement of each
annual general meeting (AGM) of the company and keep it open and
accessible during the meeting.
(a) a reference to a participatory interest is a reference to an interest
within the meaning of the Interest Schemes Act 2016;
(b) a reference to a person who holds or acquires shares,

debentures or participatory interests or an interest in shares,
debentures or participatory interests includes a reference to a
person who under an option holds or acquires a right to acquire or
dispose of a share, debenture or participatory interest or an
interest in a share, debenture or participatory interest; and
(c) a reference to a director shall include the spouse of a director

who is not a director of the company and a child of a director,
including adopted child or stepchild who is not a director of the
company and the interest of the spouse or child shall be treated
as the interest of the director in the shares or debentures of the
company after the relevant facts have come to the director’s
knowledge.
Subsection (12) states that s 8, except for sub-s (1) and (3), has effect
in determining whether a person has an interest in a debenture or
participatory interest and in applying those provisions, a reference to a
share shall be read as a reference to a debenture or participatory
interest.
liable to a fine not exceeding RM500,000 or to imprisonment for a
term not exceeding ten years, or to both and, in the case of a
continuing offence, to a further fine not exceeding RM1000 for each
Law: s 59 of CA 2016.
¶6-410 General duty of directors to make disclosure

Pursuant to s 219(1), a director of a company shall give notice in
writing to the company—
(a) of the particulars relating to the shares, debentures, participatory
interests, rights, options and contracts as are necessary for the
purposes of compliance with s 59 by the company;
(b) of particulars of any change in respect of the particulars referred

to in para (a) of which notice has been given to the company
including the consideration, if any, received as a result of the
event giving rise to the change; and
(c) of such events and matters affecting or relating to himself as are

necessary for the purposes of compliance with the requirements
of CA 2016 by the company.
Subsection (2) states that a person required to give notice shall give
the notice, within 14 days:
(a) in the case of a notice under para (1)(a)—
(i) from the date on which the director became a director; or
(ii) from the date on which the director acquired an interest in

the shares, debentures, participatory interests, rights, options
or contracts;
(b) in the case of a notice under para (1)(b), from the occurrence of
the event giving rise to the change; and
(c) in the case of a notice under para (1)(c), from the date of such
events and matters referred to in that paragraph.
Subsection (3) states that for the purposes of para (2)(a) and (b), in
the case of a company whose shares are quoted on a stock
exchange, the notice period shall be five days.
Subsection (4) states that a company shall, send a copy of the notice
to each of the other directors of the company within seven days from
receiving a notice under sub-s (1).
(a) a reference to a participatory interest means a reference to an
interest within the meaning of the Interest Schemes Act 2016; and
(b) in determining whether a person has an interest in a debenture

or participatory interest, s 8 on interests in shares, except for s
8(1)1 and (3)2, have effect and in applying those provisions, a
reference to a share shall be construed as a reference to a
debenture or participatory interest.
Subsection (6) states that a director who contravenes sub-s (1) or (2)
commits an offence and shall, on conviction, be liable to—
(a) in the case of sub-s (1) of giving notice of his interest in shares,
debentures, participating interests, rights, options and contracts
as are necessary for this compliance, imprisonment for a term not
exceeding five years or a fine not exceeding RM3 million or both;
and
(b) in the case of sub-s (2) of giving 14 days’ notice to the company
by the interested director, a fine not exceeding RM25,000 and in
the case of a continuing offence, to a further fine of RM1,000 for
each day during which the offence continues.
Subsection (7) states that a company which contravenes sub-s (4)
regarding giving seven days’ notice to other directors after having
been informed by a director in writing, commits an offence and shall,
on conviction, be liable to a fine not exceeding RM25,000 and in the
case of a continuing offence, to a further fine of RM1,000 for each day
during which the offence continues.
Law: s 219 of CA 2016.
Footnotes
1 Section 8(1) provides: “This section shall have effect for the
purposes of sections 56, 59, Subdivision 7 of Division 1 of
Part III and section 219 respectively.”
2 Section 8(3) provides: “A right does not constitute an

interest in a share where — (a) the right is being issued or
offered to the public for subscription or purchase of interest
under the Interest Schemes Act 2016; (b) the public was
invited to subscribe for or purchase such a right, and the
right was so subscribed for or purchased; (c) such right is
held by the management company and was issued for the
purpose of an offer to the public under the Interest
Schemes Act 2016; or (d) such right is a right which has
been prescribed, after consultation with the Minister
charged with the responsibility for finance, as not being an
interest in a share.”
DIRECTORS’ REMUNERATION
¶6-500 Regulation of directors’ remuneration and fees
The remuneration paid to directors vary from company to company,
and is not regulated by law. In listed companies, the remuneration of
executive directors is subject to the review and evaluation of the
Remuneration Committee on a regular basis, whilst non-executive and
independent directors’ fees are subject to the board as a whole.
A director’s right to fee and benefits payable is reflected in the
company’s constitution, especially for non-executive directors.
However, executive directors’ pay arise pursuant to a service contract
between them and the company. Directors are only entitled to fees
and benefits payable if provisions for such rewards are expressed in
the constitution (Hutton v West Cork Railway Co Ltd). If the company
has a constitution, it would normally provide that directors’
remuneration would be decided by the company in members’ meeting,
and be differentiated as fees and benefits payable which are deemed
to accrue from day to day. In view of the confusion arising from the
use of the term “remuneration”, CA 2016 uses the term “fees and
benefits payable”, which carries a wider interpretation of rewards paid
to non-executive directors. The term also clarifies that fees and
benefits payable to non-executive are non-contractual under service
contracts, and therefore, must be approved by members at members’
meeting. On the other hand, executive directors working full-time with
the company are employee directors. They are employed by the
powers of the board of directors, and therefore, their pay need not be
approved by members.
The constitution may also provide that directors be paid “meeting
allowances”, all travelling and other expenses properly incurred by
them in attending and returning from board, committee or general
meetings of the company or in doing work in relation with the business
of the company. However, the position remains that in the absence of
such a provision in the constitution, directors are not entitled to receive
any remuneration, as held by the courts (Dunstan v Imperial Gas Light
Co). Directors are also not entitled to payment on a quantum meruit
basis in the absence of express authorisation in the company’s
constitution (Hutton v West Cork Railway Co). The company will not
reimburse its directors their travelling expenses unless the constitution
so provides (Young v Naval, Military and Civil Service Co-operative
Society Ltd) or unless a resolution of the company in general meeting
so authorises.
When the constitution provides for directors’ remuneration to be fixed
by the company in general meeting, it is important from the directors’
point of view that this be done properly. A good illustration can be
drawn from Re J Franklin & Son Ltd. In that case, a quorum was not
present at a company’s general meeting where a resolution was
passed for the remuneration of a director. The quorum was not
technically present because it included the executor of a deceased
shareholder who was not the registered holder of the estate shares at
the time of the meeting. The court found that the resolution was invalid
and that the payments made pursuant to the resolution were also
invalid. The director concerned was therefore liable to refund the
payments to the company as being funds improperly paid out of the
assets of the company. In addition, the directors who authorised the
payments were also liable for repayment to the company.
In the past, the courts will intervene if the directors’ emoluments are
so unreasonably high as to be oppressive to remaining shareholders,
eg where the emoluments are in effect a distribution of the profits
which should have been distributed as dividends. Such a situation
may be grounds for an order that those responsible for the oppression
buy out the shares of the oppressed members (Sanford v Sanford
Courier Service Pty Ltd & Ors).
Approvals for fees of directors
Section 230 stipulates the proper approvals for directors’ fees:
Subsection (1) states that the fees of the directors, and any benefits
payable to the directors including any compensation for loss of
employment of a director or former director—
(a) of a public company; or
(b) of a listed company and its subsidiaries,
shall be approved at a general meeting.

Subsection (2) states that in the case of a private companies, the
board may, subject to the constitution approve the fees of the directors
and any benefits payable to the directors including any compensation
for loss of employment of a director or former director.
Subsection (3) states that any approval made under sub-s (2) shall be
recorded in the minutes of the directors’ meeting and the board shall
notify the shareholders of the approval of the fees within 14 days from
the date of the approval.
Subsection (4) states that where a fee is made or other benefits
payable to which sub-s (2) applies, members holding at least 10% of
the total voting rights and who consider that the payment was not fair
to the company, within 30 days after they have knowledge of such
payments, may require the company to pass a resolution to approve
the payment either by way of a written resolution or at a general
meeting.
Subsection (5) states that unless an approval has been obtained
through a resolution passed under sub-s (4), the payment shall
constitute a debt due by the director to the company.
Subsection (6) states that a company that contravenes sub-s (1)
commits an offence and shall, on conviction, be liable to a fine not
exceeding RM3 million and any payment in contravention of sub-s (1)
shall constitute a debt due by the director to the company.
Approval procedures in public and private companies
The approval procedure for fees and benefits payable differ between a
public company and a private company, simply because public
companies must hold an AGM where members can approve
uncontracted benefits and fees paid to non-executive directors.
In the case of a private company which no longer holds AGM but
merely circulates its financial statements and reports, the approval of
fees and benefits payable is by the board of directors. However,
unless otherwise expressed in the constitution, members holding 10%
or more voting shares who after knowing of the amount approved by
the board do not agree to the amount approved, may within 30 days of
the receipt of the notification, request that these be further approved
either by way of a written resolution or at a general meeting of
members.
Law: s 230 of CA 2016.
¶6-510 Fees of nominee or trustee directors

Sometimes, the executors or trustees of an estate are, by virtue of the
estate’s shareholding in a company, elected to the board of directors
of that company. The general principle in relation to the fees paid to
such directors is that a trustee must not profit from his trust.
Therefore, if a trustee of shares in a company is appointed to the
office of director or managing director (by virtue of the control over the
company which the shares give him), he is not entitled to retain for his
own benefit any remuneration paid to him as director. This is so even
though the remuneration is not paid in respect of the trustee holding,
but for work done by the trustee in his capacity as a director of the
company. Essentially, the trustee director is not entitled to retain the
directors’ fees because he is appointed a director by virtue of the trust
he is holding. It has, however, been held that a trustee director is
entitled to keep his director’s fees where the terms of the will clearly
permit it (Re Llewellin’s Will Trusts, Griffiths v Wilcox).
In the case of a nominee director (that is a director who is requested
by his company to be a director of a second company), the courts
have ruled that he obtains his remuneration by acting as a director of
the second company and not by virtue of the qualification shares
which he may hold in relation to the second company (Re Dover
Coalfields Extension Ltd). This decision has been explained on the
basis that since the first company requested the director to become a
director of the second company, it was fair to infer that the first
company consented to the director keeping the fees for himself.
Therefore, if a nominee director wishes to retain the director’s fees
from a board on which he is requested to sit by another company, he
must be able to show some agreement to that effect by the nominating
company.
¶6-520 Remuneration on a quantum meruit basis

Where there is no valid agreement between the company and the
director, the director may be remunerated on a quantum meruit basis
(Craven-Ellis v Canons Ltd). If there is an express contract, payment,
if any, must be made according to the terms of the contract and a
quantum meruit will be excluded (Re Richmond Gate Property Co
Ltd). Note that directors are not entitled to payment on a quantum
meruit basis in the absence of express authorisation in the company’s
Constitution (Hutton v West Cork Railway Co).
¶6-530 Tax-free payments to directors
A company is prohibited from paying to any director remuneration free

of income tax or otherwise calculated in relation to the amount of his
income tax. The contract must provide expressly for the payment of
the tax-free emoluments. If not, the payments will be treated as if they
were gross sums subject to income tax.
Prohibition of tax free payments to directors
This is provided in s 226 as follows:
Subsection (1) states that a company shall not pay a director any
remuneration, whether as director or otherwise, free of income tax, or
otherwise calculated by reference to or varying with the amount of his
income tax, or the rate of income tax.
Subsection (2) states that any provision contained in the constitution
or any resolution of the board or members of the company for
payment to a director of remuneration free of income tax or otherwise
calculated by reference to or varying with the amount of his income
tax or the rate of income tax shall have effect as if the provision or
resolution, as the case may be provide for payment as a gross sum
subject to income tax, of the net sum for which it actually provides.
Subsection (3) states that the company and every officer and any
other person or individual who contravene this section commit an
both.
Payment to directors for loss of office, etc
Section 227(1) states that it shall not be lawful—
(a) for a company to make to any director any payment by way of
compensation for loss of office as an officer of that company or of
a subsidiary of that company or as consideration for or in
connection with his retirement from any such office; or
(b) for any payment to be made to any director of a company in

connection with the transfer of the whole or any part of the
undertaking or property of the company, unless particulars with
respect to the proposed payment including the amount, have
been disclosed to the members of the company and the
resolution for the proposal has been approved by the members
and when any such payment has been unlawfully made the
amount received by the director shall be deemed to have been
received by him in trust for the company.
Subsection (2) states that in the case of a public company, the director
who is interested in the proposed payment referred to in para (1)(a) or
(b) and persons connected with the director shall abstain from voting
on the resolution.
Subsection (3) states that where a payment is to be made to a director
in connection with the transfer to any person as a result of an offer
made to shareholders of all or any of the shares in the company, the
director shall take all reasonable steps to secure that particulars with
respect to the proposed payment, including the amount of the
proposed payment, shall be included in or sent with any notice of the
offer made for their shares which is given to any shareholders, unless
those particulars are furnished to the shareholders in accordance with
the relevant law applicable to takeovers.
Subsection (4) states that if in connection with any such transfer the
price to be paid to a director of the company whose office is to be
abolished or who is to retire from office for any shares in the company
held by the director is in excess of the price which could at the time
have been obtained by other shareholders or any valuable
consideration is given to any such director, the excess or the money
value of the consideration, as the case may be, shall be deemed to
have been a payment made to him by way of compensation for loss of
office or as a consideration for or in connection with his retirement
from office.
Subsection (5) states that any reference in this section to payments to
any director of a company by way of compensation for loss of office or
as consideration for or in connection with his retirement from office
shall not include—
(a) any payment under an agreement entered into before the
commencement of CA 2016;
(b) any payment under an agreement, where particulars have been

disclosed to and approved by special resolution of the company;
(c) any bona fide payment by way of damages for breach of

contract;
(d) any bona fide payment by way of pension or lump sum payment
in respect of past services including any superannuation or
retiring allowance, superannuation, gratuity or similar payment,
where the value or amount of the pension or payment, except so
far as it is attributable to contributions made by the director, does
not exceed the total remuneration of the director in the three
years immediately preceding his retirement or death; or
(e) any payment to a director under an agreement made between

the company and the director before he became a director of the
company as a consideration or part of a consideration for the
director agreeing to serve the company as a director.
Subsection (6) states that this section shall be in addition to and not in
derogation of any rule requiring disclosure to be made with respect to
any such payments or any other like payment.
Subsection (7) states that in this section, “director” includes any
person who has at any time been a director of the company or of a
corporation which is by virtue of s 7 deemed to be related to the
company.
(a) a person who contravenes sub-s (2) commits an offence; and
(b) a director who contravenes sub-s (3) and a person who has
been properly required by a director to include in or send with any
notice under this section the particulars required by sub-s (3) and
who fails to do so, commits an offence, and if the requirements of
this section are not complied with any sum received by the
director on account of the payment shall be deemed to have been
received by him in trust for any person who has sold his shares
as a result of the offer made.
Law: s 226 and 227 of CA 2016.
LOANS TO DIRECTORS AND CONNECTED

PERSONS
¶6-600 Loans to directors
Companies incorporated under CA 2016 (other than exempt private

companies) are generally not allowed to extend loans to their directors
or to directors of related companies. The prohibition extends to the
giving of a guarantee or the provision of security by the company in
connection with a loan or proposed loan to its directors.
Section 224 provides for loans to directors:
Subsection (1) states that a company shall not—
(a) make a loan to a director of the company or of a company which
by virtue of s 7 is deemed to be related to that company; or
(b) enter into any guarantee or provide any security in connection

with a loan made to such a director by any other person.
Subsection (2) states that nothing in this section shall apply—

(a) to an exempt private company;
(b) subject to sub-s (3), to anything done to provide such director

with funds to meet the expenditure incurred or to be incurred by
him for the purposes of the company or for the purpose of
enabling him properly to perform his duties as an officer of the
company;
(c) subject to sub-s (3), to anything done to provide such a director

who is engaged in the full-time employment of the company or its
holding company, as the case may be, with funds to meet
expenditure incurred or to be incurred by him in purchasing or
otherwise acquiring a home; or
(d) to any loan made to such a director who is engaged in the full-
time employment of the company or its holding company, as the
case may be, where the company has passed a resolution to
approve a scheme for the making of loans to employees of the
company and the loan is in accordance with that scheme.
Subsection (3) states that para (1)(a) or (b) shall not authorise the
making of any loan, or the entering into any guarantee or the provision
of any security except with the prior approval of the company on the
resolution in which the purpose of the expenditure and the amount of
the loan or the extent of the guarantee or security, as the case may
be, are disclosed.
Subsection (4) states that if there is no prior approval given under sub-
s (2), the company may authorise the making of any loan or the
entering into any guarantee or the provision of any security—
(a) in the case of a public company, at or before the next following
AGM; or
(b) in the case of a private company, within six months from the
making of the loan, the entering into any guarantee, or the
provision of any security.
Subsection (5) states that if there is no authorisation given by

company under sub-s (3), the loan shall be repaid or the liability under
the guarantee or security shall be discharged, as the case may be—
(a) in the case of a public company, after six months from the
conclusion of the AGM referred to in para 4(a); or
(b) in the case of a private company, after 12 months from the

Subsection (6) states that where the approval of the company is not
given as required by any such condition, the directors authorising the
making of the loan or the entering into the guarantee or the provision
of the security shall be jointly and severally liable to indemnify the
company against any loss incurred.
prevent the company from recovering the amount of any loan or
amount for which it becomes liable under any guarantee entered into
or in respect of any security given contrary to this section.
Subsection (8) states that this section shall not apply to the extent that
a financial institution in the ordinary course of business makes a loan
to a director of a financial institution or of a company which by virtue of
s 7 is deemed to be related to that financial institution, or enter into
any guarantee or provide any security in connection with a loan made
to such a director by any other person, in accordance with
specifications made by the Central Bank of Malaysia under the laws
enforced by it.
Subsection (9) states that for purposes of this section, “financial
institution” refers to a licensed institution and a development financial
institution prescribed under the Development Financial Institutions Act
2002.
Subsection (10) states that if a company contravenes this section, any
director who authorises the making of any loan, the entering into of
any guarantee or the providing of any security contrary to this section
million or to both.
Law: s 224 of CA 2016.
¶6-610 Permitted loans to directors

Although companies are generally prohibited from lending money to
their directors, the following loans are, however, permitted:
• loans, guarantees or security to enable a person to meet expenses
incurred for the company;
• home purchase loans to full-time directors; and
• loans to full-time directors under an employee loan scheme.
The loans, guarantees or security granted under the first two

exceptions will not be allowed unless:
• prior approval is given by the company at a general meeting at
which the purpose of the expenditure, the amount of the loan or
the extent of the guarantee or security are disclosed; or
• they are made on condition that if such approval is not given:

– at or before the next AGM of a public company; or
– in the case of a private company within six months from the

making of the any loan or entering into any guarantee or
If there is no authorisation given by company under sub-s (3) (ie prior

approval of the company by resolution), the loan shall be repaid or the
liability under the guarantee or security shall be discharged, as the
case may be—
(a) in the case of a public company, after six months from the
conclusion of the AGM referred to in para 4(a); or
(b) in the case of a private company, after 12 months from the

Law: s 224(2), (4), (5) and (6) of CA 2016.
¶6-620 Unapproved loans

If a loan, guarantee or security is not approved by the company as
required, the directors who authorised the making of the loan or the
entering into the guarantee or the provision of the security shall be
jointly and severally liable to indemnify the company for any loss
arising from the making of the loan, the giving of the guarantee or the
providing of the security. The directors will also be liable to account to
the company for any profits or gains which they may have made (Paul
A Davies (Australia) Pty Ltd (in liq) v PA Davis & Anor). Despite the
contravention, the company itself is not subject to any criminal liability
and may recover the loan and any interest accruing. It can also
recover any amount for which it becomes liable under any guarantee
or security given by it.
Law: s 224(6) of CA 2016.
¶6-621 Non-application of s 224 (“Loans to director”)

Section 224 shall not apply to the extent that a financial institution in
the ordinary course of business makes a loan to a director of a
financial institution or of a company which by virtue of s 7 is deemed
to be related to that financial institution, or enter into any guarantee or
provide any security in connection with a loan made to such a director
by any other person, in accordance with specifications made by the
Central Bank of Malaysia (ie Bank Negara) under the laws enforced
by it.
For purposes of this section, “financial institution” refers to a licensed
institution and a development financial institution prescribed under the
Development Financial Institutions Act 2002.
Law: s 224(7) and (8) of CA 2016.
¶6-630 Loans to connected persons
A company (other than a private exempt company) is generally

prohibited from making loans to persons connected to its directors or
to persons connected to directors of its holding company. It is also
unlawful for a company to enter into any guarantee or to provide any
security in relation to a loan made to such a person by a third party.
Prohibition of loans to persons connected with directors
Section 225(1) prohibits loans to persons connected with directors. It
states that subject to the provisions of this section, a company, other
than an exempt private company, shall not—
(a) make a loan to any person connected with a director of the
company or of its holding company; or
(b) enter into any guarantee or provide any security in connection

with a loan made to such person by any other person.
Law: s 225(1) of CA 2016.
¶6-640 Permitted loans to connected persons
Although companies are generally prohibited from lending money to

persons connected with their directors, the following loans are
permitted:
• loans and related transactions entered into by companies for the
benefit of their related companies;
• companies which are in the business of money-lending and giving

guarantees in relation to loans by banks, finance companies and
insurance companies; and
• home purchase loans and loans under an approved scheme to a

person connected with a director.
Law: s 225(2) of CA 2016.

¶6-650 Penalties for company where unlawful loan made
If a company contravenes s 224 (“Loans to director”), any director who

authorises the making of any loan or the entering into any guarantee
contrary to this section commits an offence and shall, on conviction,
be liable to imprisonment for a term not exceeding five years or to a
fine not exceeding three million ringgit or to both.
With regards to contravening the prohibition of loans to persons
connected with directors, sub-s 225(3) states that nothing in s 225
shall operate to prevent the company or any person from recovering
the amount of any loan or the amount for which it becomes liable
Law: s 224 and 225 of CA 2016.
PROPERTY ARRANGEMENTS BETWEEN

DIRECTORS AND THEIR COMPANIES
¶6-700 Statutory requirements
Section 228 provides that a company cannot enter into any
arrangements or transactions whereby a director or substantial
shareholder (or person connected to him) of the company or of a
holding company acquires from or disposes to that company shares or
non-cash assets of the requisite value. Such arrangements are only
allowed if they are approved of by the company in general meeting; or
where the holding company is involved, by the holding company in
general meeting.
“Persons connected with a director”3 are:
• a member of the director’s family;4
• a body corporate which is associated with the director;5
• a trustee of a trust (other than a trustee for an employee share

scheme or pension scheme) of which the director or his family
member is a beneficiary;
• a partner of the director or a partner of a person connected with

that director.
A non-cash asset is of the requisite value if, at the time the

arrangement was made, the value of the asset is:
• not less than RM10,000;
• transacted value exceeds RM250,000; or
• transacted value does not exceed RM250,000 but exceeds 10% of

the company’s net asset value provided it is not less than
RM50,000.
“Non-cash asset” has been defined as any property or interest in

property other than cash. “Cash” is further defined as including foreign
currency. Any reference to an acquisition or disposal of non-cash
assets will include the creation or extinction of an estate or interest in,
or right over, any property. It will also refer to a discharge of a
person’s liability which is not a liability for a liquidated sum.
A company’s asset value is the value of the company’s net assets in
its latest accounts, or if no accounts are prepared, the amount of the
company’s called-up share capital.
Transactions with directors, substantial shareholders or
connected persons
Subsection (1) states that subject to sub-s (2) and s 229, a company
shall not enter or carry into effect any arrangement or transaction
where a director or a substantial shareholder of the company or its
holding company, or its subsidiary, or a person connected with a
director or substantial shareholder—
(a) acquires or is to acquire shares or non-cash assets of the
requisite value, from the company; or
(b) disposes of or is to dispose of shares or non-cash assets of the
requisite value, to the company, unless—
(i) the entering into the arrangement or transaction is made
subject to the approval of shareholders at a general meeting;
or
(ii) the carrying into effect of the arrangement or transaction has

been approved by shareholders at a general meeting.
Subsection (2) states that an arrangement or transaction which is

carried into effect in contravention of sub-s (1) shall be void unless
there is prior approval of the arrangement or transaction—
(a) by a resolution of the company; or
(b) by a resolution of the holding company, if the arrangement or

transaction is in favour of a director or substantial shareholder of
its holding company or person connected with such director or
substantial shareholder.
Subsection (3) states that for the purposes of sub-s (1), in the case of
an unlisted subsidiary whose holding company is a listed company,
the directors of such holding company shall procure the shareholders’
approval of the holding company in a general meeting for the
arrangement or transaction by the unlisted subsidiary in addition to the
shareholders’ approval of the unlisted subsidiary in a general meeting
procured by the directors of the unlisted subsidiary.
Subsection (4) states that in the case of a public company or its
holding company or its subsidiary, the director or substantial
shareholder or person connected with the director or substantial
shareholder who is interested in the arrangement or transaction
referred to in para (1)(a) or (b) shall abstain from voting on the
resolution at the general meeting to consider the arrangement or
transaction referred to in sub-s (1).
Subsection (5) states that where an arrangement or transaction is
entered or carried into effect by a company in contravention of sub-s
(1) and (2), the director, substantial shareholder or person connected
with a director or substantial shareholder and any director who
knowingly authorised the arrangement or transaction shall, in addition
to any other liability, be liable—
(a) to account to the company for any gain which he had made
directly or indirectly by the arrangement or transaction; and
(b) jointly and severally with any person liable under this subsection,
to indemnify the company for any loss or damage resulting from
the arrangement or transaction.
Subsection (6) states that the court may, on the application of any
member or director of the company, restrain the company from
entering or carrying into effect an arrangement or transaction in
contravention of sub-s (1).
Subsection (7) states that a director or substantial shareholder of a
company or its holding company, or its subsidiary or a person
connected with such director or substantial shareholder, in whose
favour the company carries into effect an arrangement or transaction
and who knows that such arrangement or transaction is carried into
effect by a company in contravention of this section, or a director who
knowingly authorised the company to carry into effect such
arrangement or transaction, in contravention of this section, commit an
both.
“Requisite value”, in the case of a company where all or any of its
shares are quoted on the stock exchange, shall be the same value as
the value prescribed in the listing requirements of the stock exchange
where approval of the shareholders at a general meeting is required.
In the case of any company other than a company which is not listed
with an exchange, a non-cash asset is of the requisite value if, at the
time of the transaction, its value exceeds RM250,000 or if its value
does not exceed RM250,000 but exceeds 10% of the company’s net
asset value provided it is not less than RM50,000, where—
(i) the value of the company’s assets is determined by reference to
the accounts prepared under s 245 (“Accounts to be kept”) in
respect of the last financial year prior to the arrangement or
transaction; or
(ii) no accounts have been so prepared and laid before that time,
the amount of the company’s called up share capital.
Law: s 228 of CA 2016.
Footnotes
3 Section 197 of CA 2016.
4 “A member of the director’s family” means the director’s

spouse, parent, child, including adopted child and stepchild,
brother, sister and the spouse of the director’s child, brother
or sister.
5 A body corporate is associated with a director if — (i) the

body corporate is accustomed or is under an obligation,
whether formal or informal, or the majority of directors of the
body corporate is accustomed, to act in accordance with
the directions, instructions or wishes of that director; (ii) that
director has a controlling interest in the body corporate; or
(iii) that director, or persons connected with that director, or
that director and persons connected with him, are entitled to
exercise, or control the exercise of, not less than 20% of the
votes attached to voting shares in the body corporate.
¶6-710 Exempted substantial property transaction
There are several transactions which are exempted from the

restriction on substantial property transactions. These are stipulated in
s 229 as follows:
Section 228 shall not apply to an arrangement or transaction for the
acquisition or disposal of a non-cash asset entered into—
(a) by a company—
(i) and any of its wholly-owned subsidiaries;
(ii) and its holding company which holds all the issued shares of
the company; or
(iii) which is a wholly-owned subsidiary of a holding company

and another wholly-owned subsidiary company of that same
holding company;
(b) by a company which is being wound up, unless the winding up is

a members’ voluntary winding up;
(c) by a company which is an acquisition or disposal of an asset in

the ordinary course of business of the company and is on terms
not more favourable than those generally available to the public
or employees of the company;
(d) by a company if such arrangement or transaction does not

involve transfer of cash or property and which shall have no effect
unless approved at a general meeting or by a relevant authority;
(e) by a company made in accordance with a scheme of

arrangement approved by the court under s 366; or
(f) by a company in connection with a takeover offer made in

accordance with the relevant law applicable to such offers.
Law: s 228 and 229 of CA 2016.
¶6-720 Effect of prohibited arrangements

An arrangement or transaction which is carried into effect in
contravention of sub-s (1) of s 228(1) shall be void unless there is
prior approval of the arrangement or transaction—
(a) by a resolution of the company; or
(b) by a resolution of the holding company, if the arrangement or

transaction is in favour of a director or substantial shareholder of
its holding company or person connected with such director or
substantial shareholder.
The director or substantial shareholder entering into the prohibited

transaction (or person connected to him) will be liable:
(a) to account to the company for any gain which he had made
directly or indirectly by the arrangement or transaction; and
(b) jointly and severally with any person liable under this subsection,
to indemnify the company for any loss or damage resulting from
the arrangement or transaction.
The court may, on the application of any member or director of the

company, restrain the company from entering or carrying into effect an
arrangement or transaction in contravention of s 228(1).
A director or substantial shareholder of a company or its holding
company, or its subsidiary or a person connected with such director or
substantial shareholder, in whose favour the company carries into
effect an arrangement or transaction and who knows that such
arrangement or transaction is carried into effect by a company in
contravention of this section, or a director who knowingly authorised
the company to carry into effect such arrangement or transaction, in
contravention of this section, commit an offence and shall, on
conviction, be liable to imprisonment for a term not exceeding five
Law: s 228(2), (5), (6) and (7) of CA 2016.
PUBLIC COMPANY DIRECTOR’S SERVICE

CONTRACT
¶6-800 Public company director’s service contract
The service contracts of public company directors must be kept at the
company’s registered office and be made available for inspection, if
required. Section 231(1) states that such contract means a contract
under which—
(a) a director of the company undertakes personally to perform
services, as a director or otherwise for the public company or for
a subsidiary of the public company; or
(b) services that a director of the public company undertakes

personally to perform as director or otherwise are made available
by a third party to the public company, or to a subsidiary of the
public company.
Subsection (2) states that the provisions of this Division relating to

directors’ service contracts shall—
(a) be applicable to the terms of a person’s appointment as a
director of a public company; or
(b) not be restricted to contracts for the performance of services

outside the scope of the ordinary duties of a director.
¶6-810 Copy of contracts to be available for inspection

Section 232 provides that the service contracts shall be made
available for inspection in the following manner:
Subsection (1) states that subject to s 233, a public company shall
keep and maintain a copy of every director’s service contract with the
company or with its subsidiaries available for inspection.
Subsection (2) states that all the copies of contracts shall be kept
available for inspection at the registered office of the company.
Subsection (3) states that the copies of contracts shall be made
available for inspection for at least one year from the date of
termination or expiry of the contract.
Subsection (4) states that the company shall give notice to the
Registrar—
(a) of the place at which the copies of the contracts are kept
available for inspection; and
(b) of any change in that place, unless the copies of the contracts
have at all times been kept at the registered office of the
company.
contravene sub-s (1), (2) or (3) commit an offence and shall, on
conviction, be liable to a fine not exceeding RM1 million.
Subsection (6) states that this section shall apply to a variation of a
director’s service contract as is applicable to the original contract.
¶6-820 Right of member to inspect and request copy

Subsection (1) states that every copy of the contract required to be
kept under s 232 shall be made available for inspection by—
(a) in the case of a public company having share capital, by
members holding at least 5% of the total paid up capital; or
(b) in the case of a public company not having share capital, by at

least 10% of members.
Subsection (2) states that subject to sub-s (1), the members so

entitled to inspect on request and on payment of such fee as may be
prescribed shall be entitled to be provided with a copy of any such
contract.
Subsection (3) states that the copy shall be provided within seven
days from the date the request is received by the company.
Subsection (4) states that every officer who refuses a request for
inspection under sub-s (1) or contravenes sub-s (2) commits an
RM250,000.
Subsection (5) states that in the case of any such refusal or default,
the court may, by order, compel an immediate inspection or, as the
case may be, direct that the copy required be sent to the person
requiring it.
Law: s 233 of CA 2016.
CONTRACT OF A ONE DIRECTOR COMPANY

¶6-900 Contract of a one director company
A contract with sole member who is also a director is stipulated in s

234 as follows:
Subsection (1) states that this section applies where—
(a) a limited company having only one member enters into a
contract with the sole member;
(b) the sole member is also a director of the company; and
(c) the contract is not entered into in the ordinary course of the
company’s business.
Subsection (2) states that the company shall, unless the contract is in
writing, ensure that the terms of the contract are duly recorded in the
minutes of the meeting of the directors that immediately after the
making of the contract.
Subsection (3) states that this section shall be in addition to and not in
derogation of any other law applying to contracts between a company
and a director of the company.
contravenes this section commit an offence and shall, on conviction,
be liable to a fine not exceeding RM1 million.
Law: s 234 of CA 2016.

1. What are the fiduciary duties and duties of care of a director?
2. In what ways have the case of AWA v Daniels changed the

attitudes of the courts?
3. What must the directors show in the business judgment rule?
4. What disclosures are required of directors, especially if he is a

director of a listed company?
5. What type of private company is the loan to directors exempted

from all various restrictions?
CHAPTER 7: MANAGEMENT OF
COMPANY AFFAIRS
Division of powers between directors and
shareholders ¶7-000
Board meetings ¶7-100
Importance of record of minutes and resolutions ¶7-195
Company secretary’s duties and authority ¶7-300
Requirements, registration and appointment of
company secretary ¶7-370
Resignation and removal of company secretary ¶7-420
Remuneration of company secretary ¶7-440
Company secretary’s exclusion from liability ¶7-450
Company secretary’s Code of Ethics ¶7-500
Appendix 7.1: Third Schedule, CA 2016 ¶7-1001
Appendix 7.2: E-forms in MyCoID that are relevant to
company secretaries ¶7-1002
Appendix 7.3: Company Secretary’s Code of Ethics ¶7-1003
DIVISION OF POWERS BETWEEN DIRECTORS

AND SHAREHOLDERS
¶7-000 Division of powers between directors and general
meeting
The directors of a company are responsible to direct and provide
oversight responsibilities in managing the business of the company,
and to exercise all the powers of the company which are not otherwise
required to be exercised by the company in general meeting. There is
no requirement under Companies Act 2016 (CA 2016) for a company
with share capital to be incorporated with a constitution. Where a
company with share capital does not have a constitution, the duties
and responsibilities shall be subject to the provisions of CA 2016,
particularly under Div 2, Subdiv 2 and 3 of Pt III of the Act.
Where a company has a constitution, especially companies
incorporated under the former Companies Act 1965 (CA 1965) that
adopted Table A, the effect of Art 73, now known as Clause 73 is that
“the directors, and no one else, are responsible for the management
for the company, except in the matters specifically allotted to the
company in general meeting” (Alexander Ward & Co v Samyang
Navigation Co). Therefore, in Automatic Self-Cleansing Filter
Syndicate Co v Cunninghame, the court ruled that the directors of a
company were entitled to refuse to carry out an agreement for the sale
of the company’s assets notwithstanding that they had been directed
to do so by the majority of the shareholders in general meeting. This
was because the directors did not believe that the sale was in the best
interests of the company, and resisted the direction.
If the directors are unable to exercise the powers vested in them, the
general meeting can exercise them. Thus the general meeting can act
to break a deadlock amongst the board members (Barron v Potter;
Foster v Foster).
Law: s 31(1) and Subdiv 2 and 3 of Div 2 of Pt III of CA 2016.
¶7-010 Directors’ powers

The structure and workings of the board of directors are determined
by CA 2016 if a company with share capital does not have a
constitution. With regard to board structure, s 196 states a company
shall have a minimum number of directors as follows:
(a) in the case of a private company, one director; or
(b) in the case of a public company, two directors.
A director shall be a natural person who is at least 18 years of age. A

director of a company shall not resign or vacate his office if by his
resignation or vacation from office, the number of directors of the
company is reduced below the minimum number required. Any
purported resignation or vacation of office in contravention of this
section shall be deemed to be ineffective unless a person is appointed
in his place.
For the purposes of this requirement, the minimum number of
directors—
(a) shall ordinarily reside in Malaysia by having a principal place of
residence in Malaysia; and
(b) shall not include an alternate or substitute director.
A wide discretion will usually be conferred upon the directors in the

conduct of the necessary administration and procedure, unless CA
2016 restricts arrangements or transactions such as those in s 223,
224, 225, 226 and 228. The Act provides that the directors may
regulate their proceedings as they think fit, subject to those sections
that restricts or prohibits directors’ action.
As for conduct of board meetings, it is usual for directors to confer and
reach decisions in meetings of which a record of their proceedings
must be kept. The directors may appoint one of their numbers to
preside over the meeting as chairman, who may have a casting vote
in the event of a deadlock. Under CA 2016, if a company does not
have a constitution, Sch 3 of CA 2016 shall govern the proceedings of
the board, such as board meetings, appointing committees,
appointment of managing director and associate director.
The managing director is an employee director and usually has a
greater responsibility for the day-to-day operations and management
of the company’s overall affairs, as a consequence of delegation by
the rest of the board. An executive director is also an employee and
has responsibility for one particular area of the company’s activities,
such as a sales, marketing or financial director.
Specific powers of the directors of company in managing the business
of the company include the power to:
• Appoint additional directors. This power is usually vested in the
directors by the company’s constitution, if the company has one, if
not by the Act. The general meeting cannot intrude in the exercise
of the power unless the directors are unable to exercise it (Blair
Open Hearth Furnace Co v Reigart).
• Bind the company. A company cannot be more effectively bound

than by an instrument sealed with its common seal in pursuance
of a resolution of the directors.
• Borrow money. Directors have a general power to borrow and

give security for such borrowings (Gibbs and West’s case).
• Convene meetings of the company. The constitution usually

provides that the chairman or any director of a company may
convene an extraordinary general meeting (EGM) or summon a
meeting of directors. If a company with share capital does not
have a constitution, CA 2016 provides the manner to convene
company meetings.
• Delegate their powers. The CA 2016 or the constitution gives

directors the right to delegate their powers. Note that directors do
not have any power to delegate if the constitution did not vest
them with that power (Cartmell’s case). The CA 2016 stipulates
that except as is otherwise provided by the Act, the directors may
delegate any power of the board to any committee of the board,
director, officer, employee, expert or any other person [s 216(1)].
Where the directors have delegated any power, the directors are
responsible for the exercise of the power by the delegatee as if
the power had been exercised by the directors themselves [s
216(2)].
• Forfeit of shares. Directors are usually vested with the power to

forfeit shares through a directors’ resolution in the event of a
shareholder’s failure to pay a call on shares. If a shareholder fails
to pay any call or instalment of a call within the stipulated time,
the directors may serve a notice on the shareholder requiring
payment of the amount unpaid together with any interest or
compensation which may have accrued (s 83).
• Call on shares. Directors may make calls upon the shareholders

in respect of any money unpaid on the shares of the shareholders
and not by the conditions of allotment of shares made payable at
fixed date (s 82).
• Allot or issue shares. Unless prior approval by way of resolution

by the company has been obtained, the directors of a company
shall not exercise any power (s 75)—
(a) to allot shares in the company;
(b) to grant rights to subscribe for shares in the company;
(c) to convert any security into shares in the company; or
(d) to allot shares under an agreement or option or offer.
• Issue negotiable instruments. Directors may issue negotiable

instruments without interference by the company in general
meeting (Peruvian Railways Co v Thames & Mersey Maritime
Insurance Co);
• Make calls. Directors may make calls subject to any limitation in

the Constitution (Ambergate, Nottingham & Boston & Eastern
Junction Railway Co v Mitchell). The directors may make calls
upon the shareholders in respect of any money unpaid on the
shares of the shareholders and not by the conditions of allotment
of shares made payable at fixed date (s 82).
• Pay brokerage that is reasonable. See Metropolitan Coal

Consumers’ Assoc v Scrimgeour) and s 80(5).
• Petition in bankruptcy. See Re Tomkins & Co.

• Reject a transfer of shares. Directors may approve or reject a
transfer of shares if the Constitution give the directors discretion
in that regard. The discretion must, however, be exercised in
good faith (Re Bell Bros). Subject to the constitution, the directors
may refuse or delay the registration of a transfer of shares [s
106(2)].
• Sue. Directors may bring legal action in the name of the company
and may support an employee in litigation arising out of his
employment (Shaw and Sons Ltd v Shaw).
Law: s 75, 82, 85, 106, and 216 of CA 2016.
¶7-020 Power to delegate

Although the power to manage a company is usually vested in the
board of directors, the constitution of most companies allows the
directors to delegate their powers. If the directors have the express
authority to delegate, they may do so. If they do not have the authority
they cannot delegate (Horn v Henry Faulder & Co Ltd). Care should
therefore be taken to ensure that the power to delegate is included in
the constitution. If a company has a constitution that adopts the
wordings of Table A, Art 86 provides that the directors may delegate
any of their powers to committees consisting of such member or
members of their body as they think fit. Such a committee of directors
must exercise the powers delegated to it in accordance with any
regulations which the directors may impose on it.
A board of directors may delegate any of their powers to a committee
or committees or even to a single director (Re Fireproof Doors Ltd). It
may not, however, delegate all of its powers and functions. The board
must retain general control. The power to delegate must be exercised
bona fide so that, for example, some members of the board cannot be
deprived of their powers to delegate by the device of delegation to a
committee which includes those directors (Kyshe v Alturas Gold Co).
When powers have been delegated to a committee, a director who is
not on that committee is justified in trusting those directors who are on
the committee. The director who is not on the committee will not
normally be blamed for the mistakes of the committee unless the
mistakes could be detected and avoided by proper supervision of the
other directors. In the absence of grounds for suspicion, a director is
not negligent in trusting his co-directors (Re Brazilian Rubber
Plantations and Estates Ltd).
By delegating its powers to a committee, a board of directors does not
deprive itself of its own powers in that regard (Huth v Clarke). The full
board can ratify acts made by a committee in excess of that
committee’s powers (Bolton Partners v Lambert).
Responsibility for actions of delegatee
• Except as is otherwise provided by CA 2016, the constitution or
any resolution of the board or members of the company, the
directors may delegate any power of the board to any committee
of the board, director, officer, employee, expert or any other
person.
• Where the directors have delegated any power, the directors are
responsible for the exercise of the power by the delegatee as if
the power had been exercised by the directors themselves.
• Directors are not responsible for the delegated power if—

(a) the directors believed on reasonable grounds at all times
that the delegatee would exercise the power in conformity
with the duties imposed on the directors under CA 2016 and
the constitution of the company, if any; and
(b) the directors believed on reasonable grounds, in good faith

and after making a proper inquiry, if the circumstances
indicated the need for the inquiry, that the delegatee was
reliable and competent in relation to the power delegated.
Law: s 216 of CA 2016.

¶7-030 Shareholders have certain restricted powers of
administration
The shareholders do not retain much control of the day-to-day

administration of the company’s affairs. They often do not have much
influence on the formulation and implementation of policies either.
This abdication of power into the hands of the board of directors is
often recognised in the constitution, which constitutes a contract
between the company and the shareholders. Certain matters are left
to the shareholders in general meeting under Companies Act, and
directors cannot carry out certain transactions as provided by the Act,
for instance adoption or amendments to the constitution, the disposal
of a substantial portion of the company’s undertaking or property,
loans to director and/or connected persons with directors, the issue of
new shares, etc. The constitution may also reserve some other
administrative issues for determination by the shareholders. For
example, directors’ remuneration and fees are to be determined by the
company in general meeting of a public company, or in the case of a
private company subject to the constitution.
Despite the assumption of control of the company’s affairs by directors
under the constitution, the courts have acknowledged circumstances
in which the shareholders in general meeting must take charge of the
reins. Deadlock in the boardroom, inability to fulfil the management
role, or the fact that the board has ceased to exist, will vest power in
the shareholders to get over the incapacity. However, once the board
is again in a position to function as envisaged under the constitution,
power is returned to the board. This principle, and the circumstances
in which the residual power of the shareholders may be called into
play, are illustrated by the case of Barron v Potter. In this
aforementioned case, the constitution of a company provided that the
quorum for directors’ meetings should be two. There were only two
directors, Mr Potter (the chairman), and Canon Barron. Canon Barron
refused to attend board meetings at which Mr Potter was present.
However, a general meeting of shareholders was convened by Canon
Barron, at which additional directors were appointed. This
appointment was upheld. The court held that, for practical purposes,
the board of directors was non-existent. Thus, there had to be “some
power in the company to do itself that which under other
circumstances would be otherwise done”.
Another instance where the court came to the aid of a company
experiencing a boardroom deadlock was in Foo Tong Eng v Po Gun
Suan. There, the managing director of a company could not hold an
extraordinary general meeting as one of the directors refused to
attend the meeting. The meeting could not be held as there was no
quorum. The judge said that in refusing to attend the meeting the
director had reduced the company to a state of complete helplessness
and had exposed the company to penalties for non-compliance with
the law. The judge accordingly directed that if the director failed to
attend the meeting, the managing director by himself attending the
meeting would be deemed to constitute a meeting.
However, not all deadlocks in the boardroom will be serious enough
for the court to acknowledge that the company’s business cannot be
carried on by the directors of the company. In Ng Eng Hiam v Ng Kee
Wei & Ors, one of the two directors of a company applied for the
winding up of the company complaining that it was impossible to
properly conduct the business of the company with the other director.
The Privy Council dismissed the petition as there had been
reasonable hope of reconciliation and co-operation between the two
directors.
Law: s 32, 36, 75, 223 and 225 of CA 2016.
BOARD MEETINGS
¶7-100 General principles
In contrast to general meetings which are regulated by CA 2016 and

the company constitution, the conducting of board meetings for a
company without a constitution is now governed by s 212. This section
provides that subject to the constitution, the provisions set out in Sch 3
of CA 2016 shall govern the proceedings of the board. Schedule 3 is
reproduced in Appendix 7.1 at the end of this chapter.
The board of directors is a collective body comprising executive, non-
executive and independent directors meeting together to make policy
decisions that will be carried out by the management and executives.
There are, however, some general principles which must be noted in
connection with directors’ meetings:
• Directors must exercise their powers for proper purposes as
determined by the Act and constitution.
• Every director has a right and duty to deliberate upon the affairs of
the company, even though he does not have a vote. Therefore,
he cannot be excluded from board meetings. If he is, he can seek
relief by way of an injunction (Hayes v Bristol Plant Hire Ltd).
• Although a director is not legally bound to attend all board

meetings, he ought to attend whenever he is reasonably able to
do so. However, neglect or omission to attend meetings is not the
same as neglecting or omitting to carry out a duty which ought to
be performed at those meetings. In other words, a director who
attends board meetings and finds out that something is wrong
and does nothing about it is in a worse position than a director
who fails to attend board meetings and knows nothing at all.
• The intention of the company may be adduced other than through

the recorded minutes of the directors’ meetings. A company can
form an intention without necessarily calling a board meeting.
This proposition is based on Lord Denning’s remark that there are
certain directors and managers who represent the directing mind
and will of the company, and their state of mind “is the state of
mind of the company and is treated in law as such” (HL Bolton
(Engineering) Co Ltd v TJ Graham & Sons Ltd).
• The role of the rules of natural justice is limited in board meetings.

The aspect of bias does not apply to board meetings as directors
are only required to vote in the interest of the company and
members as a whole and to exercise their powers in good faith (In
the Matter of Calvary Charismatic Center Ltd). The Act has
strengthened these expectations in a statutory manner.
¶7-110 What constitutes a board meeting?
Board meetings have been constituted under the rules and principles
of meetings, commonly known as the law and practices of meetings,
which are crafted in the constitution of the company, if the company
has one. But for a company without a constitution, Sch 3 of CA 2016
provides for the proceedings of the board as prescribed by s 212.
Schedule 3 is reproduced in Appendix 7.1 at the end of this chapter.
Case law has held that the mere coincident physical presence of all
directors at a place, does not constitute a formal directors’ meeting
(Petsch v Kennedy). Thus, where two persons who are the directors of
a company have a discussion between themselves on company
affairs, this will not amount to an effective directors’ meeting unless
both are aware that the occasion is to be a directors’ meeting. There
must be willing participation from the directors who constituted the
quorum.
In Barron v Potter, there was long-standing dispute between the only
two directors of the company, Mr Potter the chairman and Canon
Barron. The Articles of the company gave the chairman a casting vote
at a board meeting in the event of a deadlock. The Canon, realising
this, refused to attend meetings proposed by Mr Potter. One day, Mr
Potter knowing that the Canon was arriving in town in a train, met his
train and purported to hold a board meeting on the platform. The court
ruled that the alleged board meeting on the train platform was not
effective. Note that the absence of formality is not important where
there is unanimity amongst the directors in relation to a course of
action that is within the powers of the company [Swiss Screen
(Australia) Pty Ltd & Anor v Burgess & Ors].
It is common for the company’s constitution to provide for a situation
where all the directors are of one mind and participated in the
deliberation, so that such a meeting would have been properly
convened and not found to be a waste of time. The constitution may
also provide alternative modes deemed to be a board meeting, eg that
a resolution in writing signed by all directors is deemed to have been
passed at a meeting of the directors duly convened and held and that
any such resolution may consist of several documents in like form,
each signed by one or more directors. In modern times, the use of
electronic and telecommunication technology could be recognised as
a form of board meeting.
In CA 2016, matters relating to the proceedings of the board are
stipulated in s 212 in Sch 3, particularly if a company does not have a
constitution.
¶7-120 Notice of board meeting
Notice of any meeting of directors should always be given. The

constitution would normally provide the form and length of the notice
but if they are silent on this, it is sufficient if the notice contains
reasonable information of the place, time and agenda items for
consideration normally practiced by the company. There is no general
requirement what information must be specified in the notice calling
the said meeting (La Compagnie de Mayville v Whitley).
If all the directors meet without notice they may expressly or by
acquiescence waive the requirement for notice (Petsch v Kennedy).
An “instant” meeting, ie a meeting called immediately, occurs out of
convenience because the parties happen to be present and the
directors stay and proceed to business.
If a director is faced with what he regards as inadequate notice, he is
entitled to object and complain immediately and later challenge the
validity of the meeting. If he does not complain immediately, he will not
be able to complain later that the meeting was not proper because he
had not received formal notice (Browne v La Trinidad). If, however, he
unwillingly participates in the “exigencies of the situation” because he
was “overborne”, the court will be prepared to accept that his
participation did not waive his rights to complain about the absence of
notice later (Petsch v Kennedy).
The High Court of Malaya held that a five-day notice given to a
director to attend a board meeting is sufficient, even though the
meeting was to decide on certain allegations made against him (In the
Matter of Dr Leela Ratos dan Rakan-Rakan (Chow Kit) Sdn Bhd
(1994) 4 MSCLC 91‐234). In order to determine whether sufficient
notice had been given, the court examined the previous practice of the
board in calling meetings. The law is that the business to be
transacted at a board of directors’ meeting need not be included in the
notice and the director in that case could not complain that he was not
given sufficient particulars of the allegations.
¶7-130 Quorum
If a company has a constitution, the wording of Clause 83, adopted by
most existing companies (ie Art 83 of Table A of the former CA 1965)
usually provides that the quorum necessary for the transaction of the
business of the directors may be fixed by the directors. It seems that
this allows the directors to appoint a quorum of one (Re Fireproof
Doors Ltd). If the quorum has not been fixed, the constitution would
usually provide that the quorum be two, but s 328 provides that in the
case of a private company having only one member, then one
member personally present at a meeting shall constitute a quorum,
and that in any other case, two members personally present at a
meeting or by proxy shall be a quorum unless a higher number is
specified in the constitution. It was held in a case that if the
constitution (Articles) is silent on this point and the directors do not fix
a quorum, the number of directors who normally conduct the
company’s business will be regarded as the quorum (Lyster’s case).
A director must not be counted to form a quorum if he is disqualified
by the Companies Act or other laws from voting in a matter which he
is interested in (Re Greymouth-Point Elizabeth Railway & Coal Co Ltd;
Anaray Pty Ltd v Sydney Futures Exchange Ltd & Ors).
A director cannot wilfully refuse to attend a board meeting with the
object of preventing a quorum and thus deprive a transferee of shares
of his right to have his transfer registered (AM Spicer & Son Pty Ltd (in
liq) v Spicer). In Re Copal Varnish Co, the Articles of a company
provided that shares could not be transferred to a non-member
without the consent of the company’s two directors. One of the
directors transferred shares to non-members and lodged the transfers
with the company for registration. The other director refused to attend
board meetings in order to prevent a quorum and thus prevent
registration of the transfers. The court ruled that the director could not
wilfully refuse to attend board meetings and directed that the transfers
be registered.
A meeting of directors may not be capable of transacting the business
of the company because of insufficient quorum of directors, which was
unforeseen and unavoidable. This may occur when the Act provides
that the minimum number of directors must not be less than one, or
two as maybe required by the company’s constitution, but due to
vacancies in the board of directors caused by sudden death,
disqualification or prohibition by law, the actual number of directors fall
short of the required minimum. To overcome this dilemma, the Act via
s 209(1) and (3) provides the following:
• Subsection (1) states that where a company has only one director
or the last remaining director, that director shall not resign office
until that director has called a meeting of members to receive the
notice of the resignation and to appoint one or more new
directors, and
• Subsection (3) states that for the purpose of appointing a new

director, in the event of the office of a sole director or the last
remaining director of the company being vacated due to the
circumstances referred to in para 208(1)(d), (e), (f) or (g), the
secretary shall, as soon as practicable, call a meeting of the next
of kin, other personal representatives or a meeting of members,
as the case may be.
Apart from fixing the minimum number of directors to form a quorum,

CA 2016 has provided for a one person director meeting for a private
company. Such one-man meeting is permitted by the Act if the private
company has one director only, and also if a company having more
than one director, this number can be used for the purpose of forming
the quorum to meet the legal requirement of a minimum two directors
in a company.
¶7-140 Conduct at board meetings

The chairman of the board or any director may at any time direct the
secretary to summon a meeting of directors. This right is normally
stipulated in the constitution of companies, and the secretary must
summon a meeting on the direction of the chairman or a director. The
frequency and place of meeting are usually decided by the directors
themselves. Note that once a regular pattern has been established by
a company, that pattern assumes some significance in determining
whether sufficient notice is given for the board meeting. This is
because, in proceedings in which the validity of the directors’ meeting
is in question, the court will have regard to the company’s “structure,
practice and affairs”.
A board meeting can deal with any business of the company which is
not subject to a general meeting, as provided by certain provisions in
CA 2016. Unless the constitution says otherwise, it is not necessary
for notice of special business to be given (Re Sly, Spink & Co). The
directors deal with the business of the meeting in the order that suits
them (La Compagnie de Mayville v Whitley).
Schedule 3 of CA 2016, which regulates the conduct of board meeting
prescribes the appointment of the chair, the quorum and voting
process, if a company does not have a constitution. Schedule 3 is
reproduced in Appendix 7.1 at the end of this chapter.
¶7-150 Chairman
For a company without a constitution, Sch 3 of CA 2016 provides that

the directors shall elect a chairman from one among its number for
chairing of their meetings and may determine the period for which he
is to hold office. If no chairman has been elected or if the chairman
elected is not present within 15 minutes of the appointed time of a
meeting, the directors present shall elect one of the directors present
to be chairman of the meeting.
A chairman is a person who has control of a meeting. He exercises
procedural control over a meeting by nominating who is to speak,
dealing with the order of business, putting questions to the meeting,
declaring resolutions carried or not carried out, in due course asking
for general business, and declaring the meeting closed.
Law: Sch 3 of CA 2016.
¶7-160 Voting
Decisions made at board meetings should be by majority vote unless

the constitution provides otherwise. In case of an equality of votes, the
chairman is usually vested by the Clause 10 of Sch 3 of CA 2016 with
a casting vote, unless the constitution provides otherwise. The
constitution and s 222 of CA 2016 state that a director of a company
who is in any way, whether directly or indirectly, interested in a
contract entered into or proposed to be entered into by the company,
unless the interest is one that need not be disclosed under s 221, shall
be counted only to make the quorum at the meeting of the board but
shall not participate in any discussion while the contract or proposed
contract is being considered during the meeting and shall not vote on
the contract or proposed contract. Even if he does vote, his vote will
not be counted.
If a director has doubts over any particular provision in the constitution
regarding his rights at board meetings, the director should ask himself
whether his action is in accordance with the requirements of ethics
and propriety instead of pondering on whether his action is technically
valid (Ampol v Miller).
Law: s 222 of CA 2016.
¶7-170 Minutes of directors’ meetings

Minutes of directors’ meetings must be kept. However, who should
record the minutes is not stated in CA 2016. The records of
resolutions and meetings are provided by s 341in the following
manner:
• Every company shall keep records comprising—
(a) all resolutions of members passed otherwise than at the
meeting of members;
(b) minutes of all proceedings of meetings of members; and

(c) details provided to the company in accordance with the
requirements.
• The records shall be kept for at least seven years from the date of
the resolution, meeting or decision, as the case may be.
• Every officer who contravenes this section commits an offence and

shall, on conviction, be liable to a fine not exceeding RM10,000
and, in the case of a continuing offence, to a further fine not
exceeding RM500 for each day during which the offence
continues after conviction.
Law: s 341 of CA 2016.
¶7-180 Written resolutions of the board

As an alternative to holding a physically conducted board meeting, it is
quite common for a constitution to provide that a resolution in writing,
signed by all the directors for the time being entitled to receive notice
of a directors’ meeting, shall be as valid and effectual as if it had been
passed at a meeting of the directors duly convened and held. Any
such resolution may consist of several documents in like form, each
signed by one or more directors. For a company without a constitution,
the board must follow the provisions of Sch 3 of CA 2016.
In certain circumstances, CA 2016 may mandate an actual board
meeting be held otherwise than by written resolution of directors, eg a
declaration of solvency shall have no effect unless made at a meeting
of directors [s 443(4)(a) — Declaration of solvency for a members’
voluntary winding up] because it cannot be done by a written
resolution under the constitution.
¶7-190 Electronic forms of board meeting

It is quite common for board meetings to be carried out by electronic
means, ie using communication technology such as video conference
or teleconference.
Paragraph 6(b) of Sch 3, CA 2016 provides that a meeting of the
board may be held by means of audio or audio and visual
communication by which all directors participating and constituting a
quorum can simultaneously hear each other throughout the meeting.
IMPORTANCE OF RECORD OF MINUTES AND

RESOLUTIONS
¶7-195 Inspection of records of resolutions and
meetings
The records referred to as minutes and resolutions relating to the

previous seven years shall be kept available for inspection:
(a) at the registered office of the company; or
(b) at another place which a notice has been given to the Registrar
of Companies (“ROC” or “Registrar”).
Unless the records have at all times been kept at the registered office,
the company shall give a notice to the Registrar regarding the place
where the records are kept or the change of the place within 14 days
from the date the records are kept at such place or such change of
place.
The records shall be made available for inspection by any member of
the company without charge.
Any member shall be entitled to be furnished with a copy of any
minutes specified above within 14 days after he has made a request in
writing to the company at a charge not exceeding RM2 for every 100
words.
RM10,000 and, in the case of a continuing offence, to a further fine of
conviction.
Law: s 341 of CA 2016.
¶7-197 Records as evidence of resolutions

The record of a resolution passed otherwise than at a meeting of
members, if purporting to be signed by a director of the company or by
the secretary, is sufficient evidence of the passing of the resolution.
This refers to an extract of the minutes or resolution passed by way of
a written resolution.
If there is a record of a written resolution of a private company, the
requirements of CA 2016 with respect to the passing of the resolution
are deemed to be complied with unless the contrary is proved. Note
that written resolution of the board of directors is provided in Sch 3 of
CA 2016, which a company without a constitution shall follow, and for
a company with a constitution, it shall follow its constitution.
The record of proceedings of a meeting of members purporting to be
signed by the chairperson of that meeting or by the chairperson of the
next meeting of members is sufficient evidence of the proceedings at
the meeting.
If there is a record of proceedings of a meeting of members of a
company, then, until the contrary is proved:
(a) the meeting is deemed to be duly convened;
(b) all proceedings at the meeting are deemed to have been duly
taken place; and
(c) all appointments at the meeting are deemed to be valid.
Law: s 297(1) and 343 of CA 2016.
¶7-199 Details of decisions provided by a sole member

Where a private company has only one member, regardless of
whether the member is a natural person or a corporate body, the
details of decision is provided as follows:
If a sole member of a company takes any decision that—
(a) may be taken by the company in meeting of members; and
(b) has effect as if agreed by the company in meeting of members,
he shall provide the company with details of that decision, unless that
decision is taken by way of a written resolution.
A person who contravenes this section commits an offence and shall,
on conviction, be liable to a fine not exceeding RM10,000.
However, any failure to comply with this section does not affect the
validity of any decision referred to above.
Law: s 344 of CA 2016.
COMPANY SECRETARY’S DUTIES AND

AUTHORITY
¶7-300 Overview
Every company must appoint at least one or more persons as

company secretary.
The company secretary is today the company’s chief administrative
officer, and the main official responsible for the company’s compliance
with its statutory duties and responsibilities. Directors commonly look
to the company secretary for guidance concerning procedures under
CA 2016 and stock exchange rules. This is because the company
secretary is the main executive with a thorough knowledge and
understanding of such matters relating to company law and practices
and also other business related laws. Company secretaries of listed
corporations must also be knowledgeable of the Bursa Malaysia
Listing Requirements (BMLR). The company secretary takes many of
his instructions from the board. His status, however, entitles him to be
a governance officer with certain latitude in deciding the manner of
good corporate governance performance to be carried out in a large
corporation.
If a company has a Board Charter, it may specify more detailed and
particular tasks which the secretary is to assume responsibility for and
it is possible for more than one person to hold office as secretary of a
company.
A number of statutory duties are placed upon the company secretary.
In many cases, such duties vary from compliance work to an advisory
role, according to the size and complexity of the company and on the
terms agreed between the company secretary and the company.
The company secretary is primarily responsible to the board of
directors but the company secretary is not to be regarded as their
servant; he is an officer of the company with considerable authority
derived from the constitution, the Code on Corporate Governance and
CA 2016. In this respect, he is personally liable for his actions, not
least in regard to the statutory duties and he will be liable to the
penalties laid down in CA 2016 for an officer in default.
“Legal liabilities” in the context of the company secretary refers to
those duties which are supported by the provisions of CA 2016. As an
officer of the company, the secretary has a wide range of duties
placed upon him by the Act and other legislation.
¶7-310 Commonly accepted duties
In general, the company secretary’s commonly accepted duties are to:

• carry out the functions of the chief ministerial and administrative
officer of the company (only applicable if the company secretary
is an in-house secretary, ie an employee of the company and is
specified in the terms of employment);
• have a clear understanding of the company’s constituent

documents (especially its constitution) and of the provisions of CA
2016 in relation to the company, eg as a private or public
company;
• ensure that the necessary registers required to be kept are

established and properly maintained;
• ensure that all returns required to be lodged with the Registrar are
prepared and filed within the appropriate time limits by accessing
MyCoID1, which is the Company Commission of Malaysia
(CCM)’s e-filing portal;
• be familiar with the BMLR and regulations of the Securities

Commission if the company’s shares are listed;
• organise and attend meetings of the shareholders and directors.

This includes sending out notices, preparing agendas,
marshalling proxies and compiling minutes of the meetings;
• be aware of the meetings procedure, particularly the relevant

clauses of the constitution and/or CA 2016 in relation to quorum
requirements, voting procedures and proxy provisions so that he
may advise the chairman of the meeting, should the need arise;
• supervise the company’s issue and allotment of share capital

generally including the preparation of allotment letters, issue of
share certificates, handling of transfers and transmissions of
shares and the forfeiting of shares;
• ensure that the annual financial statements and reports are

available on time for lodgement with the Registrar before the
deadline as required by CA 2016;
• ensure that the annual returns of the companies are lodged within
30 days of the date of anniversary of the date of incorporation on
an annual basis;
• in certain large corporations, attend to the company’s insurance

requirements and ensure that the company is properly protected
including keeping of intellectual property records and registers
(this is not part of a company secretary’s legal duties unless
specifically agreed in the terms of employment as a full-time
company secretary);
• comply with the instructions of the directors and communicate
those instructions to the relevant officers of the company; and
• facilitate in briefing and training the board of directors, particularly

updating directors to keep them abreast, aware and be
knowledgeable about the changes of company law, BMLR and
any other laws that may affect the company.
The position of company secretary undoubtedly carries significant

authority and responsibilities. He is an officer of the company with
extensive duties and responsibilities. This appears not only in the
duties imposed by CA 2016 but also in the role which he plays in the
day-to-day business of said company. He is not a mere clerk
(Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics
Ltd). The power of the secretary to make representations and enter
into contracts on behalf of the company is accordingly extended. Note
that a company secretary is concerned with the administration of the
company but not with the management of the company, or with
carrying on its business (Re Maidstone Buildings Provisions Ltd).
(This is also applicable to in-house secretary)
As a safeguard to protect people who have dealings with company
secretaries, a secretary’s actions will be legally valid and binding even
if a defect is later discovered in his appointment or qualification. The
purpose of this safeguard is to ensure the legal enforceability of acts
done by a secretary who was not properly appointed. This may have
occurred because of some slip or irregularity such as the absence of a
quorum at the meeting where the appointment was made.
Footnotes
website.
¶7-320 Specifically prescribed duties under CA 2016
In addition to the above general duties, there are specifically

prescribed responsibilities of the company secretary stipulated in CA
2016:
(a) Share registering and transfer matters
Section 102 provides that it is the duty of secretary to enter
issuance and transfer of shares in the register of members:
• the secretary shall cause the register of members to be
properly kept and maintained regularly and all the particulars
on issuance and transfer of shares are entered into the
register.
• a secretary who contravenes this section commits an offence

and shall, on conviction, be liable to a fine not exceeding
RM10,000 and, in the case of a continuing offence, to a
further fine not exceeding RM500 for each day during which
the offence continues after conviction.
(b) No director situation

Where the number of required directors falls below the legally
required number because the sole director or the last remaining
director of the company:
(i) becomes disqualified from being a director under s 198
(undischarged bankrupt; committed offence in promotion,
formation or management of a corporation; convicted for
bribery, fraud, dishonesty; and disqualified by court) or s 199
(conviction by court for being involved in liquidation of one or
more companies, for failure of duties as a director or for
habitual contravention of CA 2016);
(ii) becomes of unsound mind or, he or his estate is liable to be

dealt with in any way under the Mental Health Act 2001;
(iii) dies; or
(iv) otherwise vacates his office in accordance with the

constitution of the company,
the secretary shall, as soon as practicable, call a meeting of the

next of kin, other personal representatives or a meeting of
members, as the case may be, to appoint a new director.
In carrying out his responsibilities, the secretary shall be entitled
to be indemnified by the company in relation to any reasonable
costs and expenses of the meeting convened as required.
¶7-324 Vacation of office by single director

Under CA 2016, where a company has only one director or the last
remaining director, that director shall not resign office until that director
has called a meeting of members to receive the notice of the
resignation and to appoint one or more new directors.
For the purpose of appointing a new director, in the event of the office
of a sole director or the last remaining director of the company being
vacated due to the circumstances such as the person:
• becomes disqualified from being a director;
• becomes of unsound mind or a person whose person or estate is

liable to be dealt with in any way under the Mental Health Act
2001;
• dies; or
• otherwise vacates his office in accordance with the constitution of

the company,
the secretary shall, as soon as practicable, call a meeting of the next

of kin, other personal representatives or a meeting of members, as the
case may be.
Law: s 209(3) of CA 2016.
¶7-330 To whom are duties owed?

There are certain core duties which may be identified as follows:
Duties owed to the board of directors
The company secretary is the main servicing person by which the
decision-making of the company is implemented and by which
reporting procedures are co-ordinated. In undertaking these tasks the
company secretary formulates agendas for meetings with the
chairman, organises board and company papers prior to their
circulation, attends and takes minutes of the meetings, advises the
chairman on the procedures at the meetings and certifies and
authenticates formal documents and minutes.
Duties owed to third parties
While it is generally held that the role of the company secretary is
essentially administrative and should not be seen as a business
management role, company secretaries nevertheless have ostensible
authority to bind the company, at least in administrative matters.
Also, like other company officers they may be held out as having
authority in areas beyond their actual authority. In Panorama
Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd, the
company secretary ordered cars from a hire company for client use. In
actual fact, he used the cars for personal use. When the bill was not
paid, payment was claimed from the company. The court held the
company secretary had apparent or ostensible authority to make
contracts of this kind, concerned with administration, so the company
was held liable to pay the car hire firm.
In the Panorama case the court also said that had the question arisen,
they would not have regarded the company secretary as having
apparent authority to enter commercial contracts such as buying and
selling goods, since these were not the normal duties of a company
secretary.
It follows that a company may repudiate the actions of its company
secretary if he:
• had not been expressly authorised to undertake the acts in
question; or
• had no apparent authority implied from his holding the office of a

company secretary.
¶7-340 Governance advisory role to board

The company secretary is seen as an important officer who can
provide the governance role to the corporations listed with the stock
exchange. This role is clearly mentioned in the Malaysian Code on
Corporate Governance (2000, 2007, 2012 and 2017). The following
are significant contributions by the secretary to the board:
• The company secretary is suitably qualify and competent in
carrying out the duties as required by law, governance code and
CA 2016;
• The company secretary must be able to advise the board (usually

the Chairman) on:
– board governance matters;
– ensuring an effective system of corporate governance is in

place;
– guide and advice on legal and regulatory compliance;
– implementing procedures and processes of governance; and

– being impartial in their advice and to act in the best interests
of the company.
Law: s 102 and 209(3) of CA 2016.
¶7-350 Limitations on administrative authority

There are areas of activity of an administrative nature over which the
courts have ruled to be outside the secretary’s authority. It has been
ruled that a company secretary cannot, without special authority from
the directors:
• call a meeting of the company without a resolution of the directors
(Re Haycraft Gold Reduction & Mining Co; Re State of Wyoming
Syndicate);
• issue a writ in the company’s name (Daimler Co Ltd v Continental

Tyre & Rubber Co (Great Britain) Ltd);
• alter the register of members, for example, by striking off a name

(Re Indo-China Steam Navigation Co);
• accept and enter the transfer of shares on behalf of directors

(China Mines Ltd v Anderson);
• make any request on behalf of a company for a loan or make any

such loan agreement for the company (Re Cleadon Trust Ltd).
Any of the above acts done by a secretary beyond his authority may
be ratified by the directors (Molineaux v London, Birmingham &
Manchester Insurance Co Ltd). The limitations were largely laid down
by cases decided in an earlier era when the company secretary was
regarded as a mere servant (Barnett, Hoares & Co v South London
Tramways Co, per Lord Esher). In the light of Lord Denning’s remark
in 1971 in the Panorama Developments case, it may be said that
these old restrictions should be treated with caution.
¶7-360 Company secretarial service being outsourced

It is a common commercial practice for companies to engage
professional companies like accounting firms and corporate secretarial
companies to provide secretarial services and compliance work.
Under such an arrangement, the professional firm would enter into an
agreement to provide secretarial service and permit their staff to be
named as the client’s company secretary at a monthly retainer fee.
The company secretary is therefore an “outsourced person” and
termination of the professional services would ipso facto remove the
named company secretary.
Where a company engages an external professional secretarial firm to
handle part of its secretarial work, the engagement letter will specify
the tasks that the external company secretary is to perform.
In practice, external company secretaries do not interfere with the
internal management, day-to-day business, financial and tax matters
of the company. Their job scope is purely to perform and be
responsible for company secretarial work unless agreed by them and
the company that they perform additional tasks which are not within
their scope.
REQUIREMENTS, REGISTRATION AND

APPOINTMENT OF COMPANY SECRETARY
¶7-370 Requirements to be a company secretary
A company secretary must be:

(a) a natural person;
(b) aged 18 years and above;
(c) a Malaysian citizen or permanent resident;
(d) a member of any of the following bodies as listed in Sch 4 as

Approved Bodies—
• the Malaysian Institute of Chartered Secretaries and
Administrators;
• Malaysian Institute of Accountants;
• Malaysian Bar;
• Malaysian Association of Company Secretaries;
• Malaysian Institute of Certified Public Accountants;
• Sabah Law Association;
• Advocates Association of Sarawak; or
• a person licensed by CCM;
(e) not an undischarged bankrupt;
(f) registered with the ROC.
Law: s 235, 238, 239, 240 and 241 of CA 2016.
¶7-380 Disqualification to act as secretary

Disqualification to act as a secretary is stipulated in s 238:
• A person shall be disqualified to act as a secretary if—
(a) he is an undischarged bankrupt;
(b) he is convicted whether in or outside Malaysia of any

offence referred to in s 198; or
(c) he ceases to be a holder of a practising certificate issued by

the Registrar under s 241.
• If the Registrar is of the opinion that a person has failed to act

honestly or use reasonable diligence in the discharge of his duties
as a secretary, the Registrar may require the person to show
cause why his practising certificate should not be revoked or why
he should not be disqualified from acting as a secretary of a
company.
Section 239 provides that the board may remove a secretary from his
office in accordance with the terms of appointment or the constitution.
Law: s 238, 239 and 240 of CA 2016.
¶7-390 Registration of company secretary

Section 241 requires a qualified secretary to register with ROC:
Subsection (1) states that any person who is qualified to act as a
secretary and who desires to act as a secretary shall be registered
under this section before he can act as a secretary.
Subsection (2) states that the Registrar shall cause a register of
secretaries to be kept and shall cause to be entered in the register in
relation to a secretary—
(a) the name of the secretary;
(b) the residential address and business address of the secretary;
(c) the details of the qualifications referred to in sub-s 235(2); and
(d) such other information as the Registrar may require.
Subsection (3) states that the Registrar, before registering such

person, may—
(a) require him to produce any evidence to his satisfaction of the
qualification as stated under s 235(2); or
(b) impose any other conditions that he deems fit.
Subsection (4) states that if the requirements under sub-s (3) are
satisfied, the Registrar shall—
(a) enter the particulars in the register of secretaries; and
(b) issue a practising certificate in such form as the Registrar may

determine.
Subsection (5) states that on or after the commencement of this Act, a
person who is a secretary of a company and who is not registered as
required, may continue to act as a secretary to the company for a
period of not more than 12 months or any longer period as the
Registrar may allow.
Subsection (6) states that after the expiry of the period stated above, a
person who fails to comply with the requirement to register shall be
deemed to have not been registered under this section.
Subsection (7) states that the Minister shall have the power to make
regulations on any matters relating to any practising certificate issued
under this section.
Subsection (8) states that any person who contravenes sub-s (1)
commits an offence.
A person is prohibited to act in a dual capacity as both a director and a
secretary in a situation that requires or authorises anything to be done
by a director and a secretary.
Law: s 241 of CA 2016.
¶7-400 Appointment of company secretary

The board shall appoint a secretary and determine the terms and
conditions of such appointment.
The appointment of the first secretary shall be made within 30 days
from the date of incorporation of a company.
No person shall be appointed as a secretary unless—
(a) he has consented in writing to be appointed as a secretary;
(b) he is qualified under s 235(2); and
(c) he is not disqualified under s 238.
The company and every person who contravene this section commit
an offence.
It is the board that appoint secretaries and there is no requirement to
state the first secretary in the application for incorporation of a
company, except that after incorporation and within 30 days, the
secretary must be appointed by the board, in compliance with the
necessary qualifications and that the secretary must hold a practising
certificate issued by the Registrar under s 241.
Law: s 236 and 241 of CA 2016.
RESIGNATION AND REMOVAL OF COMPANY

SECRETARY
¶7-420 Resignation and vacation of position as company
secretary
The resignation of the company secretary is provided in s 237.

The resignation of a company secretary is by way of tendering a letter
of resignation to the company, and it is the responsibility of the board
of directors to appoint another qualified person who is registered with
the Registrar as replacement.
Essentially, the procedure for resignation is as follows:
• The notice of resignation is to be tendered in accordance to the
constitution or terms of appointment. Where there is none, the
notice may be sent to the board.
• This is done by writing an AR letter indicating the intention to

vacate the position to all the directors at their last residential
addresses, giving them a reasonable time to reply.
• If no reply is forthcoming or none of the directors can be

communicated with at their last known address, the resigning
secretary may notify the Registrar of his intention to resign by
lodging the prescribed e-form “Notice of intention to vacate the
office of secretary” in Schedule B of MyCoID.
• The e-form “Notification of change in the register of directors,
managers and secretaries” in Schedule B of MyCoID must be
lodged with the ROC within 14 days of the company secretary’s
resignation or vacation of office.
Where notice is successfully given to the company or board, the

secretary ceases to be the company’s secretary 30 days from the date
the notice is lodged with the board or in accordance with the
constitution or terms of appointment. Where notice was given to the
Registrar, the secretary ceases to be the company’s secretary on the
expiry of 30 days from the date of the notice lodged.
The vacation of office by the secretary will not relieve the secretary
from liability for any act or omission done before the secretary vacated
that office.
Section 240 further states that the office of secretary cannot be left
vacant for more than 30 days at any one time.
Law: s 58, 237 and 240 of CA 2016
¶7-430 Removal and dismissal of company secretary

Section 239 allows the board to remove a secretary from his office in
accordance with the terms of appointment or the constitution. The
secretary may, therefore, be dismissed by resolution of the board of
directors, but subject to the commentary below.
If the company secretary is employed full-time by the company, a
service agreement is executed between the company and the
company secretary, containing various terms and conditions of the
secretary’s engagement. This may specify such terms as the duration
of the appointment and the length of notice to be given by either side
for the termination of the agreement. However, a number of grounds
are established which would generally justify dismissal
notwithstanding that the engagement has not run its full term. These
grounds include:
• fraud or gross misconduct such as dishonesty;
• the giving of fraudulent information to obtain appointment;
• the taking of secret commission, profit, benefit or bribe;
• disclosure of confidential company information;
• physical incapacity prohibiting proper attention to duties; and
• negligence towards duties to such an extent as to prejudice the

company’s business.
Under this type of arrangement, the company will have to also

observe the service contract in relation with employment law, as the
company secretary is an employee of the company.
In the case of outsourced company secretary’s professional services,
removal of the secretary will be subject to the terms and conditions of
the engagement letter entered with the secretarial firm that provides
the services.
Law: s 239 of CA 2016.
REMUNERATION OF COMPANY SECRETARY

¶7-440 Remuneration of company secretary
The company’s constitution will normally stipulate that the

remuneration of the company secretary is to be fixed by the directors
as they see fit. Even if such a provision is missing from the company’s
constitution, the fixing of the secretary’s salary would still be within the
ambit of the board’s power.
In the unusual event where no remuneration was agreed upon
between company and secretary, a person who has served as
company secretary is entitled to be paid on a quantum meruit basis for
the services rendered (Craven-Ellis v Canons Ltd). Note however that
the company secretary has no right to a lien on the books or other
property of the company for any wages due to him (Barnton Hotel Co
v Cook).
Under an outsourcing arrangement of professional services, the
company secretary’s wages is paid by the professional firm that
employs the secretary and for which the firm would receive the
retainer fee from the client company.
COMPANY SECRETARY’S EXCLUSION FROM

LIABILITY
¶7-450 Exclusion from liability
The company secretary is a corporate officer. As such, he cannot by

virtue of any provision, whether contained in the constitution or in any
contract with the company or otherwise, be exempt from, or
indemnified in respect to any liability for:
• negligence;
• default;
• breach of duty; or
• breach of trust,
of which he may be guilty in relation to the company.

In this regard, if a company secretary had purchase a professional
indemnity insurance, s 289 provides that a company shall not
indemnify or directly or indirectly effect insurance for an officer or
auditor of the company in respect of—
(a) the liability for any act or omission in his capacity as an officer or
auditor; or
(b) the costs incurred by that officer or auditor in defending or

settling any claim or proceedings relating to any such liability.
But a company may indemnify an officer or auditor of the company for

any costs incurred by him or the company in respect of any
proceedings—
(a) that relates to the liability for any act or omission in his capacity
as an officer or auditor; and
(b) in which judgment is given in favour of the officer or auditor or in

which the officer or auditor is acquitted or in which the officer or
auditor is granted relief under this act, or where proceedings are
discontinued or not pursued.
A company may indemnify an officer or auditor of the company in

respect of—
(a) any liability to any person, other than the company, for any act or
omission in his capacity as an officer or auditor; and
(b) costs incurred by that director or officer or auditor in defending or

settling any claim or proceedings relating to any such liability.
Amongst others, “officer”, in relation to a corporation, includes any

director, manager, secretary or employee of the corporation.
Law: s 289 of CA 2016.
COMPANY SECRETARY’S CODE OF ETHICS

¶7-500 Background
The Company Secretary’s Code of Ethics (“the Code”) was launched

by the Minister of Domestic Trade and Consumer Affairs on 4 July
1996. It was formulated to enhance the standard of corporate
governance and to instil professionalism and effectiveness among the
company secretaries.
The Code may be broadly understood as the application of ethics to
corporate affairs where every decision, judgment or action should only
be performed when it is ethical to do so.
However, the Code should not just serve as a code of human conduct
but must be extended to deal with the question of what is morally right
and wrong and what is morally good or evil.
The Company Secretary’s Code of Ethics is reproduce in Appendix
7.3 at the end of this chapter.

1. Explain the division of powers between the board of directors and
shareholders.
2. Who is a chairman of a meeting and what are his roles as

chairman of meetings?
3. What are the qualifications required for a person to be appointed

company secretary, and the legal requirements for him/her to act
as secretary for a company?
4. What are the roles and functions of a company secretary in a

large corporation?

Third Schedule
[Section 212]
PROCEEDINGS OF THE BOARD
Chairperson
1. The directors may elect one of their number as chairperson of the
Board and determine the period for which he is to hold office.
2. If no chairperson is elected, or if at any meeting of the Board the

chairperson is not present within fifteen minutes after the time
appointed for the commencement of the meeting, the directors
present may choose one of the numbers to be chairperson of the
meeting.
Notice of meeting
3. A director or, if requested by a director to do so, a secretary, may
convene a meeting of the Board by giving notice in accordance
with paragraph 4.
4. A notice of a meeting of the Board shall be sent to every director

who is in Malaysia, and the notice shall include the date, time,
and place of the meeting and the matters to be discussed.
5. An irregularity in the notice of a meeting is waived if all directors

entitled to receive notice of the meeting attend the meeting
without objection to the irregularity.
Methods of holding meetings

6. A meeting of the Board may be held either—
(a) by a number of the directors who constitute a quorum, being
assembled together at the place, date, and time appointed
for the meeting; or
(b) by means of audio, or audio and visual, communication by

which all directors participating and constituting a quorum
can simultaneously hear each other throughout the meeting.
Quorum
7. A quorum for a meeting of the Board shall be fixed by the Board
and if not so fixed shall be a majority of the directors.
8. No business may be transacted at a meeting of the Board if a

quorum is not present.
Voting
9. Every director has one vote.
10. The chairperson shall have a casting vote.
11. A resolution of the Board is passed if it is agreed to by all

directors present without dissent or if a majority of the votes cast
on it are in favour of it.
12. A director present at a meeting of the Board is presumed to
have agreed to, and to have voted in favour of, a resolution of the
Board unless he expressly dissents from or votes to object
against the resolution at the meeting.
Minutes
13. The Board shall ensure that the minutes of all proceedings at
meetings of the Board are kept.
Resolution passed at adjourned meetings

14. Where a resolution is passed at an adjourned meeting of the
Board, the resolution shall, for all purposes, be treated as having
been passed on the date on which it was in fact passed and shall
not to be deemed to have been passed on any earlier date.
Resolution in writing
15. A resolution in writing, signed or assented to by all directors
then entitled to receive notice of meeting of the Board, is as valid
and effective as if it had been passed at a meeting of the Board
duly convened.
16. Any such resolution may consist of several documents,

including facsimile or other similar means of communication, in
similar form and each document shall be signed or assented to by
one or more directors.
17. A copy of any such resolution shall be entered in the minute

book of Board proceedings.
Other proceedings
18. Except as provided in this Schedule, the Board may regulate its
own proceedings.
Committees of the Board

19. The Board may delegate any of its powers to committees
consisting of such member or members of its body as the Board
thinks fit and any committee so formed shall in the exercise of the
powers so delegated conform to any terms or conditions that may
be imposed on it by the Board.
20. A committee may elect a chairperson of its meetings and may

determine its own proceedings.
21. Any questions arising at any meeting of a committee shall be

determined by a majority of votes of the members present, and in
the case of an equality of votes the chairman shall have a second
or casting vote.
Managing Directors
22. The Board may, from time to time, appoint one or more of its
body to the office of managing director for such period and on
such terms as the Board thinks fit and may revoke any such
appointment.
23. A director appointed to the office of managing director shall not,

while holding that office, be subject to retirement by rotation or be
taken into account in determining the rotation of retirement of
directors, but his appointment shall be automatically determined if
he ceases from any cause to be a director.
24. A managing director shall, subject to the terms of any

agreement entered into in any particular case, receive such
remuneration, whether by way of salary, commission, or
participation in profits, or partly in one way and partly in another,
as the Board may determine.
25. The Board may entrust to and confer upon a managing director
any of the powers exercisable by the Board upon such terms and
conditions and with such restrictions as the Board may think fit,
and either collaterally with or to the exclusion of the Board’s own
powers, and may from time to time revoke, withdraw, alter, or
vary all or any of those powers.
Associate Directors
26. The Board may, from time to time, appoint any person to be an
associate director and may from time to time revoke any such
appointment.
27. The Board may fix, determine and vary the powers, duties and
remuneration of any person so appointed, but a person so
appointed shall not have any right to attend or vote at any
meeting of the Board except by the invitation and with the consent
of the Board.

E-forms in MyCoID that are relevant to company secretaries
Item Section Title of e-form When to Any

No. in of CA lodge Lodgement
Sch B 2016 fee
7 58 and Notification of Within 30 Nil
236(2) appointment of first days of date
secretary of
incorporation
18 58 Notification of Within 14 Nil
change in the days of any
register of directors, change
managers and
secretaries
43 237(2) Notification of After 21 Nil
intention to vacate days of
the office of informing all
secretary the directors
and no
response
44 241 Registration to act not yet To be
as secretary enforced announced
NOTE:
As these are electronic forms prescribed by the Companies
Regulations 2017, it is advisable to download from MyCoID when
used.
¶7-1003 Appendix 7.3:
Company Secretary’s Code of Ethics

Introduction
With the increasing complexity of Company Laws and the continued
rationalisation of business into larger groups of companies, the
position of the company secretary in relation to the affairs of the
company has evolved from being a mere servant to a much more
important person in a company. He is now a recognised officer of the
company with greater responsibility and authority which demands
ethical conduct among company secretary at all times.
This Code of Ethics, which may be broadly understood as the
application of ethics to corporate affairs, is formulated to enhance the
standard of corporate governance and to instil professionalism and
effectiveness among the company secretaries.This Code of Ethics
should serve as a code of human conduct and to deal with the
question of what is morally right or wrong and what is morally good or
evil.
Principles
The principles on which the Code relies are those that concern
transparency, integrity, accountability and corporate social
responsibilities.
Objectives
The Code was formulated to raise the standard of corporate of
governance and to inculcate good corporate behaviour to achieve to
following objectives:
(1) To instil professionalism among company secretaries within the
tenets of morality, efficiency and administrative effectiveness; and
(2) To uphold the spirit of social responsibilities and accountability in

line with the legislations, regulations, and guidelines governing a
company.
Code of conduct
In the performance of his duties, a company secretary should always
observe the following codes:
• Strive for professional competency and at all times exhibit a high
degree of skill and proficiency in the performance of his duties of
his office;
• At all times exercise the utmost good faith and act both
responsibly and honestly with reasonable care and due diligence
in the exercise of his powers and the discharge of the duties of
his office;
• At all times strive to assist the company towards its proper

objectives within the tenets of moral responsibility, efficiency and
administrative effectiveness;
• Have a clear understanding of the aims and objectives of the

company, and of the powers and restrictions as provided in the
memorandum and articles of association of the company;
• Be knowledgeable of the law of meetings, meeting procedures,

particularly quorum requirements, voting procedures and proxy
provisions and be responsible for the proper administration of
meetings;
• Neither direct for his own advantage any business opportunity that
the company is pursuing, nor may he use or disclose to any party
any confidential information obtained by reason of his office for
his own advantage or that of others;
• Adopt an objective and positive attitude and give full co-operation

when dealing with governmental authorities and regulatory
bodies;
• Disclose to the board of directors or an appropriate public officer

any information within his knowledge that he honestly believe
suggests that fraud is being or is likely to be practiced by the
company or by any of its directors’ employees;
• Limit his secretaryship of companies to a number in which he can

best and fully devote his times and effectiveness;
• Assist and advise the directors to ensure at all times that the
company maintains an effective system of internal control, for
keeping proper registers and accounting records;
• Be impartial in his dealing with shareholders, directors and without

fear or favour, use his best endeavours to ensure that the
directors and the company comply with the relevant legislation,
contractual obligations and other relevant requirements;
• Be present in person or ensure that in his absence he is so

represented at the company’s registered office on the days and at
the hours that the office is accessible to the public;
• Advise the board of directors that no policy is adopted by the

company that will antagonise or offend any stakeholders of the
company;
• Be aware of all reporting and other requirements imposed by the

statute under which the company is incorporated; and
• Be present or represented at meetings and do not allow himself or

his representative to be excluded or withdrawn from those
meetings in way that prejudices his professional responsibilities
as secretary of company.
CHAPTER 8: COMPANY
REGISTERS AND FOREIGN
COMPANIES
Types of registers ¶8-000
Register of members and index ¶8-200
Register of directors, managers and secretaries ¶8-300
Register of directors’ shareholdings ¶8-320
Register of substantial shareholders ¶8-340
Register of debenture holders ¶8-360
Instruments of charges and register of charges ¶8-380
Register of interest holders ¶8-400
Branch registers ¶8-500
Foreign companies ¶8-700
Appendix 8.1: E-forms in MyCoID relevant to share
registers ¶8-1001
Appendix 8.2: E-forms in MyCoID for lodgement by
substantial shareholders ¶8-1002
Appendix 8.3: E-forms in MyCoID related to
debentures ¶8-1003
Appendix 8.4: E-forms in MyCoID relevant to charges ¶8-1004
Appendix 8.5: E-forms in MyCoID relevant to
satisfaction and release from charge ¶8-1005
Appendix 8.6: E-forms in MyCoID related to foreign
companies ¶8-1006
TYPES OF REGISTERS
¶8-000 The need to keep registers and statutory books
A company being an artificially incorporated person must keep
registers and statutory books to enable people interested in the
company to examine its records and information. It is a legal
requirement for companies to keep these registers and statutory
books at the Registered Office address and to make them available
for inspection by authorised persons.
¶8-010 Registers to be kept

A shareholder or member has the right to inspect the following
registers which the company must maintain:
• register of members and Index of members (see ¶8-200);
• register of directors, managers and secretaries (see ¶8-300);
• register of directors’ shareholdings (see ¶8-320);
• register of options (see ¶4-300);
• register of substantial shareholders for a public company (see ¶8-

340);
• register of debenture holders (see ¶8-360);
• register of charges (see ¶8-380); and
• register of holders of participatory interests (see ¶8-400).
These registers must be in the form that enables them to be inspected

and located at a place that makes inspection reasonably easy.
The general intent of the Companies Act 2016 (CA 2016) is that the
registers should provide sources of information about the company to
shareholders and others wishing to have that information. For
example, the register of charges provides full particulars of such
encumbrances which a company has granted over its property. This
enables a person to obtain an accurate picture of the company’s
current indebtedness.
The registers represent a practical demonstration of the principle that
full disclosure is the best safeguard against impropriety. Therefore, the
overriding rule in relation to the maintenance of the registers is that
they must be kept in a way that complies with the letter of the law and
in a manner which is consistent with the intention of the law.
Generally, these registers must be kept at the company’s registered
office. A member has a statutory right to inspect all registers except
the register of debenture holders. Inspection of registers by a member
is free of charge. All other persons have to pay a small fee for it,
where applicable. Section 342 provides for the inspection of records of
resolutions and meetings by company members without any charge,
and s 48 provides for inspection of documents and records kept by the
company for inspection by any person who is entitled to inspect such
documents and records at the registered office of the company or any
other place allowed by CA 2016. The person who is entitled under the
Act to inspect the documents and records shall be allowed to make
copies or take extracts from the documents and records.
Law: s 48 and 342 of CA 2016.
¶8-020 Method of keeping registers, circulating notices

and written resolutions
It is a practice that any register to be kept under CA 2016 may be kept
by making entries in a bound book or in a loose-leaf or electronic
system. The general requirement is that all registers must be in writing
so that they are available for inspection. Information stored in an
electronic device is not able to be opened for inspection. Therefore,
such devices, in non-written form, are generally regarded as
incompatible with the general intent of the Act, although accounting
transactions could be kept in electronic devices and software,
provided they can be generated into hard copies for verification and
inspection.
Where a company chooses to maintain its registers other than by
means of entries in bound books, it has to ensure that reasonable
precautions have been taken for guarding against falsification and for
facilitating the discovery of any falsification. The company must also
provide the proper facilities for the inspection of the registers. In the
Act, there is no specific provision as to whether minutes and
resolutions can be kept in electronic format, but circulation of notices
and written resolutions can done electronically.
Law: s 300, 341, 342 and 343 of CA 2016.
REGISTER OF MEMBERS AND INDEX

¶8-200 Register of members
Every company is required to keep a register of members. The

register must contain:
• the name and addresses of members;
• the nationality, national registration identity card number and the

occupation of each member;
• where company has a share capital: the number of shares held by

each member (distinguished by share numbers, if any, or by
number of certificates, if any), and the amount paid (or agreed to
be considered as paid) on shares held by each member;
• date at which the name of each person is entered as a member;
• the date at which any person ceased to be a member during the

previous seven years;
• where company has a share capital: date of every allotment of

shares to members and number of shares in each allotment; and
• the amount of stock or number of stock units held by each member

where a company has converted shares into stock.
The register of members must be kept at the registered office of the

company. It may also be kept at:
• another of the company’s office that is in Malaysia, if the work of
making up the register is done in that office; or
• the office of the preparer of the register (eg a share registry

organisation) if the preparer’s office is in Malaysia and the
company has arranged with the preparer to prepare its register.
If the register is kept at a place other than the registered office, notice
of it must be lodged with the Registrar of Companies (“ROC” or
“Registrar”) within 14 days of the change. Further notice of any
subsequent change in the location of the register must also be lodged:
s 47(3).
A shareholder does not have the right to demand that he be entered in
the register of members immediately upon payment of the shares. He
will only be entered after the allotment of the shares is completed at a
date specified by the directors of the company (Raja Khairulzaman
Shah bin Raja Aziddin & Ors v Zaman Indah Sdn Bhd).
The register of members shall be prima facie evidence of any matters
inserted in the register as required or authorised by CA 2016.
Notifying Registrar of changes in the register of members
This is stipulated in s 51.
A company must notify the Registrar of the changes in the particulars
in the register within 14 days from the date—
(a) of the change of any shareholder contained in the register;
(b) after a person ceases to be, or becomes, a shareholder of the

company; or
(c) the information required under s 57 is received by the company
or is recorded in the register.
The Registrar shall determine the form, manner and extent of the
information to be lodged as required above.
Note that notice to the Register is not applicable to a company whose
shares are quoted on a stock exchange because of Central
Depository system.
The company and every officer who do not keep the register of
members as required under CA 2016 is liable on conviction to a fine
not exceeding RM10,000 while the fine for contravening the
requirement to notify the Registrar of any changes to the register of
member is to an amount not exceeding RM20,000. In the case of a
continuing offence, in both instances, there will be a further fine not
exceeding RM500 for each day during which the offence continues
after conviction.
Law: s 47(3), 50 and 51 of CA 2016.
¶8-210 Index of members

A company with more than 50 members must keep an index of the
names of members. This index must be kept in a convenient form and
must enable the account of each member to be readily found in the
members’ register. The index is to be updated within 14 days from the
date of change in the register itself. The register of members and
index shall be kept at the registered office of the company, but:
(a) if the register and index are prepared at another office of the
company within Malaysia, the register and index may be kept at
that other office; or
(b) if the company arranges with any person to prepare the register
and index on its behalf, the register and index may be kept at the
office of that person at which the work is done if that office is
within Malaysia.
The prescribed e-form “Notification where branch register is kept or

change in the address” of Schedule B in MyCoID1 must be lodged
within 14 days of the change.
The company and every officer who contravene any of the above
commit an offence and shall, on conviction, be liable to a fine not
exceeding RM10,000 and, in the case of a continuing offence, to a
further fine not exceeding RM500 for each day during which the
Law: s 52 and 54 of CA 2016.
Footnotes
website.
¶8-220 Closing of register
The register of members or any class of members may be closed from

time to time but notice of at least 14 days must be given to the
Registrar. In addition, there is a restriction that the total closure period
in any calendar year must not exceed 30 days in aggregate.
During the period of closure of the said register, the company shall not
accept transfers for registration. Similarly, all rights of inspection and
copying are suspended. However, the company must still certify
transfers and register other documents.
In order to close the register, there must be a resolution of the board
of directors and the e-form “Notice to close register of members” in
Schedule B of MyCoID must be lodged with the Registrar within 14
days.
In the case of a public listed company, the announcement must be
published in a major newspaper circulating generally in the country
and the stock exchange must be informed of the closure dates
accordingly.
Law: s 55 of CA 2016.
¶8-230 Right of member to inspect

The register and index must be open to inspection:
• by any member without charge; and
• by any other person on payment of RM10 or such lesser sum as

the company requires.
Copy of register of members and index

Any member or other person may request the company to furnish him
with a copy of the register, or of any part the register, but only so far
as it relates to names, addresses, number of shares held and
amounts paid on shares, on payment in advance of RM10.00 or such
lesser sum as the company requires for every 100 words or fractional
part of the register required to be copied and the company shall cause
any copy requested by any person to be sent to that person within 21
days or within such period as the Registrar considers reasonable from
the day on which the request is received by the company.
If the request of any copy is not sent within the period prescribed
above, the company and every officer of the company commits an
offence against CA 2016 shall, on conviction, be liable to a fine not
Law: s 55(1) and (2) of CA 2016.
¶8-240 Rectification of register of members by the court

The court may rectify the register of members if:
• the name of any person is without sufficient cause entered into or
omitted from the register; or
• default is made or unnecessary delay takes place in entering in the

register the fact that a person has ceased to be a member.
Application to the court for rectification of the members’ register may

be made by:
• an aggrieved person;
• any member; or
• the company itself.
The provision in CA 2016 enabling the court to rectify the members’

register is confined to conferring on the court the power to put right the
register so as to reflect correctly what has been or ought to have been
done. It is not available to enable shares properly issued and entered
on the register to be cancelled (Reinvestment (Australia) Ltd v Murray
Securities Ltd). The court has a discretion whether or not to order
rectification of the register even in the case of an invalid allotment of
shares (Re Asian Organisation Ltd). The court will not order a
rectification of the register if the rectification is seen as an undesirable
retrogression and if it does not serve any useful purpose to the
company (Gan Tuck Meng & Ors v Ngan Yin Groundnut Factory Sdn
Bhd & Anor).
The rectification of register of members is stipulated in s 103 of CA
2016 as follows:
• If the name of a person is wrongly entered in, or omitted from, the
register of members, the person aggrieved may apply to the court
for—
(a) rectification of the register of members;
(b) compensation for loss sustained; or
(c) both rectification and compensation.
• On an application under this section, the court may order—

(a) the rectification of the register of members by the company;
(b) the payment of compensation by the company or an officer

who has caused the error or omission for any loss sustained;
or
(c) the rectification and payment of compensation.
For the e-forms in MyCoID relevant to share registers, see Appendix

8.1 at the end of this chapter.
Law: s 103 of CA 2016.
REGISTER OF DIRECTORS, MANAGERS AND

SECRETARIES
¶8-300 Register of directors, managers and secretaries
Every company shall keep at its registered office a register of

directors, managers and secretaries and shall contain the following:
• the full name and any former name;
• residential address;
• service address;
• date of birth;
• business occupation; and
• identification.
“Identification” in the case of a person holding an identity card, means

the number of the identity card; in the case of a person without an
identity card, it means the particulars of passport or such other similar
evidence of identification as is available. “Director” includes an
alternate, substitute or local director.
In addition, the particulars of any other directorships of public
companies or subsidiaries of public companies which the directors
hold (which are not related to the company) must also be stated. If the
director is a director of one or more subsidiaries of the same holding
company, it shall be sufficient compliance for the name of the group of
companies to be disclosed.
The register shall be open for inspection of any member of the
company without charge and of any other person on payment of not
more than RM10 for each inspection.
A certificate of the Registrar specifying that any person was a director,
manager or secretary shall be admissible in evidence in any
proceedings and shall be prima facie evidence of the facts stated in
the certificate.
The company and every officer who contravene this section (s 57)
The company must notify the Registrar of any changes to the register
within 14 days by lodging a prescribed return e-form (“Notification of
change in the register of directors, managers and secretaries”) in
Schedule B of the MyCoID.
Law: s 57 of CA 2016.
REGISTER OF DIRECTORS’ SHAREHOLDINGS
¶8-320 Register of directors’ shareholdings
A register of directors’ shareholdings contains particulars of:
• any interests the directors have in shares in the company or
related companies;
• debentures or participatory interests in the company or its related

companies;
• rights or options which the directors and other person or persons

have in the acquisition or disposal of shares in the company or its
subsidiary; and
• contracts (being contracts under which a person has a right to call

or make delivery of shares, debentures or participatory interests
in the company or its subsidiary) of which any of the directors are
one of the parties or under which any of the directors may be
entitled to benefit.
A company shall enter the above particulars, including changes to a

director’s particulars, within three days after receiving the disclosure
notice from a director.
A company need not disclose in its register any particulars of shares
of director’s interest in a wholly owned subsidiary of a company which
is deemed to be a related corporation.
A company is not deemed to have notice of or to be put upon inquiry
as to the right of a person to or in relation to, a share in, debenture of
or participatory interest made available by the company.
The register shall be open for inspection by a member of the company
without charge and by any other person on payment of not more than
RM20 as the company requires.
Any person may request the company for a copy of its register or any
part of its register on payment of RM20 and the company shall send
the copy to that person within 21 days or such longer period as the
Registrar thinks fit from the day on which the request is received by
the company.
The Registrar may, at any time in writing, require a company to furnish
him with a copy of its register or any part of its register and the
company shall furnish the copy within seven days from the day on
which the requirement is received by the company.
At the commencement of each of its annual general meeting (AGM), a
public company shall produce its register to all persons attending the
meeting and keep it open and accessible during the meeting.
A “director” includes the spouse of a director who is not a director of
the company and a child of a director, including adopted child or
stepchild who is not a director of the company and the interest of the
spouse or child shall be treated as the interest of the director in the
shares or debentures of the company after the relevant facts have
come to the director’s knowledge.
See also ¶6-400.
Law: s 59 of CA 2016.
REGISTER OF SUBSTANTIAL
SHAREHOLDERS
¶8-340 Register of substantial shareholders
A substantial shareholder is a person (including a company) who has

an interest in one or more voting shares in the company and the
nominal amount of that share or the aggregate of the nominal amount
of those shares is not less than 5% of the aggregate of the nominal
amount of all voting shares in the company. This information is
particularly important where a shareholder’s acquisition is for the
purpose of gaining control of the company.
The register of substantial shareholders contains:
• the names of the company’s substantial shareholders; and
• the details of their interest in the shares of the company.
Under CA 2016, all listed companies and foreign companies or bodies

corporate which the Minister has declared to be companies for the
purposes of the Division must keep a register of substantial
shareholders. Public companies with a share capital but are not listed
must also keep this register.
Law: s 134 and 135 of CA 2016.
¶8-343 Required notifications
A notice in writing from the substantial shareholder must be given to

the company within three days for a listed public company, or five
days for non-listed public company in the following manner:
• when a shareholder becomes a substantial shareholder (s 137) —
in the e-form “Notice of interest of substantial shareholder” in
Schedule C of MyCoID;
• when there is any change in the interests of the substantial

shareholder (s 138) — in e-form “Change in the interests of
substantial shareholder” in Schedule C of MyCoID;
• when the substantial shareholder ceases to be one (s 139) — in e-

form “Notice of person ceasing to be a substantial shareholder” in
Schedule C of MyCoID.
At the same time any of the above forms is lodged, the substantial
shareholder must also give notice in e-form “Notice of interest of
substantial shareholder” in Schedule B of MyCoID.
In notifying the company of the changes, the substantial shareholder
must explain the circumstances causing the change in interest or the
reasons why he has ceased to be a substantial shareholder. Note that
in Malaysia there is no statutory provision regarding the inspection of
registers of substantial shareholders.
Any substantial shareholder who contravenes s 137, 138 and 139
exceeding RM 1 million and, in the case of a continuing offence, to a
further fine not exceeding RM1,000 for each day during which the
Upon an application by the person required to give notice, the
Registrar has the discretion to extend the time for giving the above
notifications.
Law: s 137, 138, 139, 140, 141 and 143 of CA 2016.
¶8-345 Failure to notify
Failure to give notice of these changes is an offence and the court on

application by the Registrar may make one or more of the following
orders:
• restrain the offender from disposing the shares which he has an
interest in or is entitled to be registered;
• restrict the offender’s voting rights;
• restrict the offender’s right to a dividend;
• direct the offender to sell all or any of the shares in question;
• direct the company not to register the transfer or transmission of

specified shares;
• disregard any exercise of voting or other rights attached to

specified shares in the company;
• for purposes of securing compliance with any other order made

under s 137, 138 or 139, an order directing the company or any
other person to do or refrain from doing a specified act.
Law: s 145 of CA 2016.
¶8-347 Definition of substantial holder

Section 136 states that a person has a substantial shareholding in a
company:
(a) if the person has an interest in one or more voting shares in the
company and the number or the aggregate number of such
shares is not less than 5% of the total number of all the voting
shares in the company; or
(b) being a company the share capital of which is divided into—

(i) two or more classes of the shares, if the person has an
interest in one or more voting shares include in one of those
classes; and
(ii) the number or the aggregate number of such shares is not

less than 5% of the aggregate number of the total number of
all the voting shares included in that class of shares.
A person who has a substantial shareholding in a company is a

substantial shareholder in such company.
Law: s 136 of CA 2016.
¶8-349 Company to keep and maintain register of

substantial shareholders
Section 144 stipulates the keeping of a register for substantial
shareholders as follows:
• A company shall keep a register and enter—
(a) the names of persons in alphabetical order from whom the
company receives a notice under s 137 and the information
given in the notice against each name entered in the register;
and
(b) the information given in such notice if the company receives

a notice under s 138 or 139.
• The register shall be kept at the registered office of the company

and shall be open for inspection by any member of the company
without charge and by any other person on payment RM10 for
each inspection or such lesser sum as the company requires.
• The Registrar may at any time in writing require the company to

furnish him a copy of the register or any part of the register within
14 days from the day on which the requirement is received by the
company.
For the e-forms in MyCoID related to substantial shareholders, see

Appendix 8.2 at the end of this chapter.
Law: s 144 of CA 2016.
REGISTER OF DEBENTURE HOLDERS

¶8-360 Register of debenture holders
Every company that issues debentures must keep a register of

debenture holders and copies of trust deed.
The register must contain the following information:
• names of debenture holders;
• addresses of debenture holders, and
• the amount of debentures held by each debenture holder.
The register of debenture holders is only open to inspection by

shareholders and debenture holders and not by any other member of
the company.
Section 60 provides for the requirement to keep a register of
debenture holders and copies of trust deed:
Subsection (1) states that every company which issues debentures,
not being debentures transferable by delivery, shall keep a register of
debenture holders.
Subsection (2) states that the company shall notify the Registrar of the
issuance of debentures in accordance with the requirements within 14
days from the date of issuance.
Subsection (3) states that the register shall, except if duly closed, be
open to the inspection of the registered holder of any debentures and
of any holder of shares in the company and shall contain particulars of
the names and addresses of the debenture holders and the amount of
debentures held by the debenture holders.
Subsection (4) states that for the purposes of this section, a register
shall be deemed to be duly closed during the periods not exceeding in
the aggregate 30 days in any calendar year if it is closed in
accordance with the provisions and period specified in the constitution
or in the debentures or debenture stock certificates, or in the trust
deed or other document relating to or securing the debentures.
Subsection (5) states that the company shall, at the request of every
registered holder of debentures and every shareholders in a company,
supply a copy of the register of the holders of debentures of the
company or any part of the register on payment of RM5 for every page
or part of the register required to be copied but the copy need not
include any particulars as to any debenture holder other than his
name and address and the debentures held by him.
Subsection (6) states that a copy of any trust deed relating to or
securing any issue of debentures shall be forwarded by the company
to a holder of those debentures at his request on payment of RM10 for
every page or such lesser sum as is fixed by the company, or, where
the copy has to be specially made to meet the request on payment of
RM5 for every page or part of the register required to be copied.
Subsection (7) states that a company which issues debentures may
cause to be kept in any place outside Malaysia a branch register of
debenture holders which shall be deemed to be part of the company’s
register of debenture holders and s 50 (“Register of members”); 51
(“Duty to notify of particulars and changes in the register of
members”); 52 (“Index of members of company”); 53 (“Branch register
of members”); 54 “(Place where register of members and index to be
kept”); 55 (“Inspection and closing of register of members and index”)
and 601 (“Registers and inspection of register”) of this Act shall apply
with necessary modification in relation to the keeping of a branch
register of debenture holders.
Subsection (8) states that the company and every officer who refused
an inspection, or refused to forward a copy within 30 days after a
request has been made under this section commit an offence.
For the e-forms in MyCoID related to debentures, see Appendix 8.3 at
the end of this chapter.
Law: s 60 of CA 2016.
INSTRUMENTS OF CHARGES AND REGISTER

OF CHARGES
¶8-380 Register of charges
Section 362 requires every company2 to keep at its registered office

the instrument creating any charge that requires registration. In the
case of a series of debentures, keeping of a copy of one debenture of
the series shall be sufficient.
The register of charges kept at the company’s registered office must
include all charges specifically affecting the company’s property and
all floating charges on the company’s undertakings or any property,
giving in each case:
(a) a short description of the property charged;
(b) the amount of the charge; and
(c) the names of the persons entitled to the charge except in the
case of securities to the bearer.
Inspection and copies
The instruments or copies of such instruments and the register of
charges kept under this section shall be open for inspection by:
(a) any creditor or member of the company for a fee of RM5; or
(b) any other person on payment of such fee not exceeding RM10
for each inspection as is fixed by the company.
On an application to a company, any person may be furnished with a

copy of any instrument of charge or debenture kept by the company
upon payment of a fee not exceeding RM10 as is fixed by the
company for every page, within three days of making the application.
The company and every officer who contravene s 362 commit an
RM50,000, and in the case of a continuing offence, to a further fine
not exceeding RM500 for each day during which the offence continues
after conviction.
Law: s 362 of CA 2016.
Footnotes
2 In regard to charges, “a company” includes a foreign
company but the Subdivision does not apply to a charge on
property outside Malaysia of a foreign company: s 364, CA
2016.
¶8-383 Registration of charges
Section 352 provides for the registration of charges as follows:

• A company that creates a charge over its property or any of its
undertakings shall register the charge with the Registrar within 30
days from the creation of the charge, together with the prescribed
fee. The lodgement will include a statement of particulars of the
charge (see ¶8-380) in the form and manner as may be
determined by the Registrar.
• If a company contravenes any of the above, the charge shall be

void against the liquidator and any creditor of the company, so far
as any security on the company’s property or undertaking is
conferred.
Registration of a charge is done by lodging the e-form “Statement of

particulars to be lodged with charge” in Schedule B of MyCoID and
paying an application fee as follows:
(a) private company and public company — RM300.00;
(b) foreign company — RM500.00.
In the case of registration of a series of debenture, the following

relevant e-form available in Schedule B of MyCoID is to be lodged
together with the applicable fee as stipulated above:
(a) “Statement containing particulars of a series of debentures”;
(b) “Particulars when more than one issue is made of debentures in

a series”.
Failure to register a charge created (other than those relating to land)

shall not affect the validity or limit the effect of the charge created.
The company and every officer who contravene by not registering a
charge or series of debenture, commit an offence and shall, on
conviction, be liable to a fine not exceeding RM50,000 and in the case
of a continuing offence, to a further fine not exceeding RM500 for
each day during which the offence continues after conviction.
Lodgement of documents made out of Malaysia
In regard to an instrument, deed, statement or other document
executed or made in a place out of Malaysia, time frame for
lodgement with the Registrar is extended by seven days or longer, if
permitted by the Registrar.
Registration of charges created outside Malaysia
If a charge created in Malaysia affects property outside Malaysia, the
statement of the particulars as determined by the Registrar may be
lodged for registration in accordance with s 352 even if further
proceedings may be necessary to make the charge valid or effectual
according to the law of the country in which the property is situated: s
354.
Registration of charges in series of debentures
When a series of debentures is created by a company, it must be
lodged with the Registrar within 30 days from the date of the execution
of the instrument containing the charge; or if there is no such
instrument after the execution of the first debenture of the series, a
statement containing the following particulars:
(a) the total amount secured by the whole series;
(b) the dates of the resolutions authorising the issue of the series
and the date of the covering instrument, if any, by which the
security is created or defined;
(c) a general description of the property charged; and
(d) the names of the trustee, if any, for the debenture holders.
If more than one issue is made of debenture in the series, particulars

of the date and amount of each issue shall be lodged within 30 days
from each issue, but an omission to do so shall not affect the validity
of the debentures issued.
If a commission, allowance or discount is given by a company to any
person in consideration of his subscribing or procuring the debentures
(or agreeing to do so), the amount or rate percentage of the
commission, allowance or discount given must be lodged, but
omission to do so shall not affect the validity of the debentures issued.
The deposit of any debentures as security for any debt of the
company shall not, for the purposes of subscription or procuring
subscription, be treated as the issue of the debentures at a discount.
Duty of company to register charges on property acquired
This duty is provided in s 356 for a local company and for a foreign
company as follows:
(a) a company acquires property which is subject to a charge and
which would, if it had been created by the company after the
acquisition of the property, have been required to be registered
under this Subdivision;
(b) a foreign company becomes registered in Malaysia and has prior

to such registration created a charge which would, if it had been
created by the company while it was registered in Malaysia, have
been required to be registered under this Subdivision; or
(c) a foreign company becomes registered in Malaysia and has prior

to such registration acquired property which is subject to a charge
of any such kind as would, if it had been created by the company
after the acquisition and while it was registered in Malaysia, have
been required to be registered under this Subdivision,
the company or foreign company shall lodge a statement of the

particulars of the charge as determined by the Registrar within 30
days from the date on which the acquisition is completed or the date
of the registration of the foreign company in Malaysia, as the case
may be, with the Registrar for registration.
Subsection (2) states that the company or a foreign company and
every officer of the company or the foreign company who contravene
the above requirements, commit an offence, and shall, on conviction,
be liable to a fine not exceeding RM50,000 and in the case of a
The particulars are to be lodged in the e-form “Statement of particulars
to be lodged with charge” in Schedule B of MyCoID and paying the
following fees:
(a) private company and public company — RM 300.00;
(b) foreign company — RM 500.00.
Law: s 352, 355, 356 and 363 of CA 2016.
¶8-386 Types of charges requiring registration

The types of charges requiring registration are:
(a) a charge to secure any issue of debentures;
(b) a charge on uncalled share capital of a company;
(c) a charge on shares of a subsidiary of the company which are

owned by the company;
(d) a charge or an assignment created or evidenced by an

instrument which if executed by an individual within Peninsular
Malaysia and affecting property within Peninsular Malaysia, would
be invalid or of limited effect if not filed or registered under the
Bills of Sale Act 1950;
(e) a charge on land wherever situate or any interest in the land;
(f) a charge on book debts of the company;
(g) a floating charge on the undertaking or property of a company;
(h) a charge on calls made but not paid;
(i) a charge on a ship or aircraft or any share in a ship or aircraft;
(j) a charge on goodwill, on a patent or licence under a patent, on a

trade mark, or on a copyright or a licence under a copyright; and
(k) a charge on the credit balance of the company in any deposit

account.
¶8-389 Endorsement of certificate of registration

It is important that a company endorses on every debenture forming
one of a series of debentures or certificate of debenture stock issued
by the company and the payment that secured by a charge registered
—
(a) a copy of the certificate of registration; or
(b) a statement that the registration has been effected and the date
of registration.
This, however, does not apply to any debenture or certificate of

debenture stock issued by the company before the charge was
registered.
If a company contravenes the above, every person who knowingly and
wilfully authorises or permits the delivery of any debenture or
certificate of debenture stock which is not endorsed as required
commits an offence.
Law: s 358 of CA 2016.
¶8-391 Assignment and variation of charge

If after a charge on property of a company has been created and
registered, a person other than the original charge holder becomes
the new holder of the charge, the new holder of the charge shall,
within 30 days and upon payment of a prescribed fee:
(a) Lodge with the Registrar a notice stating that he has become the
new holder of the charge and the notice shall contain the
information as may be determined by the Registrar; and
(b) Give a copy of the notice to the company.
If after a charge on the property of a company has been created and

registered there is a variation in the terms of the charge having the
effect of—
(a) varying the amount of the debt or liabilities, whether present or
prospective, secured by the charge; or
(b) prohibiting or restricting the creation of subsequent charges on
the property,
the company shall lodge with the Registrar a notice setting out the
particulars of the variation as may be determined by the Registrar
within 30 days from the occurrence of variation and upon payment of a
prescribed fee.
For the purposes of the variation, if the amount of debt or liability
secured by a registrable charge created by the company is—
(a) unspecified; or
(b) specified with further advances,
any payment or advance made by the charge holder to the company

in accordance with the terms of the charge shall not be regarded to be
a variation in the terms of the charge.
A reference to the charge holder in relation to a charge shall be
construed as a reference to the trustee for debenture holders if the
charge is constituted by a debenture or debentures and there is a
trustee for the debenture holders.
The new holder of the charge who contravenes this section commits
RM50,000 and, in the case of a continuing offence, to a further fine
not exceeding RM500 for each day during which the offence continues
after conviction.
For the e-forms in MyCoID relevant to charges, see Appendix 8.4 at
Law: s 359 of CA 2016.
¶8-394 Satisfaction and release of property from charge

Where a registered charge as been paid, satisfied, released or ceased
to form part of the company’s property or undertaking whether in
whole or in part, the company shall lodge with the Registrar the
particulars as may be determined by the Registrar of the fact within 14
days from the payment, satisfaction, release or cessation, and the
Registrar shall enter that particulars in the register.
The payment, satisfaction, release or cessation referred to in the
charge must be supported with sufficient evidence.
For the purposes of discharging the charge, any other person entitled
to the charge may lodge the particulars of the information.
For the e-forms in MyCoID relevant to satisfaction and release from
charge, see Appendix 8.5 at the end of this chapter.
Law: s 360 of CA 2016.
REGISTER OF INTEREST HOLDERS

¶8-400 Register of interest holders
With the enactment of the Interest Schemes Act 2016, it has been
clarified that a right does not constitute an interest in a share where
the right is being issued or offered to the public for subscription or
purchase of interest under the Interest Schemes Act 2016 [s 8(3)(a),
CA 2016]. Also, such right is held by the management company and
was issued for the purpose of an offer to the public under the Interest
Schemes Act 2016 [s 8(3)(c), CA 2016]. In view of this, the register of
interest holder shall be kept by the management company under the
Interest Schemes Act 2016.
Section 76 of the Interest Schemes Act 2016 stipulates that a
management company shall, in respect of each trust deed or
contractual agreement with which the management company is
concerned, keep a register of the interest holders and enter in the
register—
(a) the names and addresses of the interest holders;
(b) the extent of the holding of each interest holder and, if his
interest consists of a specific interest in any property, a
description of the property and its location is sufficient to identify
it;
(c) on the date the name of each person was entered in the register
as a holder;
(d) the date at which any person ceased to be a holder; and
(e) any other information as the Registrar thinks necessary.
A management company may keep and maintain the register of

interest holders at a place other than at its registered office but shall
notify the Registrar of that fact.
“Interest holder” means a person who participates in a “scheme”, in
relation to an interest, includes any contract, arrangement,
undertaking, enterprise, programmes or plans of actions relating to an
investment scheme, a time-sharing scheme or a recreational
membership scheme, regulated by the Interest Schemes Act 2016.
Nature of schemes
Section 4(1) of the Interest Schemes Act 2016 states a scheme shall
be either:
(a) an investment scheme;
(b) a recreational membership scheme;
(c) a time-sharing scheme; or
(d) a combination of such schemes.
A scheme is an investment scheme if the interest holder does not

have day-to-day control over the operation of the scheme, whether or
not the interest holder has the right to be consulted or to give direction
and that:
(a) the interest holder contributes money or money’s worth as a
consideration to acquire a right or interest to profits, assets or
realisation of any financial or business undertaking of the
scheme, whether the right or interest are actual, prospective or
contingent and are enforceable or not; or
(b) the contribution by the interest holder is pooled or used in
common enterprise, to produce financial benefits, or benefits
consisting of rights or interests in property for which the interest
holder is led to expect profits, rent or interest from the efforts of
the promoter of the enterprise or a third party.
A scheme is a recreational membership scheme if:

(a) in substance and irrespective of the form, the scheme involves
the investment of money in or under such circumstances that an
interest holder acquires or may acquire an interest or right in
respect of property which under or in accordance with the terms
of investment will or may, at the option of the investor, be used or
employed in common with any other interest or right in respect of
property acquired in or under like circumstances and includes an
entitlement to a right to use or enjoy any sport, recreational,
holiday or other related facilities for a consideration; and
(b) the scheme is to operate for a duration of not less than 12

months whether or not on a recurring basis.
A scheme is a time-sharing scheme if:

(a) an interest holder is or may become entitled to use, occupy or
possess for two or more periods during the period for which the
scheme, whether in Malaysia or elsewhere is to operate, property
to which the scheme relates; and
(b) the scheme is to operate for a period of not less than three
years.
A scheme referred to above may be in the form of Shariah compliant

scheme.
Prospectus
Section 152 of CA 2016 clarifies that the application of Subdivision 9
on “Prospectus” as follows:
• unless otherwise provided in CA 2016, this Subdivision shall apply
to an offer made to the public or any section of the public with
regards to—
(a) an offer or invitation in respect of shares or debentures
made by an unlisted recreational club; and
(b) an offer or invitation to deposit money with or lend money to

a corporation as specified in s 158 (“Invitations to the public
to lend money to or to deposit money with a corporation.
• this Subdivision shall not apply to an offer or invitation to subscribe

for or purchase any securities of a corporation, including any
excluded offer or excluded invitation as defined in the Capital
Markets and Services Act 2007.
The register is kept by the management company of not only an

unlisted recreational membership club, but any investment scheme
and any time-sharing scheme which shall, in respect of each deed
with which the company is concerned, keep a register of the holders of
interests under the deed.
The register of participatory interests contains the following
information on the interest holders:
• names;
• addresses;
• extent of holdings, and if his interest consists of a specific interest

in any property, a description of the property and its location
sufficient to identify it;
• the date at which the name of each person was entered in the
register as a holder; and
• the date at which any person ceased to be holder.
“Participatory interests” means a right to participate or an interest in:

• any profits, assets or realisation of any financial or business
undertaking or scheme whether in Malaysia or elsewhere;
• any common enterprise whether in Malaysia or elsewhere in which
the right/interest holder is led to expect profits, rent or interest
from the efforts of the promoter of the enterprise or a third party;
• any time-sharing scheme (where participants are entitled to use,

for two or more periods within the duration of the scheme,
undertaking, or enterprise whether in Malaysia or elsewhere is to
operate, property to which the scheme, undertaking or enterprise
relates) and that is to operate for a period of not less than three
years; or
• any investment contract that includes any contract, scheme or

arrangement which entitles the investor to the use of sports,
recreational, holiday or other related facilities at a fee (or
consideration) and for a duration of not less than 12 months
whether or not on a recurring basis (eg club memberships, etc).
The following interests are not regarded as participatory interests:

• any interest in shares or debentures of a corporation;
• any interest in or arising out of a policy of life insurance;
• any interest in a partnership agreement unless the agreement—

(i) relates to an undertaking, scheme, enterprise or investment
contract promoted by or on behalf of a person whose
ordinary business is or includes the promotion of similar
undertakings whether or not that person is a party to the
agreement; or
(ii) is an agreement, or is within a class of agreements

prescribed by regulations; or
(iii) any participatory interest in a unit trust scheme.
A participatory interest usually arises when a company enters into a

joint venture with a person, or when it sets up a unit trust. The person
who participates in these activities is an interest holder. A company
which carries out such activities must maintain a register of its interest
holders. This register is maintained in the same manner as the
register of members.
Law: s 152 of CA 2016; s 76 of the Interest Schemes Act 2016.
BRANCH REGISTERS
¶8-500 Branch registers
By virtue of s 568, companies having a share capital are allowed to

keep branch registers of members in any place outside Malaysia. No
limitation is placed as to where such register may be kept, but since
the establishment of the register in another country will constitute a
carrying on of business within that country, the foreign company or
recognised company provisions shall apply accordingly.
If a foreign company opens a branch register in Malaysia, the foreign
company shall lodge with the Registrar a notice of that fact specifying
the address where the register is kept within 14 days from the opening
of the branch.
If any change is made in the place where the register is kept or where
the register is discontinued, the foreign company shall lodge notice of
the change or discontinuance with the Registrar within 14 days of the
change or discontinuance.
The branch register must be kept in the same manner as the principal
register. Entries are deemed to be part of the principal register so
copies of every entry in the branch register must be sent to the office
where the principal register is kept as soon as possible after the entry
is made in the branch register.
A clear distinction must be drawn between shares registered on the
branch register and those registered on the principal register. No
transaction regarding shares in the branch register may be registered
in any other register while the branch register continues to exist.
When a branch register is discontinued, entries must be transferred
either to some other branch register kept by the company in the same
place or to the principal register.
In order for shares to be transferred from one register to another it is
usual for a completed form of request to be submitted to the company
in duplicate, accompanied by the relevant share certificate. A receipt
should be delivered to the member submitting the request which he
can exchange for a new certificate. The board (or a committee of the
board) should, pursuant to a schedule of requests, resolve that the
shares therein referred to be transferred to the branch register. The
schedule together with a copy of the form of request should be sent to
the person in charge of the branch register who should then enter the
shares transferred in the branch register, prepare and have sealed
(under the seal of use of such register) a new share certificate.
Law: s 568 of CA 2016.
FOREIGN COMPANIES
¶8-700 Provisions on foreign companies in CA 2016
In CA 2016, the operational matters and compliance requirements of a

foreign company are stipulated in Pt V (“Miscellaneous”), Div 1.
¶8-710 Prohibition on carrying on a business
Section 561 prohibits foreign companies from carrying on business in

Malaysia as follows:
• A foreign company shall not carry on a business in Malaysia
unless the foreign company is registered as a foreign company
under CA 2016.
• A foreign company shall not be regarded as carrying on business

in Malaysia for the reasons only that it carries on activities as
specified in Sch 13 of CA 2016 (“Activities not regarded as
carrying on business in Malaysia”) within Malaysia. “Carrying on
business” includes establishing or using a share transfer or share
registration office or administering, managing or otherwise dealing
with property situated in Malaysia as an agent, legal personal
representative, or trustee, whether by servants or agents or
otherwise.
• The foreign company and every officer who contravene this

section commit an offence.
Law: s 561 of CA 2016.
¶8-720 Registration of foreign company
This registration is different from that in s 14 for a local company.

Registration of foreign companies is provided in s 562 as follows:
• for the purpose of registration under CA 2016, a foreign company
shall provide to the Registrar the following information:
(a) the name, identification, nationality and the ordinary place of
residence of every shareholder in Malaysia and, if any of
these persons is a body corporate, the corporate name,
place of incorporation, registration number and the registered
office of the body corporate;
(b) the name, identification, nationality and the ordinary place of

residence of every person who is appointed as a director of
the foreign company in Malaysia;
(c) the list of its shareholders or members at its place of origin;
(d) in the case of a foreign company with share capital, the

details of class and number of shares at its place of origin;
(e) in the case of a foreign company limited without share

capital, the amount up to which the member undertakes to
contribute to the assets of the foreign company at its place of
origin in the event of its being wound up;
(f) the name and address of a person who is a resident in

Malaysia, who is appointed by the foreign company as its
agent under a memorandum of appointment or power of
attorney; and
(g) such other information that the Registrar may require.
• The application for registration shall be accompanied with a

statement by the agent of the foreign company confirming his
consent for the appointment.
• If the Registrar is satisfied that the requirements of CA 2016 have

been complied with and on payment of the prescribed fee, the
Registrar shall—
(a) register the foreign company and allocate a registration
number for the foreign company; and
(b) issue a notification of registration in the form and manner as

the Registrar may determine and the notification shall be
conclusive evidence that the requirements as to registration
have been complied with.
• For the purposes of registration as foreign company, “list of

shareholders or members” means a list of all of the shareholders
or members of the foreign company, provided that if the number
of its shareholders or members exceeds 500—
(a) a list of its 20 largest shareholders or members; and
(b) a certificate by the agent stating that the foreign company

has more than 500 shareholders or members and the full list
of shareholders or members is kept at the registered office of
the foreign company and also kept at the registered office of
the foreign company in Malaysia.
Law: s 562 of CA 2016.
¶8-730 Requirement for foreign companies to have agent

Section 563 of CA 2016 requires a foreign company to have an agent:
• A foreign company shall at all times appoint an agent in Malaysia
who, until he ceases to be an agent, shall—
(a) continue to be the agent of the foreign company;
(b) be answerable for all such acts, matters and things that are
required to be done by the foreign company under CA 2016;
and
(c) be personally liable to all penalties imposed on the foreign

company for any contravention of CA 2016 unless the agent
satisfies the court that the agent should not be liable.
• The foreign company shall notify the Registrar of any changes

relating to the registered particulars of agent within 14 days of the
change.
• A foreign company or its agent shall lodge with the Registrar a

notice in writing stating that the agent has ceased or will cease to
be the agent on a date specified in the notice.
• The agent in respect of whom the notice has been lodged shall
cease to be an agent—
(a) on the expiry of 21 days from the date of lodgement of the
notice with the Registrar or on the date of lodgement of the
memorandum of appointment of another agent, whichever is
the earlier; or
(b) if the notice states a date on which the agent is to cease

and the date is later than the expiration of that period, on that
later date.
• If an agent ceases to be an agent and the foreign company

continues to carry on business or has a place of business in
Malaysia, the foreign company shall appoint another agent within
21 days from the date the previous agent ceases to be an agent.
Law: s 563 of CA 2016.

¶8-740 Name of foreign company and its publication
Section 564 provides that a foreign company must publish its name
and registered number as follows:
• A foreign company shall be registered under the name as
registered in its place of origin subject to the name being
available under s 26 (“Availability of name”).
• Any change in the name of a foreign company shall not be

registered if the name is not available under s 26.
• No foreign company shall use in Malaysia any name other than

that under which it is registered.
• The foreign company and every officer or agent who contravene

this section commit an offence and shall, on conviction, be liable
Obligation to state name of foreign company, whether limited,

and place where incorporated
• A foreign company shall—
(a) conspicuously exhibit its name and the place where the
foreign company is formed or incorporated in romanised
letters outside its registered office and every place of
business established by it in Malaysia;
(b) cause its name, company number and the place where the
foreign company is formed or incorporated to be stated in
legible romanised letters on the following:
(i) its business letters, notices and other official
publications, including in electronic medium;
(ii) its websites;

(iii) its bills of exchange, promissory notes, endorsements
and order forms;
(iv) cheques purporting to be signed by or on behalf of the

company;
(v) orders, invoices and other demands for payment,

receipts and letters of credit purporting to be issued or
signed by or on behalf of the company; and
(vi) all other forms of its business correspondence and

documentation.
(c) if the liability of its members is limited, unless the last word
of its name is the word “Berhad” or “Limited” or the
abbreviation “Bhd.” or “Ltd.”, cause notice of that fact—
(i) to be stated in legible characters in every prospectus
issued by the foreign company and all circumstances
referred to in para (b); and
(ii) except in the case of a banking corporation, to be

exhibited outside its registered office and every place of
business established by the banking corporation in
Malaysia.
• The requirement relating to the exhibition or statement of its name

shall be deemed not to have been complied with if the name of a
foreign company is indicated in characters or in other way than by
the use of romanised letters—
(a) on the outside of its registered office;
(b) on the outside of any place of business established by it in

Malaysia; or
(c) on any of the documents referred to above, unless the name

of the foreign company is exhibited outside its registered
office or place of business or stated on the document in
romanised letters, at least of equal size with all of the
characters exhibited or stated on the relevant office, place of
business or document.
• “Company number” means the number allocated by the Registrar

to a foreign company on its registration.
Law: s 564 and 565 of CA 2016.
¶8-750 Requirement to have a registered office
Section 566 stipulates the requirement to have a registered office as

follows:
Subsection (1) states that a foreign company shall, at all times, have a
registered office within Malaysia—
(a) to which all communications and notices may be addressed; and
(b) which shall be open and accessible to the public during ordinary
business hours.
Subsection (2) states that every foreign company shall, within 30 days
from it establishing a place of business or commencing to carry on
business within Malaysia, lodge with the Registrar of the situation of
its registered office in Malaysia and, unless the office is open and
accessible to the public during ordinary business hours, the days and
hours during which it is open and accessible to the public.
Law: s 566 of CA 2016.
¶8-760 Return to be filed where documents of foreign

company are altered
Any changes or alterations of documents of a foreign company must
be filed with the Registrar as stipulated in s 567 in the following
manner:
• If any change or alteration is made in—
(a) the charter, statutes, constitution, memorandum or articles
of the foreign company or other instrument lodged with the
Registrar;
(b) the directors of the foreign company or in the name or

address of any director;
(c) the agent of the foreign company or the name or address of

any agent;
(d) the situation of the registered office of the foreign company

in Malaysia or the days or hours during which the registered
office of the foreign company is open and accessible to the
public;
(e) the address of the registered office of the foreign company

in its place of incorporation or origin;
(f) the name of the foreign company; or
(g) the powers of any directors resident in Malaysia who are

members of the local board of directors of the foreign
company, the foreign company shall, within 14 days or within
such further period as the Registrar in special circumstances
allows after the change or alteration, lodge with the Registrar
particulars of the change or alteration and such documents
as may be determined by the Registrar.
• The Registrar shall register the change or alteration as provided

for above upon receipt of the particulars of the change or
alteration.
• If a foreign company increases its share capital or authorised

share capital, the foreign company shall lodge with the Registrar
notice of the amount from which and the amount to which the
share capital has been increased within 30 days or within such
further period as the Registrar in special circumstances allows
after the increase.
• If a foreign company not having a share capital increases the
number of its members beyond the registered number, the foreign
company shall lodge with the Registrar notice of the increase
within 30 days or within such further period as the Registrar in
special circumstances allows after the increase was resolved on
or took place.
• If any order is made by a court under any law which corresponds

to s 366 (“Power of court to order compromise or arrangement
with creditors and members”) in force in the country in which a
foreign company is incorporated, the foreign company shall lodge
with the Registrar an office copy of that order within 30 days or
within such further period as the Registrar in special
circumstances allows after the order was made.
Law: s 567 of CA 2016.
¶8-770 Accounting requirements of foreign companies

Accounts to be kept by foreign companies
Every foreign company must keep accounts. Section 574 provides as
follows:
• Every foreign company, the directors and managers shall cause—
(a) to be kept accounting and other records in Malaysia as will
sufficiently explain the transactions and financial position of
the foreign company, arising out of its operations in Malaysia;
and
(b) the records of accounts are to be kept in such a manner as

to enable the records to be conveniently and properly
audited.
• The records referred to above shall be audited by a person

approved under s 263 (“Company auditors to be approved by
Minister charged with responsibility for finance”) in relation to
approved company auditor.
• Every foreign company, the directors and managers of the foreign
company shall cause appropriate entries to be made in the
accounting and other records within 60 days of the completion of
the transactions to which the entries relate.
• Subsections 245(3), (4), (7) and (8)3 shall apply to foreign

companies.
Lodgement of financial statements

The lodgement of financial statements by a foreign company is
provided in s 575 of CA 2016:
Subsection (1) states that subject to this section, a foreign company
shall, within two months of its AGM, lodge with the Registrar a copy of
its financial statement made up to the end of its last financial year in
such form and containing such particulars and accompanied by copies
of such documents as the company is required to annex, attach or
send with its financial statement by the law for the time being
applicable to that company in the place of its incorporation or origin,
together with a statutory declaration in the prescribed form verifying
that the copies are true copies of the documents so required.
Subsection (2) states that the Registrar may, if he is of the opinion that
the financial statement and other documents referred to above do not
sufficiently disclose the company’s financial position, require the
company to lodge a financial statement within such period, in such
form and containing such particulars and to annex thereto such
documents as the Registrar by notice in writing to the company
requires, but this subsection does not authorise the Registrar to
require a financial statement to contain any particulars or the company
to annex, attach or to send any documents that would not be required
to be furnished if the company were a public company incorporated
under CA 2016.
Subsection (3) states that the foreign company shall comply with the
requirements set out in the notice.
Subsection (4) states that where a foreign company is not required by
the law of the place of its incorporation or origin to hold an AGM and
prepare a financial statement, the foreign company shall prepare and
lodge with the Registrar a financial statement within such period, in
such form and containing such particulars and to annex such
documents as the directors of the foreign company would have been
required to prepare or obtain if the foreign company were a public
company incorporated under CA 2016.
Subsection (5) states that in addition to the financial statement and
other documents required to be lodged with the Registrar in relation to
the above requirements, a foreign company shall lodge with the
Registrar—
(a) a duly audited financial statements and other documents
required to be attached with the financial statements; and
(b) a duly audited statement showing the foreign company assets

used in and liabilities arising out of its operations in Malaysia as at
the date to which its financial statement was made up, which so
far as is practicable, complies with the applicable approved
accounting standards and which gives a true and fair view of the
foreign company’s operations in Malaysia for the last preceding
financial year of the company.
Subsection (6) states that subject to sub-s (5), the foreign company
shall be entitled to make such allotment of expenses incurred in
connection with the operations or administration affecting both
Malaysia and elsewhere and to add such notes and explanations as in
its opinion are necessary or desirable in order to give a true and fair
view of the profit or loss of its operations in Malaysia.
Subsection (7) states that the Registrar may waive compliance with
applicable approved accounting standards in relation to any foreign
company if the Registrar is satisfied that—
(a) it is impractical to comply with this subsection having regard to
the nature of the company’s operations in Malaysia;
(b) it would be of no real value having regard to the amount

involved;
(c) it would involve expense unduly out of proportion to its value; or
(d) it would be misleading or harmful to the business of the

company or to any company which is deemed by virtue of s 7
(“When corporations deemed to be related to each other”) to be
related to the company.
Subsection (8) states that financial statements shall be deemed to

have been duly audited for the purposes of applicable approved
accounting standards if the financial statement is—
(a) accompanied by a report by an approved company auditor in
accordance with s 266 (“Powers and duties of auditors”); and
(b) accompanied with a statutory declaration by the agent or, where

the agent is not primarily responsible for the financial
management of the company, by the person so responsible
setting forth his opinion as to the correctness or otherwise of the
statement and profit and loss account.
Law: s 574 and 575 of CA 2016.
Footnotes
3 Section 245(3) requires accounting and other records to be
retained for seven years; sub-s (4) requires accounting and
other records to be kept at registered office or at such other
places; sub-s (7) empowers the Registrar to request for
accounting and other records kept outside Malaysia; and
sub-s (8) permits the court to order the accounting and
other records of the company to be open for inspection by
auditors.
¶8-780 Lodgement of annual return
Like local companies, a foreign company is required to lodge its

annual return within 30 days of its registration in Malaysia. Section
576 provides as follows:
• A foreign company shall lodge with the Registrar, once in every
calendar year, an annual return in the form and manner as the
Registrar may determine.
• The annual return shall contain the following particulars:

(a) the address of its registered office;
(b) the address of its business place including branch, if any;
(c) the address at which its register of members is kept, if not

kept at the registered office;
(d) the address at which its financial records are kept, if not
kept at the registered office;
(e) in the case of a company with a share capital, the summary

of its shareholding structure, including debentures;
(f) the total amount of its indebtedness in Malaysia;
(g) the particulars of directors, officers, auditors and agents in

Malaysia;
(h) the list of its shareholders or members; and
(i) such other information as the Registrar may require from

time to time.
• The return shall be lodged not later than 30 days from the
anniversary of its registration date or within such further period as
the Registrar in special circumstances allows.
Law: s 576 of CA 2016.
¶8-790 Service of notice

Any document required to be served on a foreign company shall be
sufficiently served—
(a) if the document is addressed to the foreign company and left at
or sent by post to its registered office in Malaysia;
(b) if the document is addressed to an agent of the company and

left at or sent by post to his registered address; or
(c) in the case of a foreign company which has ceased to maintain a

place of business in Malaysia, if the document is addressed to the
foreign company and is left at or sent by post to its registered
office in the place of its incorporation or origin.
Law: s 577 of CA 2016.
¶8-800 Power of foreign company to hold immovable

property
Subject to and in accordance with any written law, a properly
registered foreign company shall have the power to hold any
immovable property in Malaysia.
Law: s 579 of CA 2016.
¶8-810 Cessation of foreign company’s business in

Malaysia
When a foreign company stops doing business in Malaysia, s 578
provides for the cessation of business in Malaysia as follows:
Subsection (1) states that if a foreign company ceases to have a place
of business or to carry on business in Malaysia, the foreign company
shall, within seven days from ceasing, lodge with the Registrar notice
to that fact, and as from the day on which the notice is lodged, its
obligation to lodge any document, other than a document that ought to
have been lodged before that day, shall cease.
Subsection (2) states that the Registrar shall remove the name of that
foreign company from the register upon the expiration 12 months after
the lodging of the notice.
Subsection (3) states that if a foreign company goes into liquidation or
is dissolved in its place of incorporation or origin—
(a) any person who, immediately prior to the commencement of the
liquidation proceedings, was an agent shall, within 30 days from
the commencement of the liquidation or the dissolution or within
such further time as the Registrar in special circumstances
allows, lodge or cause to be lodged with the Registrar notice of
that fact and, when a liquidator is appointed, notice of his
appointment; and
(b) the liquidator shall have the powers and functions of a liquidator
until a liquidator for Malaysia is duly appointed by the court.
Subsection (4) states that a liquidator of a foreign company appointed

for Malaysia by the court or a person exercising the powers and
functions of a liquidator—
(a) shall, before any distribution of the assets of the foreign
company is made, by advertisement in a newspaper widely
circulated in each country where the foreign company had been
carrying on business prior to the liquidation if no liquidator has
been appointed for that place, invite all creditors to make their
claims against the foreign company within a reasonable time
before the distribution;
(b) shall not pay out any creditor to the exclusion of any other
creditor of the foreign company without obtaining an order of the
court except as otherwise provided in sub-s (8); and
(c) shall, unless otherwise ordered by the court—

(i) only recover and realise the assets of the foreign company in
Malaysia; and
(ii) subject to sub-s (8), pay the net amount so recovered and
realised to the liquidator of that foreign company for the place
where it was formed or incorporated after paying any debts
and satisfying any liabilities incurred in Malaysia by the
foreign company.
Subsection (5) states that where a foreign company has been wound
up, so far as its assets in Malaysia are concerned and there is no
liquidator for the place of its incorporation or origin, the liquidator may
apply to the court for directions as to the disposal of the net amount
recovered under sub-s (3).
Subsection (6) states that upon receipt of a notice from a compliance
officer that the foreign company has been dissolved, the Registrar
shall remove the name of the company from the register.
Subsection (7) states that where the Registrar has reasonable cause
to believe that a foreign company has ceased to carry on business or
to have a place of business in Malaysia, the provisions of this Act
relating to the striking off the register of the names of defunct
companies shall, with such modifications as are necessary, extend
and apply accordingly.
Subsection (8) states that priorities and ranking of payments in
liquidation of a local company shall apply to a foreign company wound
up or dissolved under this section as if for references to a “company”
were substituted references to a “foreign company”.
For the e-forms in MyCoID relevant to foreign companies, see
Appendix 8.5 at the end of this chapter.
Law: s 578 of CA 2016.

1. What registers must be kept for a private company as compared
to a public company?
2. Why do you think the law requires registers to be kept?
3. Who is a substantial shareholder and what are his responsibilities

relating to disclosures?
4. Describe the responsibilities of a foreign company as regard to
the maintenance of branch registers.
5. Explain what the meaning of an interest scheme under the

Interest Schemes Act 2016.
¶8-1001 Appendix 8.1:

E-forms in MyCoID relevant to share registers
Schedule B —
Item Section Particulars of e-form in When to lodge Fee

No.
16 53(2) Notification where branch Within 30 days NIL
register is kept or change of opening or
in the address change
17 55(3) Notice to close register of At least 14 days NIL
members to registrar
NOTE:
As these are e-forms available in MyCoID, they should be downloaded and lodged
electronically.
¶8-1002 Appendix 8.2:
E-forms in MyCoID for lodgement by substantial holders

Schedule B —
Item Section Particulars of the When to lodge Fee

No e-form
34 141 Notice of Interest of Listed company: NIL
Substantial within 3 days
Shareholder Others: within 5
days
Schedule C —
Item Section Particulars of the When to lodge Fee

No e-form
3 137 Notice of Interest of Listed company: NIL
Substantial within 3 days
Shareholder Others: within 5
days
4 138 Change in Interest Same as above NIL
of Substantial
Shareholder
5 139 Notice of Person Same as above NIL
Ceasing to be a
Substantial
Shareholder
NOTE:
For each service of notice in Schedule C, a copy in Schedule B
shall also be submitted to the Registrar on the day (s 141).
¶8-1003 Appendix 8.3:
E-form in MyCoID related to debentures

Schedule B —
Item No Section Particulars of the e- When to FEE

form lodge
19 60(2) Notification of Within 14 days NIL
issuance of from date of
debentures issue
¶8-1004 Appendix 8.4:
E-forms in MyCoID relevant to charges

Schedule B —
Item Section Form When to Fee

No lodge
60 359(1) Notice of 30 days of (a) Private/public
assignment of becoming company:
charge new holder RM100.00
(b) Foreign
company:
RM300.00
61 359(2) Notice of variation 30 days of Same as above
in terms of charge variation
¶8-1005 Appendix 8.5:
E-forms in MyCoID relevant to satisfaction and release from

charge
Schedule B —

No lodge
document
62 360(1) Memorandum Within 14 (a)
where property or days of Private/public
undertaking is payment, company:
released from satisfaction, RM50.00
registered charge release or (b) Foreign
or has ceased to cessation company:
form part of RM150.00
company’s
property or
undertaking
63 360(1) Memorandum of Within 14 (a)
satisfaction of days of Private/public
registered charge payment, company:
satisfaction, RM50.00
release or (b) Foreign
cessation company:
RM150.00
64 360(2) Statutory Within 14 NIL
declaration days of
verifying payment,
memorandum satisfaction,
release or
cessation
65 360(2) Evidence of Within 14 NIL
satisfaction of days of
charge/release or payment,
property or part of satisfaction,
property from release or
charge cessation
¶8-1006 Appendix 8.6:
E-forms in MyCoID related to foreign companies

(1) In relation to changes/alterations
Schedule B —

No lodge
96 567(1) Particulars of change or Within 14 Change
alteration relating to days of of name:
foreign company alteration of RM250
change
97 567(3) Notice of increase of Within 30 Nil
share capital by foreign days
company
(2) In relation to lodgement of financial statements

Schedule B —
Item Section Form When to Filing

No lodge Fee
98 575(1) Statutory declaration Within 2 RM200.00
verifying financial months of its
statement of foreign AGM
company
99 575(7) Application for waiver – –
by foreign company
(3) In relation to lodgement of annual return

Schedule B —

No lodge
100 576 Annual return of Within 30 RM500.00
foreign company days of
anniversary
of
registration
(4) In relation to cessation of business in Malaysia

Schedule B —

No lodge
101 578(1) Notice of foreign Within 7 days NIL
company of cessation ofcessation
of business
102 578(3) Notice of agent of Within 30 NIL
foreign company of days of event
liquidator or happening
dissolution of
company
CHAPTER 9: SHAREHOLDERS
AND MEETINGS
Shareholders and members ¶9-000
Duties and rights of shareholders ¶9-100
Company meetings ¶9-300
Minutes ¶9-400
Quorum ¶9-500
Notices of meetings ¶9-600
Resolutions ¶9-700
SHAREHOLDERS AND MEMBERS

¶9-000 Definition of member
The rights and duties of shareholders and members relating to the law
and practice of company meetings are found in Pt III (“Management of
Company”), Div 5 (“Meetings”) of Companies Act 2016 (CA 2016))
and also in the company’s constitution, if a company has one. Certain
areas of the law such as those concerning deceased shareholders
and deceased legal personal representatives of shareholders are
covered by the Probate and Administration Act 1959.
The terms “shareholder” and “member” are in most contexts used
interchangeably. However, there are exceptions to this:
• a member is not called a “shareholder” in a company limited by
guarantee and does not have a share capital;
• a shareholder is not regarded as a member of the company if he
had purchased the shares of the company but is not yet
registered in the company’s register of members.
A shareholder who is not a member cannot exercise any member’s

rights. However, he will also not be liable for any member’s duties and
responsibilities.
Definition of member under CA 2016
Section 2(1) of the Act defines a “member” to mean:
(a) in the case of a company limited by shares, a person whose
name is entered in the register of members as the holder for the
time being of one or more shares in the company; or
(b) in the case of a company limited by guarantee, a person whose

name is entered in the register of members.
¶9-010 A company cannot be a member of itself

A company cannot purchase or deal in its own shares and it cannot be
a member of itself (Trevor v Whitworth). It also cannot be a member of
its holding company. Note that a transaction in which a company
obtains a loan to purchase shares in another company on the security
of the latter company’s land does not amount to the latter company
financing the purchase of its own shares (Cheah Theam Swee & Anor
v Overseas Union Bank & Ors).
However, a listed company in Bursa Malaysia is permitted to buy back
its own shares from the stock market, and the directors are permitted
to decide whether to cancel all the shares bought back or keep part as
treasury shares and part as cancelled shares. But these buyback
shares are to be called “treasury shares” which are to be treated as
“suspended” shares that cannot be counted as part of the issued
capital, has no voting power and share of distribution of profits.
Law: s 127(4)(b), (8) and (9) of CA 2016.
¶9-020 Essential requirements of a company
Section 9 states that the essential requirements of a company are:

(a) a name;
(b) one or more members, having limited or unlimited liability for the
obligations of the company;
(c) in the case of a company limited by shares, one or more shares;

and
(d) one or more directors.
¶9-025 Restrictions on membership
In the case of a company having only one member, one member

personally present at a meeting shall constitute a quorum.
An unincorporated body should not be registered as a member of a
company. A trustee or official of such a body has to be registered in
his own name. Likewise, a partnership would not be registered as a
member since shares must be held by the partners jointly without
reference to the partnership.
The CA 2016 prohibits unincorporated associations by stipulating that
no association or partnership consisting of more than 20 persons shall
be formed for the purpose of carrying on any business for profit,
unless it is incorporated as a company under CA 2016, or is formed
under any other written laws.
Law: s 13 and 328 of CA 2016.
¶9-030 Infant shareholders
Legally it is doubtful whether an infant should be entered as a member

of a company. In making a decision as to whether to register an infant
as a member, a company should consider the following points:
• An infant is a person under the age of 18 years, as defined under
the Age of Majority Act 1971.
• An infant maybe allowed to hold shares. There is no legal

prohibition against an infant owning shares, being entered on the
share register and voting at a meeting, unless there are
contractual obligations under contract law.
• A company has a right to refuse to accept an infant as a transferee

and should do so when the shares are not fully paid up [Re
Asiatic Banking Corporation (Symon’s case)].
• A transfer of shares to an infant is voidable and can be approved

when he comes of age (Cork & Brandon Railway Co v Cazenove;
Lumsden’s case).
• Until he repudiates the shares, an infant is liable for calls (North

Western Railway Co v McMichael).
• An infant may repudiate a contract to take shares within a

reasonable time of his reaching majority (Re Laxon & Co).
• A company may set aside a transfer on learning that the transferee

is an infant even though it has already registered the infant as a
member [Re Asiatic Banking Corporation [Symon’s case)].
¶9-040 Substantial shareholders

A substantial shareholder is one who has an interest in one or more
voting shares, the nominal value of which is not less than 5% of the
nominal value of all voting shares in the company. If a company’s
share capital is divided into classes, the holding of 5% of all voting
shares of one class constitutes a substantial shareholding. Note that
“interests” here embraces both equitable and legal interests. It follows
that a substantial shareholder can be a person holding the beneficial
title to the shares.
Persons who are substantial shareholders in listed companies are
required to disclose their shareholdings to the company. The company
is in turn obliged to keep a register of its substantial shareholders.
Substantial shareholders of listed public companies must also inform
the said company, Bursa Malaysia and the Securities Commission of
the following:
• when they become a substantial shareholder;
• when there are changes in their interests; and
• when they cease to be substantial shareholders.
The above information should be given to the said company within

three days after the occurrence of the event for a company listed with
the Stock Exchange, and five days for a non-listed public company: s
37(3), 138(1) and 139(1).
Law: s 135, 136, 137, 138 and 139 of CA 2016.
¶9-050 Deceased shareholders

When a registered shareholder dies, his shareholdings vest in his
personal representative (Look Chun Heng & Anor v Asia Insurance Co
Ltd). Sections 109 and 110 provide for the registration of transmission
of shares and the obligations of trustees, executor or administrator of
estate of deceased person’s shares. For a company that has a
constitution, the constitution will usually state that when a member
dies, the survivor (where the deceased was a joint holder), and the
legal representative of the deceased (where the deceased was a sole
shareholder), are the only persons recognised by the company as
having any title to his interest in the shares but nothing herein
contained shall release the estate of a deceased joint holder from any
liability in respect of any share which had been jointly held by him with
other persons.
Where the deceased shareholder was domiciled in the State in which
the company is incorporated and has its share register and where the
estate is of a size requiring a grant of representation:
• the estate solicitors must notify the company and request
particulars of the said holding at death;
• a dividend declared and paid after notification of death must be

paid to the “deceased” holder or “the estate of the late” holder and
forwarded to the address shown on the register.
• the grant of probate or letters of administration must be proved by

production to the company of the probate of the will or letters of
administration. Note that the company is forced to accept the
probate of the will or the letters of administration notwithstanding
anything in its articles as sufficient evidence of the grant;
• depending on whether or not the constitution provide for it, there

will be a transmission of shares to the deceased’s representative.
Law: s 109 and 110 of CA 2016.
¶9-060 Transmission of shares

Whether or not there is a need for a transmission of shares to the
deceased’s representative after the death of a shareholder will depend
on the company’s constitution. Some company constitutions provide
that all shares of a deceased member be transmitted to the legal
representative of the deceased. However, s 109 provides for the
registration of transmission of shares of a deceased shareholder. For
companies with a constitution, the clauses providing for transmission
requirements are normally stated in Clause 26 of the constitution.
Note that where the shares of a deceased shareholder are transferred
by one co-executor without the knowledge or approval of the other,
that transfer is valid and a company must register it. This is because
co-executors are regarded as individual persons. The acts of any of
them alone, for the purposes of administration, are deemed to be the
acts of all (Look Chun Heng & Anor v Asia Insurance Co Ltd).
Registration of transmission of shares or debentures
Section 109 stipulates the registration of transmission of shares or
debentures as follows:
Subsection (1) states that this section applies if the right to shares or
debentures is transmitted to a person by operation of law and the
person notifies the company in writing that the person wishes to be
registered as a shareholder or debenture holder of the company in
respect of the shares or debentures.
Subsection (2) states that notwithstanding sub-s (1), if the person
referred to in that subsection elects to have another person registered,
he shall testify his election by executing to that person a transfer of the
share or debenture, as the case may be.
Subsection (3) states that all limitations, restrictions and provisions of
this Subdivision relating to the right to transfer and the registration of
transfers of shares or debentures referred to in sub-s (2) shall be
applicable to any notice or transfer as if the death or bankruptcy of the
shareholder or debenture holder had not occurred and the notice or
transfer were signed by that shareholder or debenture holder.
Subsection (4) states that any document which is by law sufficient
evidence of probate of the will or letters of administration of the estate
of a deceased person having been granted to a person shall be
accepted by the company as sufficient evidence of the grant.
Subsection (5) states that the company shall register the person as a
shareholder or debenture holder of the company in respect of the
shares or debentures within 60 days from receiving the notification.
Subsection (6) states that the registration of transmission of shares or
debentures under this section shall entitle the registered holder to the
same dividends and other advantages and to the same rights in
relation to meetings of the company or to voting or otherwise.
Subsection (7) states that for the purposes of sub-s (1), in case of the
death of a member, the persons recognised as having any title to his
interest in the shares or debentures shall be—
(a) where the deceased was a sole holder, the legal personal
representatives; and
(b) where the deceased was a joint holder, the survivor, but nothing
in this section shall release the estate of a deceased joint holder
from any liability in respect of any share which had been jointly
held by him with other persons.
Law: s 109 of CA 2016.
¶9-065 Limitation of trustee, executor or administrator of

estate
Section 110 provides for the limitation of liability of trustee, etc,
registered as owner of shares as follows:
Subsection (1) states that any trustee, executor or administrator of the
estate of any deceased person who was registered in a register or
branch register kept in Malaysia as the holder of a share in any
corporation may become registered as the holder of that share as
trustee, executor or administrator of that estate and shall, in respect of
that share, be subject to the same liabilities and no more as he would
have been subject to if the share had remained registered in the name
of the deceased person.
Subsection (2) states that any trustee, executor or administrator of the
estate of any deceased person who was beneficially entitled to a
share in any corporation, being a share registered in a register or
branch register kept in Malaysia may, with the consent of the
corporation and of the registered holder of that share, become
registered as the holder of the share as trustee, executor or
administrator of that estate and shall, in respect of the share, be
subject to the same liabilities and no more as he would have been
subject to if the share had been registered in the name of the
deceased person.
Subsection (3) states that shares in a corporation registered in a
register or branch register kept in Malaysia and held by a trustee in
respect of a particular trust may, with the consent of the corporation,
be marked in the register or branch register in such a way as to
identify the shares as being held in respect of the trust.
Subsection (4) states that except as provided in this Act, no notice of
any trust expressed, implied or constructive shall be entered on a
register or branch register or be receivable by the Registrar and no
liabilities shall be affected by anything done under the above
paragraphs or under the law of any other place which corresponds to
this section and the corporation concerned shall not be affected with
notice of any trust by anything so done.
Law: s 110 of CA 2016.
¶9-070 Deceased joint-holder

When shares are held jointly and one of the joint owners dies, the
constitution may provide that the survivor shall be the only person
recognised by the company as having any title to the deceased
member’s interest in the shares. This is also provided in s 109(7)(b),
which also states that the estate of the deceased joint holder shall not
be released from any liability in respect of any share which had been
jointly held by him with other persons.
When this happens the surviving joint-holder of the shares shall
furnish the company with:
• proof of death (by certificate);
• production of the probate or letter of administration.
Law: s 109 of CA 2016.
¶9-080 Deceased legal personal representative

There are several possibilities as to what may happen when an
executor or administrator dies before completing his functions:
• If he was the sole executor, his executor has power to complete
the functions (unless there is a provision to the contrary in the will
of the deceased shareholder).
• If he was the sole administrator, the letters of administration would

lapse and a new grant must be sought.
• If he was one of two or more executors, the surviving executor (or

executors) may finalise the estate on proof of the death of the
deceased executor.
• If he was one of two or more administrators, the surviving

administrator (or administrators) may finalise the estate on proof
of the death of the deceased administrator.
Law: s 14(1), Probate and Administration Act 1959.
DUTIES AND RIGHTS OF SHAREHOLDERS

¶9-100 Role of shareholders
Although shareholders are the owners of the company, they, however,

have no property rights over the company’s property because the
company is a separate legal entity from its members.
However, the following areas of company law encapsulate some of
the rights granted to and obligations imposed on shareholders:
• Any alteration, revocation or adoption of the constitution of the
company;
• Election and removal of directors;
• Attending and voting at the company’s annual general meetings

(AGMs) and general meetings;
• Appointment and removal of auditors;
• Receiving and adopting annual audited financial statements and

reports;
• Rights as to oppression of the minority;
• Notification by substantial shareholders in public companies;
• Rights to information of the company, eg prospectuses, proposed

resolutions, etc;
• Rights to transfer of shares/variation of rights;
• Rights to vote on capital reduction;
• Voting at schemes of arrangements/take-overs, winding up and

rescue mechanism;
• Obligation to pay calls on shares.
Unlike directors of a company, there is no obligation for shareholders

to declare conflicts of interest, if any, because they are no involved in
management and administrative powers.
¶9-105 Attend and participate in general meetings

At the AGM of a public company, shareholders participate in:
• discussion on audited financial statements and reports;
• the election/re-election of the directors on their retirement by

rotation;
• the remuneration of directors.
Frequently, a chairman receiving a question on the accounts after they

have been accepted will rule such a question out of order.
At general meetings, shareholders participate in:
• any change of name, object clauses or amendments;
• revocation or adoption of constitution;

• any increases by allotment relating to issue of new shares; and
• other matters that affects the company’s business and financial

well-being.
Generally, voting on matters discussed in general meetings is by way

of show of hands in the first instance, but a poll can be called for by a
certain number of those present. Shareholders who are unable to
attend general meetings are entitled to grant a proxy for some other
person to attend and vote on their behalf.
Law: s 32, 340, 619(3) of CA 2016.
¶9-120 Right to require directors to convene a meeting

Shareholders have a right to requisition a meeting. Directors of a
company have to convene an extraordinary general meeting where
one has been requisitioned by members holding not less than 10% of
the paid-up capital or, in a case where the company does not have a
share capital, members representing not less than 5% of the total
voting rights of all members who have a right to vote at general
meetings on the date of the deposit of the requisition. The meeting
must be held as soon as is practicable, but not more than two months
after the company receives the requisition. If the directors do not call
for the meeting within 21 days after the date of deposit of the
requisition, the requisitionists may themselves sign the notice for
calling of the meeting.
A lender of money to whom more than 10% of the shares in a
company have been pledged and who registers the pledged shares in
his own name, is also entitled to requisition an extraordinary general
meeting (EGM). The express right to call for an extraordinary general
meeting need not be looked for in the pledge documents. In a case
held it was decided by the court that the lender has all the rights of a
registered shareholder vested in it by virtue of the CA and the Articles
and Memorandum of the company (Canopee Investment Pte Ltd &
Ors v Landmarks Holding Bhd & Ors).
The court has the power to order a meeting to be called, held and
conducted in any manner it thinks fit, either of its own motion or on the
application—
(a) of a director of the company;
(b) of a member of the company who would be entitled to vote at the

meeting; or
(c) of the personal representative of any such member.
Procedure for requisitioning a meeting

The requisition may consist of several documents in like form. This
means that if there is more than one requisitionist, it is not necessary
for all of them to sign copies of the same form. They may also sign a
single form when all the copies are the same.
The requisition:
(a) shall be in hard copy or electronic form;
(b) shall state the general nature of the business to be dealt with at
the meeting;
(c) may include the text of a resolution that may properly be moved
and is intended to be moved at the meeting; and
(d) shall be signed or authenticated by the person making the

requisition.
In practice the requisitioned notice must be deposited at the registered

office of the company.
The directors shall call for the meeting within 14 days from the date of
the requisition and hold the meeting not more than 28 days after the
date of the notice to convene the meeting. If this is not done the
requisitioning members or any of them representing half the voting
strength of all requisitionists may convene the meeting themselves by
signing on the notice of the meeting but any meeting so convened
shall not be held after the expiration of three months from that date.
If the requests received by the company identify a resolution intended
to be moved at the meeting, the notice of the meeting shall include the
text of the resolution and the business dealt with at the meeting will
include the resolution.
See further ¶9-330.
Purpose for requisitioning a meeting
A shareholder must exercise his right to requisition a meeting in good
faith and for a proper purpose. Where there is an application to stop
the meeting from being convened the court will be very reluctant to
interfere with a minority shareholder’s statutory right to requisition an
extraordinary general meeting. The court will interfere only “when it is
clear [that] the purpose for calling the meeting is something other than
the passing of the resolutions contained in the requisition” (Humes Ltd
v Unity APA Ltd & Anor).
See further ¶9-330.
Law: s 311, 312, 313 and 314 of CA 2016.
¶9-125 Power to require circulation of written resolution

Section 302 provides that any member of a private company having a
total of 5%, or a lower percentage as specified in the constitution, of
the total voting rights of all eligible members may require the company
to circulate a resolution that may properly be moved as a written
resolution. A statement of not more than 1000 words on the subject
matter of the written resolution may be included with the written
resolution.
The request shall:
(a) be in hard copy or electronic form;
(b) state the resolution and provide any accompanying statement;

and
(c) be signed or authenticated by the member making the request.

Directors shall circulate resolution proposed by members
Section 303 provides that if a company receives a request to circulate
a written resolution, the directors shall circulate to every eligible
member in hard copy or electronic form a copy of the resolution and
any accompanying statement at the same time. The resolution and
accompanying statement are to be circulated at the same time, so far
as reasonably practicable to all eligible members.
The directors must send the copies, or if copies are sent to members
on different days, the first of those copies, not more than 21 days from
it being subject to the requirement to circulate the resolution.
The copy of the resolution shall be accompanied by a statement as to
—
(a) the procedure for signifying agreement or otherwise to the
resolution; and
(b) the date by which the resolution shall lapse if the resolution is
not passed.
The validity of the resolution, if passed, is not affected by a failure to

comply with s 303.
If the director fails to circulate a written resolution, any member who
has requested the written resolution may circulate the resolution and
any reasonable expenses incurred by the members circulating the
resolution shall be reimbursed by the company. Any sum so
reimbursed shall be retained by the company out of any sums due or
to become due from the directors by way of fees or other
remuneration in respect of the services of the directors as who were in
default.
Law: s 302, 303 and 311 of CA 2016.
¶9-150 Right to call a meeting

Any member holding not less than 10% of the company’s issued share
capital or a lower percentage as specified in the constitution may call
a meeting of the company. Where the company does not have a share
capital, not less than 5% of the members may call a general meeting.
Pursuant to s 310, the directors may also convene meetings of
members.
Court’s intervention in calling a meeting
If it is impracticable for a company to call a meeting in accordance
with CA 2016 or the company’s constitution, the court, under s 314,
may:
• order that a meeting be called;
• give directions as to the conduct of the meeting; and
• give any ancillary or consequential directions it thinks is expedient.
Section 314(2) provides that the court may, either of its own motion or
on the application of:
(a) a director of the company;
(b) a member of the company who would be entitled to vote at the

meeting; or
(c) the personal representative of any such member,
order a meeting to be called, held and conducted in any manner the

court thinks fit.
An applicant applying to the court for any of the above orders not only
has to satisfy the court that it has been impracticable to call or
convene a meeting. He must also satisfy the court that it has been
impracticable to call a meeting of the company in a manner in which
meetings of that company may be called, or to conduct the meeting in
a manner prescribed by the constitution or CA 2016 (Leong Ah Hong v
Hup Seng Co Ltd).
In giving such ancillary or consequential direction that it thinks is
expedient, the court may direct that:
• one member present in body or by proxy shall be deemed to
constitute a meeting; or
• the personal representative of any deceased member may
exercise all or any of the powers that the deceased member could
have exercised if he were present at the meeting.
A meeting called, held and conducted in accordance with an order

under this s 314 shall be deemed for all purposes to be a meeting of
the company duly called, held and conducted.
Note that the power of the court to call meetings does not extend to
calling meetings of directors (Tay Say Geok v Tay Ek Seng Co Sdn
Bhd).
Law: s 310(b) and 314 of CA 2016.
¶9-170 Rights at meetings

Every member has a right to attend any general meeting. He can
speak and vote on any resolution before the meeting. A member’s
right to vote may be restricted by the Companies Act or a company’s
constitution. For example, s 293(2) states that, no member shall be
entitled to vote at a meeting unless all calls or other sums presently
payable by the member in respect of shares in the company has been
paid.
The constitution may provide that preference shareholders do not
have a right to vote at general meetings that does not affect their right,
except in its class meeting:
• during such period as the preferential dividend or any part thereof
remains in arrear and unpaid, such period starting from a date not
more than 12 months, or such lesser period as the constitution
may provide, after the due date of the dividend;
• “upon any resolution which varies the rights attached to such

shares”; or
• “upon any resolution for the winding up of the company”.
¶9-175 Members’ rights for management review

This is provided in s 195:
Subsection (1) states that the chairperson of a meeting of members of
a company shall allow a reasonable opportunity for members at the
meeting to question, discuss, comment or make recommendation on
the management of the company.
Subsection (2) states that a meeting of members may pass a
resolution under this section which makes recommendations to the
board on matters affecting the management of the company.
Subsection (3) states that any recommendation made under sub-s (2)
shall not be binding on the board, unless the recommendation is in the
best interest of the company, provided that:
(a) the rights to make recommendations is provided for in the
constitution; or
(b) passed as a special resolution.
Law: s 195 of CA 2016.
¶9-180 Right to appoint proxies

Every member who has a right to attend and vote at a meeting of the
company or at a meeting of a class of members, is entitled to appoint
another person as a proxy to attend and vote in his place at the
meeting. The proxy has the same rights as the member to speak at
the meeting.
In the case of a company with share capital, a member may appoint
more than one proxy and if he does so, he must specify the
proportions of his holdings to be represented by each proxy for the
appointment to be valid.
Note that a statement stating that members have the right to appoint
proxies to attend and vote instead of the member and that proxies
need not be members must be stated prominently in every notice
calling for a meeting. Officers of the company who are in default of this
requirement are guilty of an offence.
Section 334(3) states that the instrument appointing a proxy and the
power of attorney or other authority, if any, under which it is signed or
a notarially certified copy of that power or authority shall be deposited
at the registered office of the company, or at such other place within
Malaysia as is specified for that purpose in the notice convening the
meeting, not less than 48 hours before the meeting or adjourned
meeting at which the person named in the instrument proposes to
vote, or, in the case of a poll, not less than 24 hours before the time
appointed for the taking of the poll, and in default the instrument of
proxy shall not be treated as valid.
Votes by proxy
In the absence of any provision in the constitution, CA 2016 provides
that a proxy is entitled to:
• Vote on a show of hands — if he is the only proxy appointed by
the member. If more than one proxy is appointed and the
company is a public listed company, the entitlement of those
proxies to vote on a show of hands shall be in accordance with
the Bursa Malaysia Listing Requirements (BMLR).
• Vote on poll — if more than one proxy is appointed, the proxies

are only entitled to vote on poll and the member must specify the
proportions of his holdings to be presented by each proxy.
Right of proxy to demand for a poll

Section 337(1) states the appointment of a proxy to vote on a matter
at a company meeting authorises the proxy to demand, or join in
demanding, a poll on that matter.
Proxy as a chairperson of a meeting of members
Section 336 states unless expressly prohibited in the constitution, a
proxy may be elected to be the chairperson of a meeting of members
by a resolution of the company passed at the meeting.
Termination of a person’s authority to act as a proxy
If the notice terminating the proxy is not received by the company
before the commencement of a meeting of members or an adjourned
meeting of members, then the termination of the authority of the
person to act as proxy does not affect:
(a) the constitution of the quorum at the meeting;
(b) the validity of anything he did as chairperson of a meeting;
(c) the validity of a poll demanded by him at a meeting; or
(d) the validity of the vote exercised by him at a meeting.
Law: s 294, 334, 335, 336, 337 and 338 of CA 2016.
¶9-190 Right to vote

Section 293 provides that in the absence of any provision to the
contrary in the constitution:
• every member of a company with a share capital is to have one
vote for each share; or
• every member of a company without a share capital is to have one

vote each.
However, the company constitutions are rarely silent on voting rights,

so that the entitlement to vote is almost always spelt out in the
constitution, if the company has one, and if not s 293 shall prevail.
Unless the constitution provide otherwise, the right to vote may be
cast on a resolution in which the shareholder has a personal interest,
for example, as the other party in a contract with the company (North-
West Transportation Co Ltd v Beatty). The voting right is vested in the
registered shareholder and the question of beneficial ownership is not
the concern of a general meeting.
Exercise of vote and demand for a poll
At a general meeting a vote in the first instance will usually be taken
by a show of hands, one vote per member attending. Unless the
constitution otherwise provides, proxy votes are not counted on a
show of hands but a proxy holder may demand or join in the demand
for a poll.
The constitution may, to a limited extent, regulate the right to demand
a poll. Any provision of the company’s constitution is void to the extent
that:
• it attempts to exclude the “right to demand a poll at a general
meeting on any question or matter other than the election of a
chairman or the adjournment of the meeting”;
• it attempts to make ineffective a demand for a poll by:

(a) not less than five members having a right to vote;
(b) a member or members representing 10% of all votes; or
(c) members holding shares (conferring a right to vote), which

on the aggregate of the sums paid up, equals not less than
10% of the total sum paid up on all shares conferring a voting
right;
• it requires the instrument appointing the proxy to be received by

the company more than 48 hours before a meeting.
The way the poll is to be conducted is usually prescribed in the

constitution. Note that a chairman has no common law casting vote
but most constitution provide him with one in the case of an equality of
votes. A chairman may exercise his ordinary vote as a member. For
more on conduct of poll, see ¶9-310.
Voting on a poll
On a poll taken at a meeting of company members, a member entitled
to more than one vote need not use all his votes or cast all the votes
he uses in the same way.
If a poll is duly demanded, it shall be taken either immediately or after
an interval or adjournment or otherwise as the chairman directs, and
the result of the poll shall be the resolution of the meeting at which the
poll was demanded, but a poll demanded on the election of a
chairman or on a question of adjournment shall be taken immediately
or as soon as it can be reasonably done. See also ¶9-310.
Law: s 293, 331 and 332 of CA 2016.
¶9-210 Obligation to pay calls on shares

The obligation to pay a call in respect of any money unpaid on shares
is the basic contractual relationship between the shareholder and the
company. It is “the duty of directors, when a call is made … to compel
every shareholder to pay to the company the amount due by him in
respect of that call; and they are guilty of a breach of their duty to the
company if they do not take all reasonable means of enforcing that
payment …” (Spackman v Evans).
The CA 2016 vests the power to make a call in the directors. The
power is a fiduciary one and it must be exercised for the benefit of the
company. Within those conditions the making of the call is a matter of
the directors’ discretion.
Section 82 stipulates the calls on shares as follows:
Subsection (1) states that the directors may make calls upon the
shareholders in respect of any money unpaid on the shares of the
shareholders and not by the conditions of allotment of shares made
payable at fixed date.
Subsection (2) states that a sum which, by the terms of issue of a
share, becomes payable on allotment or at any fixed date shall be
deemed to be a call duly made and payable on the date on which by
the terms of issue the shares becomes payable and in the case of
non-payment, all the relevant provisions of CA 2016 as to payment of
interest and expenses, forfeiture or otherwise shall apply as if the sum
had become payable by virtue of a call duly made and notified.
Subsection (3) states that subject to the company’s constitution:
(a) no call shall exceed 1/4 of the issued price of the share or be
payable at less than 30 days from the date fixed for the payment
of the last preceding call; and
(b) each member shall, subject to receiving at least 14 days’ notice

specifying the date, time and place of payment, pay to the
company the amount called on his shares.
Subsection (4) states that a call shall be deemed to have been made
at the time when the resolution of the directors authorising the call was
passed and such resolution may authorise the call to be paid by
instalments.
Subsection (5) states that the joint holders of a share shall be jointly
and severally liable to pay all calls in respect of their shares.
Subsection (6) states that if a sum called in respect of a share is not
paid before or on the day appointed for payment of the sum, the
person from whom the sum is due shall not be required to pay any
interest or compensation on that sum unless stated in the constitution
of the company.
Subsection (7) states that for the purposes of sub-s (6), the rate stated
in the constitution shall not exceed 8% per annum from the day
appointed for the payment of the sum to the time of actual payment as
the directors may determine.
Subsection (8) states that the directors may waive payment of the
interest due wholly or in part from the person referred to in sub-s (6).
Subsection (9) states that a call may be revoked or postponed as the
directors may determine.
Note that not all payments made by shareholders to the company are
payments for calls. Surcharge payments, for example, paid by
shareholders to meet the daily running of the company’s business are
not payment for calls. Rather, they are loans made by the
shareholders to the company and are repayable on demand (Tan Tien
Kok v Medical Specialist Centre (JB) Sdn Bhd).
Law: s 82 of CA 2016.
COMPANY MEETINGS
¶9-300 General meetings of members
Under CA 2016, the general meetings of members’ of a public
company and a private company, can be categorised into:
(a) a public company’s annual general meeting (AGM) — see ¶9-
320; and
(b) general meetings (GMs) of a public company or private company

— see ¶9-330.
The term “extraordinary general meeting” (EGM) has no significant

meaning under CA 2016, the reason being that any meeting other
than the AGM is known as a “general meeting”, which is applicable in
the case of a public company, and especially in a private company,
because a private company is not required to hold an AGM by law.
Members’ meetings generally
Company meetings provide the principal forum in which the directors
make an account to the shareholders for their stewardship of the
company’s finances and business performance for the financial period
under review. It also gives shareholders an opportunity to raise issues
before voting on matters which may require a vote of their approval.
As such, the shareholders’ relationship with their company can be
developed significantly by enhancing the general meetings by
providing them with a forum to participate and engage in a dialogue
with the board of directors and key management officials of the
company.
Public companies
In the context of a public company, the formal relationship between
the shareholders and the board of directors is that the shareholders
elect the directors, the directors’ report on their stewardship to the
shareholders and the shareholders appoint the auditors to provide
external check on the directors’ financial statements. Thus, the
shareholders as owners of the company elect the directors to run the
business on their behalf and hold them accountable for its progress.
It is important for the boards of public companies to maintain an active
and constructive shareholder communications policy, both by following
the minimum requirements of CA 2016 and voluntarily maintaining
principles of good practice in handling shareholders’ affairs.
Thus, it is best practice for public companies to engage in an active
policy of communication with all shareholders (not just institutional
shareholders). Companies need to put procedures in place to ensure
that correspondence from all shareholders is properly considered and
answered. Ideally, the companies should arrange for all
correspondence from shareholders to receive a full reply from the
chairman, the directors, the company secretary and other designated
senior executives. The company’s aim must be to handle members’
communications appropriately and sensitively, in accordance with its
shareholder communications policy.
Public companies should take the view that they have an interest in
encouraging responsible questions and promoting constructive debate
at their general meetings. However, there is a need to strike the right
balance between encouraging shareholders’ involvement and avoiding
excessive costs and burdens.
Private companies
There is no statutory requirement for private companies to hold
general meetings, including AGMs, but merely to circulate financial
statements and reports within six months of its financial year end [s
258(1)(a)].
With the abolishment of AGMs, the election and retirement of
directors, election of auditors, the tabling of audited financial
statements and lodgement of annual returns will be dealt with by way
of written resolution of members, as provided in Div 5, Subdiv 2 of Pt
III of CA 2016 for private companies. Members will still have a right to
receive the audited financial statements but may not have the benefit
of the forum of a general meeting to discuss and question the
directors on such statements and reports unless the members
specifically requisitioned for a general meeting to table the financial
statements and reports of that year end.
¶9-310 Proceedings at general meetings

Attendance of directors’ at general meetings
It is best practice to ensure that, wherever possible, all directors
attend the general meetings as it is very important that all the directors
make themselves available to address any issues that may be raised
by members.
The normal practice at the general meetings is that they be chaired by
the Chairman of the Board, with the directors seated at a table facing
the shareholders. Directors should be present and seated so that
questions can be conveniently addressed to them by the shareholders
(through the Chairman), and they can be seen to be participating in
the meeting.
Registration of attendance
Normally, the Company Secretary will work together with the Share
Registrar to ensure that attendance at the general meeting is properly
handled and disruptions or delays in the conduct of the meeting are
avoided. The shareholders or proxies will be required to present their
identity cards to verify their names and shareholdings, as stated in the
register. Sometimes, certain companies (usually public listed
companies) will give a door gift to the shareholders.
Chairman to call the meeting to order
Usually the Chairman will welcome the members and invitees present,
call the meeting to order and move on to the items on the agenda.
Notice of meeting
The notice of meeting that has been sent earlier to all shareholders
need not be read, and is taken as read at the AGM of a public
company procedurally, because shareholders are assumed to have
read the notice.
See also ¶9-600.
Proposing and seconding at meeting
Although there is no legal obstacle to the Chairman proposing his own
election or re-election, or proposing any resolution in which he has an
interest, it is best practice for him not to do so. Formally vacating the
chair is not necessary, the Chairman could simply invite another
director to propose the resolution. There may, however, be occasions
when it is not appropriate to invite another director to propose the
resolution, eg where shareholders are being asked to approve a
resolution in which all the directors are interested. In such
circumstances, the Chairman should draw members’ attention to his
interest and conduct the proceedings with scrupulous fairness.
The only relevant legal requirement relating to the reports and
financial statements is that they be laid before the members in an
AGM of a public company. This is normally dealt with by way of a
proposal that the shareholders receive or adopt the reports and
financial statements.
It is possible that shareholders may raise issues regarding the reports
and financial statements in the AGM of a public company, which could
result in the directors having to issue revised financial statements and
the auditors having to issue a revised audit report.
The Chairman should invite shareholders to put questions to the
directors on the reports and financial statements and that
shareholders should be permitted by the Chairman to raise questions
on any item concerning the company’s past performance, its results
and its intended future performance.
The Chairman or other directors should not, of course, be compelled
to answer questions which are entirely irrelevant to the company or its
business. Nor should they answer questions where to do so could
result in the release of commercially sensitive information or the
disclosure of information which could be price sensitive in relation to
the company’s securities. In the latter case, that information can be
given at the meeting only if it can be done in compliance with the
BMLR regarding the release of price-sensitive information.
Questions raised at general meetings may sometimes be trivial,
uninformed or raised on behalf of single issue pressure groups, or by
unsatisfied customers and small businesses who own shares in the
company. The questions can also be addressing the same issues. In
such eventuality, clearly, the Chairman will need to restrict repetitive
questions and to limit the amount of debate permitted on each
resolution.
When a particular issue has been raised by a shareholder, the
Chairman may facilitate and expedite the flow of the meeting by
inviting other shareholders who wish to speak on the same subject to
do so at that time. That apart, the Chairman’s inherent powers to stop
repetitive speakers, and to move on once he feels that items have
been fully debated, should be adequate to deal with repetitious or
irrelevant issues.
Voting — by show of hands or poll
Section 330(1) provides at any meeting of members, a resolution put
to the vote of the meeting shall be decided on a show of hands unless
before or on the declaration of the result of the show of hands, a poll is
demanded. The demand for a poll can be made by:
• the Chairman;
• at least three members present in person or by proxy;
• any member or members present in person or by proxy and

representing not less than 10% of the total voting rights of all
members having the right to vote at the meeting; or
• a member or members holding shares in the company conferring a

right to vote at the meeting being shares on which an aggregate
sum has been paid up equal to not less than 10% of the total sum
paid up on all the shares conferring that right.
Section 330 does not provide for the case of equality of votes, whether
on a show of hands or on a poll. In such instance, the constitution (if
the company has one) may entitle the Chairman to a second or
casting vote.
Vote by show of hands
On a vote by a show of hands, a declaration by the chairman that the
resolution has been passed unanimously or with a particular majority
or is lost, and an entry to that effect in the minutes of the proceeding
shall be conclusive evidence of that fact without proof of the number
or proportion of the votes recorded in favour of or against the
resolution.
Vote on a poll and conduct of poll
Voting on a poll is discussed in ¶9-190.
The conduct of polls differ from company to company. Some
companies conduct the poll immediately and await the result before
moving on to the next item. Other companies conduct the poll at the
end of the meeting after all other businesses have been dealt with.
However, it possible that voting on other items could be affected by
the outcome of a particular poll; clearly this would be so where the poll
is on an amendment to a proposed resolution.
Given the current technology and the fact that in many cases proxies
will have been lodged with the company at least 48 hours before the
meeting, it is possible to ascertain fairly quickly the number of votes
cast on a poll.
However, much may depend on the number of shareholders who
attend the general meeting, and in case of some of the major private
companies, this could be several thousand shareholders. Moreover,
where the company’s practice is to conduct a poll as soon as this has
been validly demanded, it can been seen that dissident shareholders
(or proxies), possibly holding only single shares, could use the
demand for a poll on every item of business to disrupt the general
meeting. Therefore, it cannot be said that the best practice is to
require the taking of a poll and the announcement of its result before
moving on to subsequent items on the agenda (although polls on
amendments to resolutions should be taken as soon as a demand for
the poll has been validated).
Taking a poll as soon as it has been demanded ensures that the
casting of votes by those shareholders (or proxies) who have attended
the meeting will reflect their recollection of what was said during the
relevant debate.
Some shareholders may wish to leave before the general meeting
ends, but after a poll has been validly demanded. If the poll is not
taken until the end of the general meeting, they may be
disenfranchised. Where companies conduct polls at the end of the
meeting, that problem may be overcome by shareholders and proxies
being given poll forms as they enter. Those who depart early, may
deposit their forms with the registrars as they leave.
Another technical issue is that a poll may be validly called not only on
the resolutions as proposed to the meeting, but also on proposed
amendments to resolutions and on other business which may arise at
the meeting. The proxy form may only provide for voting on the
resolutions recorded in the notice of meeting. In the absence of
appropriate additional wording, proxy voters might be disenfranchised
on a poll concerning an amendment to a resolution, or on a resolution
in its amended form if the amendment is carried by the meeting. They
would also be disenfranchised on a poll on other items which are not
referred to in the notice of meeting but which might properly be
resolved at the meeting.
To avoid any doubt, as a matter of best practice, all proxy forms
should include either of the following statements or words to the same
effect:
• “I/We direct that my/our proxy will vote (or abstain from voting) as
he or she thinks fit on any other matter which may properly come
before the meeting.”
• “Unless otherwise instructed, the proxy may vote as he or she

sees fit or abstain in relation to all the business of the meeting.”
Proxies
Proxies have greatest relevance in connection with votes on a poll.
This is because many shareholders, both institutional and private,
tend to stay away from the general meeting and to appoint the
Chairman of the meeting or some other person to act as proxy to vote
their shares on any poll.
For the appointment, termination and rights of proxies, see ¶9-180.
Appointment of scrutineers
The chairman of the meeting may appoint scrutineers to verify that the
poll has been properly conducted. The question then arises as to
whom the scrutineers should be. The company must evaluate the
suitability of the scrutineer to ensure they are independent and able to
discharge their role free from any conflicts. The scrutineer must not be
an officer of the listed company or its related corporation, be
independent of the person undertaking the polling process and if he is
interested in a resolution to be passed, refrain from acting as
scrutineer for that resolution.
Given that the registrars will be responsible for checking the votes
cast against the register of members, most companies will choose
officials from their registrars to act as poll scrutineers. An alternative
suggestion is that the company’s auditors should scrutinise the
conduct of the poll; however, they could be regarded as no more
independent than company registrars, given the audit fees they earn.
Where a poll is called, shareholders should be able to rely on the
integrity of the company’s registrars (properly supervised by and
answerable to the company secretary), acting in that regard on behalf
of the shareholders generally and not the directors. In the case of
small companies which do not have registrars, the auditors may be
the appropriate scrutineers.
Companies should disclose the result of the poll as soon as possible
and if at all practicable, at the venue of the meeting after the poll has
been taken. It is best practice when announcing the decision on a poll
to disclose the total number of votes cast in favour of, and against, the
resolution.
Closure of general meeting
When all the business in the meeting agenda have been transacted
and there are no other questions from the floor, the Chairman will
declare the meeting closed and will invite all the shareholders and
invitees to have some light refreshments (usually, for public listed
companies).
Notification to stock exchange
The BMLR requires listed companies to notify the stock exchange
after the conclusion of the AGM of certain items of business have
been approved by the shareholders.
¶9-320 Public companies’ AGM
Section 340 states that a public company must hold an AGM within six
months of the company’s financial year end and not more than 15
months after the last preceding AGM to transact the following
business:
(a) laying of the audited financial statements and reports of the
directors and auditors;
(b) election of directors in place of those retiring;
(c) appointment and the fixing of the fee of directors; and
(d) any resolution or other business of which notice is given in

accordance with CA 2016 or the constitution.
A public company is not required to hold an AGM in the year of its

incorporation or in the following year provided that the company hold
its first AGM within 18 months of its incorporation.
The company may apply to the Registrar to extend the time frames
stipulated in CA 2016 and the Registrar may extend such periods as
he considers appropriate, upon being satisfied with the reasons
provided. A person aggrieved by a decision of the Registrar in this
regard may appeal to the court against the decision.
If a company fails to convene an AGM, the court may, on the
application of any member, order a general meeting to be called.
The company and every officer who contravene the section commit an
RM20,000.
Directors to prepare financial statements
Section 248 stipulates that directors shall prepare financial statements
within 18 months from the date of the company’s incorporation, and
subsequently, within six months of its financial year end. The financial
statements are to be duly audited before they are sent to every
member. In the case a public company, the financial statements and
reports after circulation to members, are to be laid before an AGM.
Any company director who contravenes s 248 commits an offence and
shall, on conviction, be liable to a fine not exceeding RM500,000 or
imprisonment for a term not exceeding one year or both.
Circulation of financial reports and statements
Section 258 requires the financial statements and reports to be
circulated to members:
• for a private company: within six months of its financial year end;
and
• for a public company: at least 21 days before the date of its AGM.
For public companies, the financial statements and reports may
be circulated at a shorter period if agreed by all the members
entitled to attend and vote at the AGM.
Financial statements and reports to be lodged with Registrar

Section 259 stipulates that the financial statements and report must be
lodged with the Registrar:
• in case of a private company: within 30 days after they are
circulated to its members; and
• in the case of a public company: within 30 days from its AGM.
An application for extension may be made to the Registrar before the

expiry of the time limits above.
All amounts in the financial statements and reports shall be in
Malaysian currency, and if the financial statements and reports are not
in Bahasa Malaysia or English, there must be annexed to them a
certified correct translation in the Bahasa Malaysia or English in the
manner to be determined by the Registrar.
Every officer who contravenes s 259 commits an offence and shall, on
conviction, be liable to a fine not exceeding RM50,000 and, in the
case of a continuing offence, to a further fine not exceeding RM1,000
for each day during which the offence continues after conviction.
For the purposes of s 259, “financial statements and reports” includes
“consolidated financial statements and reports” in cases of holding
companies.
Certificate of an exempt private company
Section 260 provides that an exempt private company,1 may lodge a
certificate in lieu of the financial statements and report with the
Registrar within 30 days from the circulation of its financial statements
and reports to members.
The certificate shall be signed by a director, auditor and secretary of
the company confirming that—
(a) the company is and has at all relevant times been an exempt
private company;
(b) a duly audited financial statements and reports required under

CA 2016 has been circulated to its members; and
(c) as at the date to which the financial statement has been made
up, the company appeared to have been able to meet its liabilities
as and when the liabilities fall due.

not exceeding RM1,000 for each day during which the offence
continues after conviction.
Lodgement of annual return on anniversary of incorporation
Section 68 requires both public and private companies to lodge an
annual return for each calendar year not later than 30 days from the
anniversary date of the company’s incorporation. Lodgement is done
via the appropriate e-forms available in Schedule B of MyCoID:
• E-form “Annual return of company having share capital”; or
• E-form “Annual Return of company not having share capital”.
The filing fee of for private companies is RM150.00, and for public
companies it is RM500.00.
Law: s 68, 248, 258, 259, 260 and 340; reg 8(9) of Companies
Regulations 2017.
Footnotes
1 An “exempt private company” in s 2(1) of CA 2016 means a
private company in the shares of which no beneficial
interest is held directly or indirectly by any corporation and
which has not more than 20 members none of whom is a
corporation.
¶9-330 General meeting or meeting of members
In CA 2016, other than AGM, the terms “meeting of members” is used

as well as “general meeting”.
Power to convene meetings of members
Section 310 states that a meeting of members may be convened by:
(a) the board; or
(b) any member holding at least 10% of the issued share capital of a
company or a lower percentage as specified in the constitution or
if the company has no share capital, by at 5% in the number of
the members.
The directors must convene a meeting of members if they are

requisitioned to do so by the members. Any reasonable expenses
incurred by the requisitioning members in calling the extraordinary
general meeting (EGM) are to be paid by the company. However, the
company may claim these sums out of any sums due to the directors
who have failed to convene the meeting.
Members’ power to require directors to convene members’
meeting
Members’ power to require directors to convene meetings of members
is stipulated in s 311 as follows:
Subsection (1) states that the members of a company may require the
directors to convene a meeting of members of the company.
Subsection (2) states that a requisition under sub-s (1)—
(a) shall be in hard copy or electronic form;
(b) shall state the general nature of the business to be dealt with at
the meeting;
(c) may include the text of a resolution that may properly be moved
and is intended to be moved at the meeting; and
(d) shall be signed or authenticated by the person making the

requisition.
Subsection (3) states that the directors shall call for a meeting of
members once the company has received requisition to do so from—
(a) members representing at least 10% of the paid up capital of the
company carrying the right of voting at meetings of members of
the company, excluding any paid up capital held as treasury
shares; or
(b) in the case of a company not having a share capital, members

who represent at least 5% per centum of the total voting rights of
all members having a right of voting at meetings of members.
Subsection (4) states that in the case of a private company, members

representing at least 5% of the paid up capital of the company
carrying the right of voting at meeting of members of the company
may require a meeting of members to be convened if more than 12
months has elapsed since the end of the last meeting of members
convened pursuant to a requisition under this section and the
proposed resolution is not defamatory, vexatious or frivolous.
Subsection (5) states that a resolution may properly be moved at a
meeting unless the resolution—
(a) if passed, would be ineffective whether by reason of
inconsistency with any written law or the constitution;
(b) is defamatory of any person;
(c) is frivolous or vexatious; or
(d) if passed, would not be in the best interest of the company.
Subsection (6) states that for the purposes of sub-s (3) and (4), the
right of voting shall be determined at the date the requisition is
deposited with the company.
Directors’ duty to call meetings required by members
Section 312 stipulates as follows:
Subsection (1) states that in relation to s 311, the directors shall—
(a) call for the meeting within 14 days from the date of the
requisition; and
(b) hold the meeting on a date not more than 28 days after the date
of the notice to convene the meeting.
Subsection (2) states that if the requests received by the company

identify a resolution intended to be moved at the meeting, the notice of
the meeting shall include the text of the resolution.
Subsection (3) states that the business that may be dealt with at the
meeting includes a resolution of which notice is given in accordance
with this section.
Subsection (4) states that if the resolution is to be proposed as a
special resolution, the directors shall be considered as not having duly
called for the meeting if the notice of the resolution is not given in
Power of members to convene meeting at company’s expense
The power of members to convene meeting of members at company’s
expense is stipulated in s 313 as follows:
Subsection (1) states that if the directors—
(a) are required under s 311 to call a meeting of members; and
(b) do not do so in accordance with s 312,
the members who requisitioned the meeting, or any of the members

representing more than one half of the total voting rights of all of the
members who requisitioned the meeting, may call for a meeting of
members.
Subsection (2) states that where the requisition received by the
company included the text of a resolution intended to be moved at the
meeting, the notice of the meeting shall include the text of the
resolution.
Subsection (3) states that the meeting shall be convened on a date
not more than three months after the date on which the directors
received a requisition under s 311(1) to call for a meeting of members.
Subsection (4) states that the meeting shall be convened in the same
manner, as nearly as possible, as that in which meetings are
requisitioned to be convened by directors of the company.
Subsection (5) states that the business which may be dealt with at the
meeting includes a resolution of which notice is given in accordance
with this section.
Subsection (6) states that any reasonable expenses incurred by the
members requisitioning the meeting by reason of the failure of the
directors to call a meeting shall be reimbursed by the company.
Subsection (7) states that any sum so reimbursed shall be retained by
the company out of any sums due or to become due from the
company by way of fees or other remuneration in respect of the
services of the directors as who were in default.
Law: s 311, 312, and 313 of CA 2016.
¶9-340 Class meetings

A class meeting is a meeting of only a certain class of members. It is
therefore not a general meeting. Class meetings are called when:
• there is a variation of class rights; or
• there is a compromise or arrangement under s 366(3).
The procedure for general meetings applies with modifications to class

meetings (see ¶9-310 and ¶9-330).
Application to class meetings
In CA 2016, the application to class meetings is stipulated in s 339 in
the following manner:
Subsection (1) states that the provisions of Subdiv 5 (“Procedure at
meetings”) of this Division in relation to meetings shall apply to a
meeting of holders of a class of shares and class of members subject
to the modifications specified in this Subdivision.
Subsection (2) states that s 328 (“Quorum at meetings”) and 330
(“Declaration by chairperson on a show of hands”) shall not apply in
relation to a meeting of holders of a class of shares and class of
members in connection with a meeting in respect of the variations of
rights attached to the class of shares and class of members.
Subsection (3) states that the quorum for a variation of class rights
meeting in respect of holders of a class of shares is—
(a) for a meeting other than an adjourned meeting, two persons
present holding at least one-third of the number of issued shares
of such class, excluding any shares of that class held as treasury
shares; and
(b) for an adjourned meeting, one person present holding shares of

such class unless otherwise provided in the constitution.
Subsection (4) states that the quorum for a variation of class rights
meeting in respect of holders of a class of members is—
(a) for a meeting other than an adjourned meeting, two members of
the class present, in person or by proxy, who together represent
at least one-third of the voting rights of the class; and
(b) for an adjourned meeting, one member of the class present, in
person or by proxy, unless otherwise provided in the constitution.
Subsection (5) states that for the purposes of sub-s (3), where a
person is represented by a proxy or proxies, he is treated as holding
only the shares in respect of which the proxy or proxies are authorised
to exercise voting rights.
(a) any amendment of a provision contained in the constitution for
the variation of the rights attached to a class of shares or the
rights of a class of members, or the insertion of any such
provision into the constitution, is itself to be treated as a variation
of those rights; and
(b) references to the variation of rights attached to a class of shares

or a class of members include references to the abrogation.
Subsection (7) states that at a variation of class rights meeting, any

holder of shares of such class or any member present, in person or by
proxy, as the case may be, may demand a poll.
Law: s 339 of CA 2016.
¶9-350 Conduct of company meetings
The provisions in CA 2016 relating to the conduct of meetings are:
Part Division Subdivision Schedule

Board – Sch 3
meetings (“Proceedings
of the board”)
Notice of Pt III 5 4 (“Notice of
meetings (“Management (“Meetings”) Meetings”)
of Company”)
Procedure Pt III 5 5
of (“Management (“Meetings”) (“Procedure
meetings of Company”) at
Meetings”)
Companies with a company constitution may rely on these provisions

for conducting board and members’ meetings.
In the previous company law regime, it is left for the meeting to
regulate its own procedure (Carruth v Imperial Chemical Industries
Ltd). And the courts have set out the following guidelines in relation to
the conduct of meetings:
Chairman and his duties
• A meeting must have a chairman. A meeting is unable to proceed
and stand adjourned if there is no one to exercise procedural
control over it (except in a small meeting where control may pass
by acquiescence from one to another) (Colorado Constructions
Pty Ltd v Platus).
• The paramount duty of a chairman of meetings is to keep order. If

there is disorder, it is his duty to make an effort to restore order.
He can summon the help of an officer or others to assist him. If he
is unsuccessful at restoring order, he should obtain a resolution to
adjourn the meeting. If he is still unsuccessful, he should exercise
his inherent power to adjourn the meeting for a short while, for
example, 15 minutes, while taking care that all present know of
this adjournment (John v Rees).
• If a meeting degenerates into a brawl the meeting should be

deferred (Colorado Constructions Pty Ltd v Platus). Note that any
business transacted during a meeting will not be vitiated by the
following:
(a) a disorder in which there is still a semblance of observance
of the proper procedures; and
(b) a disorder in which there is still a clearly recognisable

division between those for and against a resolution (Flynn v
The University of Sydney).
• The chairman has a legal duty to demand a poll when he thinks it
is necessary in order to give effect to the real sense of the
meeting (The Second Consolidated Trust Ltd v Ceylon
Amalgamated Tea and Rubber Estates Ltd).
• A chairman must exercise his powers and discretions bona fide,

and carry out the purpose for which the meeting is convened (The
Second Consolidated Trust Ltd v Ceylon Amalgamated Tea and
Rubber Estates Ltd).
Freedom to discuss company’s affairs

Shareholders of a public listed company should be free to discuss the
company’s affairs at the company meetings. The shareholder should
be at liberty to give voice to his feelings if there has been abuse by
those in control of the company. He cannot be thwarted by one of the
company’s officers taking out a writ of defamation (Wallersteiner v
Moir). A “gagging writ” ought not to be effective and matters of public
interest should be open to discussion notwithstanding the issue of a
writ (A-G v Times Newspapers Ltd). Under the Malaysian Code on
Corporate Governance shareholders attending general meetings must
participate actively by engaging the board of directors on the financial
and performance of the company.
Voting
• A shareholder may vote as he thinks fit but if he has agreed (for
valuable consideration) to cast his vote as instructed by another
person, he can be compelled by injunction to keep to that
agreement (Siemens Bros & Co v Burns).
• A shareholder may exercise his vote even though his personal

interests conflict with those of the company (Peter’s American
Delicacy Co Ltd v Heath).
• An Article which prohibits a director from voting in respect of

anything in which he has a personal interest does not prohibit him
from voting at a company meeting as a shareholder (East Pant
Du United Lead Mining Co Ltd v Merryweather). A director is also
not fettered at a company meeting by the concept of the collective
agency of the board; a director is free to vote at meetings of the
company as a shareholder, unrestricted by the fact that he is also
a director (Northern Counties Ltd v Jackson & Steeple Ltd).
MINUTES
¶9-400 Minutes generally
“Minutes”, as it generally appears in ordinary usage in company law,

means the record of the proceedings, resolutions and matters ancillary
thereto that are prepared by a secretary or appointed person and
taken as evidence that a meeting had been convened and held under
company law. The CA 2016 states that records comprise—
(a) all resolutions of members passed otherwise than at the meeting
of members;
(c) details provided to the company in accordance with s 344

relating to details of decisions by a sole member of a company —
see ¶9-420.
They all constitute the records of the proceedings of a company

meeting.
A company has a discretion as to how to keep its minutes, provided
that it faithfully records all that is required to be recorded, namely, how
the business of the meeting was conducted and what resolutions were
passed (August Investment Pty Ltd v Poseidon Ltd).
¶9-410 Statutory requirement
In practice, every company will usually keep and maintain minutes of

all proceeding of:
(a) general meetings;
(b) meetings of directors;
(c) meetings of managers (if any),
and those minutes be signed by the chairman of the meeting at which

the proceedings were had, or by the chairman of the next succeeding
meeting.
Note that:
• The rules as to what is to be included in board minutes are much
the same as for general meetings. “Minutes of board meetings
are kept in order that the shareholders of the company may know
exactly what their directors have been doing, why it is done and
when it is done.” (Re Cawley & Co). But the inspection of board
minutes may be done by an order of the court.
• “Manager” means the principal executive officer of the company

for the time being by whatever name called and whether or not he
is a director. However, a statement as to this fact must be lodged
by the company with the Registrar in the e-form “Notification of
change in the directors, managers and secretaries” in the
“manager” section.
• Any register, index, minute book or book of account may be kept

either by making entries in a bound book or by recording the
matters in question in any other permanent manner. Where any
minute book required to be kept by CA 2016 is not kept by
making entries in a bound book but by some other means,
reasonable precautions must be taken for guarding against
falsification and for facilitating the discovery of any falsification
and proper facilities shall be provided to enable the register,
index, minute book or book of account to be inspected.
Records of resolutions and meetings

Section 341 requires every company to keep records comprising:
(a) all resolutions of members passed otherwise than at the meeting
of members;
(c) details provided to the company in accordance with s 344

(“Details of decisions provided by a sole member” — see ¶9-420).
The records must be kept for at least seven years from the date of the
resolution, meeting or decision, as the case may be.
Every officer who contravenes s 341 commits an offence and shall, on
case of a continuing offence, to a further fine not exceeding RM500 for
Law: s 341 of CA 2016.
¶9-420 Minutes as evidence

Any minute entered in the minute book that purports to be signed by
the chairman of the meeting shall be evidence of the proceeding to
which it relates. Also, in the Articles of most companies, there is a
provision that an entry of minutes into a minute book shall be
conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against the resolution.
When no minutes have been kept, the proceedings of a company
meeting may be otherwise proved (McLean Bros & Rigg Ltd v Grice).
The CA 2016 also provides that where minutes have been properly
entered and duly signed, until the contrary is proved:
• the meeting shall be deemed to have been duly held and
convened;
• all proceedings of the meeting shall be deemed to have been duly

had; and
• all appointments of officers or liquidators made at the meeting

shall be deemed to be valid.
Records as evidence of resolutions

Section 343 provides:
Subsection (1) states that the record of a resolution passed otherwise
than at a meeting of members, if purporting to be signed by a director
of the company or by the secretary, is sufficient evidence of the
passing of the resolution.
Subsection (2) states that if there is a record of a written resolution of
a private company, the requirements of CA 2016 with respect to the
passing of the resolution are deemed to be complied with unless the
contrary is proved.
Subsection (3) states that the record of proceedings of a meeting of
members purporting to be signed by the chairperson of that meeting
or by the chairperson of the next meeting of members is sufficient
evidence of the proceedings at the meeting.
Subsection (4) states that if there is a record of proceedings of a
meeting of members of a company, then, until the contrary is proved—
(a) the meeting is deemed to be duly convened;
(b) all proceedings at the meeting are deemed to have been duly
taken place; and
(c) all appointments at the meeting are deemed to be valid.
Details of decision provided by sole member

As CA 2016 permits a sole company member to be registered, the
details of a sole member’s decisions is stipulated in s 344 as follows:
Subsection (1) states that if a sole member of a company takes any
decision that—
(a) may be taken by the company in meeting of members; and
(b) has effect as if agreed by the company in meeting of members,
he shall provide the company with details of that decision, unless that
decision is taken by way of a written resolution.
Subsection (2) states that a person who contravenes this section
exceeding RM10,000.
Subsection (3) states that failure to comply with this section does not
affect the validity of any decision referred to in sub-s (1).
Law: s 343 and 344 of CA 2016.
¶9-430 Inspection of minute books

The minute books of general meetings, directors’ meetings and
managers’ meetings must be kept at the company’s registered office
or its principal place of business in the State. All books containing the
minutes of general meetings must be open for inspection by all
members without charge.
Any member is entitled to be furnished, within 14 days of making a
written request to the company, with a copy of any minutes of a
general meeting at a charge not exceeding RM2.00 per 100 words
thereof. Note that the right to inspect minutes does not apply to
minutes of directors’ meetings or managers’ meetings.
The minute book must be available for inspection at the place where it
is kept during the hours in which the registered office of the
corporation in the State is accessible to the public. Members are
entitled to inspect the minute book or may make copies of it or take
extracts from it.
Inspection of records of resolutions and meetings
Section 342 requires the records of resolutions and meetings to be
kept for seven years (s 341) must also be made available for
inspection at the company’s registered office or another place which
has been notified to the Registrar. The records may be inspected by
any member of the company without charge. If copies are requested
the member will have to make a written request and pay a fee not
exceeding RM2 per 100 words.
RM10,000 and, in the case of a continuing offence, to a further fine of
conviction.
Law: s 342 of CA 2016.
QUORUM
¶9-500 Definition of “quorum”
“Quorum” means a fixed number of members of any body, society,

etc, whose presence is necessary for the valid transaction of
business. In the context of company meetings, the law is that where a
quorum of shareholders is prescribed, no business may be transacted
unless that prescribed number is present (Re Alma Spinning Co). A
resolution passed at a meeting at which the quorum is not present is
invalid (Re Cambrian Peat Co).
Quorum at meetings
Since CA 2016 allows formation of single shareholder company, the
quorum of one natural person is legally valid. Section 328 stipulates
the quorum at meetings as follows:
• In the case of a company having only one member, one member
personally present at a meeting shall constitute a quorum.
• In any other case, two members personally present at a meeting

or by proxy shall be a quorum unless a higher number is specified
in the constitution.
• For the purpose of constituting a quorum—

(a) one or more representatives appointed by a corporation
shall be counted as one member; or
(b) one or more proxies appointed by a person shall be counted

as one member.
• No business shall be transacted at any meeting of members

unless a quorum is present at the time when the meeting
proceeds to business.
• Unless otherwise provided in the constitution, if within half an hour

from the time appointed for the meeting, a quorum is not present,
the meeting—
(a) if convened upon the requisition of members, shall be
dissolved; or
(b) in any other case, shall stand adjourned to the same day in
the next week at the same time and place, or to such other
day and at such other time and place as the directors may
determine.
However, most company constitutions do fix the required quorum for

general meetings. If a company has adopted the wordings of
Regulation 47 of Table A of the former CA 1965, it may state that no
business shall be transacted at any general meeting unless a quorum
of members is present at the time when the meeting proceeds to
business. A member includes a person attending as a proxy or as
representing a corporation which is a member. Note that under the
former CA 1965, a quorum could be formed by one member holding
the entire issued capital of another company as a corporate member
and represented by a natural person called corporate representative
since a sole member company was prohibited. To avoid ambiguity, it
is proper to state that the meeting may be terminated, if the requisite
quorum is not present during the meeting.
Law: s 328 of CA 2016.
¶9-510 Quorum requirements

The following should be noted with regards to quorum requirements:
• the prescribed number of members must be present through the
whole proceeding unless the Articles provide otherwise (note that
it is not necessary that the quorum should be present when the
vote is taken) (Re Hartley Baird Ltd);
• members making up the quorum must be effective members, that
is, members qualified to take part in and decide upon a question
before the meeting;
• proxies are not counted for quorum purposes if all of them are
appointed by one individual shareholder and no other shareholder
or his proxy present;
• bankruptcy does not necessarily debar a member from voting and

being counted for quorum purposes;
• the inclusion of any member in arrears of calls in the quorum

invalidates any resolution of that meeting (United Investment and
Finance Ltd v Tee Chin Yong & Ors); and
• not every member making up the quorum must vote.
A meeting of one can make up a quorum if the court finds that the
company may be paralysed and reduced to a state of complete
helplessness which will expose it to penalties for non-compliance with
the law if the meeting is not held (Foo Tong Eng v Po Gun Suan).
Under CA 2016, single member quorum is legally valid.
If the chairman of a meeting signs the minutes of a meeting which
records that a particular resolution was passed there is a presumption
that the quorum was present. So, a person who has no notice of an
irregularity is not affected in his dealings with the company by any
absence of a quorum and may rely on the general presumption
(County of Gloucester Bank v Rudry Merthyr Steam and House Coal
Colliery Co). However, this presumption may be rebutted by evidence
to the contrary.
NOTICES OF MEETING
¶9-600 Fair and reasonable notice
A notice of general meeting should give fair and reasonable indication

of the meeting to members reading it. It should state the business of
the meeting with sufficient clarity so that those reading it will be made
aware of the proposed business so that they can decide whether or
not to attend and vote or, if appropriate, to vote by proxy. The rule is
that notice of a meeting “should be so plain that those who run may
read” (Alexander v Simpson). If the proper notice under the
Constitution is not given, the meeting is not validly summoned and all
resolutions passed at the meeting are considered void by the court
(Flynn v The University of Sydney).
Once a meeting has been called, the directors have no power to
postpone it. If it has to be postponed it can only be done according to
the constitution. However, if the meeting is postponed in contravention
of the constitution and the court finds that there is no practical good in
ordering a fresh meeting, the court will not hold the meeting null and
void (David Lau Tai Bek v Lau Ek Ching Sdn Bhd). An example of
where there is no practical good in ordering a fresh meeting is where
the matter is one which a majority of the members can set right by
ordinary resolution.
¶9-610 Notification of members’ meeting

The notice required for meeting of members depends on the type of
company. Section 316 provides that other than a meeting for the
passing of a special resolution, the notice of meetings to members
are:
Type of Type of At least

company meeting
Public AGM 21 days
company
General 14 days or any longer period
meeting specified in the constitution
Private General 14 days or any longer period
company meeting specified in the constitution
However, a meeting may be called by a notice shorter than period

above in the following manner:
• An AGM (public company) may be called at a shorter notice if
agreed by all the members entitled to attend and vote thereat.
• A meeting of members (public company and private company)

other than an AGM may be called at a shorter notice if so agreed
by the majority in the number of members entitled to attend and
vote at the meeting, being a majority who—
(a) together hold not less than the requisite percentage in the
number of the shares giving a right to attend and vote at the
meeting, excluding any shares in the company held as
treasury shares; or
(b) in the case of a company not having a share capital,

together represent not less than the requisite percentage of
the total voting rights at that meeting of all the members.
• The requisite percentage shall be—

(a) in the case of a private company, 90% or such higher
percentage, not exceeding 95% as may be specified in the
constitution; or
(b) in the case of a public company, 95%.
• Any accidental omission to give notice of a meeting to, or the non-

receipt of the notice of the meeting by, any member shall not
invalidate proceedings at a meeting.
In convening meetings, it is important understand the computation of

“clear days”. “Clear days” excludes the day of the notice and the day
on which the meeting is held. For example, if a notice is dated on 1
September the meeting can be properly held on 16 September, if a 14
days’ notice is required for convening the meeting.
Case law shows that a notice is defective if it is short of the length of
service required by the company’s constitution (formerly,
Memorandum and Articles of Association). Such a meeting is
ineffective and the resolution passed will be invalid unless saved by a
validation order of the Court. (First Nominee (Pte) Ltd v New Kok Ann
Realty Sdn Bhd & Anor). Unless the court is of the opinion that the
irregularity has caused or may cause substantial injustice that cannot
be remedied by any order of the Court, it may declare the defective
proceedings valid. In exercising its discretion under the law, the court
must satisfy itself that any order to validate defective proceedings
would not do injustice to the company or to any member or creditor
thereof (First Nominee (Pte) Ltd v New Kok Ann Realty Sdn Bhd &
Anor).
For public company or public listed company, a meeting shall be
called by a notice in writing of not less than 21 days before the AGM
or such longer period as is provided in other regulatory requirements,
eg the Malaysian Code on Corporate Governance 2017 suggests 28
days’ notice. The notice shall be given by advertisement in at least
one nationally circulated Bahasa Malaysia or English daily newspaper
and in writing to each Stock Exchange upon which the company is
listed. (Clause 7.17, BMLR).
Notification of publication of notice of meeting on website
The publication of a notice of meeting by a company to members is
valid only if it is in writing and given in hard copy or electronic form
stating that:
(a) that it concerns a meeting of members;
(b) the place, date and time of the meeting; and
(c) in the case of a public company, whether the meeting is an

AGM.
The notice must be on the website throughout the period from the date
of the notification to the conclusion of the meeting.
Where a meeting of members is adjourned for 30 days or more, the
notice of the adjourned meeting must be given in the same manner as
in the case of the original meeting.
Manner in which notice to be given
The notice of a meeting of members must be in writing and given to
the members either in hard copy, in electronic form, or partly in hard
copy and partly in electronic form.
Unless the constitution provides otherwise, a notice—
• given in hard copy must be sent to any member either personally
or by post to the address supplied by the member to the company
for such purpose; or
• given in electronic form shall be transmitted to the electronic

address provided by the member to the company for such
purpose or by publishing on a website.
Law: s 316, 319 and 320 of CA 2016.
¶9-620 Persons entitled to receive notice

Every member, director and auditor of the company is entitled to
receive notice of meetings of members. “Member” includes any
person entitled to a share as a consequence of the death or
bankruptcy of a member who if not for his death or bankruptcy, would
be entitled to receive notice of the meeting and the company has been
notified of the person’s entitlement in writing.
Where notice is to be sent to joint-holders of shares or debentures, it
is sufficient that only one notice be sent to the joint-holder who is
named first in the company’s members’ register. This proposition is
based on s 295(1), which stipulates that a joint-shareholder is
regarded as one shareholder.
Law: s 321 of CA 2016.
¶9-630 Contents of notice

The contents of notice of meetings of members must state:
(a) the place, date and time of the meeting; and
(b) the general nature of the business of the meeting.

A notice of meeting of members may include the text of any proposed
resolution and other information as the directors deem fit.
A notice is defective if it does not spell out the draft resolutions to be
proposed at an EGM as required by the Articles of Association (now
constitution, under CA 2016) of the company in a case law (Hup Seng
Co Ltd v Chin Ying & Ors).
Where the notice of a meeting specifies the business to be dealt with
at the meeting, the general rule is that no other business can be
embarked upon at the meeting unless the entire body corporate is
present and consents. A motion dismissing a council, which was
plainly beyond the scope of the notified business of the meeting, has
been held to be invalid (Efstathis v The Greek Orthodox Community &
Ors).
Law: s 317 of CA 2016.
¶9-640 Notice of creditors’ meeting

A meeting of creditors called by the company and at which the
resolution for voluntary winding up is proposed must be preceded by
not less than seven clear days’ notice of the time and place of the
meeting by advertisement in a daily newspaper circulating in the
country. Notice of the meeting must also be sent to creditors
simultaneously with the sending of notices to the members. The
company must send to each creditor with the notice a statement
showing the names of all creditors and the amounts of their claims.
Meeting of creditors
Subsection (1) states that the company shall cause a meeting of the
creditors of the company to be summoned for the day, or the next day
on which there is to be held the meeting at which the resolution for
voluntary winding up is to be proposed.
Subsection (2) states that where a meeting of the creditors is
summoned under sub-s (1), the company shall cause the notice of the
meeting of creditors to be sent by post to the creditors simultaneously
with the sending of the notices of the meeting of the company.
Subsection (3) states that the company shall convene the meeting at a
time and place convenient to the majority in value of the creditors and
shall—
(a) give notice by post of the meeting to the creditors at least seven
clear days; and
(b) send to each creditor together with the notice of meeting, a

statement showing the names of all creditors and the amounts of
their claims.
Subsection (4) states that the company shall cause notice of the
meeting of the creditors to be advertised at least seven days before
the date of the meeting in one widely circulated newspaper in
newspaper in Malaysia in the English language.
Subsection (5) states that the directors of the company shall—
(a) cause a full statement of the company’s affairs showing in
respect of assets, the method and manner in which the valuation
of the assets was arrived at, together with a list of the creditors
and the estimated amount of their claims to be laid before the
meeting of creditors; and
(b) appoint one of the directors to attend the meeting.
Subsection (6) states that the director so appointed under para 5(b)
and the secretary shall attend the meeting and disclose to the meeting
the company’s affairs and the circumstances leading up to the
proposed winding up.
Subsection (7) states that the creditors may appoint one of the
creditors or the director appointed under para 5(b) to preside at the
meeting.
Subsection (8) states that the chairperson shall, at the meeting,
determine whether the meeting has been held at a time and place
convenient to the majority in value of the creditors and his decision
shall be final.
Subsection (9) states that if the chairperson decides that the meeting
has not been held at a time and place convenient to that majority, the
meeting shall lapse and a further meeting shall be summoned by the
company as soon as is practicable.
Subsection (10) states that if the meeting of the company is adjourned
and the resolution for winding up is passed at an adjourned meeting,
any resolution passed at the meeting of the creditors shall have effect
as if it had been passed immediately after the passing of the
resolution for winding up.
contravened this section commits an offence and shall, on conviction,
be liable to a fine not exceeding RM10,000.
Law: s 449 of CA 2016.
¶9-645 Meeting of company and creditors in voluntary

arrangement
A corporate voluntary arrangement (CVA) is a formal process enabling
a compromise to be entered into between a company and its creditors,
based on a vote passed by a majority of at least 75% of the creditors
voting on the proposal.
In CA 2016, voluntary arrangement is an alternative rescue
mechanism for companies in financial difficulties under Pt III
(“Management of Company”), Div 82 (“Corporate Rescue
Mechanism”).
“Nominee” means a qualified insolvency practitioner whose powers
and duties include the powers and duties specified in Sch 7.
“Voluntary arrangement” means a composition in satisfaction of a
company’s debts or a scheme of arrangement of a company’s affairs.
Corporate voluntary arrangement is not applicable to—
(a) a public company;
(b) a company which is a licensed institution or an operator of a
designated payment system regulated under the laws enforced by
the Central Bank of Malaysia;
(c) a company which is subject to the CMSA 2007; and
(d) a company which creates a charge over its property or any of its
undertaking.
Summoning of meetings
Section 399 stipulates the summoning of meetings as follows:
• Where a moratorium is in force, the nominee shall summon a
meeting of the company and a meeting of its creditors at the time,
date and place as the nominee thinks fit within the period
specified in Sch 8.
• Every creditor of the company of whose claim and address the

nominee is aware shall be summoned to the creditors’ meeting
under this section.
• A meeting summoned under this section shall be conducted in

accordance with the rules of meeting under Div 5 of Pt III.
Decisions of meeting
Section 400 provides that:
• A meeting summoned under s 399 shall decide whether or not to
approve the proposed voluntary arrangement. For the proposal to
be approved, the required majority to approve a proposal for
voluntary arrangement in the creditors’ meeting shall be 75% of
the total value of creditors present and voting at the meeting
either in person or by proxy.
• A simple majority is required to pass a resolution to approve the

proposal for voluntary arrangement in a meeting of members.
• A meeting summoned under s 399 shall not approve any proposal

which affects the right of a secured creditor of the company to
enforce his security, except with the concurrence of the secured
creditor concerned.
• If resolution to approve the proposal for CVA is passed by

members and the required majority of creditor approve the CVA,
the proposed CVA shall take effect and be binding on all creditors
of the company whether or not the creditors have voted in favour
of the proposal. The results of both these meetings must be
reported to the court, the Registrar and to such other persons or
bodies as the court may approve.
• Any modification to the CVA proposal shall not be allowed to be

made in any of the meeting under s 399.
Law: s 394, 395, 399 and 400 of CA 2016.
Footnotes
2 This Div 8 came into force on 1 March 2018, by the
gazetting of P.U.(B) 106/2018.
RESOLUTIONS
¶9-700 Types of resolutions
There are two kinds of resolutions that may be passed by a company,
namely:
• ordinary resolutions requiring 14 days’ notice and only a simple
majority to pass (see ¶9-710);
• special resolutions requiring 3/4 majority of the votes cast and 21

days’ notice of intention to propose as a special resolution (see
¶9-720).
¶9-710 Ordinary resolution
An ordinary resolution is passed on a simple majority (more than 50%

votes), that is, a majority of those voting and in attendance.
Abstentions are not counted in determining whether or not a majority
is obtained. The ordinary resolution is the most commonly used
resolution for the vast majority of business transacted at company
meetings.
Section 291 provides for ordinary resolutions as follows:
Subsection (1) states that an ordinary resolution of the members or a
class of members of a company means a resolution passed by a
simple majority of more than half of such members—
(a) who are entitled to vote and do vote in person, or where proxies
are allowed, by proxy at a meeting of members; or
(b) who are entitled to vote on a written resolution.
Subsection (2) states that subject to para 1(a), an ordinary resolution

passed at a meeting on a show of hands is passed by a simple
majority if it is passed by members representing a simple majority of
members who are present at the meeting.
Subsection (3) states that an ordinary resolution is passed on a poll
taken at a meeting if it is passed by members representing more than
half of the total voting rights of the members who are entitled to vote
and do vote in person or by proxy on the resolution.
Subsection (4) states that subject to the provision of the constitution,
any matter that may be passed by ordinary resolution may also be
passed by special resolution.
Law: s 291 of CA 2016.
¶9-720 Special resolutions
A resolution is a special resolution when it has been passed by a

majority of not less than three-fourths (3/4) of members who are
entitled to vote at a general meeting of which not less than 21 days’
notice specifying the intention to propose the resolution as a special
resolution has been duly given. Normally the business required to be
done by special resolution is of major significance, for example,
adopting or amending constitution; converting a public company to a
private company or vice versa; capital reduction; or winding up.
Section 292 provides for special resolutions as follows:
Subsection (1) states that a special resolution of the members or class
of members of a company means a resolution passed by a majority of
not less than 75% of such members—
(a) who are entitled to vote and do vote in person, or where proxies
are allowed, by proxy at a meeting of members; or
(b) who are entitled to vote on a written resolution.
Subsection (2) states that if a resolution of a private company is

passed as a written resolution, the resolution is not a special
resolution unless it is stated that it is a special resolution and passed
as a special resolution.
Subsection (3) states that subject to para 1(a), a special resolution
passed at a meeting on a show of hands is passed as a special
resolution if it is passed by not less than 75% of the members who are
present at the meeting.
Subsection (4) states that a special resolution is passed on a poll
taken at a meeting if it is passed by members representing not less
than 75% of the total voting rights of the members who are entitled to
vote and do vote in person or by proxy on the resolution.
Subsection (5) states that where a resolution is passed at a meeting –
(a) the resolution is not a special resolution unless the notice of the
meeting includes the text of the resolution and states that the
resolution is proposed as a special resolution; and
(b) if it is so stated in the notice of the meeting, the resolution shall

only be passed as a special resolution.
Law: s 292 of CA 2016.
¶9-730 Resolution requiring special notice
The CA 2016 specifies when resolutions requiring special notice may

be given to the company by members of the company. These
resolutions relate to the removal of directors and auditors. When such
a special notice is required, the resolution is not effective unless a
notice of the intention to move it is given to the company at least 28
days before the general meeting and the company has given its
members notice of such resolution at the same time and in the same
manner as it gives notice of the meeting. If it is not practicable for the
company to give such a notice, it must give the notice in an
advertisement under s 322(4) at least 14 days before the meeting (see
¶9-610).
If, after notice of the intention to move such a resolution has been
given to the company, a meeting is called for a date 28 days or less
after the notice has been given, the notice, although not given to the
company within the time required, is deemed properly given.
Law: s 322 of CA 2016.
¶9-740 Written resolutions of private companies

A written resolution, which may be ordinary or special, is a resolution
that is passed in writing rather than at a meeting of members where
each member casts his votes in person or by proxy. The proposed
resolution is circulated to members eligible to vote, who signs on the
document containing the proposed resolution to signify agreement,
and returns the signed document to the company.
Under CA 2016, private companies can pass any type of members’
resolutions (both ordinary and special resolutions) by way of a written
resolution. However, a resolution to remove a director or auditor
before the expiry of their term of office cannot be passed as a written
resolution. A written resolution may be proposed by the board or any
member of a private company.
A written resolution proposed by directors as a members’ written
resolution shall be signed by the required majority of members eligible
to vote, and the date of returning the signed resolution is determined
by the directors. Whereas, a written resolution proposed by members
under s 302 must be returned signed within 28 days as required by s
307(1).
Under CA 2016, public companies (whether listed or unlisted) can no
longer pass members’ resolutions through written resolutions. All
members’ resolutions of a public company must be passed at a
general meeting.
Eligibility of members to receive written resolution (s 298)
The members who would have been entitled to vote on the resolution
on the circulation date of the resolution are eligible to receive the
written resolution. If the person entitled to vote changes during the
course of the circulation of the written resolution, the eligible members
will be the persons entitled to vote on the resolution at the time that
the first copy of the resolution is circulated.
The circulation date (s 299)
The circulation date of a written resolution is the date on which copies
of the written resolution are circulated to members. If copies are
circulated to members on different days, to the first of those days.
Manner of circulating written resolution (s 300)
A written resolution may be circulated in hard copy or electronic form.
Unless otherwise provided in the constitution, a written resolution:
• circulated in hard copy must be sent to members either personally
or by post to the address; or
• circulated in electronic form shall be transmitted to the electronic

address, provided by the member to the company for such
purpose.
Circulation of written resolution proposed by directors (s 301)

If a written resolution is proposed by the directors, the document
circulating the proposed resolution include:
• a statement how to signify agreement or otherwise to the
resolution; and
• the date for returning the signed document before the validity of
the resolution lapses.

comply with this section.
Members’ power to require circulation of written resolution (s
302)
Members also have the power to require circulation of a written
resolution under certain conditions. Section 302 provides:
Subsection (1) states that any member of a private company having a
total of 5%, or such lower percentage as specified in the constitution,
of the total voting rights of all eligible members may require the
company to circulate a resolution that may properly be moved as a
written resolution.
Subsection (2) states that any resolution may properly be moved as a
written resolution unless the resolution—
(a) if passed, would be ineffective whether by reason of
inconsistency with any written law or the constitution;
(b) is defamatory of any person;
(c) is frivolous or vexatious; or
(d) if passed, would not be in the best interest of the company.
Subsection (3) states that where a member requires a company to

circulate a written resolution, the member may require the company to
circulate with the written resolution a statement of not more than 1000
words on the subject matter of the written resolution.
Subsection (4) states that a company is required to circulate the
written resolution and any accompanying statement once the
company has received a request to do so from any member
representing not less than 5% or such lower percentage as is
specified in the constitution of the total voting rights of all members
entitled to vote on the resolution.
Subsection (5) states that a request under sub-s (1) shall—
(a) be in hard copy or electronic form;
(b) state the resolution and provide any accompanying statement;

and
(c) be signed or authenticated by the member making the request.
Circulation of written resolution proposed by members (s 303)

The directors shall circulate to every eligible member in hard copy or
electronic form a copy of the resolution and a copy of any
accompanying statement. Both of these must be circulated at the
same time to the eligible members. The copies must be circulated not
more than 21 days from the date it becomes a requirement under s
302 to circulate the resolution.
The copy of the resolution must include a statement as to the
procedure for signifying agreement or otherwise to the resolution and
the lapse date of the resolution if it is not passed.
comply with this section.
If the directors fail to circulate a written resolution, any member who
has requested the written resolution under s 302 may circulate the
resolution and any reasonable expenses incurred by the members in
circulating the resolution will be reimbursed by the company. The
company shall retain the amount reimbursed out of any sums due to
the defaulting director(s) by way of fees or other remuneration.
Procedure for signifying agreement to written resolution (s 306)
A member is deemed to signify his agreement to a proposed written
resolution when the company receives from him, in hard copy or
electronic form, an authenticated document—
(a) identifying the resolution to which it relates; and
(b) indicating his agreement to the resolution.
Once signified, a member’s agreement to a written resolution cannot

be revoked.
The written resolution is passed when the required majority of eligible
members have signified their agreement to the written resolution.
Period for agreeing to written resolution (s 307)
There must be a time frame for the duly signed written resolution to be
returned to the company once signed by the required majority. This is
an important matter in secretarial practice because a written resolution
without the required majority agreeing is a resolution that has not been
passed, and the company should not carry out such invalidly signified
written resolution.
Unless otherwise provided in the constitution, a proposed written
resolution lapses if it is not passed before the end of a period of 28
days beginning from the circulation date. A member’s agreement to
the written resolution is not effective if signified after the expiry of that
period.
Sending of documents relating to written resolutions by
electronic means (s 308)
Where a company has given an electronic address in any document in
a proposed written resolution, the company is deemed to have agreed
that any document or information relating to that resolution may be
sent by electronic means to that address, subject to any conditions or
limitations specified in the document.
Law: s 297, 299, 300, 301, 302, 303, 306, 307 and 308 of CA 2016.
¶9-750 Registration of resolutions and lodgement of

notice
The CA 2016 specifies that certain special resolutions must be lodged
with the Registrar. Some examples (which are available in MyCoID)
are:
Section and change Filing days Item in MyCoID

(a) S 27(1) and (4) – Item 3,
– Application for Schedule A
availability of names
and reservation
(b) s 28(2) 30 days Item 2,
– Application for Schedule B
change of name
(c) s 36(3) 30 days Item 4,
– Notification of Schedule B
alteration or
amendment to
constitution
(d) s 40(1) 30 days Item 6,
– Notice of conversion Schedule B
from unlimited to
limited company
(e) s 41(1) 30 days Item 7,
from a public company
to a private company
(f) s 41 30 days Item 8,
from a private
company to a public
company
(g) s 46(3) 14 days Item 12,
change in the
registered office
(h) s 84(2) 14 days Item 25,

(h) s 84(2) 14 days Item 25,
alteration of share
capital (consolidate,
convert, subdivide)
(i) s 91(2)(b) 30 days Item 27,
variation of class
rights
(j) s 117 14 days Item 29,
– Notice of proposed Schedule B
reduction of share
capital (special
resolution)
(k) s 119 (1) After 6 weeks and Item 30,
– Notice of reduction before end of 8 Schedule B
of share capital weeks from the date
of resolution
(l) s 119(2) 14 days from Item 31,
– Notice of reduction dismissal/withdrawal Schedule B
of share capital where of such application
objection was
dismissed or received
(m) s 439(2)(a) 7 days Item 70,
– Notice of resolution Schedule B
(creditors’ winding up)
(n) s 439(2)(a) 7 days Item 71,
– Notice of resolution Schedule B
(members’ winding
up)
(o) s 459(3) 7 days Item 75,
– Return by liquidator Schedule B
relating to final
meeting
All lodgement of company forms are by e-lodgement prescribed by the
Companies Regulations 2017 under the MyCoID e-lodgement
platform, from which the relevant forms can be assessed by the
company secretary responsible for carrying out the submission via
MyCoID. The relevant e-forms shall be used for lodgement of the
following resolutions:
• Special resolutions to convert a public company to a private
company or a private company to a public company are not
effective until a copy of the resolution is registered with the
Registrar, and the Registrar issues an altered certificate of
incorporation to the company. The relevant e-forms are:
(a) “Notice of conversion from an unlimited company to a
limited company”;
(b) “Notice of conversion from a public company to a private

company”;
(c) “Notice of conversion from a private company to a public

company”,
• A special resolution for the voluntary winding up of a company

must be lodged.
• Every special resolution must be registered with the Registrar

within 30 days unless otherwise specified.
• Every special resolution must be registered within seven days after

the passing of the special resolution.
• Any resolution affecting the constitution of a company must be

registered with the Registrar within relevant 30 days of the
passing of the resolution, eg revocation, adoption or amendments
to clauses.
• Every resolution or agreement that binds a class of shareholders,
whether or not agreed to by all the members of that class, must
be registered with the Registrar within 30 days unless otherwise
specified.
• Every resolution that attaches the rights to shares, not otherwise

required to be lodged, must be registered within 30 days of the
passing of the resolution.
The lodgement fees, if required in the e-form, are listed in reg 8 of the

1. When is a person considered a member of a company?
2. List the rights of shareholders of a company.
3. What types of meeting are held in a company? Give a brief

description of each of such meetings.
4. Who are the people entitled to receive notice of an AGM

meeting?
5. What proposed resolutions would require a special notice to be

served with the company?
CHAPTER 10: MINORITY
PROTECTION
Rights of minority shareholders and remedies
available ¶10-000
Common law minority protection ¶10-100
Modes of action against company ¶10-200
Statutory protection against oppression ¶10-300
Just and equitable winding up ¶10-400
RIGHTS OF MINORITY SHAREHOLDERS AND

REMEDIES AVAILABLE
¶10-000 Majority rule and company to take action
Two factors affect the ability of minority shareholders to enforce the
rights of a company in respect of harm the company has suffered:
• The principle of majority rule acknowledges that a company is
governed by the will of the majority of the shareholders. The court
will not allow minority shareholders to start litigation in respect of
an issue to which the majority shareholders can subsequently
grant their approval (Foss v Harbottle). If the thing complained of
is a thing which in substance the majority of the company is
entitled to do, or if something has been done irregularly which the
majority is entitled to do regularly, or if something has been done
illegally which the majority is entitled to do legally, there is no use
in having the matter litigated (per Mellish LJ in MacDougall v
Gardiner).
• The concept of locus standi whereby a company which has
suffered harm is the only party capable of beginning proceedings
to seek redress for that harm. Action by the company may be
through directors acting under a general power of management
(John Shaw & Sons (Salford) Limited v Shaw) or at the request of
the company in general meeting through powers conferred by the
company’s constitution. If the actions of the directors constitute a
wrong to the company, it is generally the company that should
take the action against them. It is therefore for the company, in
effect the majority, to say whether proceedings will be taken or
whether the directors’ acts will be condoned. It is not available to
a single shareholder to complain of a breach of the constitution.
Such litigation ought to be in the name of the company (Duckett v
Gover; Normandy v Ind Coope & Co Ltd). This is a result of the
separate legal personality of the company.
¶10-010 Remedies available to individual and minority

shareholders
To prevent injustice, the court in some circumstances, will allow an
individual shareholder to seek the court’s assistance in the
enforcement of directors’ and other officers’ duties. In addition, there
are statutory remedies which afford individual and minority
shareholders protection both against misconduct by those running the
company and against being dominated by the majority.
Statutory remedy under CA 2016
The Companies Act 2016 (CA 2016) provides for “Remedies” under Pt
III, Div 6. However, Div 6 opens up with “Interpretation” in s 345 which
states that for the purposes of this division “complainant” means—
(a) a member of a company, or a person who is entitled to be
registered as a member of a company;
(b) a former member of a company if the application relates to the

circumstances in which the member ceased to be a member;
(c) any director of a company; or

(d) the Registrar of Companies (“ROC” or “Registrar”), in the case of
a company declared under s 5901.
Remedy in cases of an oppression

The remedy in cases of an oppression is provided in s 346 as follows:
Subsection (1) states that any member or debenture holder of a
company may apply to the court for an order under this section on the
ground:
(a) that the affairs of the company are being conducted or the
powers of the directors are being exercised in a manner
oppressive to one or more of the members or debenture holders
including himself or in disregard of his or their interests as
members, shareholders or debenture holders of the company; or
(b) that some act of the company has been done or is threatened or
that some resolution of the members, debenture holders or any
class of them has been passed or is proposed which unfairly
discriminates against or is otherwise prejudicial to one or more of
the members or debenture holders, including himself.
Subsection (2) states that if on such application the court is of the

opinion that either of those grounds is established, the court may
make such order as it thinks fit with the view to bringing to an end or
remedying the matters complained of, and without prejudice to the
generality of the above, the order may:
(a) direct or prohibit any act or cancel or vary any transaction or
resolution;
(b) regulate the conduct of the affairs of the company in the future;

company by other members or debenture holders of the company
or by the company itself;

a reduction accordingly of capital of the company; or
Subsection (3) states that if an order that the company be wound up is

made, the provisions of CA 2016 relating to winding up of a company
shall apply as if the order had been made upon a petition duly
presented to the court by the company, with such adaptations as are
necessary.
Subsection (4) states that if an order under this section makes any
alteration in or addition to any constitution, then, notwithstanding
anything in any other provision of CA 2016, but subject to the order,
the company concerned shall not have power without the leave of the
court to make any further alteration in or addition to the constitution
inconsistent with the order, but subject to the foregoing provisions of
this subsection, the alterations or additions made by the order shall be
of the same effect as if duly made by resolution of the company.
Subsection (5) states that an office copy of any order made under this
section shall be lodged by the applicant with the Registrar within 14
days from the making of the order.
Subsection (6) states that the applicant who contravenes sub-s (5)
further fine of RM500 for each day during which the offence continues
after conviction.
For more on statutory protection against oppression, see ¶10-300ff.
Law: s 345 and 346 of CA 2016.
Footnotes
1 Declare the affairs of the company or foreign company to
be investigated under this section.
COMMON LAW MINORITY PROTECTION

¶10-100 The rule in Foss v Harbottle
The rule in Foss v Harbottle results from the concept that a company
has an independent legal personality separate from its shareholders.
The rule states that only the company can sue in respect of wrongs
done to it.
The rule is procedural in character (Jenkins LJ in Edwards v Halliwell)
and is only referable to domestic activities or the internal management
of companies. Hence, complaints against a company’s accountants do
not fall within the ambit of the rule in Foss v Harbottle (Mooney & Ors
v Peat, Marwick, Mitchell & Co & Anor).
In Foss v Harbottle, two shareholders of a company complained to the
court that the company’s assets were improperly applied. The
shareholders failed in their action. The court said that it would not
interfere in the affairs of the company as the acts were capable of
confirmation and ratification by the majority of the shareholders in
general meeting. The proper course of action for those bringing the
action would have been to obtain the authority of the general meeting
to bring an action in the company’s name. Hence, a complaint of
wrong done to the company or an action to enforce the rights of the
company has to be brought by the company (in effect, the majority of
the shareholders) and not by the individual shareholders. This
principle cannot stifle an objection that the act complained of was ultra
vires or illegal, as such acts cannot be retrospectively ratified by the
majority. The principle is sometimes referred to as the proper plaintiff
aspect of the rule in Foss v Harbottle.
The rule embraces a related principle that an individual shareholder
cannot bring an action in the courts to complain of an irregularity as
(distinct from an illegality) in the conduct of the company’s affairs
where the irregularity is one that can be cured by a majority in general
meeting. This is the internal management principle.
¶10-110 Exceptions to the rule in Foss v Harbottle
It is clear that the rule in Foss v Harbottle may operate greatly to the
disadvantage of minority shareholders. If, however, the rule is
exploited by a majority to the obvious prejudice of minority
shareholders, the courts may refuse to apply it. The circumstances in
which the court will not apply the rule are often confused with those in
which application of the rule would be inappropriate. However, for all
practical purposes, it is possible to list the circumstances in which the
rule in Foss v Harbottle will not preclude an objection by minority
shareholders to an act of the majority, as follows:
• The activity objected to is ultra vires or illegal (Foss v Harbottle).
• The activity undertaken must be sanctioned by a special resolution

(Baillie v Oriental Telegraph & Electric Co; Edwards v Halliwell).
• The activity is an infringement of personal rights of shareholders

(Pender v Lushington; Hayes v Bristol Plant Hire Ltd).
• The activity amounts to a fraud on the minority shareholder

(Menier v Hooper’s Telegraph Works Ltd; Cook v Deeks; Daniels
v Daniels). See further ¶10-120.
• The activity is oppressive to minority shareholders. See further

¶10-300.
Ultra vires or illegal acts

A shareholder can sue in person to restrain the company from
committing an illegal or ultra vires act. Such an action can be personal
or representative. It is possible to sue for the recovery of property or
for compensation because of an ultra vires act. In this case, the action
must be derivative.
The activity undertaken must be sanctioned by a special
resolution
If the majority shareholders propose to force an issue which should
have been sanctioned by a special resolution (eg an alteration of the
constitution), a shareholder may apply to the court to restrain the
breach of the constitution because the company cannot, by an
ordinary resolution, ratify this breach. The shareholder would sue by a
representative action. However, if the breach was actually committed,
he could sue in his personal capacity on the basis of his contractual
rights under the constitution. This rule operates to ensure that
resolutions which require a special resolution are not passed by a
bare majority.
The activity is an infringement of personal rights of shareholders
This is the situation considered in Pender v Lushington. Because
shareholders have proprietary rights in a company by reason of their
shareholding, it is possible to commence a personal action to compel
observance of these rights. However, the courts will only uphold such
objections where the consequences of not doing so are potentially
significant.
The activity is oppressive to minority shareholders
This situation is covered by legislation in CA 2016. See further ¶10-
300.
¶10-120 The activity amounts to fraud on the minority

There are two elements which have to be satisfied before a
shareholder can qualify for this exception. First, the shareholder must
show that the wrongdoers in the company are in control of the
company and preventing the company from bringing an action in its
own name. Secondly, he must establish fraud on the minority.
Wrongdoers in control
The wrongdoers will be in control if they:
• hold the majority of the votes in the company;
• have actually approved a fraud on the minority; or
• have shown that they are not willing to sue for a wrong done to the
company.
The minority shareholders must make some attempt to persuade the

company to sue. It is not enough to simply allege that the wrongdoers
are in control of the company. Although it is not clear whether actual
control will be recognised by the courts or whether numerical voting
control must be established, it would appear that a clear voting
majority is necessary [Prudential Assurance Co Ltd v Newman
Industries Ltd (No 2)].
A problem may arise where a company has only two shareholders
who hold the shares of the company in equal shares. In such a case,
there would be no clear majority so that neither of the shareholders
could be a minority shareholder. This was the case in Ting Chong
Maa v Chor Sek Choon. However, one of the shareholders was also a
director of the company. The other shareholder alleged that the
director obtained secret profits in the course of his duties. The
shareholder sued the director for accounts and payment of any sums
found to be due. The director argued that the shareholder had no
locus standi to bring the action. The High Court of Malaya ruled that all
things being equal, the shareholder who was also a director of the
company had control of the company. The other shareholder therefore
had locus standi to maintain the action.
Fraud on the minority
Fraud includes not only fraud in the tortious sense but also fraud in the
wider equitable sense of an abuse of power (Estmanco (Kilner House)
Ltd v Greater London Council).
The classic illustration of fraud on the minority is provided by the case
of Cook v Deeks in which the directors appropriated for themselves a
contract which the company had been pursuing. The company had
three directors one of whom was a minority shareholder. The two
directors diverted a contract from the company to a new company
which they had formed. In addition, the two directors obtained a
resolution from the company ratifying what they had done. The
minority shareholder sued the two directors on behalf of the company
for the benefit of the contract wrongly obtained by the directors. The
Privy Council said that the two directors had been in clear breach of
their duties as directors and that their actions could not be ratified by
the company as it amounted to forfeiting the interests and property of
the minority in favour of the majority.
Another aspect of fraud on the minority is where directors do not act
bona fide in the interests of the company. A wrongful exercise of
power is clearly not ratifiable as shown in Cook v Deeks. In contrast,
an exercise of power for a collateral purpose seems to be ratifiable
(Hogg v Cramphorn Ltd; Bamford v Bamford).
Where all that has been alleged is that the controllers have been
negligent, the rule in Foss v Harbottle has been applied with different
results. In Pavlides v Jensen, the minority shareholder alleged that the
directors had been grossly negligent in selling the company’s mines
for about one-fifth of their actual value. The judge agreed with the
directors’ argument that the action did not fall within any of the
recognised exceptions to the rule in Foss v Harbottle. If, however, the
allegation is that the directors have profited from their negligence at
the expense of the company, the courts will allow a derivative action.
The courts regard such conduct as a type of fraud. Thus, in Daniels v
Daniels, an action was successfully brought by minority shareholders
against directors (also the controlling shareholders) who had sold
company property at a gross undervalue, to one of their number. This
Australian landmark case also turned British precedent cases on the
subject tests for directors’ duty of care, diligence and skills.
Note that a class right given by the constitution may be enforced in an
action by a member of that class and the rule in Foss v Harbottle has
no application.
MODES OF ACTION AGAINST COMPANY

¶10-200 The different forms of action
The courts have identified exceptions to the rule in Foss v Harbottle. A

minority shareholder who wishes to bring an action must select the
appropriate procedure.
When a shareholder applies to the court or serves a writ in respect of
harm done to a company, the form of the application or the writ can be
of the following kinds:
• The shareholders will act in his personal capacity if he has
suffered a wrong himself. This is a personal action (see ¶10-210).
• If a shareholder seeks to represent himself and the other

shareholders who have suffered harm, a representative action is
appropriate (see ¶10-220).
• If a minority of the shareholders seek to vindicate the company’s

rights, they must do so by means of a derivative action (see ¶10-
230).
These forms of action are considered in turn.
¶10-210 Personal action

A personal action is brought by somebody who has been wronged,
and wishes to recover on his own behalf. Such an action may be used
by a shareholder to restrain a company from undertaking an ultra vires
act. It is also appropriate for enforcement of the contractual rights
which may be conferred upon a shareholder, eg under the
constitution, if there is one. A personal action is therefore brought by
the shareholder against the company.
This is illustrated by the case of Pender v Lushington where a minority
shareholder sought to have a resolution passed at a meeting of
shareholders. An amendment to the resolution was proposed to,
which he objected. His votes were ignored by the chairman. The
shareholder brought an action to prevent the company acting on the
amended resolution. The court held that the shareholder was entitled
to have his votes counted and that he could institute legal proceedings
to compel observance of his rights.
If, however, a shareholder objects to a breach of the constitution
which amounts to a technical irregularity in the company’s procedures,
it is unlikely that the court would interfere. Thus, in the above case
example, had the shareholders’ votes been irrelevant to the outcome
of the vote, his application would have been refused in view of an
overwhelming majority.
¶10-220 Representative actions
A representative action is appropriate where a shareholder brings an

action on behalf of both himself and other persons, to enforce their
collective personal rights. The relief sought will therefore be beneficial
to all those persons represented by the plaintiff. Any judgment
obtained in respect of a representative action binds all persons so
represented. The function of this procedure is obviously to prevent
duplicity of actions in respect of the same issue. Detailed rules as to
commencement and conduct of representative actions are contained
in the Malaysian Rules of High Court.
¶10-230 Derivative actions
A derivative action by minority shareholders can be used to enforce

the rights of the company against majority shareholders. However, a
derivative action cannot be brought by a shareholder who participated
in the wrongdoing. Judgment is given in favour of the company. The
individual plaintiff or applicant does not, therefore, directly benefit if the
action is successful. The company must be joined in the action, and
may be ordered to indemnify the shareholder who acted on its behalf
for his legal costs in the action if it is a reasonable and prudent course
to take in the circumstances [Wallersteiner v Moir (No 2)].
If the company asks the court to strike out a derivative action, prior to
commencement of proceedings, the action will be allowed to continue
only if allegations in the statement of claim justify a derivative action
and a prima facie case is provided [Prudential Assurance Co Ltd v
Newman Industries Limited (No 2)].
Derivative proceedings under CA 2016
Pursuant to s 347 and 348, a complainant may, with the leave of the
court initiate, intervene in or defend a proceeding on behalf of the
company.
Derivative proceedings brought under these provisions shall be
brought in the company’s name, and the right of any person to bring,
intervene in, defend or discontinue any proceedings on behalf of a
company at common law is abrogated.
An application for leave of court shall be made to the court without the
need for an appearance to be entered, and the complainant shall give
30 days’ notice in writing to the directors of his intention to apply for
the leave of court.
Where leave has been granted for an application, the complainant
shall initiate proceedings in Court within 30 days from the grant of
leave.
In deciding whether or not the leave shall be granted, the court shall
take into account whether:
(a) the complainant is acting in good faith; and
(b) it appears prima facie to be in the best interest of the company

that the application for leave be granted.
And any proceedings brought, intervened in or defended shall not be

discontinued, compromised or settled except with the leave of the
court.
The “leave of Court” means the application has been granted
permission of the court, without which the process cannot be carried
out.
Law: s 347 and 348 of CA 2016.
¶10-240 Security for costs where company is plaintiff

When a company brings legal action, it is up to the other party (ie the
defendant) to ask the court before which the matter is heard, to
require the company to give security for costs. This power is vested by
s 350.
The court’s main consideration is the probability of the success of the
company’s action (Dictating Machine Centre Pty Ltd v Combe). That
there are substantial issues to be tried and that the company’s claim is
made in good faith and is not a sham, are relevant factors (MA
Productions Pty Ltd v Austarama Television Pty Ltd). It is also
pertinent to ask whether the defendant is the cause of the company’s
impecuniosity. If the company is outside the jurisdiction of the court
and is limited by liability and in liquidation, the court should exercise its
discretion in favour of the defendant unless it is obvious that the
defendant will fail in its defence (Lin Securities (Pte) v Noone & Co
Sdn Bhd).
The court must also be satisfied, whether or not there is any
admission by the defendant in the pleadings, that the amount claimed
is actually due and owing by the company. The application for security
must not be used oppressively to stifle the company’s genuine claim.
The court must not allow the section to be used as an instrument of
oppression shutting out the small company from bringing a genuine
claim against a bigger company (MA Productions Pty Ltd v Austarama
Television Pty Ltd). The section is wide enough to include a company
applying to the court in respect of a scheme of arrangement with its
creditors (Gula Perak Bhd (In Receivership) v Agri-Projects (M) Sdn
Bhd). Where a claim for security for costs is presented after much
delay, a company may resist the claim by pointing to the expenditure
which it has incurred on the proceedings up to the date of the claim,
all of which would be lost if security is ordered and cannot be provided
(Caruso Australia Pty Ltd v Protec (Australia) Pty Ltd).
The court must as far as possible, do justice to each of the parties.
The court should neither prejudice a defendant nor shut out a
company from litigating its complaints. The court in exercising its
discretion in an application for security should weigh the competing
interests of the parties. The factors to be considered include whether
an order for security would prevent or inhibit the company from
proceeding with the proceedings and the prospect of the company
succeeding (Gula Perak (In Receivership) v Agri-Projects (M) Sdn
Bhd). The order for security for costs should not be made if the burden
of providing security imposed on a company would be unjust and
inequitable.
¶10-250 Power of the court to make order

The power of the court provides that in granting leave under derivative
proceedings or just an application, the court may make such other
orders as it thinks appropriate, including an order:
(a) authorising the complainant or any other person to control the
conduct of the proceedings;
(b) giving directions for the conduct of the proceedings;
(c) for any person to provide assistance and information to the

complainant, including to allow inspection of the company’s
books;
(d) requiring the company to pay reasonable legal fees and

disbursements incurred by the complainant in connection with the
application or action, or pending the grant of the leave or pending
the grant of any injunction by the court hearing the application for
leave under this section; or
(e) the costs of the complainant, the company or any other person
for proceedings taken under this section, including an order as to
indemnity for costs.
Law: s 347, 348, and 350 of CA 2016.
STATUTORY PROTECTION AGAINST

OPPRESSION
¶10-300 Scope of statutory protection
The CA 2016 provides that any shareholder of a company may apply

to the court complaining that the company’s affairs are being
conducted oppressively or in disregard to his interest. Alternatively,
the shareholder may show that something done or not done was
unfairly discriminatory against him or prejudicial to him. The Act
provides the court with wide powers to remedy the acts and conduct
complained of. It is necessary to consider:
• the meaning of “oppressive”, “in disregard”, “unfairly
discriminatory” and “prejudicial” (see ¶10-310);
• the forms of relief available (see ¶10-330); and
• the factors which affect valuation principles of a minority’s shares,

should a share purchase be ordered by the court (see ¶10-340).
Note that the local provision for protection of the minority is adapted
from the UK Companies Act 1948 which laid out the relief for a
minority against matters conducted “in a manner oppressive”. The
Privy Council said in Re Kong Thai Sawmill (Miri) Sdn Bhd that the
local provision is wider than the UK’s and that although the English
cases pertaining to the English provisions are persuasive in authority,
the local courts should not be bound by them in construing the local
provision. It was also recognised in the same case that the statutory
remedy is not a substitute for a minority shareholders action at
common law. The protection of minority shareholders at common law
is limited to the situations falling within the exceptions to the rule in
Foss v Harbottle. The most important exception is where fraud on the
minority is committed by those in control of the company.
The statutory provisions against oppression provide an important
safeguard of shareholder rights from a practical point of view.
Although the statutory remedy may be available where there is also an
existing common law remedy, the statutory remedy is superior in two
respects:
• the statutory oppression provision is unhampered by the
procedural problems presented in Foss v Harbottle, that is, the
rule that requires proceedings to be brought by the company, not
individual shareholders; and
• the court has an almost unlimited discretion to order any form of

relief.
Law: s 346(1)(a) of CA 2016.
¶10-310 Construction of the statutory remedy

The meaning of the operative words of the provision can be gleaned
both from cases on the old English statutory remedy and cases on the
provision itself. Perhaps the foremost authority for the construction of
the statutory remedy is Re Kong Thai Sawmill (Miri) Sdn Bhd. Lord
Wilberforce in this Privy Council decision said that:
“… there must be a visible departure from the standards of fair
dealing and a violation of the conditions of fair play which a
shareholder is entitled to expect before a case of oppression can
be made … ‘disregard’ involves something more than a failure to
take account of the minority’s interest: there must be awareness
of that interest and an evident decision to override it or brush it
aside or to set at naught the proper company procedure … What
is attacked by [the remedy] is not particular acts but the manner in
which the affairs of the company are being conducted or the
powers of the directors exercised. And these may be held to be,
‘oppressive’ or ‘in disregard’ even though a particular
objectionable act may have been remedied. A last minute
correction by the majority may well leave open a finding that, as
shown by its conduct over a period, a firm tendency or propensity
still exists at the time of the proceedings to oppress the minority
or to disregard its interests so calling for a remedy …”
“In a manner oppressive” was described in Scottish Co-operative
Wholesale Society Ltd v Meyer as:
• burdensome and hard;
• lack of probity on the part of those conducting the affairs of a

company.
Oppression will be found where:

• a shareholder who is entitled to manage the company is excluded
from the scope of management (Re a Company);
• a director pays himself huge director’s fees and makes loans

unconnected with the company’s business. The director was said
to have also acted in disregard of the shareholder’s interest (Re
Coliseum Stand Car Services Ltd);
• there is persistent illegal conduct towards a shareholder dictated
by the self-interest of the directors (Re Tivoli Freeholds Ltd).
Relief from oppression will not be granted where:

• a shareholder complains of disagreements as to company policy in
the absence of bad faith (Re Jermyn Street Turkish Baths Ltd);
• a shareholder did not suffer harm in his capacity as shareholder

(Re a Company);
• the application is made by a member of the company’s creditor or

shareholder (Verghese Mathai v Telok Plantations Sdn Bhd);
• a shareholder asks for relief from past acts of oppression (Re Five
Minute Car Wash Service Ltd). However, a petition may be made
to restrain anticipated acts of prejudice (Whyte, Petitioner 1984
SLT 336);
• the shareholder acquiesces in the conduct complained of (Re

Senson Auto Supplies Sdn Bhd);
• the applicant is either guilty of serious misconduct himself or has

delayed making an application despite knowing about the
prejudicial conduct (Re RA Noble & Sons (Clothing) Ltd);
• the application is merely an attempt by the petitioner to get his own

way in the running of the business (Re Bellador Silk Ltd).
A prejudicial or oppressive act must jeopardise the rights of a minority

to be grounds for a petition. Acts which harm the rights of all
shareholders will not entitle any one shareholder to relief (Re
Carrington Viyella plc). Proposed resolutions which will affect
shareholders of a company as a whole do not amount to oppression to
the minority (In the Matter of Tong Eng Sdn Bhd).
The correct procedure to commence action
The correct procedure to commence an action against oppression
under the Act is by originating petition (Re Lee Mah Realty Sdn Bhd;
In the Matter of Chong Lee Leong Seng Co (Pte) Ltd).
¶10-320 Oppression and the negligence of directors
It was said in Re Five Minute Car Wash Service Ltd that a minority
shareholder will not succeed in an action against his company for the
negligent or inept management of the company by the directors. In
contrast, in Ng Chee Keong v Ng Teong Kiat Highlands Plantations
Ltd, the neglect and indifferent conduct of directors towards the assets
of a company clearly established that the affairs of the company were
being conducted in an oppressive manner. Note that in the latter case,
the assets were allowed to deteriorate to such an extent that they
were almost forfeited by the Government. Hence, the difference
between the two cases may lie in the degree of negligence and the
seriousness of the resulting loss.
¶10-323 Director may be added as a party to oppression

A director of a company may be added as a party to an action against
oppressive conduct and made personally liable for breaches of his
fiduciary duties (Automobiles Peugeot S.A. v Asia Automobile
Industries Sdn Bhd & Ors).
¶10-330 Forms of relief
The courts have wide and unfettered discretion as to the reliefs they
may grant and the reliefs are in no way limited to those listed in the
Act (Automobiles Peugeot SA v Asia Automobile Industries Sdn Bhd &
Ors). The suitability of any one form of relief will depend on the
circumstances of the conduct.
Per s 346(2) of CA 2016, the court order may:
(a) direct or prohibit an act, or cancel or vary a transaction or
resolution undertaken by a company;
(b) regulate the company’s affairs in the future;

company by other members or holders of debentures of the
company or by the company itself;

a reduction accordingly of the company’s capital; or
Note that the courts’ underlying objective of the provision against

oppression is not to wind up a company but to end acts of oppression
against minority shareholders. A minority shareholder petitioning for
relief from oppression is not entitled as of right to wind up the
company even where he proves oppression. A court will only wind up
a company as a last resort in order to relieve a shareholder from
oppression. Such a petition is not a winding up petition. Such a
petition should be commenced under the Rules of the High Court and
not under the Malaysian Companies (Winding-up) Rules.
In old case law, a company cannot make any further alterations in or
addition to the Memorandum or Articles which are inconsistent with
the court order unless the company has obtained the permission of
the court. If the court orders the winding up of the company, the
general rules for winding up will apply. Relief will not be granted to
minority shareholders if they are found to be actually in control of the
management of the company (In Re Sin Lee Sang Sawmill Sdn Bhd).
Section 346(4) provides for the alteration in or addition of the
constitution in order to comply with the court order. Such order of the
court shall have the same effect as if duly made by resolution of the
company. The company concerned cannot make any further alteration
in or addition to the constitution inconsistent with the order without the
court’s permission.
Law: s 346(4) of CA 2016.
¶10-340 Valuation of shares

A difficulty which arises in the application of the statutory provisions
for the protection of minority shareholders is the value to be placed on
the shares if the court orders a purchase of the minority shareholders’
shares by the other members. The principal questions which have to
be resolved are:
• the date at which the valuation should be made; and
• the basis for making the valuation.
The question of timing of the valuation was considered in Re a

Company No 002567 of 1982. The finding was that the valuation date
was a question of fairness, which was to be determined by the court.
A valuation at a date prior to the award by the court (which would have
favoured the petitioner) was not allowed, because the petitioner had
chosen to turn down an offer from the other shareholders for the sale
of his shares at an earlier date. The petitioner had refused because he
was keen to see the company wound up. Consequently, Vinelott J
considered it would be wrong to let him benefit from the earlier refusal.
However, in circumstances in which the petitioner was not culpable, a
date earlier than the award may be the correct one to apply. This
observation has been approved in Re OC Transport Services Limited
in which a valuation as at the date of the unfairly prejudicial act was
applied. In Re a Company No 002612 of 1984 the Court of Appeal
considered that on the facts of the case, the appropriate valuation
date was when the petition was presented, rather than the date of the
court order some 12 months later.
The formula for share valuation is also founded upon the principle of
“fairness” (Re Bird Precision Bellows Ltd). What is “fair” must depend
on the facts of each case. Shares in a company which is run on a
quasi-partnership basis will be valued pro rata to the total value of all
the shares, with no discount applied. However, culpability of the
petitioner is a relevant factor. If he has acted in such a fashion as to
deserve exclusion he will be treated as having elected to sever his
connection with the company. A fictional basis for valuation founded
upon a free decision to sell the shares on the open market is then
appropriate. A discount would then be applied, to take into account the
size of the shareholding.
Where the company is not active at the time of court judgment, it is not
fair for the court to put the value of the shares as of the date of
judgment. This is because the net value of the shares will be much
lower than the price at which the oppressed shareholder first
purchased them. In such a situation, it is fairer that the shares be
bought back by the oppressor at the price originally paid by the
oppressed shareholder (Planeto Tullio v Andrea G Maoro).
JUST AND EQUITABLE WINDING UP

¶10-400 Application of the remedy
A company’s existence is brought to an end by “winding up”. A facility

is available in CA 2016 for minority shareholders to terminate their
company’s existence on the ground that “it is just and equitable that
the company be wound up”. However, the petitioning shareholders
must first convince the court of their case.
This procedure is considered to be appropriate for situations in which
it is no longer practical to perpetuate the existence of small quasi-
partnership type companies. This is most likely to occur because of a
breakdown in the relationship between those responsible for the
running of the company. A good illustration of the circumstances in
which the court will grant the petitioner’s request is provided by
Ebrahimi v Westbourne Galleries Ltd. In that case, a company was
formed to take over the business of two partners. The approach of the
court to applications for a just and equitable winding up was outlined
by Lord Wilberforce in the following terms:
“The superimposition of equitable considerations requires … one
or more of the following elements—
• an association formed or continued on the basis of a personal
relationship involving mutual confidence — this element will
often be found where a pre-existing partnership has been
converted into a limited company;
• an agreement, or understanding, that all, or some … of the

shareholders shall participate in the conduct of the business;
• restriction on the transfer of the member’s interest in the

company — so that if confidence is lost, or one member is
removed from management, he cannot take his stake and go
elsewhere.”
Three further conditions must be satisfied before the court will agree
to a winding up. These are:
• the shareholder has a tangible interest in a winding up, ie that
there is a surplus divisible among the shareholders after full
payment of all debts and liabilities (Re Othery Construction Ltd;
Re Expanded Plugs Ltd; Re Ah Yee Contractors (Pte) Ltd);
• the loss sustained by the shareholder as a consequence of

oppressive conduct is suffered in his capacity as a shareholder
and not in any other capacity (Ebrahimi v Westbourne Galleries
Ltd); and
• there is no evidence of misconduct on the part of the petitioning

shareholder (Ebrahimi v Westbourne Galleries Ltd).
Law: s 465(1)(h) of CA 2016.
¶10-410 Grounds for granting a winding up petition
The circumstances in which a company may be wound up by court are

stipulated in s 465(1) as follows:
(a) the company has by special resolution resolved that the
company is to be wound up by the court;
(b) the company defaults in lodging the statutory declaration under s

190(3);
(c) the company does not commence business within a year from its
incorporation or suspends its business for a whole year;
(d) the company has no member;
(e) the company is unable to pay its debts;
(f) the directors have acted in the affairs of the company in the
directors’ own interests rather than in the interests of the
members as a whole or acted in any other manner which appears
to be unfair or unjust to members;
(g) when the period, if any, fixed for the duration of the company by
the constitution expires or the event, if any, occurs on the
occurrence of which the constitution provide that the company is
to be dissolved;
(h) the court is of the opinion that it is just and equitable that the
company be wound up;
(i) the company has held a licence under the Financial Services Act
2013 or the Islamic Financial Services Act 2013, and that the
licence has been revoked or surrendered;
(j) the company has carried on a licensed business without being

duly licensed or the company has accepted, received or taken
deposits in Malaysia, in contravention of the Financial Services
Act 2013 or the Islamic Financial Services Act 2013, as the case
may be;
(k) the company is being used for unlawful purposes or any purpose
prejudicial to or incompatible with peace, welfare, security, public
interest, public order, good order or morality in Malaysia;
(l) the Minister has made a declaration under s 590 (“Investigation

of affairs of company at direction by Minister”).
Section 465(2) states that for the purpose of winding up actions

commenced by the Registrar under s 465(1)(k) above, the finding of
the Registrar that a company is being used for unlawful purposes or
any purpose prejudicial to national security or public interest or
incompatible with peace, welfare, public order, security, good order or
morality in Malaysia shall in all courts and by all persons having power
to take evidence for the purposes of this Act, be received as prima
facie evidence until proven otherwise.
In the past, the courts have granted orders for the winding up of a
company where:
• the company was formed for fraudulent or illegal purposes (Re TE
Brinsmead & Sons);
• oppression of the minority shareholders by the majority was

established (see ¶10-300). The acts of oppression must be of a
serious nature and not isolated acts of misconduct (Re Diamond
Fuel Co);
• one director was excluded from participation in management

(Ebrahimi v Westbourne Galleries Ltd, In the Matter of Lar Mar
Diamant (Oversea) Pte Ltd);
• the directors persistently breached the Articles of Association (Re

K/9 Meat Supplies (Guildford) Limited);
• a deadlock arose in the management of the company (Re Yenidje

Tobacco Co Ltd). A shareholder must make efforts at solving a
deadlock in the company before a winding up order will be
granted. He must not have an ulterior motive for seeking the
winding up of the company, such as to see the company crippled
(Re Xing Ji Food Products (M) Sdn Bhd). A person cannot merely
refuse to attend meetings of a company and then claim there is a
deadlock sufficient to justify a winding up on the “just and
equitable” ground. A winding up petition will also not be granted if
there is reasonable hope for reconciliation and co-operation
between the parties involved in the deadlock (Ng Eng Hiam v Ng
Kee Wei & Ors). Non-communication between two directors does
not amount to a deadlock if there are other shareholders in the
company who can maintain some form of company activity
(Morgan v 45 Fleurs Avenue Pty Ltd & Anor);
• a company has exhausted or cannot achieve the purpose for
which it was formed (Re Kitson & Co. Ltd; Re German Date
Coffee Co);
• the company is unable to pay its debts and a judgement order is

obtained by the petitioner.
The court will not grant a winding up order if the shareholder

acquiesces in the acts and conduct complained of and which form the
basis of the petition (Re Senson Auto Supplies Sdn Bhd).
As mentioned earlier, winding up is also a remedy against oppressive
conduct under the Companies Act. In the Privy Council case of Re
Kong Thai Sawmill (Miri) Sdn Bhd, Lord Wilberforce stated that the
following factors are to be considered when deciding whether to order
the winding up of a company as a remedy against oppressive conduct
under s 346 of CA 2016:
• that the court must bear in mind the drastic nature of the remedy of
winding up where the company is a going concern;
• the gravity of the oppression;
• the availability of alternative remedies; and
• the interest of the minority shareholder in the company and the

interests of other members not involved in the proceedings.
The above factors arguably also apply to the remedy of just and
equitable winding up.
The court must also consider whether the minority shareholder is
acting unreasonably in seeking a winding up order where some other
remedy is available, and that a grant of the petition is a remedy of last
resort. The statutory remedy for minority shareholders against
oppressive conduct (see ¶10-300) has reduced the significance of the
provision for just and equitable winding up.
Law: s 465 of CA 2016.
1. What are the exceptions to the rule of Foss v Harbottle?
2. Explain the meaning of fraud on the minority.
3. Explain the wide meaning of “oppression”.
4. Explain the various grounds for winding up by the court.

CHAPTER 11: ACCOUNTS AND
AUDIT
Accounts to be kept ¶11-000
Accounts and audit ¶11-100
Compliance with approved accounting standards ¶11-140
True and fair view ¶11-170
Group accounts and consolidated accounts ¶11-200
Directors’ report and auditor’s statement ¶11-300
Administrative matters ¶11-400
Relief from compliance with CA 2016 ¶11-450
Auditors ¶11-500
Appointment and change of auditors ¶11-550
Vacation of office ¶11-570
Company’s obligations to its auditors ¶11-600
Protection from defamation actions ¶11-750
Duties and liabilities of auditors ¶11-800
Appendix 11.1: Fifth Schedule, CA 2016 ¶11-1001
ACCOUNTS TO BE KEPT
¶11-000 Meaning of “accounts”
The Companies Act 2016 (CA 2016) in Pt III (“Management of
Company”), Div 3 sets out the legislative framework governing
accounts and audit in:
• Subdivision 1 on “Financial Statements and Report”; and
• Subdivision 2 on “Auditors”.
Although the term “accounts” is not defined, it commonly refers to

profit and loss accounts and balance sheets, and includes notes
attached or intended to be read with any of those profit and loss
accounts or balance sheets.
One of the fundamental requirements of company law in Malaysia is
that directors of companies must render an annual account of their
stewardship to the shareholders for their consideration. This
accounting must take the form of a financial report, ie a profit and loss
account and a balance sheet. In some cases, a statement of cash flow
is also required. A directors’ report referring in detail to specific areas
of activity is to be attached to the accounts. The contents of the
accounts and the directors’ report are prescribed in considerable detail
by CA 2016.
A condition precedent to the proper preparation of accounts is the
continuing requirement that adequate accounting records be
maintained at all times.
In CA 2016, the term “financial statements” has the same meaning as
set out in the approved accounting standards issued or approved by
the Malaysian Accounting Standards Board under the Financial
Reporting Act 1997; and “financial year” means the period in respect
of which any financial statements of a corporation is made up whether
that period is a year or not.
Law: s 2(1), 244 and 245 of CA 2016.
¶11-010 Requirements for every company

Every company must keep accounting records which sufficiently
explain the transactions and financial position of the company with
accuracy. The accounting records must be kept in such a way as to
enable:
• true and fair financial statements of the company to be prepared
from time to time;
• the financial statements to be conveniently and properly audited in

accordance with the provisions of CA 2016.
The CA 2016 requires that appropriate entries be made in the

accounting records within 60 days of the completion of the
transactions to which they relate and that the accounts be audited
before they are laid before the company at its annual general meeting
(AGM) of public companies or circulated to members of private
companies. In addition, attached to every balance sheet made, there
is to be an auditor’s report and a directors’ report made in accordance
with a resolution of the directors and signed by at least two directors.
The auditor’s report should contain a statement whether, in the
opinion of the directors, the profit and loss account and balance sheet
show a true and fair view for the period under review, and that the
accounts have been prepared in accordance with the applicable
accounting standards.
The accounts to be kept must comply with the following requirements:
• the directors and managers of a company shall—
(a) cause to be kept the accounting and other records to
sufficiently explain the transactions and financial position of
the company and enable true and fair profit and loss
accounts and balance sheets and any documents required to
be attached thereto to be prepared; and
(b) cause the accounting and other records to be kept in a

manner as to enable the accounting and other records to be
conveniently and properly audited.
• the directors and managers of a company shall cause appropriate

entries to be made in the accounting and other records within 60
days of the completion of the transactions to which the entries
relate.
• the company shall retain the records referred to for seven years
after the completion of the transactions or operations to which the
entries relate.
Law: s 245 of CA 2016.
¶11-020 Where accounting records are to be kept

The company’s accounting records are to be kept at the registered
office of the company or at a place within the country to be decided by
the directors. The directors must resolve where the accounting
records are to be kept if they are not kept at the registered office of the
company.
If the directors decide to keep the accounting records outside the
country, there must be kept within the country (at a place determined
by the directors) such statements and records in relation to the
matters dealt with in the records kept outside the country. These
statements and records should be sufficient to enable the preparation
of true and fair accounts and the documents required to be attached to
the accounts. In addition, a company in Malaysia has to produce the
accounting records kept outside the country if and when required by
The maintenance of adequate accounting and other records is a
continuous responsibility. If the company fails to take reasonable
steps to secure compliance with the statutory requirements, the
company and every officer of the company who is in default will be
Law: s 245(4), (5), (6) and (7) of CA 2016.
¶11-030 Inspection of records

A company’s accounting records and other records must be available
at all times for inspection by the company’s directors currently serving
the company. In Conway v Petronius Clothing Co Ltd, it was said that
the court may intervene to prevent a director from exercising his right
to inspection if the court is satisfied that the director is likely to abuse
the confidence reposed in him. That decision was arrived at on the
basis that a similar provision in the UK Companies Act 1948 did not
confer on a director a statutory right to inspect but that it merely
recognised implicitly the existence of this right at common law.
In particular cases, the court may order that the accounting and other
records be inspected by an approved company auditor acting for a
director. However, the auditor must first give a written undertaking to
the court that any information acquired will only be disclosed to that
director. However, if such a director is removed from office whilst an
approved auditor is inspecting the accounts on his behalf, the
inspection must stop immediately (Haw Par Bros (Pte) Ltd v Dato Aw
Kow).
Other persons with the right of access to the company’s financial
statements and reports are:
• the company’s auditor;
• the Registrar or any person authorised by any government

agencies;
• the Registrar or the Official Receiver in relation to the

disqualification of unfit directors of insolvent companies;
• the Minister for Finance or authorised person in relation to the

affairs of a corporation;
• the Securities Commission (SC) in relation to disqualification of

unfit directors of insolvent companies;
• the trustee for debenture holders (or an approved company auditor

on his behalf);
• the trustee or representative for the holders of interests other than

shares, debentures, etc;
• an inspector where the company is subject to an investigation;

• the Official Receiver if he is not appointed as liquidator of the
company;
• creditors and contributories of the company as the court so

empowers;
• persons named in a court order where an offence in connection

with the management of the company’s affairs is suspected; and
• the Director General of Inland Revenue.
At common law, a shareholder has a right to receive the company’s

accounts. However, to establish that right, the shareholder has to
show that inspection is necessary with reference to some specific
dispute or question to which the shareholder is a party. The right to
inspect is granted to the extent as is necessary for the particular
purpose (per Street J in Edman v Rose). Under CA 2016,
shareholders do not have any right to inspect the company’s
accounting records or transactions. Company constitutions that have
adopted the former reg 97 of Table A of the Companies Act 1965 (CA
1965) may provide that no member shall have any right of inspecting
any account or book or paper of the company except as conferred by
statute or authorised by the directors or by the company in general
meeting.
¶11-040 Form and language of accounting records
All amounts shown in the financial statements and reports lodged with
the Registrar shall be quoted in Malaysian currency.
The accounting records should be in the national language or English.
If the accounts are not maintained in the required languages, the
directors of the company must ensure that true translations of the
entries are made at least every seven days and ensure such
translations are kept with the original accounts, minutes books and
other records for so long as these original records are required to be
kept by CA 2016.
The Act merely states that the company, the directors and managers
shall cause the accounting and other records to be kept in a manner
as to enable the accounting and other records to be conveniently and
properly audited. This may imply that company accounting records
and registers may be recorded on computers so long as the
information recorded is capable of being reproduced in a legible form
for audit purposes.
The extent and range of accounting records maintained will vary to
suit the needs of each company and the complexity of the business.
Accounting records and books are properly maintained if they exhibit
and explain the transactions and financial position of the company.
Law: s 245 and 586(3) of CA 2016.
¶11-050 Retention of accounting records

All companies are required to retain their accounting records for a
period of seven years after the completion of the transactions to which
they relate.
The company, its directors and its managers have the responsibility to
ensure that:
(a) the accounting and other records to sufficiently explain the
transactions and financial position of the company and enable
true and fair profit and loss accounts and balance sheets and any
documents required to be attached thereto to be prepared; and
(b) the accounting and other records to be kept in a manner as to

enable the accounting and other records to be conveniently and
properly audited.
In the case of a company being wound up the following requirements

apply:
• All books and papers of the company and of the liquidator that are
relevant to the affairs of the company at or subsequent to the
commencement of the winding up of the company shall be prima
facie evidence of the truth of all matters recorded in the books or
papers in respect of the contributories and the company.
• The liquidator shall retain the books and papers referred to above
for a period of five years from the date of the dissolution of the
company and at the expiration of that period, may destroy the
books and papers.
• The books and papers referred to by the company may be

destroyed within a period of five years after the dissolution of the
company—
(a) in the case of a winding up by the court, in accordance with
the directions of the court;
(b) in the case of a members’ voluntary winding up, as the

company by resolution directs at the final meeting; and
(c) in the case of a creditors’ voluntary winding up, as the

committee of inspection, or, if there is no such committee, as
the creditors of the company direct at the final meeting.
• The company or the liquidator shall not be responsible to any

person claiming to have interest in any book or paper destroyed
in accordance with s 518 (“Books and papers of company”).
• Any person who contravenes the section commits an offence and

shall, on conviction, be liable to a fine not exceeding RM10,000.
The Income Tax Act 1967 requires the retention of records for a
period of seven years. Where the situation warrants it, the Director
General of Inland Revenue has the right to review tax assessments
within six (6) years after the end of any year of assessment.
Law: s 245 and 518 of CA 2016; s 91(1) Income Tax Act 1967.
ACCOUNTS AND AUDIT

¶11-100 Scope of directors’ duties in financial reporting
Unless a company is granted relief (see ¶11-450), its directors have a

duty to prepare and lay before the company at each AGM (for public
companies) or circulate to members (for private companies) the
following audited financial statements:
• profit and loss account for the period since the last account or in
the case of the first account, since the incorporation of the
company. The account must be made up to date to not more than
six months before the date of the meeting. The account must
reflect a true and fair view of the profit and loss of the company
for that period as shown in the accounting and other records of
the company;
• balance sheet as at the end of the financial year. The balance

sheet must give a true and fair view of the state of affairs of the
company as at the end of that financial year.
Company directors must ensure that the first profit and loss account
has to be made out within 18 months of the incorporation of the
company. Subsequent accounts must be made at least six months of
its financial year end. However, not more than 15 months must pass
between any two sets of accounts. If a company requires an extension
of time to lodge the financial statement and reports, the company may
apply to the ROC for the extension in accordance with s 259(2). The
Registrar may grant an extension if the reasons for the application are
in his view, special enough to warrant an extension.
The financial statements must be audited before they are sent to
every member. In the case of a public company, they must be sent to
every member 21 days before laying the accounts before an AGM of a
public company under s 340. In the case of a private company, they
are to be circulated to all shareholders within six months of the
financial year end in accordance with s 258(1)(a) of CA 2016.
The accounts of a company cannot be laid before the company in
general meeting unless they have attached to them the following
documents:
• a directors’ report (see ¶11-300);
• a statement by the directors (see ¶11-330);

• a statutory declaration by the director or other person in charge of
the financial management of the company (see ¶11-340);
• the auditors’ report; and
• the audited financial statements, cash flow statements and notes

to the accounts.
In the case of a listed company, the Annual Report must be submitted

to Bursa Malaysia and must contain the following documents:
• the abovementioned five documents;
• the Chairman’s Report;
• the listed company’s full profile and corporate information;
• a detailed list of directors’ profile of those seeking for re-election;
• a detailed list of all landed properties and their description;
• a list of the 20 largest registered shareholders and their

shareholdings;
• a statement of corporate governance in accordance with the

Malaysian Code of Corporate Governance (2017);
• a statement of the internal control and state of internal control

system.
Law: s 258 and 259 of CA 2016.
¶11-110 Financial institutions’ accounting obligations

Financial institutions, insurance companies and companies that are
licensed institutions, or operators of a designated payment system
shall be obliged to comply with the rules and regulations enforced by
the Central Bank of Malaysia (Bank Negara) with such modifications
and exceptions on their financial statements and reports as
determined.
¶11-112 Audit exemption requirements for private

companies
On 27 August 2017, the Companies Commission of Malaysia (CCM)
issued a Practice Directive explaining the categories of private
companies that could qualify for audit exemption under s 267(2) of CA
2016. The following categories of private companies may be
exempted from the audit requirements:
(a) dormant companies;
(b) zero-revenue companies; and
(c) threshold-qualified companies.
A dormant company qualifies for audit exemption if it has been

dormant from the time of its incorporation, or it is dormant throughout
the current financial year and in the immediate preceding financial
year.
A zero-revenue company is qualified for audit exemption if:
(i) it does not have any revenue during the current financial year;
(ii) it does not have any revenue in the immediate past two financial
years; and
(iii) its total assets in the current statement of financial position (FS)
does not exceed RM300,000 as well as in the FS of the
immediate past two financial years.
A threshold-qualified company is qualified for an audit exemption if it

fulfils the following criteria:
(i) it has revenue not exceeding RM100,000 during the current
financial year and in the immediate past two financial years;
(ii) its total assets in the current FS does not exceed RM300,000
and in the immediate past two financial years; and
(iii) it has, at the end of its current financial year and in each of its
immediate past two financial years’ end, not more than five
employees.
Notwithstanding the audit exemption, companies are required to lodge

a full set of unaudited financial statements accompanied with a
statement that the company is qualified for audit exemption and that
the company did not receive any request from its shareholders that
audit must be conducted for a particular year.
The CCM reiterates the importance of keeping accounting records and
preparing financial statements as required under CA 2016 and such
requirements are mandated for all companies irrespective whether
they qualify for audit exemption or otherwise.
Financial statements are still required to be prepared and lodged with
the Registrar by all companies and these must be prepared in
accordance with the approved accounting standards, hence the
dispensation of audit will not undermine the quality of financial
statements prepared. In regard to lodging financial statements which
are fraudulent, s 593 of CA 2016 makes it an offence and errant
companies and directors lodging false and misleading statements to
the Registrar will be prosecuted. (See also ¶11-553.)
Law: s 267(2) of CA 2016.
¶11-120 General requirements for financial statements

The compiling of accounts or financial statements is to comply with CA
2016 for all companies incorporated under CA 2016. For the listed
companies, they must further comply with the Bursa Malaysia Listing
Requirements (BMLR).
The general requirements for financial statements are:
• The annual financial statements for a financial year shall give a
true and fair view of the financial position as at the end of the
financial year and the financial performance for the financial year
of the company.
• The annual consolidated financial statements for a financial year

shall:
(a) give a true and fair view of the financial position of the
company and all its subsidiaries which are dealt with in the
consolidated financial statements as a whole at the end of
the financial year; and
(b) give a true and fair view of the financial performance of the
company and all its subsidiaries which are dealt with in the
consolidated financial statements as a whole for the financial
year.
• For the purposes of accounts and audit, the Registrar may require
additional information as he deems fit apart from the information
required by the authorities referred to in s 26D of the Financial
Reporting Act 1997 in the financial statements.
• Notwithstanding any relevant provisions of the applicable

approved accounting standards, the financial statements shall
contain, in the notes to the statements, the information as the
Registrar may determine and may include but not limited to the
following—
(a) directors’ remuneration;
(b) directors’ retirement benefits;
(c) compensation to directors for loss of office;
(d) loans, quasi-loans and other dealings in favour of directors;
(e) the total of the amount paid to or receivable by the auditors

as remuneration for their services as auditors, inclusive of all
fees, percentages or other payments or consideration given
by or from the company or by or from any subsidiary of the
company.
• Any document, other than financial statements prepared in
accordance with CA 2016 or advertisement published, issued or
circulated by or on behalf of a company, other than a banking
corporation, shall not contain any direct or indirect representation
that the company has any reserve unless the representation is
accompanied:
(a) if the reserve is invested outside the business of the
company, with a statement showing the manner in which it is
invested and the security for such investment; or
(b) if the reserve is being used in the business of the company,

with a statement to the effect that the reserve is being so
used.
• Where a company licensed under any written law relating to

insurance or takaful is required to prepare financial statements in
the form prescribed by that law, the company shall be deemed to
have complied with the requirements of the approved accounting
standards if its financial statements are prepared in accordance
with that law.
• If the company carries on business other than insurance or takaful

business so far as that law does not require the company to deal
with any matters which are required to be dealt with under
approved accounting standards, the company shall comply with
this section and the approved accounting standards.
• A holding company of any company licensed under any written law

relating to insurance or takaful shall be deemed to have complied
with the requirements of the approved accounting standards
relating to the preparation of its financial statements provided that
it carries no other business except as the holding company.
Furthermore, the form and contents of directors’ report and financial

statement of a banking corporation, etc, is stipulated in s 254 which
requires that the provisions of this Act relating to the form and content
of the report of the directors and the financial statements for a
financial year shall apply to a licensed institution with such
modifications and exceptions as are determined either generally or in
any particular case by the Central Bank of Malaysia.
Law: s 249 and 254 of CA 2016.
¶11-130 Audit Committees (for listed corporations)

Every listed public company is required to establish an Audit
Committee to perform corporate governance practices under BMLR.
The members of the committee are to be appointed by the board of
directors of the company. There must be at least three members. The
majority of these three members must be independent non-executive
directors (ie not executive directors or employees of the company or
persons connected with them). A company may wish to appoint the
members of its Audit Committee on a fixed term basis and to rotate
the members on a regular basis. An Audit Committee is free to
regulate its’ own proceedings. It may make its own arrangements for
the calling of meetings, voting at meetings, taking minutes of the
meetings and the inspection of the minutes.
The functions of the Audit Committee are to review:
• the audit plan with the external auditor of the company;
• with the external auditor, his evaluation of the system of internal

accounting control;
• the quarterly financial performance, mid-term financial reports and

the final audit report with the auditor;
• the scope and results of the internal audit procedures;
• the accounting policies of the company and recommend any

changes, if necessary;
• the adequacy of the services of external auditors and recommend

change, if necessary; and
• any related party transactions affecting directors of the company.
Where the directors of a listed company are required to make a

directors’ report to be annexed to the company’s annual accounts, the
directors must describe in the report the nature and extent of the Audit
Committee’s functions.
COMPLIANCE WITH APPROVED

ACCOUNTING STANDARDS
¶11-140 Compliance with Malaysian approved
accounting standards
Section 244 of CA 2016 provides for compliance with approved

accounting standards as follows:
Subsection (1) states that the approved accounting standards shall
apply to the financial statements of a company or the consolidated
financial statements of a holding company if, at the time when the
financial statements or consolidated financial statements are made
out, the approved accounting standards:
(a) apply in relation to the financial year of the company or the
holding company to which the financial statements or
consolidated financial statements relate; and
(b) are relevant to those financial statements or consolidated

Subsection (2) states that without prejudice to the generality of the

provisions of this provision, the directors of a company shall ensure
that the financial statements of the company and, if the company is a
holding company for which consolidated financial statements are
required, the consolidated financial statements of the company are
made out in accordance with the applicable approved accounting
standards and shall:
(a) in the case of a public company, be circulated to its members
and laid before the company at its AGM; or
(b) in the case of a private company, be circulated to its members or

laid before the company at a meeting of members.
Subsection (3) states that notwithstanding sub-s (2), the directors of a

company or holding company shall not be required to ensure that the
financial statements or consolidated financial statements, as the case
may be, are prepared in accordance with the approved accounting
standards if the directors are of the opinion that preparing the financial
statements or consolidated financial statements in accordance with
the approved accounting standard would not give a true and fair view:
(a) of the matters required under general requirements for financial
statements to be dealt with in the financial statements or
consolidated financial statements; or
(b) of the results of the business and the state of affairs of the
company and, if applicable, of all the companies the affairs of
which are dealt with in the consolidated financial statements.
Subsection (4) states that if the financial statements of a company or

consolidated financial statements of a holding company are not
prepared in accordance with a particular approved accounting
standard as required, the directors of the company shall:
(a) disclose by way of a note on the financial statements the reason
for not making out the financial statements or consolidated
financial statements in accordance with the approved accounting
standards; and
(b) give particulars in the note of the quantified financial effect on

the financial statements or consolidated financial statements if the
relevant approved accounting standards was complied with.
Subsection (5) states that notwithstanding anything in CA 2016, if

financial statements are required to be prepared for or lodged with the
authorities referred to in s 26D of the Financial Reporting Act 1997,
those financial statements shall be prepared in accordance with the
approved accounting standards subject to any specifications,
guidelines or regulations as may be issued by the authorities.
Subsection (6) states that the information in the accounts or
consolidated accounts of persons reporting to the authorities as
referred to in s 26D of the Financial Reporting Act 1997 shall be
deemed to have complied with the requirements of this Division
(“Audits and Accounts”) if the financial statements are made out in
accordance with that law.
Subsection (7) states that if a conflict or inconsistency arises between
the provisions of an applicable approved accounting standard and CA
2016 in their respective applications to the financial statements of a
company or consolidated financial statements of a holding company,
the provisions of the applicable approved accounting standard shall
prevail.
The MPERS and MFRS frameworks
For financial statements with annual periods beginning on or after 1
January 2016, private entities must comply with either:
• the Malaysian Private Entities Reporting Standard (MPERS) in its
entirety; or
• the Malaysian Financial Reporting Standards (MFRS) in their

entirety.
A private entity is a private company incorporated under the

Companies Act that—
• is not itself required to prepare or lodge any financial statements
under any law administered by the SC or Bank Negara; and
• is not a subsidiary or associate of, or jointly controlled by, an entity

which is required to prepare or lodge any financial statements
under any law administered by the SC or the Bank Negara
Malaysia.
The meaning of “subsidiary”, “associate” and “jointly controlled” are as

respectively defined and explained in MFRS 10 Consolidated
Financial Statements, MFRS 128 Investments in Associates and Joint
Ventures and MFRS 11 Joint Arrangements.
An entity may only be treated as a private entity in relation to such
annual periods or interim periods throughout which it is a private
entity.
Entities Other Than Private Entities shall apply the MFRS framework
for annual periods beginning on or after 1 January 2012, with the
exception of entities that are permitted in the alternative to apply the
Financial Reporting Standards (FRS) framework.
Pursuant to the MASB Notice issued on 28 October 2015 entitled
“Amendment to the effective date and applicability of the Malaysian
Financial Reporting Standards”, entities that have in the alternative
chosen to apply FRSs shall comply with MFRSs for annual periods
beginning on or after 1 January 2018. Early application of the MFRS
framework is permitted.
For more information please refer to the following MASB Notices:
(a) 19 November 2011: Issuance of new MASB Approved
Accounting Standards;
(b) 31 July 2012: Amendment to the effective date and applicability

of the Malaysian Financial Reporting Standards (MFRS
framework);
(c) 6 September 2013: Amendment to the effective date and

applicability of the Malaysian Financial Reporting Standards
(MFRS framework);
(d) 2 September 2014: Amendment to the effective date and

applicability of the Malaysian Financial Reporting Standards;
(e) 28 October 2015: Amendment to the effective date and

applicability of the Malaysian Financial Reporting Standards.
Law: s 244 of CA 2016.

¶11-150 Profit and loss account
A profit and loss account includes income and expenditure income,

revenue account and any other account showing the results of the
business of a company for a period. Every profit and loss account
must show a true and fair view of the results of the company for the
financial year. It must also comply with the approved accounting
standards stipulated in s 244 of CA 2016 (see ¶11-140). The
consolidated accounts of a holding company must also comply with s
244 of CA 2016.
The phrase “true and fair view” represents a concept which is not
difficult to understand yet is often the subject of controversy in its
application to specific facts. It is easier to grasp the concept by
explaining why a set of accounts do or do not give a true and fair view.
Accounts intending to show a true and fair view should possess the
following characteristics:
• compliance with the Accounting Standards as stated in s 244 of
CA 2016;
• information in the accounts must reflect the underlying

transactions accurately and comprehensively within acceptable
limits;
• the accounting principles selected by the company are those

which are generally accepted and appropriate in the
circumstances. The principles must also be consistently applied;
• adequate disclosure of all material facts of the company relevant

to the proper presentation of financial information;
• financial information appropriately classified to facilitate their use,

understanding and interpretation;
• information in the accounts is sufficient in quantity and quality to

satisfy the reasonable expectations of users of the accounts;
• the view presented by the financial information as a whole is

consistent with the company’s operations and records.
The accounting principles comprise the accounting principles

announced through International Accounting Standards and
pronouncements of the Malaysian Accounting Standards Board,
established by the Financial Reporting Act 1997.
The matters required to be shown in the profit and loss account are
commonly the following:
• sales or other operating revenues;
• the net balance of profit or loss;
• the amount of income received or due and receivable as dividends

from quoted and unquoted investments in subsidiaries;
• any profit or loss arising from the sale of assets (other than current
assets);
• the amount of any other profit or loss arising otherwise than in the
ordinary course of business;
• any amount set aside for payment of income tax attributable to any
other financial period;
• the amount charged or provided for depreciation, diminution in

value or amortisation of assets;
• the total of the amount paid to the directors as remuneration for

their services; and
• significant transactions with related companies.
Note that the ROC may relieve companies from compliance with the
form and content of the profit and loss account, if an application was
made (see ¶11-450).
Law: s 244 and 247 of CA 2016.
¶11-160 Balance sheet
A balance sheet is a statement of a company’s affairs as at the date at

which it is prepared. That date is normally when the company closes
its accounts at the end of a financial period for statutory reporting
purposes. The statement shows the share capital, reserves and
liabilities of a company and the manner in which these funds are
represented by the various assets of the company.
The balance sheet is prepared within a framework of recognised
accounting policies under the historical cost convention and the
company is viewed as a going concern. The balance sheet does not
attempt nor is it intended to indicate the present value or net worth of
a company.
The historical cost basis of accounting is an accepted accounting
practice in Malaysia. It minimises the range and scope from which
accounts are prepared. This is in contrast to other forms of accounting
such as current cost accounting or current purchasing power where
such accounts are prone to various interpretations and opinions.
Every balance sheet must give a true and fair view of the company’s
state of affairs as at the end of the financial year. It must also comply
with the provisions of s 244 and 247 of CA 2016. Section 247 requires
the accounting periods of companies within the same group to be
consolidated if there is a holding and subsidiary relationship between
the company.
Note that the Registrar is empowered to relieve companies from
compliance with the form and content of the balance sheet (see ¶11-
450).
Law: s 244 and 247 of CA 2016.
TRUE AND FAIR VIEW

¶11-170 Applicable Malaysian legislation
Directors of companies incorporated under CA 2016, are required to
prepare accounts that give a “true and fair” view of the state of affairs
of the company (and where applicable, the group of companies) at the
end of the financial year and of the profit and loss of the company (or
the group) for the financial year. According to s 244(3) and (4) of CA
2016, approved accounting standards are to be applied in relation to
any published accounts of commercial, industrial or business
enterprises in Malaysia and of overseas subsidiaries and associated
corporations where those accounts are to be incorporated in
consolidated accounts in Malaysia.
For the purposes of both CA 2016 and the Financial Reporting Act
1997, “approved accounting standards” are new accounting standards
issued and existing accounting standards adopted by the Malaysian
Accounting Standards Board (MASB). With the publication in the
Gazette of the Financial Reporting (Publication of Approved
Accounting Standards) Regulations 1999, the legal status of MASB
approved accounting standards pursuant to CA 2016, has been
further clarified. Hence, compliance with these approved accounting
standards is mandatory and legally enforceable.
Law: s 244(3) and (4) of CA 2016.
¶11-180 Nature of true and fair view

The “true and fair view” has not been defined in legislation and it has
been left to the courts to decide on the legal meaning and application
of the term.
In a legal opinion sought by the UK Accounting Standards Board
(ASB), Leonard Hoffman QC1 and Mary H Arden2 (1983), while
concluding “true and fair view” is a legal concept, stated that the
courts will treat compliance with accepted accounting principles as
prima facie evidence that accounts are true and fair, and equally the
converse would apply. Although the opinion is not binding, auditors
generally follow the guidelines provided in the opinion when auditing
the accounts of companies. An excerpt of the opinion is reproduced in
¶11-185 below. Following the passage of the UK Companies Act 1989
that gave statutory recognition of accounting standards, Arden in 1993
wrote that an accounting standard upheld by the law becomes an
authoritative source of law itself. Yet case law would suggest that
compliance with the rules is in itself insufficient to comprise a “true and
fair view” or “fair presentation”.
Footnotes
1 Now the Rt Hon Lord Hoffman.
2 Now the Hon Mrs Justice Arden, DBE.
¶11-185 Legal opinion on “true and fair”
The role of accounting standards in the meaning of “true and fair view”
is addressed in the written opinion from counsel in England. The
opinion (1983), given by Leonard Hoffmann and Mary H Arden, gains
its weight from the quality of its argument and needs to be read in its
entirety. It will be seen from the written opinion that opinion has been
given with particular reference to the role of accounting standards, ie
Statements of Standard Accounting Practice (SSAPs). Therefore, it
may be noted that what is stated in regard to SSAPs in England will
apply to a large extent to the accounting standards adopted in
Malaysia.
“1. The Accounting Standards Committee (ASC)3 from time to
time issues Statements of Standard Accounting Practice
(SSAPs). These are declared in the Explanatory Foreword to be
‘methods of accounting approved … for application to all financial
accounts intended to give a true and fair view of financial position
and profit or loss’. They are not intended to be ‘a comprehensive
code of rigid rules’ but departures from them should be disclosed
and explained. The Committee also noted in its Explanatory
Foreword that ‘methods of financial accounting evolve and alter in
response to changing business and economic needs. From time
to time new accounting standards will be drawn at progressive
levels, and established standards will be reviewed with the object
of improvement in the light of new needs and developments.’
2. The ASC has recently undertaken a review of the standard
setting process and decided that future standards will ‘deal only
with those matters which are of major and fundamental
importance and affect the generality of companies’ but that, as in
the past, the standards will apply ‘to all accounts, which are
intended to show a true and fair view of financial position and
profit or loss’. A SSAP is therefore a declaration by the ASC, on
behalf of its constituent professional bodies, that save in
exceptional circumstances accounts which do not comply with the
standard will not give a true and fair view.
3. But the preparation of accounts which give a true and fair view
is not merely a matter of compliance with professional standards.
In many important cases it is a requirement of law. Since 1947 all
accounts prepared for the purpose of compliance with the
Companies Acts have been required to ‘give a true and fair view’,
s 13(1) of the Companies Act 1947, re-enacted as s 149(1) of the
Companies Act 1948. In 1978 the concept of a true and fair view
was adopted by the EEC Council in its Fourth Directive ‘on the
annual accounts of certain types of companies’. The Directive
combined the requirement of giving a true and fair view with
extremely detailed provisions about the form and contents of the
accounts but the obligation to give a true and fair view was
declared to be overriding. Accounts must not comply with the
detailed requirements if this would prevent them from giving a
true and fair view. Parliament gave effect to the Directive by
passing the Companies Act 1981. This substitutes a new s 149(2)
in the 1948 Act, reproducing the old s 149(1) in substantially
similar words. The detailed requirements of the Directive appear
as a new Eighth Schedule to the 1948 Act. The old s 149(1) [now
renumbered 149A(1)] and the old Eighth Schedule (now Sch 8A)
are retained for the accounts of banking, insurance and shipping
companies. So far as the requirement to give a true and fair view
is concerned, a difference between s 149(2) and s 149A(1) is that
the former has come into the law via Brussels whereas the latter
has no EEC pedigree.
4. ‘True and fair view’ is thus a legal concept and the question of
whether company accounts comply with s 149(2) [or s 149A(1)]
can be authoritatively decided only by a court. This gives rise to a
number of questions about the relationship between the legal
requirement and the SSAPs issued by the ASC, which also claim
to be authoritative statements on what is a true and fair view.
What happens if there is a conflict between the professional
standards demanded by the ASC and the decisions of the courts
on the requirements of the Companies Acts? Furthermore, the
ASC issues new SSAPs ‘at progressive levels’ and reviews
established ones. How is this consistent with a statutory
requirement of a true and fair view which has been embodied in
the law in the same language since 1947? Can the issue of a new
SSAP make it unlawful to prepare accounts in a form which would
previously have been lawful? How can the ASC have power to
legislate in this way?
5. To answer these questions it is necessary first to examine the
nature of the ‘true and fair view’ concept as used in the
Companies Act. It is an abstraction or philosophical concept
expressed in simple English. The law uses many similar
concepts, of which ‘reasonable care’ is perhaps the most familiar
example. It is a common feature of such concepts that there is
seldom any difficulty in understanding what they mean but
frequent controversy over their application to particular facts. One
reason for this phenomenon is that because such concepts
represent a very high level of abstraction which has to be applied
to an infinite variety of concrete facts, there can never be a
sharply defined line between, for example, what is reasonable
care and what is not. There will always be a penumbral area in
which views may reasonably differ.
6. The courts have never attempted to define ‘true and fair’ in the
sense of offering a paraphrase in other languages and in our
opinion have been wise not to do so. When a concept can be
expressed in ordinary English words, we do not think that it
illuminates their meaning to attempt to frame a definition. We
doubt, for example, whether the man on the Clapham omnibus
has really contributed very much to the understanding of
reasonable care or that accountants have found it helpful to ask
themselves how this imaginary passenger would have prepared a
set of accounts. It is much more useful to illustrate the concept in
action, for example, to explain why certain accounts do or do not
give a true and fair view.
7. It is however important to observe that the application of the
concept involves judgment in questions of degree. The
information contained in accounts must be accurate and
comprehensive (to mention two of the most obvious elements
which contribute to a true and fair view) to within acceptable
limits. What is acceptable and how is this to be achieved?
Reasonable businessmen and accountants may differ over the
degree of accuracy or comprehensiveness which in particular
cases the accounts should attain. Equally, there may sometimes
be room for differences over the method to adopt in order to give
a true and fair view, cases in which there may be more than one
‘true and fair view’ of the same financial position. Again, because
‘true and fair view’ involves questions of degree, we think that
cost-effectiveness must play a part in deciding the amount of
information which is sufficient to make accounts true and fair.
8. In the end, as we have said, the question of whether accounts
give a true and fair view in compliance with the Companies Acts
must be decided by a judge. But the courts look for guidance on
this question to the ordinary practices of professional
accountants. This is not merely because accounts are expressed
in a language which judges find difficult to understand. This may
sometimes be true but it is a minor reason for the importance
which the courts attach to evidence of accountancy practice. The
important reason is inherent in the nature of the ‘true and fair’
concept. Accounts will not be true and fair unless the information
they contain is sufficient in quantity and quality to satisfy the
reasonable expectations of the readers to whom they are
addressed. On this question, accountants can express an
informed professional opinion on what, in current circumstances,
it is thought that accounts should reasonably contain. But they
can do more than that. The readership of accounts will consist of
businessmen, investors, bankers and so forth, as well as
professional accountants. But the expectations of the readers will
have been moulded by the practices of accountants because by
and large they will expect to get what they ordinarily get and that
in turn will depend upon the normal practices of accountants.
9. For these reasons, the courts will treat compliance with
accepted accounting principles as prima facie evidence that the
accounts are true and fair. Equally, deviation from accepted
principles will be prima facie evidence that they are not. We have
not been able to find reported cases on the specific question of
whether accounts are true and fair, although the question has
been adverted to in the course of judgments on other matters;
see for example Willingale v International Commercial Bank Ltd.
There are however some cases on the analogous question
arising in income tax cases of whether profit or loss has been
calculated in accordance with ‘the correct principles of
commercial accountancy’ and there is a helpful statement of
principle (approved in subsequent cases in the Court of Appeal)
by Pennycuick VC in Odeon Associated Theatres Ltd v Jones
(Inspector of Taxes):
“In order to ascertain what are the correct principles [the
court] has recourse to the evidence of accountants. That
evidence is conclusive on the practice of accountants in the
sense of the principles on which accountants act in practice.
That is a question of pure fact, but the court itself has to
make a final decision as to whether that practice corresponds
to the correct principles of commercial accountancy. No
doubt in the vast proportion of cases the court will agree with
the accountants but it will not necessarily do so. Again there
may be divergence of views between the accountants, or
there may be alternative principles, none of which can be
said to be incorrect, or of course there may be no
accountancy evidence at all … At the end of the day the
court must determine what is the correct principle of
commercial accountancy to be applied.’
10. This is also in our opinion the relationship between generally
accepted accounting principles and the legal concept of ‘true and
fair’. The function of the ASC is to formulate what it considers
should be generally accepted accounting principles. Thus the
value of a SSAP to a court which has to decide whether accounts
are true and fair is two-fold. First, it represents an important
statement of professional opinion about the standards which
readers may reasonably expect in accounts which are intended to
be true and fair. The SSAP is intended to crystallise professional
opinion and reduce penumbral areas in which divergent practices
exist and can each have a claim to being ‘true and fair’. Secondly,
because accountants are professionally obliged to comply with a
SSAP, it creates in the readers an expectation that the accounts
will be in conformity with the prescribed standards. This is in itself
a reason why accounts which depart from the standard without
adequate justification or explanation may be held not to be true
and fair. The importance of expectations was emphasised by the
Court of Appeal in what may be regarded as a converse case, Re
Press Caps. An ordinary historic cost balance sheet was said to
be ‘true and fair’ notwithstanding that it gave no information about
the current value of freehold properties because, it was said, no
one familiar with accounting conventions would expect it to
include such information.
11. A SSAP therefore has no direct legal effect. It is simply a rule
of professional conduct for accountants. But in our opinion it is
likely to have an indirect effect on the content which the courts will
give to the ‘true and fair’ concept. The effect of a SSAP may
therefore be to make it likely that accounts which would
previously have been considered true and fair will no longer
satisfy the law. Perhaps the most dramatic example arises out of
the recent statement by the ASC in connection with its review of
SSAP 16, Current Cost Accounting. The Statement puts forward
for discussion the proposition that ‘where a company is materially
affected by changing prices, pure HC accounts do not give a true
and fair view’. If this proposition were embodied in a new SSAP
and accepted by the courts, the legal requirements of a true and
fair view will have undergone a revolutionary change.
12. There is no inconsistency between such a change brought
about by changing professional opinion and the rule that words in
a statute must be construed in accordance with the meaning
which they bore when the statute was passed. The meaning of
true and fair remains what it was in 1947. It is the content given to
the concept which has changed. This is something which
constantly happens to such concepts. For example, the Bill of
Rights 1688 prohibited ‘cruel and unusual punishments’. There
has been no change in the meaning of ‘cruel’ since 1688. The
definition in Dr Johnson’s Dictionary of 1755 (‘pleased with
hurting others, inhuman, hard-hearted, without pity, barbarous’) is
much the same as in a modern dictionary. But changes in society
mean that a judge in 1983 would unquestionably characterise
punishments as ‘cruel’ which his predecessor of 1688 would not
have thought to come within this description. The meaning of the
concept remains the same; the facts to which it is applied have
changed.
13. The possibility of changing accounting standards has been
recognised both by the courts and the legislature. In Associated
Portland Cement Manufacturers Ltd v Price Commission
especially at pp 45–46, the court recognised changes since 1945
in the permissible methods of calculating depreciation. Similarly
para 90 of the new Eighth Schedule to the Companies Act 1948
refers to ‘principles generally accepted … at the time when those
accounts are prepared’.
14. We therefore see no conflict between the functions of the
ASC in formulating standards which it declares to be essential to
true and fair accounts and the function of the courts in deciding
whether the accounts satisfy the law. The courts are of course not
bound by a SSAP. A court may say that accounts which ignore
them are nevertheless true and fair. But the immediate effect of a
SSAP is to strengthen the likelihood that a court will hold that
compliance with the prescribed standard is necessary for the
accounts to give a true and fair view. In the absence of a SSAP, a
court is unlikely to reject accounts drawn up in accordance with
principles which command some respectable professional
support. The issue of a SSAP has the effect, for the two reasons
which we have given in para 16, of creating a prima facie
presumption that accounts which do not comply are not true and
fair. The presumption is then strengthened or weakened by the
extent to which the SSAP is actually accepted and applied.
Universal acceptance means that it is highly unlikely that a court
would accept accounts drawn up according to different principles.
On the other hand, if there remains a strong body of professional
opinion which consistently opts out of applying the SSAP, giving
reasons which the ASC may consider inadequate, the prima facie
presumption against such accounts is weakened.
15. We therefore do not think that the ASC should be concerned
by the possibility that a court may hold that compliance with one
of its SSAPs is not necessary for the purposes of the Companies
Acts. This possibility is inherent in the fact that the courts are not
bound by professional opinion. The function of the ASC is to
express their professional judgment on the standards which in
their opinion are required.
16. There are two further points to be considered. The first is the
relationship between the ‘true and fair’ requirement and the
detailed provisions of the new Eighth Schedule. The Act is quite
explicit on this point: the true and fair view is overriding.
Nevertheless it may be said that the detailed requirements offer
some guidance as to the principles which Parliament considered
would give a true and fair view. In particular, the Schedule plainly
regards historic cost accounting as the norm and current cost
accounting as an optional alternative. In these circumstances, is a
court likely to follow a SSAP which declares that for certain
companies, historic cost accounts cannot give a true and fair
view? In our opinion, whatever reasons there may be for taking
one view or the other, the provisions of the Eighth Schedule are
no obstacle to accepting such a SSAP. As we have already
pointed out, the provisions of the Schedule are static whereas the
concept of a true and fair view is dynamic. If the latter is
overriding, it is not impossible that the effect in time will be to
render obsolete some of the provisions of the Schedule. But we
think that this is what must have been intended when overriding
force was given to a concept with a changing content.
17. Lastly, there is the effect of the adoption of ‘true and fair view’
by the EEC. Because s 149(2) of the 1948 Act now gives effect to
a Directive, it must [unlike s 149A(1)] be construed in accordance
with any decision of the European court on the meaning of article
2.3 of the Directive. In practice we do not think that this is likely to
affect the evolution of the concept in England. Just as the concept
may have a different content at different times, so it may have a
different content in different countries. Although the European
court may seek to achieve some uniformity by laying down
minimum standards for the accounts of all EEC countries, it
seems to us that they are unlikely to disapprove of higher
standards being required by the professional bodies of individual
states and in consequence, higher legal criteria for what is a true
and fair view being adopted in the national courts of some
member states.
18. So for example article 33 of the Directive gives member states
the right to ‘permit or require’ companies to use current cost
accounting instead of historic cost principles. In the UK, as we
have said, current cost accounts are permitted by the Eighth
Schedule but the only circumstances in which they may be
required is if a court should decide, on the basis of prevailing
principles, that they were necessary to give a true and fair view.
In Germany, on the other hand, the equivalent of the Eighth
Schedule does not even permit current cost accounts. In
Germany, therefore, the only way they could be permitted would
be if the German court applied ‘true and fair view’ as an overriding
requirement. For the reasons given in para 22, we do not regard it
as illogical or impossible that even a German court may take this
view. But having regard to the Directive, we think it is very unlikely
that the European court would decide as a matter of community
law that there are circumstances in which historic cost accounts
do not give a true and fair view. Developments of this kind are
more likely to be left to national courts to make in the light of local
professional opinion.”
Footnotes
Footnotes
3 The Accounting Standards Committee (UK) was replaced
by the Accounting Standards Board (ASB) in 1989.
GROUP ACCOUNTS AND CONSOLIDATED

ACCOUNTS
¶11-200 Financial year
The CA 2016 provides that the financial year of a holding company
should coincide with the financial year of each of its subsidiaries. If the
financial years do not coincide, the holding company (which is not a
foreign company) is obliged to take the necessary measures to ensure
that they not only coincide but also that they remain unaltered:
• within two years after the commencement of CA 2016; or
• within two years after any company becomes the subsidiary of the
holding company.
The directors of a holding company may apply to the ROC for

permission for the financial year of a subsidiary not to coincide with
the financial year of the holding company. The permission will only be
granted if very good reasons exist. The application must be
accompanied by a statement by the directors of the holding company
stating the reasons for the application. If the Registrar authorises the
subsidiary to have a different year end from that of the holding
company, compliance with the terms of that order will be deemed to
be compliance with CA 2016.
If the application is refused, the directors must comply with CA 2016
within 12 months after receipt of the order. The directors of the holding
company may apply again for the Registrar’s permission for its
subsidiary to have a different year end but no application will be
entertained by the Registrar within three years after the refusal of the
last application unless the facts or circumstances of the matter have
changed considerably.
Law: s 250 of CA 2016.
¶11-210 Consolidated accounts

If a company is a holding company at the end of its financial year, its
directors, must lay before the company at the AGM consolidated
accounts dealing with:
• the profit and loss of the company and its subsidiaries for their
respective last financial years; and
• the state of affairs of the company and its subsidiaries as at the

end of each of their last financial years.
A company is the holding company of another company if it:

• controls the composition of the board of directors of the latter
company;
• controls more than half of the voting power of the latter company;
or
• holds more than half of the issued share capital (excluding

preference shares) of the latter company.
The latter company is the subsidiary of the holding company.

Consolidated accounts must give a true and fair view of the profit and
loss and state of affairs of the entire group of companies so far as they
concern members of the holding company. Consolidated accounts of
a company are not required where the company is a wholly-owned
subsidiary of another company in Malaysia.
“Consolidated accounts” in relation to a holding company means a set
of consolidated accounts for the group of companies of that holding
company. Where it is impractical to prepare one set of consolidated
accounts for the whole group, “consolidated accounts” would also
include the following:
• two or more sets of consolidated accounts together covering that
group; or
• separate accounts for each company in that group; or
• a combination of one or more sets of consolidated accounts and

one or more separate accounts together covering that group.
A “group of companies” refers to a holding company and the

companies which are subsidiaries of the holding company. There are
no equivalent definitions of “consolidated accounts” and “group of
companies” in CA 2016.
As may be seen from the definition of consolidated accounts,
consolidated accounts may be prepared in many forms. Briefly, these
include:
• a set of consolidated accounts covering the holding company and
its group of companies;
• more than one set of consolidated accounts. One set will deal with
the holding company and the others with the group of
subsidiaries. This form of presentation may be especially
appropriate where the group of companies are involved in totally
different types of operations such as shipping operations as
against manufacturing and retailing operations. In such
circumstances, it may well be misleading or confusing to give the
information in one set of accounts;
• separate accounts for the holding company and each of its

subsidiaries. In this case, the accounts of the holding company
would be accompanied by the accounts of each of the subsidiary
in the group. This method is appropriate where the principal
activity of each of the companies in the group is significantly
different from that of the other companies in the group. However,
this form of presentation is only feasible if there is a limited
number of subsidiaries, Otherwise, the information will not be in a
form which can be readily appreciated by members of the holding
company;
• any combination of the foregoing. If this manner of presentation is

selected, the consolidated accounts might exclude information in
relation to a subsidiary (or subsidiaries) and the information with
regard to the subsidiary (or subsidiaries) may be provided by
submitting its accounts separately.
The accounts, report or information sent to the shareholders of the

holding company must be accompanied by a report by the directors of
the holding company explaining or qualifying the consolidated
accounts in light of the information received from the subsidiary
company.
Accounting periods of companies within the same group
The treatment is stipulated in s 247 of CA 2016 as follows:
Subsection (1) states that the directors of every holding company that
is not a foreign company shall take such necessary steps to ensure
that within two years after any corporation becomes a subsidiary of
the holding company, the financial year of that corporation coincides
with the financial year of the holding company.
Subsection (2) states that where the financial year of a holding
company that is not a foreign company and that of each of its
subsidiaries coincide, the directors of the holding company shall at all
times take necessary steps to ensure that the financial year of the
holding company or any of its subsidiaries is not altered so that all the
financial years do not coincide with the holding company unless the
consent of the Registrar is obtained.
Subsection (3) states that if the directors of the holding company are
of the opinion that there is good reason why the financial year of any
of its subsidiaries should not coincide with the financial year of the
holding company, the directors may apply in writing to the Registrar
for an order authorising any subsidiary to continue to have or to adopt,
as the case requires, a financial year which does not coincide with that
of the holding company.
Subsection (4) states that the application shall be supported by a
statement by the directors of the holding company stating their
reasons for seeking the order.
Subsection (5) states that the Registrar may require the directors who
make an application under this section to supply any information
relating to the operation of the holding company and of any
corporation that is deemed to be related to the holding company as he
thinks necessary for the purpose of determining the application.
Subsection (6) states that in determining the application, the Registrar,
may at the expense of the holding company of which the applicants
are directors, request any approved company auditor to investigate
and report on the application.
Subsection (7) states that the Registrar may make an order granting
or refusing the application or granting the application subject to such
limitations, terms or conditions as he thinks fit and shall serve the
order on the holding company.
Subsection (8) states that the applicants aggrieved by any order made
by the Registrar may appeal against the order to the Minister within
two months after the service of the order on the holding company.
Subsection (9) states that the Minister shall determine the appeal and
in determining the appeal, may make any order that the Registrar had
power to make on the original application and may exercise any of the
powers that the Registrar may have exercised in relation to the
original application.
Subsection (10) states that if the directors of a holding company have
applied to the Registrar for an order authorising any subsidiary to
continue to have a financial year which does not coincide with that of
the holding company, the requirement shall be suspended in relation
to that subsidiary until the determination of the application and of any
appeal arising out of the application.
Subsection (11) states that where an order is made authorising any
subsidiary to have a financial year which does not coincide with that of
the holding company, compliance with the terms of the order of the
Registrar or where there has been an appeal, compliance with the
terms of any order made on the determination of the appeal shall be
deemed to be a compliance in relation to that subsidiary.
Subsection (12) states that where an application for an order to
authorise any subsidiary to have a financial year which does not
coincide with that of the holding company and the appeal, if any,
arising out of that application are refused, the time within which the
directors of the holding company are required to comply with the
requirements in relation to that subsidiary shall be deemed to be the
period of 12 months after the date upon which the order of the
Registrar is served on the holding company or the period of 12 months
after the determination of the appeal, as the case may be.
Subsection (13) states that where the directors of a holding company
have applied to the Registrar for an order authorising any of its
subsidiaries to continue to have or to adopt a financial year which
does not coincide with that of the holding company and the application
and the appeal, if any, arising out of that application, has been
refused, the directors of the holding company shall not make a similar
application with respect to that subsidiary within three years after the
refusal of the application or where there is an appeal, after the
determination of that appeal unless the Registrar is satisfied that there
has been a substantial change in the relevant facts or circumstances
since the refusal of the former application or the determination of the
appeal, as the case may be.
Subsection (14) states that any director who contravenes this section
commits an offence.
Law: s 247 of CA 2016.
¶11-220 Ultimate holding company

A company which is the subsidiary of another company must state in
its accounts laid before the company at its AGM, the name of the
company which is its ultimate holding company. Such companies must
in addition, state the country of incorporation of its ultimate holding
company. A company is the ultimate holding company of another
company if the latter company is its subsidiary, and the former is not
itself a subsidiary of any other company.
Section 5 of CA 2016 states that a corporation shall be deemed to be
the ultimate holding company of another corporation if—
(a) the other corporation is a subsidiary of the corporation; and
(b) the corporation is not itself a subsidiary of any corporation.
DIRECTORS’ REPORT AND AUDITOR’S

STATEMENT
The directors of every company must report to the members annually

by way of a directors’ report which must be:
• attached to every account made out (including consolidated
accounts) and laid before the company at each AGM;
• made in accordance with a resolution of directors and signed by

not less than two directors; and
• in respect of the profit and loss of the company and of the group
for the financial year and the company’s state of affairs as at the
end of the year.
If the resolution is passed without a unanimous decision of the

directors, the report must reflect that fact.
Directors shall prepare directors’ report
This provided in s 252 of CA 2016:
Subsection (1) states that the directors of a company shall prepare for
each financial year a report and such report shall be attached to the
Subsection (2) states that a directors’ report shall—
(a) be approved by the board; and
(b) be signed on the directors’ behalf by at least two directors, or in

the case of a single director, that director.
Subsection (3) states that every copy of directors’ report laid before a
company in an AGM of a public company under s 340 (“Annual
general meeting”), or sent to a member of a private company under s
257 (“Duty to circulate copies of financial statements and reports”) or
otherwise circulated, published or issued by the company shall state
the name of the person who signed the report on the directors’ behalf.
Subsection (4) states that any director who fails to take all reasonable
steps to secure compliance as required commits an offence and shall,
on conviction, be liable to a fine not exceeding RM500,000 or
imprisonment not exceeding one year or to both.
Subsection (5) states that the company and every officer who did not
prepare the directors’ report for approval by the board and signed by
two directors or the single director, commit an offence and shall, on
Law: s 252 of CA 2016.
¶11-310 Report is a separate document

The statutory requirement to prepare the directors’ report is distinct
from the requirement to prepare annual accounts as it must be
attached to the financial statement prepared. The two are separate
documents. The directors’ report must be complete in itself and where
appropriate, incorporate amounts shown in the accounts or make
reference to the notes to the accounts. All items listed in CA 2016 to
be included in the reports (company and group) should be included
even though the answer is in the negative. If an item has no relevance
to the company, for example, steps taken on bad debts where no bad
debts have been incurred, a negative statement indicating the reason
should be made.
Every statement, report or document relating to the affairs of the
company or group attached to or included with a directors’ report is
deemed to be part of the directors’ report. This is particularly important
in view of the offence provisions in relation to false and misleading
reports.
Law: s 252(1) of CA 2016.
¶11-320 Contents of directors’ report

Some of the particulars to be included in the directors’ report are:
• the names of the directors in office at the date of the report;
• the company’s principal activities during the financial year and any
significant change in those activities in the course of the year;
• the net amount of profit or loss for the financial year after provision
for income tax;
• the amount of dividend, if any, which directors recommend should

be paid;
• whether at the date of the report, the directors are aware of any
circumstances which would render the values attributed to the
current assets to be misleading;
• whether any transaction or event of a material and unusual nature

took place and which is likely to substantially affect the results of
the company’s operations for the financial year in which the report
is made. Directors of any company including a holding company
are under a statutory duty to draw the attention of the
shareholders to these events and transactions. Such events and
transactions include:
(a) changes in the accounting policies adopted by the company
since the last report;
(b) any material change in the method of valuation of the whole

or any part of the trading stock;
(c) any material item appearing in the accounts or consolidated
accounts for the first time; and
(d) the absence from the accounts or consolidated accounts of

a material item which is usually included.
The contents of directors’ report in relation to companies in Malaysia,

including holding companies, are set out in s 253 of CA 2016. The
contents of the report are the same regardless of whether or not the
company is a holding company.
Note that a company may apply to the ROC to be relieved from
compliance in respect of form and contents of the directors’ report
(see ¶11-450).
Contents of directors’ report as stipulated in s 253 of CA 2016
Subsection (1) states that a directors’ report for a financial year in
relation to a company shall contain:
(a) the name of every person who was a director of the company—
(i) during the financial year; and
(ii) during the period commencing from the end of the financial
year and ending on the date of the report;
(b) the principal activities of the company in the course of the

financial year including its subsidiaries; and
(c) the matters set out in Sch 5.
Subsection (2) states that s 253 shall have effect in relation to a

directors’ report required to be prepared under s 252 as if a reference
to the company in sub-s (1) or (2) were a reference to—
(a) the company; and
(b) the subsidiary undertakings included in the consolidated

financial statements for the financial year.
Subsection (3) states that the directors’ report may include a business
review as set out in Pt II of Sch 5 or any other reporting as prescribed.
(Schedule 5 is reproduced in Appendix 11.1 at the end of this
chapter.)
¶11-330 Directors’ statement

Before the annual accounts and directors’ report of a company are laid
before the public company (including a holding company) in AGM, the
directors must attach to the accounts and report a statement made in
accordance with a resolution of the directors and signed by two
directors on behalf of all the directors. This emphasises the directors’
responsibility in the preparation of accounts as distinct from the
auditors’ responsibility to report on the accounts.
The directors’ statement must be made in accordance with a
resolution of the directors stating whether in their opinion:
• the profit and loss account (or consolidated profit and loss
account) reflects a true and fair view of the profit and loss of the
company or group of companies;
• the balance sheet (or consolidated balance sheet) gives a true and
fair view of the affairs of the company or group of companies; and
• the accounts (or consolidated accounts) have been made out in

accordance with the applicable approved accounting standards.
Accordingly, before the annual accounts are submitted to the

company in general meeting, the directors must pass a resolution that:
• in their opinion, the profit and loss account and the balance sheet
(including consolidated accounts) do show the true and fair view
required; and
• two directors be authorised to sign the statement on behalf of all

the other directors.
Financial statements to be approved by the board

This is provided in s 251 of CA 2016 as follows:
Subsection (1) states that financial statements shall be:
(a) approved by the board; and
(b) accompanied with a statutory declaration by a director or where

the director is not primarily responsible for the financial
management of the company, by the person responsible in
setting forth his opinion as to the correctness or otherwise of the
financial statements and where applicable, the consolidated
Subsection (2) states that the directors shall make a statement in

accordance with the resolution of the board stating whether in their
opinion the financial statements or where applicable the consolidated
financial statements is or are drawn up, in accordance with the
applicable accounting standards, to give a true and fair view of the
financial position and financial performance of the company and of the
group.
Subsection (3) states that the statement referred to in sub-s (2) shall
be signed by at least two directors and in the case of a sole director,
by that director, and to be attached to the financial statements for
circulation in accordance with s 257 (“Duty to circulate copies of
financial statements and records”).
Subsection (4) states that in respect of any financial statements a
copy of which is circulated, published or issued by a company, the
company and every officer who contravene this section commit an
RM500,000 or imprisonment not exceeding one year or to both.
Law: s 251 of CA 2016.
¶11-340 Statutory declaration

Under CA 2016, the accounts laid before a company (including a
holding company) in general meeting must also be accompanied by a
statutory declaration made by the director or officer responsible for the
financial management of the company. The statutory declaration must
contain the director’s or officer’s opinion as to the correctness of the
accounts including the consolidated accounts.
Law: s 251(1)(b) of CA 2016.
¶11-350 Certificate relating to exempt private company

and auditor’s statement
Duty to lodge certificate relating to an exempt private company
This duty is provided in s 260 of CA 2016 as follows:
Subsection (1) states that an exempt private company may lodge with
the Registrar for each financial year a certificate relating to its status
as an exempt private company in lieu of the requirements to lodge
financial statements and reports within 30 days from the circulation of
the financial statements and reports are circulated under s 258 and
lodgement with the Registrar under s 259, for a private company.
Subsection (2) states that the certificate shall be signed by a director,
auditor and secretary of the company confirming that:
(a) the company is and has at all relevant times been an exempt
private company;
(b) a duly audited financial statements and reports required under

CA 2016 has been circulated to its members; and
(c) as at the date to which the financial statement has been made
up, the company appeared to have been able to meet its liabilities
as and when the liabilities fall due.
contravene s 260 commit an offence and shall, on conviction, be liable
to a fine not exceeding RM20,000 and, in the case of a continuing
Auditor’s statements
In relation to the above, the auditor’s statements is provided in s 261
as follows:
Subsection (1) states that a company that is not required by CA 2016
to lodge financial statements with the registrar shall lodge with the
Registrar a statement relating to the financial statements of the
company required to be circulated to its members, signed by the
auditor of the company:
(a) stating whether the company has in his opinion kept proper
accounting records and other books during the period covered by
those accounts;
(b) stating whether the financial statements have been audited in

accordance with this act;
(c) stating whether the auditor’s report on the financial statements

was made subject to any qualification or opinion under any
applicable auditing standards, or included any comment made
under s 266(3) and, if so, particulars of the qualification or
comment; and
(d) stating whether as at the date to which the financial statement

has been made up, the company appeared to have been able to
meet its liabilities as and when the liabilities fall due.
contravene s 261 commit an offence and shall, on conviction, be liable
to a fine not exceeding RM20,000 and, in the case of a continuing
which the offence continued after conviction.
Law: s 260 and 261 of CA 2016.
ADMINISTRATIVE MATTERS
¶11-400 Despatch of accounts to members
Every company is obliged to send a copy of all its accounts which are
to be laid before an AGM, to all persons entitled to receive notice of
general meetings. The CA 2016 prescribes the entitlement of the
following persons to receive notices:
• every member of the company;
• every person entitled to a share in the company as a result of the

death or bankruptcy of a member who would have been entitled
to receive the notice but for the death or bankruptcy;
• the auditor of the company; and
• every debenture holder, upon request made to company
Copies of the financial statements must be sent to members of a

private company within six months of its financial year end, and for
public company members, at least 21 days before the date of its AGM.
The accounts sent to members must be accompanied by copies of the
following documents:
• the directors’ report (see ¶11-300);
• the statement of the directors (see ¶11-330);
• the statutory declaration by the director or officer in charge of the

accounting matters of the company (see ¶11-340); and
• the auditors’ report.
Apart from the persons entitled to receive the annual accounts, any
member or any holder of debentures in the company must be
supplied, upon their request, with a copy of the last profit and loss
account and balance sheet together with the ancillary documents. The
company must not charge for copies of accounts sent in this way.
Any company or director who fails to comply with the requirements in
relation to the despatch of the company’s annual accounts will be
guilty of an offence. Presenting the accounts of a company late may
also be considered as mismanagement sufficient to warrant
shareholders to commence oppression proceedings (In the Matter of
Cast Iron Products).
Duty to circulate copies of financial statements and reports
This duty is stipulated in s 257 of CA 2016 as follows:
Subsection (1) states that every company shall send a copy of its
financial statements and reports for each financial year to—
(a) every member of the company;
(b) every person who is entitled to receive notice of general

meetings;
(c) every auditor of the company; and
(d) every debenture holder of the company on a request being

made to the company.
Subsection (2) states that copies of the financial statements and

reports shall be sent to the last known address provided to the
company.
Subsection (3) states that any member or debenture holder to whom
copies of the financial statements and reports have not been sent
shall, on a request being made by the member or debenture holder to
the company be furnished with such copies without charge.
Time allowed for sending out copies of financial statements and
reports
Subsection (1) states that the circulation of financial statements and
reports:
(a) for a private company, shall be within six months of its financial
year end; and
(b) for a public company, shall be at least 21 days before the date of
its AGM.
Subsection (2) states that in relation to a public company, the financial

statements and reports may be circulated at a shorter period if it was
agreed by all the members entitled to attend and vote at the AGM.
continuing offence, to a further fine not exceeding RM500) for each
Law: s 257 and 258 of CA 2016.
¶11-410 Filing of annual returns

The CA 2016 has completely changed the procedure for lodgement of
annual returns for private and public companies. The duty to lodge
annual return is provided in s 68 as follows:
Subsection (1) states that a company shall lodge with the Registrar an
annual return for each calendar year not later than 30 days from the
anniversary of its incorporation date.
Subsection (2) states that the requirement in sub-s (1) is not
applicable to a company in the calendar year which it is incorporated.
Subsection (3) states that the annual return of a company shall
contain the following particulars:
(a) the address of its registered office;
(b) the nature of its business;
(c) the address of the places where its business is carried on

including branch, if any;
(d) the address at which its register of members is kept, if not kept
at the registered office;
(e) the address at which its financial records are kept, if not kept at
the registered office;
(f) in the case of a company with a share capital, the summary of its
shareholding structure, including debentures;
(g) the total amount of its indebtedness;
(h) the particulars of directors, managers, secretaries and auditors;
(i) the list of its members; and
(j) such other information that the Registrar may require.
Subsection (4) state that the Registrar shall have the power to
determine the form and manner in which the annual return is to be
lodged.
Subsection (5) states that the annual return shall be signed by a
director or secretary of the company.
Subsection (6) states that if the particulars under sub-s (3) are
unchanged from the last preceding annual return, the company shall
be allowed to lodge a statement signed by a director or a secretary
certifying that there is no change in any of the matters stated from
previous years.
Subsection (7) states that a public company which has more than 500
members and provides reasonable opportunities and facilities for a
person to inspect and take copies of its list of members and its
particulars of shares transferred need not comply with the requirement
under para (3)(i) if it is included in the annual return—
(a) a certificate by the secretary that the company is of a kind to
which this subsection applies; and
(b) a list showing the prescribed particulars of the 20 largest holders

of each class of equity shares.
Subsection (8) states that the Registrar may strike a company off the
register as provided in s 549 (“Power of Registrar to strike off
company”), if the company fails to lodge an annual return for three or
more consecutive years.
Lodgement and fees
The lodgement of annual returns for the respective companies are:
(a) Private and public company with share capital: by e-form item 20
(“Annual return of company having share capital”) in Schedule B
of MyCoID4 and paying the prescribed fee of RM150 or RM500
respectively;
(b) Public company without a share capital: by e-form item 21

(“Annual return of company not having share capital”) in Schedule
B of MyCoID and paying the prescribed fee of RM500;
(c) If there is no change in the particulars of an annual return: by e-

form item 22 (“Annual return (unchanged in particulars”) in
Schedule B of MyCoID and paying the prescribed fee of RM100.
Law: s 68 of CA 2016; reg 8 of Companies Regulations 2017.
Footnotes
website.
RELIEF FROM COMPLIANCE WITH CA 2016

¶11-450 Registrar’s power
The Registrar may relieve companies from complying with specific
requirements of CA 2016 relating to the form and content of:
• accounts (or consolidated accounts); or
• directors’ reports.
The application must be made in writing by the directors of a company

to the Registrar.
A fee is payable for each application and the Registrar usually
requires the reasons for making the application. The Registrar will not
grant the relief sought unless he is satisfied that compliance with the
accounting requirements of CA 2016 would:
• render the accounts or reports misleading or inappropriate to the
circumstances of the company; or
• impose unreasonable burdens on the company or any officer of

the company.
On making the order, the Registrar may impose such conditions in

respect of the form and content of the accounts or reports as he thinks
suitable.
Orders are granted for a limited period depending on the strength of
the case and the facts on which the application is based. The
Registrar is empowered to revoke or suspend the order on application
by the directors of the company or even on the Registrar’s own action.
Note that the Registrar also has the power to relieve the directors of a
specific class of companies from complying with the requirements of
CA 2016 in relation to the form and content of the accounts and
report.
Relief from requirements as to form and contents of financial
statements and directors’ report
Subsection (1) states that the directors of a company may apply to the
Registrar in writing for an order relieving the directors from any
requirement of CA 2016 relating to the form and content of the
financial statements or consolidated financial statements or to the
form and content of the directors’ report required and the Registrar
may make such an order either unconditionally or on condition that the
directors comply with such other requirements relating to the form and
content of the financial statements or consolidated financial
statements or directors’ report as the Registrar thinks fit to impose.
Subsection (2) states that the application for a relief order shall not be
granted if the Registrar is of the opinion that the order is not consistent
with the approved accounting standards.
Subsection (3) states that the Registrar may where he considers it
appropriate make an order in respect of any class of companies
relieving the directors of a company in that class from compliance with
any specified requirements of CA 2016 relating to the form and
content of financial statements or consolidated financial statements or
to the form and content of the directors’ report required.
Subsection (4) states that the order given may be made either
unconditionally or on condition that the directors of the company
comply with such other requirements relating to the form and content
of financial statements or consolidated financial statements or
directors’ report as the Registrar thinks fit to impose.
Subsection (5) states that the Registrar shall not make an order
unless he is of the opinion that compliance with the requirements of
CA 2016 would:
(a) render the financial statements or consolidated financial
statements or directors’ report, as the case may be, misleading or
inappropriate to the circumstances of the company; or
(b) impose unreasonable burdens on the company or any officer of

the company.
Subsection (6) states that the Registrar may make an order which
may be limited to a specific period and may make a decision to vary,
suspend or revoke any such order on the application by the directors
or without any such application, in which case the Registrar shall give
to the directors an opportunity to be heard.
Law: s 255 of CA 2016.
AUDITORS
¶11-500 Functions and independence of auditors
The main function of auditors is to audit a company’s accounts before

their presentation to members. The main objects of an audit are to
certify the correctness of the financial position of the company as
shown in the profit and loss account and the balance sheet, to detect
any errors and to detect fraud. The function of an auditor is to make a
skilled examination of a company’s accounts before these are
presented to the shareholders of the company. This is to enable the
auditor to report to the shareholders on the veracity of the accounts. In
particular, the auditors of a company are:
• to report on whether those accounts give a true and fair view of the
company’s financial position;
• to certify that the statutory books are kept and maintained

properly; and
• to form an opinion as to the company’s compliance with the

provisions of CA 2016.
In addition, onerous duties and liabilities have been imposed on
auditors both in relation to the company (see ¶11-830) and to third
parties (see ¶11-840).
The CA 2016 provides that:
• every company must appoint an auditor;
• the auditor so appointed must be an approved company auditor

and must not be otherwise closely associated with the company.
The auditors’ independence reflects the policy of the legislation that

the auditor should be an impartial official who is able to report to
shareholders independently on the financial results and performances.
¶11-510 Approved company auditor

An approved company auditor is a person approved by the Minister for
Finance, whose approval has not been revoked. An approved
company auditor includes a person qualified to act as an auditor of the
company under the law of the place in which the company is
incorporated, but must hold a valid licence issued by the Minister.
Any person who is a member of the Malaysian Institute of Accountants
(MIA) may apply to the Minister of Finance to be issued with a licence
to act as approved company auditor. However, the applicant must also
show evidence of his experience in auditing in an audit firm for at least
three year or more. The Minister however, will not grant his approval
unless he is satisfied that the applicant is of good character, is
competent to carry out the duties of a company auditor and has
satisfactorily passed through an interview of a panel appointed by the
Minister. The approval may be granted subject to conditions imposed
by the Minister for Finance and may be revoked at any time by the
Minister. The approval is valid for two years from the date of issue.
The object of this whole exercise is to ensure, as far as possible, that
only chartered accountants of the MIA, who have the required
competence and integrity are approved to serve as auditors.
Law: s 263 of CA 2016.
¶11-520 Eligibility to be a company auditor
A person is ineligible to be an auditor if:

(a) he is not an approved company auditor;
(b) he is indebted to the company or to a corporation that is deemed

to be related to that company in an amount exceeding RM25,000;
(c) he is—
(i) or his spouse is an officer of the company;
(ii) a partner, employer or employee of an officer of the

company;
(iii) a partner or employee of an employee of an officer of the

company; or
(iv) a shareholder or his spouse is a shareholder of a

corporation whose employee is an officer of the company;
(iv) he is responsible for or if he is the partner, employer or

employee of a person responsible for the keeping of the
register of members or the register of debenture holders of
the company;
(v) he is an undischarged bankrupt within or outside Malaysia

except with the court’s leave; or
(vi) he has been convicted of any offence involving fraud or

dishonesty punishable with imprisonment for three months or
more.
For the purposes of (c)(iii), a person shall be deemed to be an officer

of a company if he is an officer of a corporation that is deemed to be
related to the company by virtue of s 7 (“When corporations deemed
to be related to each other”) if he has been an officer or promoter of
the company or such a corporation at any time within the preceding
period of 12 months, unless the Minister directs otherwise.
A person appointed as an auditor of a corporation is not deemed to be
an officer.
Law: s 264(1)–(3) of CA 2016.
¶11-522 Acceptance of appointment as auditor

An audit firm should only consent to be appointed, act as auditor and
prepare reports if:
(a) all the partners of the firm resident in Malaysia are approved
company auditors, and where the firm is not registered as a firm
under any existing law, it must have lodged with the Registrar the
full names and addresses of all the partners of the firm; and
(b) none of the partners of the firm is disqualified under from acting
as the auditor of the company.
The appointment of a firm in the name of:

• the firm as auditors of a company shall take effect as an
appointment as auditors of the company of the persons who are
partners of that firm at the time of the appointment [s 264(6), CA
2016].
• the limited liability partnership or foreign limited liability partnership

as auditors of a company shall take effect as an appointment as
auditors of the company as if:
(a) the partners of the limited liability partnership, whether the
partners at the time the limited liability partnership was
appointed as auditor or later; and
(b) employees of the limited liability partnership who are

approved company auditors in that limited liability
partnership, whether employed at the time the limited liability
partnership was appointed as auditor or later, are appointed
as auditors of the company [s 264(7), CA 2016].
Law: s 264(4), (6) and (7) of CA 2016.
¶11-530 Consent to be company auditor
A company may not appoint a person or firm as auditor of a company

unless the person or firm has consented in writing to act as auditor
prior to the appointment. Where a company proposes to appoint a
firm, the consent must be signed by at least one partner of the firm.
The appointment of a firm as auditor of a company is taken to be the
appointment of all the persons who are the members of the firm at the
date of the appointment.
Law: s 264(5) of CA 2016.
¶11-532 Registration of firms of auditors

A new firm of auditors shall notify the Registrar the following
particulars within 30 days from the date of commencement of
business:
(a) the name of the firm;
(b) the firm number;
(c) the address of the principal place of business and the address of
each other’s place of business, if any;
(d) the date of commencement of business;
(e) the full names, addresses, approval numbers and other

particulars of all the partners; and
(f) such other particulars as the Registrar thinks appropriate.
The notification shall be in the form as determined by the Registrar,

which is by way of filing e-form item 49 (“Registration of firms of
auditor”) in Schedule B of MyCoID and paying the prescribed fee of
RM500 under reg 8(21) of Companies Regulations 2017.
The Registrar shall keep a register of firms of auditors which contains
all the required particulars related to the audit firms.
An audit firm that is reconstituted as a result of retirement, withdrawal
or death of a partner or by the admission of a new partner or where
there is a change in any particulars relating to the firm or its partners,
the firm must notify the Registrar of the alteration and the date of the
alteration within 30 days of such alteration. This is done by lodging e-
form item 50 (“Notification of changes in particulars of an audit firm”) in
Schedule B of MyCoID and paying the prescribed fee of RM500 under
reg 9(22) of Companies Regulations 2017.
Any report or notice made or given by a firm appointed as an auditor
of a company must be:
(a) signed in the name of the firm and in his own name by a partner
of the firm who is an approved company auditor; and
(b) the firm number and the approval number of the partner legibly
written or printed either under or beside the signature of the firm
and the partner respectively.
In this regard,
• “approval number”, in relation to an auditor, is the number
allocated to that person on the approval granted by the Minister
charged with responsibility for finance;
• “firm number”, in relation to a firm of auditors, is the number

allocated by the Registrar to a firm of auditors; and
• “partner”, in relation to a firm of auditors, includes a sole proprietor

of a firm.
Law: s 265 of CA 2016.
APPOINTMENT AND CHANGE OF AUDITORS

It is a statutory requirement for every company to appoint an auditor.
This must be done at any time before the first audit of the financial
year end AGM of the company. The obligation to appoint the company
auditor is placed on the directors of the company on incorporation.
The company in general meeting may appoint the auditors if the
directors do not do so. The first appointment of a company auditor is
usually done by the board of directors after incorporation but before
the first 18 months of holding the company’s first AGM in the case of a
public company. In the case of a private company within 18 months on
incorporation, so that circulation to members within six months of the
financial year end can be carried out. After the initial appointment,
every company is required to re-appoint an auditor at each AGM in the
case of a public company, or 30 days after circulation of financial
statement and reports in the case of a private company. The auditor
appointed will hold office only until the conclusion of the next AGM of
a public company, or before the next circulation of financial statements
and reports of a private company.
An auditor cannot be appointed at an AGM (not being a meeting at
which an auditor is removed from office) unless:
• he held office as auditor of the company immediately before the
meeting; or
• notice of his nomination for appointment was given to the company

by a member of the company at least 21 days before the AGM.
¶11-553 Appointment of auditors for a private company

The appointment of auditors of private company is provided by s 267
of CA 2016 as follows:
Subsection (1) states that a private company shall appoint an auditor
for each financial year of the company. (See ¶11-112 for details.)
Subsection (2) states that the Registrar has the power to exempt any
private company from the requirement under sub-s (1). This is known
as audit exemption for a private company, for which the CCM has
given Practice Directive 3/2017, dated 4 August 2017.
Subsection (3) states that the board shall appoint an auditor of the
company:
(a) in the case of newly incorporated companies, at least 30 days
before the end of the period for the submission of the first
financial statements to the Registrar; or
(b) to fill a casual vacancy in the office of auditor.
Subsection (4) states that the members shall appoint an auditor by

ordinary resolution:
(a) in the case of subsequent years following the submission of its
first financial statements, during the period for appointing
auditors; or
(b) if the board fails to appoint an auditor under sub-s (3).
Subsection (5) states that an auditor of a private company shall only

be appointed in accordance with the resolution of the board or the
members.
Subsection (6) states that for the purposes of sub-s (4), the period for
appointing auditors means the period of 30 days:
(a) before the end of the period allowed for the lodgement of the
previous year financial statements with the Registrar within 30
days from the circulation date of the financial statements and
reports to its members; or
(b) if the previous year financial statements were lodged earlier,

before the day on which financial statements were lodged with the
Registrar.
Subsection (7) states that the company and every director of the
company who contravene s 267 commit an offence.
Registrar may appoint auditors
If a private company fails to appoint an auditor, the Registrar may
appoint one or more auditors upon application in writing from any
member of the company (s 268, CA 2016).
Term of office of auditors of private company
Subsection (1) states that an auditor of a private company shall hold
office in accordance with the terms of his appointment, provided that:
(a) he does not take office until the previous auditor cease to hold
office, unless he is the first auditor of the company; and
(b) he ceases to hold office 30 days from the circulation of the

financial statements to the members unless he is re-appointed.
Subsection (2) states that an auditor may take office before the
previous auditor ceases office in the following circumstances:
(a) where the previous auditor is not the sole auditor; or
(b) where he is appointed as an additional auditor.
Subsection (3) states that where the office of an auditor becomes

vacant under para (1)(b) and no auditor has been appointed by
members of the company, the auditor who holds office immediately
before the vacancy shall be deemed to be re-appointed, unless—
(a) he was appointed by the board;
(b) the constitution require actual re-appointment;
(c) the deemed re-appointment is prevented by the members under

s 270; or
(d) the members have resolved that he should not be re-appointed.
Prevention by members of deemed re-appointment of auditor

Section 270 provides as follows:
Subsection (1) states that an auditor of a private company shall not be
deemed to be re-appointed when the office becomes vacant if the
company has received notice under this section from members
representing at least 5% of the total voting rights of all members who
would be entitled to vote on a resolution that the auditor should not be
re-appointed.
Subsection (2) states that a notice under this section:
(a) may be in hard copy or electronic form;
(b) shall be authenticated by each member giving the notice; and
(c) shall be received by the company at least thirty (30) days before
the circulation of the financial statements to the members.
Law: s 267, 268, 269 and 270 of CA 2016.
¶11-555 Appointment of auditors for a public company

Public companies must appoint an auditor for each financial year of
the company. The board is to appoint an auditor:
(a) any time before the first AGM of the company; or
(b) to fill casual vacancy in the office of the auditor.
The auditor as appointed by the board above holds office until the
conclusion of:
(a) the first AGM for the appointment at any time before the first
AGM; or
(b) the next AGM for the appointment to fill casual vacancy.
Company members shall appoint an auditor by ordinary resolution:

(a) at the AGM;
(b) if the company fails to appoint an auditor at an AGM; or
(c) if the board fails to appoint an auditor.
An auditor of a public company should only be appointed in

accordance with a resolution by the board or members’ ordinary
resolution.
an offence.
If a public company fails to appoint an auditor, the Registrar may
appoint one or more auditors upon application in writing from any
member of the company (s 272, CA 2016).
Term of office of auditors of public company
The term of office shall be as per the terms of his appointment,
provided that:
(a) he does not take office until the previous auditor has ceased to
hold office unless he is the first auditor of the company; and
(b) he ceased to hold office at the conclusion of the AGM next

following his appointment, unless he is re-appointed.
Law: s 270 271, 272 and 273 of CA 2016.
¶11-560 Appointment where auditor removed

The general position is that on removal of an auditor from office at an
AGM, the company may:
• appoint a new auditor at a meeting where a resolution appointing
the auditor is passed with an ordinary resolution provided proper
notice of nomination has been given; or
• if such a resolution is not passed, adjourn the meeting (to a date

not earlier than 20 days but not later than 30 days after the
meeting) and by ordinary resolution, appoint another person as
auditor. Note that notice of nomination of a person to be
appointed must have been received by the company at least 10
days before the holding of the adjourned meeting.
If a company auditor is removed and the company does not appoint

another auditor, the Registrar will appoint another auditor. An auditor
appointed in this way will hold office until the end of the next AGM of
the company. This is so whether the auditor is appointed by the
company itself or by the Registrar. If a company does not appoint an
auditor at all, the Registrar has a general power to appoint an auditor
for the company on the written application of any member of the
company.
Procedure to appoint auditor by written resolution
The procedure to appoint auditor in place of an outgoing auditor by
written resolution of a private company is stipulated in s 279 of CA
2016 as follows:
(1) The company shall send a copy of the proposed resolution to the
person proposed to be appointed as an auditor and to the
outgoing auditor.
(2) Within 14 days from receiving the proposed resolution above,

the outgoing auditor may make a written statement of reasonable
length to the company explaining the circumstances of his
resignation. The outgoing auditor may request a copy of the
statement to be sent to every member of the company.
(3) The company shall send a copy of the statement to every

member of the company to whom the resolution has been
circulated prior to the period for agreeing to written resolution.
(4) The company shall circulate the resolution as proposed by

directors or as proposed by members. The following requirements
relating to the circulation of the resolution shall apply:
(a) the period allowed for circulation of copies of such written
resolution proposed by members is 28 days; and
(b) the validity of the resolution, if passed, is not affected by a

failure to comply with 28-day period, and if directors fail to
circulate the resolution, the members may do so.
(5) A copy of the statement need not be circulated if, on the

application either of the company or of any other person claiming
to be aggrieved, the court is satisfied that the auditor’s intention is
to secure needless publicity or the matter is defamatory or other
grounds that the court thinks reasonable.
Procedure to appoint auditor at a meeting of members

Section 280 stipulates the procedure to appoint an auditor at a
meeting of members in place of the outgoing auditor as follows:
(1) A special notice is required of such a resolution if—
(a) in the case of a private company:
(i) no period for appointing auditor has ended since the
outgoing auditor ceased to hold office due to his
resignation or removal; or
(ii) such a period has ended and an auditor should have

been appointed but is not appointed; or
(b) in the case of a public company:

(i) no AGM is held since the outgoing auditor ceased to
hold office due to his resignation or removal; or
(ii) an AGM is held at which an auditor should have been

appointed but is not appointed.
(2) Upon receipt of notice of the proposed resolution, the company

shall immediately send a copy of the notice to the person
proposed to be appointed as an auditor.
Law: s 279 and 280 of CA 2016.
VACATION OF OFFICE
¶11-570 Removal from office
An auditor can only be removed by a resolution at a general meeting if

special notice of the resolution has been given. The process which
must be followed if the shareholders of a company wish to remove the
company auditor is as follows:
(1) A special notice of the intention to move the resolution for the
removal of the auditor must be given to the company at least 28
days before the meeting.
(2) The company, must as soon as it receives such a special notice,

send copies of it to the auditor himself and to the Registrar.
Notice to the Registrar must be lodged in the e-form “Notification
of special notice to remove auditor” in Schedule B of MyCoID.
(3) The company must convene a general meeting and give notice
of the proposed resolution in accordance to passing an ordinary
resolution.
(4) The auditor has seven days after receiving notice of the intended
resolution to prepare and deliver to the company a written
representation of reasonable length. Upon the auditor’s request,
the company is obliged to send copies of the representation to all
those persons to whom notice of the meeting had been sent.
(5) If a copy of the representation is not sent as requested by the

auditor, the auditor may insist that his representation be read out
at the meeting without prejudice to his right to be heard orally.
However, a copy of the representation need not be circulated and
the representation need not be read at the meeting if, on the
application either of the company or of any other person claiming
to be aggrieved, the court is satisfied that the auditor’s intention is
to secure needless publicity or the matter is defamatory or some
other grounds that the court thinks reasonable.
(6) If the removal resolution is passed, the company must notify the
Registrar of the removal within 14 days of passing the resolution.
The notice is by e-form “Notification to remove auditor from office”
Law: s 277 and 278 of CA 2016.

¶11-580 Resignation from office
The auditor of a company may only resign from office:

• if he is not the sole auditor of the company; or
• at a general meeting of the company.
When the auditor gives written notice of his intention to resign, the
directors of the company must call a general meeting of the company
as soon as possible to appoint another auditor. The auditor’s notice of
resignation shall bring the auditor’s term of office to an end after 28
days from which the notice is given or from the date as may be
specified in the notice.
Procedure for resignation of auditor
(1) An auditor of a company may resign his office by giving a notice
in writing to that effect at the company’s registered office.
(2) A notice of resignation shall bring the auditor’s term of office to

an end after 21 days from which the notice is given or from the
date as may be specified in the notice.
(3) The company must send a copy of the notice of resignation to

the Registrar within seven days from the receiving of a notice of
resignation.
Rights of resigning auditor of a public company

In the case of a public company, the rights of resigning auditor is more
elaborate, requiring the following provisions to be carried out under s
283 of CA 2016:
Subsection (1) states that this section applies where the notice of
resignation of an auditor of a public company is accompanied with a
statement of the circumstances connected with his resignation.
Subsection (2) states that the auditor may give the notice of
resignation together with a signed requisition calling on the directors of
the company to immediately convene a general meeting of the
company for the purposes of receiving and considering the
explanation of the circumstances connected with his resignation as he
may wish to place before the meeting.
Subsection (3) states that the auditor may request the company to
circulate a statement in writing not exceeding a reasonable length of
the circumstances connected with the auditor’s resignation to its
members:
(a) before the meeting convened on auditor’s requisition; or
(b) before any general meeting at which the auditor’s term of office
would otherwise have expired or at which it is proposed to fill the
vacancy caused by his resignation.
Subsection (4) states that the company shall state the fact that the
statement referred to has been made in any notice of the meeting
given to members of the company, and send a copy of the statement
to every member of the company to whom notice of the meeting is or
has been sent.
Subsection (5) states that the directors shall hold the general meeting
required under this section within 28 days from the date of the receipt
of the notice of a requisition by the directors made the auditor.
Subsection (6) states that if a copy of the statement by the auditor is
not sent as required due to the default of the company, the auditor
may, without prejudice to his right to be heard orally, require that the
statement be read out at the meeting.
Subsection (7) states that a copy of a statement need not be sent and
the statement need not be read out at the meeting if, on the
application either of the company or of any other person who claims to
be aggrieved, the court is satisfied that the auditor is using this section
to secure needless publicity or the matter is defamatory.
Subsection (8) states that the court may order the company’s costs on
such an application to be paid in whole or in part by the auditor,
notwithstanding that the auditor is not a party to the application.
Subsection (9) states that an auditor who has resigned has,
notwithstanding his resignation, the rights conferred to by s 285
(“Attendance of auditors at general meetings where financial
statements are laid”) in relation to any general meeting of the
company as mentioned in para (3)(a) or (b).
Subsection (10) states that in this section, any reference in s 285 to
matters concerning the auditor as an auditor shall be construed as
references to matters concerning the auditor as a former auditor.
Subsection (11) states that every director who fails to take all
reasonable steps to secure that a meeting is convened within 28 days
from receipt of the notice of a requisition commits an offence.
Duty of auditor to inform upon cessation of office
If an auditor has made written representation to the company under s
277(3) or if an auditor gives notice of his resignation to the directors of
the company, the auditor shall—
(a) submit a copy of the written representation or his statement of
circumstances connected with his resignation to the Registrar;
and
(b) in the case of a company whose shares or debentures are

quoted on a stock exchange, submit a copy of the statement of
the stock exchange, within seven days from the submission of the
written representation or his notice of resignation.
Law: s 281, 282, 283 and 284 of CA 2016.
COMPANY’S OBLIGATIONS TO ITS AUDITORS

¶11-600 Powers and duties of auditors
The CA 2016 grants the auditor the free and unhindered right of
access at all reasonable times to the accounting and other records
(including registers) of the company. In addition, the auditor is entitled
to require from any officer of the company and any auditor of the
related company such information and explanations as he needs for
the audit of the company’s accounts.
It is an offence for an officer of a company to refuse access or fail to
provide access, without lawful excuse, to the auditor of his company
or holding company in respect of accounts, records and other
documents in his control. It is also an offence by a company officer to
refuse or fail to give, without excuse, the information and explanations
the auditor requires. In addition, anyone hindering, obstructing or
delaying an auditor in the performance of his duties or exercise of his
powers will also be committing an offence.
The powers and duties of auditors provided by CA 2016 are strictly in
relation to the professional duties and responsibilities as an auditor.
They are provided in s 266 of CA 2016:
Subsection (1) states that every auditor of a company shall report to
the members on the financial statements and on the company’s
accounting and other records relating to those financial statements
and if it is a holding company for which consolidated financial
statements are prepared shall also report to the members on the
consolidated financial statements, and the report shall be:
(a) in the case of a public company, laid before the company at its
AGM; or
(b) in the case of a private company—

(i) circulated to its members; or
(ii) laid before the company at a meeting of members.
Subsection (2) states that an auditor shall, in a report under this

section, state:
(a) whether the financial statements and, if the company is a holding
company for which consolidated financial statement are prepared,
the consolidated financial statements are in his opinion properly
drawn up:
(i) so as to give a true and fair view of the matters required by s
248 (“Directors shall prepare financial statements”) to be
dealt with in the financial statement and, if there are
consolidated financial statements, in the consolidated
financial statements;
(ii) in accordance with CA 2016 so as to give a true and fair

view of the company’s affairs; and
(iii) in accordance with the applicable approved accounting

standards, or in the case where financial statements are
required to be prepared for or lodged with the authorities
referred to in s 26D of the Financial Reporting Act 1997
(“Compliance with approved accounting standards”), such
financial statements shall be made in accordance with the
applicable approved accounting standards subject to any
specifications, guidelines or regulations as may be issued by
such authorities;
(b) if in his opinion the financial statements, and where applicable

the consolidated financial statements, have not been drawn up in
accordance with a particular applicable approved accounting
standard:
(i) whether in his opinion the financial statements or
consolidated financial statements, as the case may be,
would, if drawn up in accordance with that approved
accounting standard, have given a true and fair view of the
matters required under s 248 to be dealt with in the financial
statements or consolidated financial statements;
(ii) if in his opinion the financial statements or consolidated

financial statements, as the case may be, would not, if so
drawn up, have given a true and fair view of those matters,
his reasons for holding that opinion;
(iii) if the directors have given the particulars of the quantified

financial effect under s 244 (“Compliance with approved
accounting standards”), his opinion concerning the
particulars; and
(iv) in a case to which neither sub-para (ii) nor (iii) applies, the
particulars of the quantified financial effect on the financial
statements or consolidated financial statements of the failure
to so draw up the financial statements or consolidated
financial statements, as the case may be;
(c) in the case of consolidated financial statements, the names of

the subsidiaries, if any, of which he has not acted as auditor;
(d) any defect or irregularity in the financial statements or

consolidated financial statements and any matter not set out in
the financial statements or consolidated financial statements
without regard to which a true and fair view of the matters dealt
with by the financial statements or consolidated financial
statements would not be obtained; and
(e) if he is not satisfied as to any matter referred to in para (a), (b) or

(c), his reasons for not being so satisfied.
Subsection (3) states that an auditor of a company shall have a duty

to form an opinion to each of the following matters:
(a) whether he has obtained all the information and explanations
that he required;
(b) whether proper accounting and other records, including

registers, have been kept by the company as required by CA
2016;
(c) whether the returns received from branch offices of the company
are adequate; and
(d) whether the procedures and methods used by a holding

company or a subsidiary in arriving at the amount taken into any
consolidated accounts were appropriate to the circumstances of
the consolidation, and the auditor shall state in his report the
particulars of any deficiency, failure or shortcoming in respect of
any matter referred to in this subsection.
Subsection (4) states that an auditor of a company has a right of

access at all reasonable times to the accounting and other records,
including registers of the company and is entitled to require from any
officer of the company and any auditor of a related company such
information and explanations as he desires for the purposes of audit.
Subsection (5) states that an auditor of a holding company for which
consolidated financial statements are required:
(a) has a right of access at all reasonable times to the accounting
and other records, including registers, of any subsidiary, if
necessary; and
(b) is entitled to require from any officer or auditor of any subsidiary

included in the consolidated financial statements, at the expense
of the holding company, such information and explanations in
relation to the affairs of such subsidiaries included in the
consolidated financial statements.
Subsection (6) states that the auditor’s report shall be attached to or

endorsed on the financial statements or consolidated financial
statements and shall, if any member so requires, be read before the
company in general meeting and shall be open for inspection by any
member at any reasonable time.
Subsection (7) states that an auditor of a company or his agent
authorised by him in writing is entitled to attend any general meeting
of the company and to receive all notices of, and other
communications relating to any general meeting which a member is
entitled to receive, and to be heard at any general meeting which he
attends on any part of the business of the meeting which concerns the
auditor in his capacity as auditor.
Subsection (8) states that if an auditor, in the course of the
performance of his duties as auditor of a company, is satisfied that:
(a) there has been a breach or non-observance of any of the
provisions of CA 2016; and
(b) the circumstances are such that in his opinion the matter has not
been or will not be adequately dealt with by comment in his report
on the financial statements or consolidated financial statements
or by bringing the matter to the notice of the directors of the
company or, if the company is a subsidiary, of the directors of its
holding company,
he shall forthwith report the matter in writing to the Registrar.

Subsection (9) states that in addition to the above, if an auditor in the
course of the performance of his duties as an auditor of a public
company or a company controlled by a public company is of the
opinion that a serious offence involving fraud or dishonesty is being or
has been committed against the company or CA 2016 by officers of
the company, he shall forthwith report the matter in writing to the
Registrar.
Subsection (10) states that no duty to which an auditor of a company
may be subjected to shall be regarded as having been contravened by
reason of his reporting the matter referred to in good faith to the
Registrar.
Subsection (11) states that for the purposes of determining serious
offences involving fraud or dishonesty committed against a company
or CA 2016:
(a) a company is presumed, unless the contrary is established, to
be controlled by a public company if the public company is
entitled to exercise or control the exercise of not less than 20% of
votes attached to the voting shares of the company; and
(b) “a serious offence involving fraud or dishonesty” means an

offence that is punishable by imprisonment for a term that is not
less than two years or the value of the assets derived or likely to
be derived or any loss suffered by the company, member or
debenture holder from the commission of such an offence
exceeds RM250,000 and includes offences under s 592 (“False
reports”), 593 (“False report or statement to Registrar”), 594
(“Fraudulently inducing persons to invest money”), 595 (“Fraud by
officer”) and 596 (“Restriction on offering shares, debentures, etc,
for subscription or purchase”).
Subsection (12) states that an officer of a corporation who refuses or
fails without lawful excuse to allow an auditor of the corporation, or an
auditor of a corporation who refuses or fails without lawful excuse to
allow an auditor of its holding company:
(a) to have access to any accounting and other records, including
registers of the corporation in his custody or control;
(b) to give any information or explanation as and when required

under this section; or
(c) otherwise hinders, obstructs or delays an auditor in the

performance of his duties or the exercise of his powers, commits
an offence and shall, on conviction, be liable to imprisonment for
a term not exceeding three (3) years or to a fine not exceeding
five hundred thousand ringgit (RM500,000) or to both.
Subsection (13) states that any auditor who contravenes by not

reporting to Registrar of breaches or non-observance of any
provisions of CA 2016, or serious offence involving fraud or
dishonesty in writing to Registrar commits an offence and shall, on
conviction, be liable to imprisonment to a term not exceeding five
Law: s 266 of CA 2016.
¶11-610 Auditor of holding company
The auditor of a holding company for which group accounts are

required has a right of access at all reasonable times to accounting
and other records of any subsidiary of the holding company. These
records include the registers of the subsidiary company. In addition,
the auditor of a holding company is entitled to require from an officer
or auditor of the subsidiary any information or explanations for
purposes of reporting on the consolidated accounts.
Law: s 266(5) of CA 2016.
¶11-620 Attendance of general meeting where financial

statements are laid
The CA 2016 provides that the auditor is entitled to attend all general
meetings of a public company and to receive all notices of, and other
communications relating to, those meetings which the members are
entitled to receive. He also has the right to be heard at such meetings
on any part of the business which concerns him in his capacity as
auditor of the company. This right exists even if the auditor is retiring
at that meeting or a resolution to remove him will be passed at that
meeting.
The attendance of auditors at general meetings where financial
statements are laid is provided in CA 2016 as follows:
• An auditor of a public company shall attend every AGM where the
financial statements of the company for a financial year are to be
laid, so as to respond according to his knowledge and ability to
any question relevant to the audit of the financial statements.
• In the case of a private company, if due notice is given to an

auditor of the intention to move a resolution requiring the
presence of the auditor at a general meeting of the company
where financial statements of the company for any financial year
are to laid, the auditor shall attend that meeting so as to respond
according to his knowledge and ability to any question relevant to
the audit of the financial statements.
• An auditor who fails to attend a meeting as required under the

above requirements commits an offence unless—
(a) the auditor is prevented by circumstances beyond his
control from attending the meeting;
(b) the auditor arranges for another auditor with knowledge of

the audit to attend and carry out the duties of the auditor at
the meeting;
(c) if the auditor is a partner of a firm, the person attending the

meeting in place of the designated auditor is a partner of that
firm; or
(d) the auditor arranges for an agent authorised by the auditor

in writing to attend and carry out the duties of the auditor at
the meeting.
Law: s 285 of CA 2016.
¶11-630 Fees and remuneration

The auditor of a company appointed at an AGM of the company will
receive fees and expenses as fixed by the company in AGM. The
auditor’s fees may also be decided by the directors provided they are
authorised to do so by the members at the last AGM.
If the auditor is appointed by the directors or by the Registrar his fees
will be fixed by the directors or Registrar, respectively. If the directors
or Registrar fail to fix the auditor’s fees, the fees may be determined
by the company in general meeting.
The fixing of auditor’s remuneration is provided under CA 2016 as
follows:
• The remuneration of an auditor appointed:
(a) by the members of a company shall be fixed by the
members by ordinary resolution or in such manner as the
members may determine;
(b) by the board shall be fixed by the board and if not so fixed,
by the company; or
(c) by the Registrar shall be fixed either by the Registrar or the

board and if not so fixed, by the company.
• “Remuneration” includes sums paid in respect of expenses and

payment otherwise than cash.
In relation to fees and remuneration, the obligation to furnish

particulars of payment made to auditors is provided as follows:
• if a company is served with a notice sent by or on behalf of at least
5% of the total number of members of the company or the holders
in aggregate of not less than 5% of the company’s issued share
capital, requiring particulars of all remuneration paid to or
receivable by the auditor of the company, a partner, an employer
or an employee of the auditor, by or from the company or any
subsidiary in respect of services other than auditing services
rendered to the company, the company shall forthwith:
(a) prepare or cause to be prepared a statement showing
particulars of all the remuneration paid to or receivable by the
auditor, partner, employer or employee of the auditor and of
the services in respect of which the payments have been
made for the financial year immediately preceding the service
of the notice;
(b) forward a copy of the statement to all persons entitled to

receive notice of general meetings of the company; and
(c) in the case of a public company, lay the statement before

the company in general meeting.
Law: s 274 and 275 of CA 2016.
PROTECTION FROM DEFAMATION ACTIONS

¶11-750 Protection from defamation actions
Auditors enjoy a qualified privilege in order that they may report their
findings freely and without fear of reprisals through the courts in
defamation actions. The CA 2016 specifically states that an auditor is
not liable to any defamation action for any oral or written statement
which he makes in the course of his duties as auditor unless such a
statement is made maliciously. As a natural extension of that rule, a
publisher of documents prepared by an auditor in the course of his
duties and required by CA 2016 to be prepared, also enjoys a
qualified privilege. The protection of auditors and publishers in this
manner does not limit or affect any other right, privilege or immunity
which the auditor or publisher may have as a defendant in an action
for defamation.
Law: s 286 of CA 2016.
DUTIES AND LIABILITIES OF AUDITORS

¶11-800 Common law duties of the company auditor
An auditor professing to have the requisite professional skill, enters

into a contract with a company to perform the audit. He thereby
promises to perform the necessary tasks using a reasonable degree
of skill and care. The standard of care and skill an auditor must exhibit
in carrying out his tasks is that of an ordinary reasonable auditor [Re
London and General Bank (No 2)]. An auditor is a watchdog but not a
bloodhound. Hence, although he is not bound to be a detective, he
must nonetheless approach his task with suspicion. He is justified in
trusting long-time employees of the company who are trusted by the
company itself. He is entitled to assume that they are honest and he
may rely on their representations provided he takes reasonable care.
If his suspicions are aroused, he should investigate them thoroughly
but in the absence of anything of that kind, he is only bound to be
reasonably cautious and careful [Re Kingston Cotton Mill Co (No 2)].
A number of irregular or unusual matters encountered by the audit
clerk must not be seen as inconsequential isolated incidents (Pacific
Acceptance Corporation Ltd v Forsyth).
The auditor is not confined to the mechanics of checking vouchers
and making arithmetical computations but to take care to see that
errors are not made whether they are errors of computation, omission
or plain untruths. To perform his task properly, he must come with an
inquiring mind, not suspicious of dishonesty but suspecting that
someone may have made a mistake somewhere and that a check
must be made to ensure that there has been none (Fomento (Sterling
Area) Ltd v Seldson Fountain Pen Co Ltd). The auditor is entitled to
rely a great deal on the explanations given by the company staff and
management but this is an aide to his vouching and checking
procedures and not a substitute for them. The auditors must at all
times in his reliance on management, be alert to the possibility of
fraud or falsification. For example, in dealing with a managing director
who falsified the books in three ways, the auditors were in error in
accepting assurances given by him in answer to their queries in the
course of the audit. Discovery of the altered invoices should have put
them on inquiry (Re Thomas Gerrard & Sons Ltd).
¶11-810 Auditor to report breaches of CA 2016
The auditor is under a statutory duty to inform the Registrar if he

discovers any breaches or non-observance of the provisions of CA
2016. He is also duty-bound, if as auditor of a public company or a
company controlled by a public company, he is of the opinion that a
serious offence involving fraud or dishonesty is being or has been
committed against the company or CA 2016. This is a qualified duty,
as an auditor is only bound to inform the Registrar of any breach, in
writing if he feels that the matter will not be adequately dealt with by
comment in his report on the accounts or by notifying the company
directors of the matter.
Auditors have been provided with an avenue to report infringements of
CA 2016. In the past, the auditor’s report was his only resort and by
the time the report was presented to the members of the company, the
damage caused by the infringement might well have been irreparable.
Despite the imposition of these duties on auditors, a major difficulty
encountered is that CA 2016 does not define the extent of an auditor’s
duties. The Registrar has confirmed that the obligation to report
breaches applies to all breaches and non-observance of CA 2016
noted by the auditor in the course of his audit. Therefore, all breaches
whether relating to the accounts, accounting records or other aspects
of CA 2016 will have to be reported if the auditor feels that the
breaches will not be adequately dealt with in his report.
Legal opinion has been obtained by the Malaysian Institute of Certified
Public Accountants to the effect that the decision whether to report
breaches and non-observance of CA 2016 to the Registrar lies with
the auditors. In deciding whether to report a breach or non-
observance, the auditor should:
• consider the evidence of a breach or non-observance and be
satisfied that a breach or non-observance has actually occurred;
and
• form an opinion as to whether the matter can be adequately dealt

with in his report or by notifying the directors of it.
Any officer of a corporation who refuses to allow the holding

corporation’s auditor access to accounting records and registers, or to
give any information, or obstructs or delays the auditor may be
punished with a fine RM500,000 or three years imprisonment or to
both.
Any auditor who fails to report breaches or non-observance of any of
the provisions of CA 2016, or fails to report in writing to the Registrar
of serious offence involving fraud or dishonesty of a public company or
a company controlled by a public company commits an offence and
shall on conviction be liable to imprisonment to a term of not
exceeding five years or to a fine of not exceeding RM3 million.
Law: s 266 of CA 2016.
¶11-820 Duty to trustees for debenture holders

Whenever the auditor of a borrowing company delivers to that
company any balance sheet, profit and loss account or other
document which he is bound by CA 2016 or by the debentures or trust
deed to give to that company, the auditor must within seven days of
doing so, post to every trustee for the debenture holders, copies of the
documents delivered to the borrowing company. See further ¶12-150.
Similarly, when an auditor of a borrowing company discovers in the
course of his duties any matter which in his view is relevant to the
trustees’ exercise of powers or performance of duties, the auditor is
obliged to post a written report on the matter to the borrowing
company and a copy thereof to the trustees within seven days of his
discovery.
An auditor shall not be liable to be sued in any court or be subject to
any criminal or disciplinary proceedings for any report under s 266
(“Powers and duties of auditors”) submitted by the auditor in good faith
and in the intended performance of any duty imposed on the auditor
under CA 2016.
An auditor who fails to comply with his duties to the trustees for
debenture holders will be guilty of an offence, and shall, on conviction,
be liable to a fine not exceeding RM10,000 and, in the case of a
continuing offence, to a further fine of RM500 for each day during
Duty of auditor to trustee for debenture holders under CMSA
2007
This duty is provided in s 276 of the Capital Markets and Services Act
2007 (CMSA 2007) as follows:
• The borrower’s auditor within seven days after furnishing the
borrower with any balance sheet, profit and loss account or any
report, certificate or other document which he is required by the
Companies Act or by the debenture or trust deed to give to the
borrower, must also send a copy of such document by post to
every trustee for the holders of debentures of the borrower.
• Where, in performing his duties as the borrower’s auditor, the

auditor becomes aware of any matter which, in his professional
opinion, is relevant to the exercise and performance of the
powers and duties imposed on the trustee by the CMSA 2007 or
under the trust deed, the auditor must as soon as practicable after
becoming aware of the matter, report the matter to the borrower
and the trustee.
• Where, in performing his duties as the borrower’s auditor, the

auditor becomes aware—
(a) of any matter which, in his professional opinion, may
constitute a contravention of any provision of CMSA 2007; or
(b) of any irregularities that may have a material effect on the

ability of the borrower to repay any amount under the
debenture,
the auditor shall immediately report the matter to the SC.
• If there is no proof of malice on his part, the auditor shall not be

liable to any action for defamation in any suit in respect of any
statements made in the circumstances referred to above.
• An auditor who contravenes the above requirements commits an

RM50,000.
Law: s 287 of CA 2016; s 276 of CMSA 2007.
¶11-825 Duties of auditor of listed corporations under

CMSA 2007
The CMSA 2007 regulates auditors of Bursa Malaysia-listed
corporations. In the CMSA 2007, the duties of auditors of listed
corporations are provided in s 320 as follows:
Subsection (1) states that if an auditor, in the course of the
performance of his duties as an auditor of a listed corporation, is of the
professional opinion that there has been a breach or non-performance
of any requirement or provision of the securities laws, a breach of any
of the rules of the stock exchange or any matter which may adversely
affect to a material extent the financial position of the listed
corporation, the auditor shall immediately submit a written report on
the matter—
(a) in the case of a breach or non-performance of any requirement
or provision of the securities laws, to the SC;
(b) in the case of a breach or non-performance of any of the rules of

a stock exchange, to the relevant stock exchange and the SC; or
(c) in any other case which adversely affects to a material extent the
financial position of the listed corporation, to the relevant stock
exchange and the SC.
Subsection (2) states that no auditor shall be liable to be sued in any

court for any report submitted by the auditor in good faith and in the
intended performance of any duty imposed on the auditor under this
section.
Subsection (3) states that the SC may, at any time during or after an
audit, require an auditor of a listed corporation to—
(a) submit such additional information in relation to his audit as the
SC may specify;
(b) enlarge or extend the scope of his audit of the business and
affairs of the listed corporation in such manner or to such extent
as the SC may specify;
(c) carry out any specific examination or establish any procedure in

any particular case;
(d) submit a report on any matter referred to in para (a) to (c); or
(e) submit an interim report on any matter referred to in paras (a) to

(d),
and the SC may specify the time within which any of such
requirements shall be complied with by the auditor and may specify
the remuneration which the listed corporation shall pay to the auditor
in respect thereof.
Subsection (4) states that the auditor shall comply with any
requirement of the Commission under sub-s (3) and the listed
corporation shall remunerate the auditor in respect of the discharge by
him of all or any of the additional duties under this section.
Subsection (5) states that where the listed corporation has failed to
remunerate the auditor as required under sub-s (4), the auditor may
sue for and recover the remuneration as a debt due to the auditor.
Subsection (6) states that the listed corporation shall provide such
information and access to such information as the auditor shall require
in respect of the discharge by him of all or any of the additional duties
under this section.
Subsection (7) states that for the purposes of this section, “auditor”
has the same meaning as defined under s 31A of the Securities
Commission Act 1993.
¶11-830 Auditor’s liability to the company
An auditor who commits a breach of his common law duty to use

reasonable care and skill may be sued by the company (Leeds Estate
Building and Investment Co v Shephard). Although the auditor reports
on the company’s accounts to the members, the auditor owes a
contractual duty of care to the company itself. The House of Lords
case of Carparo Industries Plc v Dickman & Ors has ruled that any
duty of care owed by auditors towards shareholders is owed to the
shareholders as a body and not to individual shareholders. The
auditor’s report is provided to shareholders as information to enable
them to better exercise their respective proprietary rights.
Where required, the company will usually sue the auditor for a
negligent audit under the contract. The auditor’s contractual duty does
not however preclude his liability in tort for negligence. It is open to the
company to sue the auditor in tort if this should prove more
advantageous (Batty v Metropolitan Property Realisations Ltd). In turn,
the auditor may counterclaim against the directors on whose
information he alleges he was relying in the preparation of his
accounts (Employers Corporate Investments Pty Ltd v Cameron).
Since the auditor has a duty under CA 2016 to form his own opinion
as to the accuracy of the company’s accounts, it is wrong for him to
rely on the opinion of the company’s accountant. The New South
Wales Court of Appeal considered a case where a company sued its
auditors for wrongly reporting the accuracy of the company’s
accounts. The auditors joined the company’s accountant as a third
party claiming an indemnity from him on the basis that the accountant
had negligently misrepresented to the auditors the accuracy of the
accounts. The court held that the argument could not be sustained.
The statutory duty was cast upon the auditors to express their own
opinion and they had no cause of action in negligence against any
other person whose opinion they relied upon and adopted instead
(Dominion Freeholders Ltd v Aird).
Where an auditor negligently certifies that a company is operating
profitably where it is in fact operating at a loss, damages payable to
the company have been held to include dividends, directors’ fees and
bonuses which were paid but which would not have been paid had the
company known that it was operating at a loss (Leeds Estate Building
& Investment Co v Shepherd). Where the accounts of a company
have been falsified and, as a result, dividends have been improperly
paid out of capital, the auditor is liable if the falsifications might have
been discovered by the exercise of reasonable care and skill.
Therefore an auditor may be liable for damages for breach of duty in
not detecting misfeasance on the part of others where the purpose of
the misfeasance was for the purpose of giving a fictitious appearance
of prosperity to a company that was not in fact prosperous (Irish
Woollen Co Ltd v Tyson).
Directors are however entitled to assume that auditors are doing their
duty, and the directors are not expected or bound to supervise or test
the auditor’s work (Dovey v Corey). Auditors are not entitled to point to
the company’s own failure to detect unauthorised activities as an
excuse for not properly conducting their audit. The fact that the
company’s own lack of perception is a cause for its loss does not
eliminate the auditor’s breaches of duty as a concurrent cause
(Simonius Vischer and Co v Holt and Thompson). Note that an auditor
is prohibited from entering into an agreement with a company by
which his liability for any negligence, default, breach of duty or breach
of trust with a company is limited. Any such term in the audit contract
is void.
¶11-840 Auditor’s liability to third parties

It would seem that the auditor’s liability does not extend to members of
the public who inspect the audited accounts of a company on public
record, ie those filed with the Registrar with the annual returns. If
liability for negligence in these circumstances were to exist generally,
“a thoughtless slip or blunder, the failure to detect a theft or forgery
beneath the cover of deceptive entries, may expose accountants to a
liability in an indeterminate amount for an indeterminate time to an
indeterminate class …” (per Cardozo CJ in Ultramares Corpn v
Touche).
The House of Lords in Carparo Industries plc v Dickman & Ors ruled
that auditors of a public company’s accounts owed no duty of care to
members of the public who relied on the audited accounts in deciding
to buy shares in the company. In arriving at the decision, the House of
Lords traced the principle of liability for negligent misstatement
through a line of cases ending with Hedley Byrne & Co Ltd v Heller &
Partners Ltd and Smith v Bush and reached the following conclusions:
• “an essential ingredient of the ‘proximity’ between the plaintiff and
the defendant [is] that the defendant knew that his statement
would be communicated to the plaintiff … specifically in
connection with a particular transaction …”, per Lord Bridge;
• “the relationship of proximity is [not] to be extended beyond

circumstances in which advice is tendered for the purposes of the
particular transaction … and the adviser knows or ought to know
that it will be relied on by a particular person …”, per Lord Oliver;
• “in each of these cases where a duty of care has been held to
exist, the statement in question has, to the knowledge of its
maker, been made available to the plaintiff for a particular
purpose …”, per Lord Jauncey.
On the basis of the above formulations, their Lordships held that the
auditors owed no duty of care to members of the public relying on the
audited accounts to buy shares. The decision in Al Saudi Banque &
Ors v Clark Pixley, that no duty of care was owed by auditors to a
bank lending money to a company, was consistent with that
reasoning.
Their Lordships rejected the argument that the duties of company’s
auditors were intended to protect purchasers of shares, whether they
already held shares or not. The court said that the auditors’ report was
provided to shareholders as information to enable them to better
exercise their respective proprietary interests. The court also ruled
that the duty of care owed by auditors was owed to the shareholders
as a body and not to individual shareholders.

1. Describe and explain the financial statements of a company.
2. List the persons who have rights to access the accounting

records of a company.
3. Who has the authority to act as an approved company auditor?
4. What are the duties and responsibilities of an approved company

auditor?
¶11-1001 Appendix 11.1: Fifth Schedule, CA 2016

FIFTH SCHEDULE
[Section 253]
DIRECTORS’ REPORT
Part I — Contents of Directors’ Report
1. Each report to which s 252 relates, shall state the following
details:
(a) the net amount of the profit or loss of the company for the
financial year after provision for income tax;
(b) the amounts and particulars of any material transfers to or

from reserves or provisions;
(c) where, during the financial year, the company has issued
any shares or debentures—
(i) the purposes of the issue, the classes of shares or
debentures issued;
(ii) the number of shares of each class and the amount of

debentures of each class; and
(iii) the terms of issue of the shares and debentures of

each class;
(d) whether at the end of that financial year—

(i) there is a subsist arrangements to which the company is
a party, being arrangements with the objects of enabling
directors of the company to acquire benefits by means of
the acquisition of shares in, or debentures of, the
company or any other body corporate; or
(ii) there have, at any time in that year, subsisted such

arrangements as aforesaid to which the company was a
party, and if so, the report shall contain a statement
explaining the effect of the arrangements and giving the
names of the persons who at any time in that year were
directors of the company and held, or whose nominees
held, shares or debentures acquired under the
arrangements;
(e) in respect of each person who, at the end of the financial

year, was a director of the company—
(i) whether or not, according to the register kept by the
company for the purposes of section 59 relating to the
obligation of a director of a company to notify such
company of his interests in shares in, or debentures of,
the company and of every other body corporate, being
the company’s subsidiary or holding company or a
subsidiary of the company’s holding company, he was at
the end of that year, interested in shares in, or
debentures of the company or any other body corporate
and, if he was so interested, the number and amount of
shares in, and debentures of, each body in which,
according to that register, he was then interested;
(ii) whether or not, according to that register, he was, at the

beginning of that year or, if he was not then a director,
when he became a director, interested in shares in, or
debentures of, the company or any other such body
corporate and, if he was so interested, the number and
amount of shares in, and debentures of, each body in
which according to that register, he was interested at the
beginning of that year or, as the case may be, when he
became a director; and
(iii) the total number of shares in or debentures of the

company or any other such body corporate bought and
sold by him during that financial year;
(f) the amount, if any, which the directors recommended should

be paid by way of dividend, and any amount which have
been paid or declared by way of dividend since the end of the
previous financial year, indicating which of those amounts, if
any, have been shown in a previous report under this
subsection or under a corresponding repealed provision of
this Act;
(g) whether the directors, before the financial statements were

prepared, took reasonable steps to ascertain what action had
been taken in relation to the writing off of bad debts and the
making of provision for doubtful debts, and satisfied
themselves that all known bad debts had been written off and
that adequate provision had been made for doubtful debts;
(h) whether at the date of the report the directors are aware of
any circumstances which would render the amount written off
for bad debts or the amount of the provision for doubtful
debts inadequate to any substantial extent and, if so, giving
particulars of the circumstances;
(i) whether the directors, before the financial statements were
prepared, have taken reasonable steps to ensure that any
current assets which were unlikely to be realised in the
ordinary course of business including the value of current
assets as shown in the accounting records of the company
have been written down to an amount which the current
assets might be expected so to realise;
(j) whether at the date of the report the directors are aware of
any circumstances—
(i) which would render the values attributed to current
assets in the accounts misleading; and
(ii) which have arisen which would render adherence to the

existing method of valuation of assets or liabilities of the
company misleading or inappropriate, and, if so, giving
(k) whether there exists at the date of the report—

(i) any charge on the assets of the company which has
arisen since the end of the financial year which secures
the liabilities of any other person and, if so, giving
particulars of any such charge and, so far as practicable,
of the amount secured; and
(ii) any contingent liability which has arisen since the end
of the financial year and, if so, stating the general nature
of the liability and, so far as practicable, the maximum
amount, or an estimate of the maximum amount, for
which the company could become liable in respect of the
liability;
(l) whether any contingent or other liability has become

enforceable, or is likely to become enforceable, within the
period of twelve months after the end of the financial year
which, in the opinion of the directors, will or may affect the
ability of the company to meet its obligations when they fall
due and, if so, giving particulars of any such liability;
(m) whether at the date of the report the directors are aware of
any circumstances not otherwise dealt with in the report or
accounts which would render any amount stated in the
accounts misleading and, if so, giving particulars of the
circumstances;
(n) whether the results of the company’s operations during the

financial year were, in the opinion of the directors,
substantially affected by any item, transaction or event of a
material and unusual nature and, if so, giving particulars of
that item, transaction or event and the amount or the effect of
the item, transaction or event, if known or reasonably
ascertainable; and
(o) whether there has arisen in the interval between the end of
the financial year and the date of the report any item,
transaction or event of a material and unusual nature likely,
in the opinion of the directors, to affect substantially the
results of the company’s operations for the financial year in
which the report is made and, if so, giving particulars of the
item, transaction or event; and
(p) any other details as determined by the Registrar.
2. The report shall state, in respect of the directors or past directors

of the company, the amounts of—
(a) fees and other benefits distinguished separately, paid to or
receivable by them from the company or its subsidiary
companies as remuneration for their services to the company
or its subsidiary companies, inclusive of all fees,
percentages, bonuses, commissions, compensation for loss
of office, any contribution in respect of them under any
pension or retirement benefit scheme and inclusive of
commission paid or payable for subscribing or agreeing to
subscribe or procuring or agreeing to procure subscriptions
for any shares in or debentures of the company or of its
holding company or any subsidiary of the company:
Provided that where a director or any firm of which the
director is a member, acts for the company in a professional
capacity, the amount paid to the director or to his firm for
services rendered to the company in that capacity shall not
be included in all fees, percentages, bonuses, commissions,
compensation for loss of office, any contribution in respect of
them under any pension or retirement benefit scheme and
inclusive of commission paid or payable for subscribing or
agreeing to subscribe or procuring or agreeing to procure
subscriptions for any shares in or debentures of the company
or of its holding company or any subsidiary of the company
but shall be shown separately whether by way of note or
otherwise;
(b) by way of a note or otherwise, the estimated money value of

any other benefits received or receivable by them otherwise
than in cash from the company or from any of its subsidiary
companies;
(c) the total of the amount paid to or receivable by any third

party in respect of the services provided to the company or
any of its subsidiary companies by any director or past
director of the company;
(d) the total amount, if any, of any indemnity given to or

insurance effected for, any director, officer or auditor of the
company.
3. The directors of a company shall state in the report whether he

has, since the end of the previous financial year, received or
become entitled to receive a benefit, other than a benefit included
in the aggregate amount of remuneration received or due and
receivable by the directors shown in the accounts or the fixed
salary of a full-time employee of the company, by reason of a
contract made by the company or a related corporation with the
director or with a firm of which he is a member, or with a company
in which he has a substantial financial interest, and, if so, the
general nature of the benefit.
4. Where at the end of a financial year a company is the subsidiary

of another corporation, the directors of the company shall state in,
or by way of note as a statement annexed to, the company’s
accounts the name of the corporation regarded by the directors
as being the company’s ultimate holding company and if known to
them, the country in which it is incorporated.
5. Where any option has been granted during the period covered by
the profit and loss account to take up unissued shares of a
company, the directors’ report shall state—
(a) the number and class of shares in respect of which the
option has been granted;
(b) the date of expiration of the option;
(c) the basis upon which the option may be exercised; and
(d) whether the person to whom the option has been granted
has any right to participate by virtue of the option in any
share issue of any other company.
6. The directors’ report shall specify—

(a) particulars of shares issued during the period to which the
report relates by virtue of the exercise of options to take up
unissued shares of the company, whether granted before or
during that period; and
(b) the number and class of unissued shares of the company

under option as at the end of that period, the price, or method
of fixing the price, of issue of those shares, the date of
expiration of the option and the rights, if any, of the persons
to whom the options have been granted to participate by
virtue of the options in any share issue of any other
company.
7. The director’s report shall specify clearly either in the profit and
loss account of the holding company or consolidated profit and
loss account of the holding company and of its subsidiary
companies the name, place of incorporation, principal activities,
and percentage of issued share capital held by the holding
company in each subsidiary to which that profit and loss account
or other document relates.
8. If the auditor’s report on the accounts of a subsidiary company is

qualified in any way, the consolidated balance sheet of the
holding company, as the case may be, shall contain particulars of
the manner in which the report is qualified in so far as the matter
which is the subject of the qualification is not covered by the
holding company’s own accounts and is material from the point of
view of its members.
9. The auditor’s report shall be shown under separate headings in

the balance sheet of every subsidiary company the extent of its
holding of shares in the holding company and in other related
corporations.
10. The total amount paid to or receivable by the auditors as

remuneration for their services as auditors, inclusive of all fees,
percentages or other payments or consideration given by or from
the company or by or from any subsidiary of the company.
Part II — Contents of business review

1. Each report prepared under section 252 may include a business
review.
2. The business review may, to the extent necessary for an

understanding of the development, performance or position of the
company’s business, contain—
(a) a fair review of the company’s business;
(b) a description of the principal risks and uncertainties facing
the company;
(c) a balanced and comprehensive analysis of—

(i) the development and performance of the company’s
business during the financial year;
(ii) the position of the company’s business at the end of

that year, consistent with the size and complexity of the
business; and
(iii) the key performance indicators of the company;
(d) information about—

(i) environmental matters, including the impact of the
company’s business on the environment;
(ii) the company’s employees; and
(iii) social and community issues, including information

about any policies of the company in relation to those
matters and the effectiveness of those policies; and
(e) subject to para 7 of this Part, information about persons with

whom the company has contractual or other arrangements
which are essential to the business of the company.
3. If the review does not contain any of the information mentioned in

sub-para 2(a), (b), (c) and (d), it shall state which of the
information it does not contain.
4. The review may, where appropriate, include references to, and

additional explanations of, amounts included in the company’s
5. In relation to a group directors’ report this Part has effect as if the

references to the company include references to its subsidiary
included in the consolidation.
6. Nothing in this Part requires the disclosure of information about
impending developments or matters in the course of negotiation if
the disclosure would, in the opinion of the directors, be prejudicial
to the interests of the company.
7. Nothing in sub-para 2(e) requires the disclosure of information

about a person if the disclosure would, in the opinion of the
directors, be prejudicial to that person and contrary to the public
interest.
8. For the purposes of this Part, “key performance indicators”

means factors by reference to which the development,
performance or position of the company’s business can be
measured effectively.
CHAPTER 12: DEBENTURES,
CHARGES AND RECEIVERSHIP
Borrowing ¶12-000
Debentures ¶12-100
Trustee for debenture holders ¶12-150
Duties and liabilities of trustee ¶12-200
Obligations of borrowing company ¶12-250
Private debentures ¶12-300
Fixed charges and floating charges ¶12-350
Registration of charges ¶12-400
Receivership ¶12-500
Process of appointing receiver ¶12-600
Appointment of receiver by the court ¶12-700
Appointment of receiver out of court ¶12-750
Powers, duties and liabilities of receiver ¶12-800
Vacancy of office of receiver ¶12-900
Appendix 12.1 Sixth Schedule of CA 2016 ¶12-1001
BORROWING
¶12-000 Borrowing needs of a company
In the Companies Act 2016 (CA 2016), Pt III (“Management of
Company”) provides for the legal framework that relates to borrowing
matters of a company:
(a) Div 1, Subdiv 10 provides for Debentures; and
(b) Div 7, Subdiv 1 provides for Charges.
Normally, when any business acquires money from external sources,

it is raised either by equity financing or debt financing. In a company,
equity financing involves the offering of shares to be purchased by
investors who become the shareholders owning the business. A
company may be unwilling or unable to raise needed capital by the
offering of shares. It must then resort to debt financing. This chapter
discusses the various ways, methods and effects of debt financing or
loan capital in financing a business.
¶12-010 Regulation on borrowing

There are a variety of ways to raise funds as a form of debt finance.
The Companies Act 2016 (CA 2016) covers only some aspects. The
regulation it provides is directed principally at obtaining loans or
money on deposit from the general public in the form of debenture
issues between the lender and the borrower, commonly under the
following methods and loan capital arrangements:
• unsecured loans;
• guaranteed loans;
• real property mortgages;
• bank overdrafts;
• floating charges;
• both public and private loan agreements.
These methods of raising loan capital should not be regarded as

strictly isolated but may be overlapping or made in combinations of the
basic types.
The main thrust of CA 2016 is towards:
• Public debenture: The public at large is approached to lend
money to the company. The legislation is directed at protecting
the public who lends the money.
• Registration of charges: Where a company gives a secured loan

over its assets, the legislation ensures that this fact is placed on
public record for all persons (interested in the company’s financial
state) to see, and treats the lender as a secured creditor.
¶12-020 Power to borrow

An ordinary commercial trading company traditionally has the power to
borrow money for the purposes of its business. This power exists
whether or not express power to do so is given by the constitution of
the company. The power may, however, be expressly prohibited
(General Auction Estate and Monetary Co v Smith). Most company
constitutions contain clauses that prescribe the power to borrow. Such
a clause would typically be in a form that reads:
“To borrow or raise or secure the payment of money in such
manner as the company may think fit and to secure the same or
the repayment or performance of any debt, liability, contract,
guarantee or other engagement incurred or to be entered into by
the company in any way and in particular by the issue of
debentures perpetual or otherwise, charged upon all or any of the
company’s property (both present and future), including its
uncalled capital; and to purchase, redeem, or pay off any such
securities.”
Power to re-issue redeemed debentures
The power to issue debentures or re-issue debentures is provided in s
174 of CA 2016, in the case of a company not having a constitution
upon its incorporation. This provision may be summarised to say that
a company may re-issue the debentures which have been redeemed
either by re-issuing the same debentures or issuing new debentures in
place of the redeemed debentures unless:
• expressly or impliedly prohibited under the constitution or in any
contract made with the company; or
• the company has showed its intention that the debentures shall be
cancelled by passing a resolution to that effect or by some other
act.
If redeemed debentures are re-issued, the person entitled to the

debenture shall have the same priorities as if the debentures have
never been redeemed.
Lender’s position
The position of the lender is that he must satisfy himself that the
company has the power to borrow. He has the opportunity of
ascertaining the extent of the power by reference to the company’s
public documents, ie its registered constitution, if any. He is therefore
assumed at law to have knowledge of their contents. If the borrowing
is apparently lawful, the lender is entitled to assume that all matters of
internal management of the borrowing company have been properly
complied with (Royal British Bank v Turquand).
DEBENTURES
¶12-100 General nature of debentures
The term “debenture” is not precisely defined. It describes any

document given by a company which creates or acknowledges a debt.
A debenture may (but not necessarily) charge the company’s assets
or some of it with repayment of that debt. A document may be a
debenture without being called one.
Generally, where any provision of CA 2016 discusses debentures in
relation to prospectuses and registration of charges, the reference
includes debenture stock, bonds, notes and other securities given by a
company whether constituting a charge on assets or not. Any
invitation to the public to deposit money with a company or to lend it
money is deemed an invitation to subscribe to the company for
debentures.
Section 2 of CA 2016 states that “debenture” includes debenture
stock, bonds, sukuk, notes and any other securities of a corporation
whether constituting a charge on the assets of the corporation or not.
Section 171 of CA 2016 provides that Subdiv 10 (“Debentures”) is
applicable to an offer made to the public, including an offer made to
any section of the public however selected, with regards to—
(a) an offer or invitation in respect of shares or debentures made by
an unlisted recreational club; and
(b) an offer or invitation to deposit money with or lend money to a

corporation that has issued prospectus and have registered it with
Subdivision 10 is not applicable to an offer or invitation to subscribe

for or purchase any securities of a corporation, including any excluded
offer or excluded invitation as provided for in the Capital Markets and
Services Act 2007 (CMSA 2007).
Law: s 2 and 171 of CA 2016.
¶12-110 Types of debentures
The most significant division of debentures is into the categories of

public debentures (see ¶12-120), and private debentures (see ¶12-
300). However, there are other debenture terms the meaning of which
should be noted. These are:
• Bearer debentures. Although not generally issued, CA 2016
refers to “securities to bearer”. Note that for purposes of keeping
a register of debenture holders, the names of the holders of
bearer debentures need not be recorded;
• Registered debentures. These debentures may evidence a loan

from one lender or a series of loans from several lenders. In the
latter case, a series of debentures may be issued with the terms
of repayment, payment of interest and other conditions printed on
the reverse side;
• Perpetual debentures. The CA 2016 specifically provides that a

condition in a debenture is not invalid by reason only that the
debenture is irredeemable or only redeemable in some remote
event or at some long distant date;
• Debenture stock. These are issued by public companies which

secure the issue by a charge on the company’s property and
enter into a trust deed with a trustee appointed to protect the
rights of the debenture stock holders. The terms of such a deed
are strictly prescribed by CA 2016 as are the duties of the
trustees.
Law: s 173 of CA 2016.

If a public company wishes to raise money from the public, ie by
inviting the public to subscribe for or purchase debentures, a
prospectus must be issued. Apart from the prospectus provisions, a
company wishing to issue debentures must comply with a whole host
of requirements. See further ¶12-130 and ¶12-260.
Listed companies issue of debentures to the public is regulated by
CMSA 2007, as stated in s 171(2):
“This subdivision 10 on debentures, however shall not apply an
offer or invitation to subscribe for or purchase any securities of a
corporation, including any excluded offer or excluded invitation as
provided for in the Capital Markets and Services Act 2007.”
¶12-130 Register of debenture holders

Any company which issues debentures must keep a register of
holders of the debentures. Since the issue of debentures are by public
companies, the requirement to keep a register of debenture holders is
stipulated by CMSA 2007 and CA 2016. The register must contain the
names and addresses of the debenture holders and indicate the
amount of debentures that they hold. The register must be kept:
• at the company’s registered office, or
• at some other place in the country.
If it is not kept at the registered office, the ROC must be informed of

the place where it is kept. This notice, to be given in the prescribed
form, must be given to the Registrar within seven days after the
register is first kept at a place other than the registered office. The
Registrar must also be notified of any changes in the location of the
register within seven days of the change.
The register of debenture holders must be open to the inspection of
any registered debenture holders and of any shareholder of the
company except when it is duly closed for various specified periods
not totalling more than 30 days in any calendar year. A register is
deemed to be duly closed when it is closed in accordance with:
• the constitution (or old Articles);
• the debentures or debenture stock certificates;
• the trust deed; or
• other documents relating to or securing the debentures.
The company must furnish a registered debenture holder or

shareholder with a copy of the register upon request and payment of
the prescribed fee. The copy need not include particulars of the
debenture holder apart from his name, address and the debentures
held by him. Similar provisions apply to the furnishing to debenture
holders of copies of trust deeds securing issues of debentures.
A company and its defaulting officers who do not comply with the
register provisions or who refuse inspection of the register will be
Register of debenture holders under CMSA 2007
This is provided in s 283 of CMSA 2007 as follows:
• Every borrower which issues debentures, not being debentures
transferable by delivery, shall keep a register of debenture
holders at its registered office or at some other place in Malaysia.
• Where the borrower is a company, the borrower shall comply with

the provisions of s 60 of CA 2016 (“Register of debenture holders
and copies of trust deed”).
• The register shall contain particulars of—

(a) the names and addresses of debenture holders; and
(b) the amount of debentures held by them.
• The register shall be open for inspection by registered debenture

holders or shareholders of the borrower except when duly closed.
The register is deemed to be duly closed:
(a) if it is closed in accordance with the provisions contained in
—
(i) the constituent documents of the borrower;
(ii) the debentures or debenture stock certificates;
(iii) the trust deed; or
(iv) any other document relating to or securing the

debenture; and
(b) where it is closed for such periods as is specified in any of

the documents mentioned, provided that such period does
not exceed, in the aggregate, 30 days in any calendar year.
• A borrower shall, upon request, supply every registered debenture

holder or shareholder of the borrower with a copy of the register
of debenture holders, or such part thereof, on the payment of a
reasonable sum as may be specified by the borrower.
• The copy of the register of debenture holders need not include the
particulars of any debenture holder other than the name and
address of the registered debenture holder and the debentures
held by him.
• If inspection is refused, or a copy is refused or not forwarded

within a reasonable time after a request has been properly made,
the borrower and every officer of the borrower who is in default
exceeding RM100,000.
• A borrower issuing debentures may keep at any place outside

Malaysia a branch register of debenture holders which shall be
deemed to be a part of the borrower’s register of debenture
holders, with such adaptations as are necessary, apply to and in
relation to the keeping of a branch register of debenture holders.
• The Securities Commission may, either on the written application

of any borrower or of its own accord, make an order relieving
such borrower from, or approving any variation from, the
requirements of s 283 of CMSA 2007 relating to the maintenance
of a register of debenture holders, subject to such terms and
conditions as its thinks fit.
• A borrower and every officer of the borrower who is in

contravention of the provisions, commits an offence and shall, on
Endorsement of certificate of registration on debentures

There is a requirement for endorsement of certificate of registration on
debentures under CA 2016. This is stipulated in s 358 as follows:
• A company shall cause to be endorsed on every debenture
forming one of a series of debentures or certificate of debenture
stock which is issued by the company and the payment of which
is secured by a charge registered—
(i) a copy of the certificate of registration; or
(ii) a statement that the registration has been effected and the
date of registration.
• This, however, shall not apply to any debenture or certificate of

debenture stock which has been issued by the company before
the charge was registered.
• If a company contravenes s 358, every person who knowingly and

wilfully authorises or permits the delivery of any debenture or
certificate of debenture stock which is not endorsed as required
by this section commits an offence.
Law: s 283 of CMSA 2007; s 358 of CA 2016.
TRUSTEE FOR DEBENTURE HOLDERS

¶12-150 Appointment requirements of trustee
corporation
Every company which offers debentures to the public must appoint a

trustee for the debenture holders. The company is not allowed to allot
the debentures until a trustee has been appointed and has consented
to act as trustee. The trustee is either appointed in the debenture or in
a trust deed relating to those debentures.
A trustee corporation must not be appointed and act as trustee for the
debenture holders of the borrowing company without leave of the
court if the corporation is:
• a beneficial shareholder of the borrowing company;
• beneficially entitled to moneys owed by the borrowing company;
• a corporation that has entered into a guarantee in respect of the

principal debt secured by the debentures or in respect of interest
in the principal debt; or
• a corporation related to the borrowing company or to the aforesaid
borrowing corporations.
Where the borrowing company owes money to the trustee corporation,

the trustee corporation is not debarred from being appointed and
acting as a trustee if the money owed:
• does not exceed 10% of the amount of the debentures offered to
the public;
• is secured by a first mortgage over land of the borrowing company

or by debentures offered to the public or any debentures to which
the trustee corporation is not beneficially entitled to; or
• is money to which the trustee corporation is entitled to as trustee

for the debenture holders of the borrowing company.
The trustee corporation is also not prevented from being a trustee

corporation if it is a shareholder of the borrowing company in respect
of shares held beneficially by it and if the shares do not give the
trustee corporation more than 5% of the general meeting voting power
of the borrowing company.
If a borrowing company does not comply with these provisions, it,
together with each of its defaulting officers, will be committing an
offence and on conviction be liable to a fine not exceeding RM20,000,
and in the case of a continuing offence, to a further fine not exceeding
RM1,000 for each day during which the offence continues after
conviction.
The requirement for trust deed and appointment of a trustee is also
reflected in s 258 of CMSA 2007.
Law: s 176 of CA 2016; s 258 of CMSA 2007.
¶12-160 Retirement requirements of trustees

A change of trustee is unusual. When a change is planned the
following requirements apply:
• A trustee for debenture holders is not allowed to retire until another
qualified corporation has been appointed and has taken office.
• If a trust deed or debenture makes provision for the appointment of

a successor to a retiring trustee, the terms of the deed or
debenture must be observed and the appointment made
according to those provisions.
• If a trust deed or debenture does not make any provision for the
appointment of a successor, the company may appoint a
successor qualified for appointment.
• If a trustee refuses to act, ceases to exist or becomes unqualified

or disqualified to act, the court may appoint any qualified
corporation to be a trustee.
The successor must give notice of its appointment as trustee for the
debenture holders to the ROC within 30 days of its appointment. If the
new trustee does not do so, it will be committing an offence.
The existing trustee shall continue to act until new trustee takes office,
notwithstanding the provisions of s 43 of the Trustee Act 1949 or any
term, provision or covenant in the debenture or trust deed.
Where no provision has been made in the debenture or trust deed for
the appointment of a successor to a retiring trustee, the borrower
shall, within one month after becoming aware of the intention of the
trustee to retire, appoint an eligible person as successor to the retiring
trustee.
Law: s 176 and s 178(5) of CA 2016; s 261 and 262 of CMSA 2007.
¶12-170 Compulsory covenants in trust deed

Whenever a company offers debentures to the public for subscription,
the debentures or the trust deed must contain a limitation on the
amount that the company may borrow. The debentures or trust deed
must also contain the following covenants:
• that the company will try its best to carry on its business properly
and efficiently;
• that the company will make its accounts and records fully available
to the trustee (or auditor appointed by the trustee) as if he were a
director;
• that the company will summon a meeting of the debenture holders

on the application of not less than 10% in nominal value of the
debenture holders to consider the accounts last lodged by the
company.
The debentures or trust deed will be deemed to contain these

covenants if they are not expressly provided for. Every corporation
and its defaulting officers who do not comply with these requirements
will be guilty of an offence.
Contents of trust deed
This provided in s 179 of CA 2016 as follows:
Subsection (1) states that where a corporation offers debentures to
the public for subscription in Malaysia, the debentures or the relevant
trust deed shall contain a limitation on the amount that the borrowing
corporation may borrow and shall contain covenants by the borrowing
corporation which shall have the following effects—
(a) the borrowing corporation shall use its best endeavours to carry
on and conduct its business in a proper and efficient manner;
(b) to the same extent as if the trustee for the debenture holders or
any approved company auditor appointed by the trustee were a
director of the corporation, the borrowing corporation shall—
(i) make available for inspection all accounting or other records
of the borrowing corporation; and
(ii) give to the borrowing corporation any information as the

borrowing corporation requires with respect to all matters
relating to the accounting or other records of the borrowing
corporation; and
(c) on the application of persons holding not less than ten per
centum (10%) in value of the issued debentures to which the
covenant relates delivered to its registered office, the borrowing
corporation shall—
(i) summon a meeting of the debenture holders to consider the
accounts and balance sheet which were last lodged with the
trustee for the debenture holders by the borrowing
corporation; and
(ii) give to the trustee directions in relation to the exercise of the

trustee’s powers, such meeting to be held at a time and place
specified in the notice and advertisement under the
chairpersonship of a person nominated by the trustee or such
other person as is appointed in that behalf by the debenture
holders present at the meeting.
Subsection (2) states that the notice of the meeting referred to shall be
—
(a) given to each of the debenture holders, other than debentures
payable to bearer, at his address as specified in the register of
debentures; and
(b) by an advertisement in at least one widely circulated newspaper

in Malaysia in the national language and one widely circulated
newspaper in Malaysia in the English language addressed to all
debenture holders.
Subsection (3) states that if the debentures or the trust deed does not
expressly contain covenants by the borrowing corporation, the
debentures or the trust deed shall be deemed to contain the
covenants as mentioned above.
Subsection (4) states that the corporation and every officer who
liable to a fine not exceeding RM1 million.
Law: s 179 of CA 2016.
DUTIES AND LIABILITIES OF TRUSTEE
¶12-200 Duties of trustees
The trustee for the debenture holders generally has access to the
court for directions in relation to the performance of their functions,
and to resolve matters affecting the rights of the debenture holders. In
particular, the trustee may apply to the Minister for Finance for
assistance if it feels that the assets of the borrowing company and its
guarantor corporations are insufficient to discharge the principal debt.
The borrowing company must be given an opportunity to be heard on
the application. The Minister may impose restrictions on the activities
of the borrowing company to protect the debenture holders. The
restrictions include those on advertising for deposits and on borrowing
by the company.
The trustee may apply to court for assistance if the borrowing
company refuses to comply with the Minister’s order. The court on
receiving the application, must give the company an opportunity to be
heard. The court may direct the trustee to call a meeting of the
debenture holders and to suggest proposals for the protection of the
debenture holders’ interest. The court may also appoint a receiver of
the property secured for the debenture holders.
Duties of trustee
This stipulated in s 177 of CA 2016 as follows:
Subsection (1) states that a trustee for debenture holders shall—
(a) exercise reasonable diligence to ascertain whether or not the
assets of the borrowing corporation and of each of its guarantor
corporations which are or may be available whether by way of
security or otherwise are sufficient or are likely to be or become
sufficient to discharge the principal debt as and when it becomes
due;
(b) satisfy itself that each prospectus relating to the debentures

does not contain any matter which is inconsistent with the terms
of the debentures or with the relevant trust deed;
(c) ensure that the borrowing corporation complies with Subdiv 1 of

Div 7 of Pt III so far as the Subdivision relates to the debentures
and is applicable;
(d) exercise reasonable diligence to ascertain whether or not the

borrowing corporation and each of its guarantor corporations
have committed any breach of the covenants, terms and
provisions of the debentures or the trust deed;
(e) take all steps and do all such things as the trustee for debenture
holders is empowered to do to cause the borrowing corporation
and any of its guarantor corporations to remedy any breach of
those covenants, terms and provisions, except where it is
satisfied that the breach will not materially prejudice the security,
if any, for the debentures or the interests of the debenture
holders;
(f) where the borrowing corporation or any of its guarantor

corporations fails to remedy any breach of the covenants, terms
and provisions of the debentures or the trust deed if so required
by the trustee, the trustee may place the matter before the
meeting of debenture holders, submit such proposals for the
protection of the debenture holders’ investment as the trustee
considers necessary or appropriate and obtain the directions of
the debenture holders in relation to the investment; and
(g) where the borrowing corporation submits to the debenture

holders a compromise or an arrangement, give to the debenture
holders a statement explaining the effect of the compromise or
arrangement and, if the trustee thinks fit, recommend to the
debenture holders an appropriate course of action to be taken by
the debenture holders in relation to the compromise or
arrangement.
Subsection (2) states that where, after due inquiry, the trustee is of the
opinion that the assets of the borrowing corporation and of any of its
guarantor corporations which are available whether by way of security
or otherwise are insufficient or likely to become insufficient to
discharge the principal debt as and when the principal debt becomes
due, the trustee may apply to the Minister for an order under this
subsection.
Subsection (3) states that on an application referred to, after giving the
borrowing corporation an opportunity of making representations in
relation to such application, the Minister, by order in writing—
(a) may serve on the corporation at its registered office in Malaysia
and impose such restrictions on the activities of the corporation,
including restrictions on advertising for deposits or loans and on
borrowing by the corporation as the Minister thinks necessary for
the protection of the interests of the debenture holders; or
(b) may direct the trustee to apply to the Court for an order and if
the borrowing corporation requires the trustee to do so, the
Minister shall direct the trustee to apply accordingly.
Subsection (4) states that where—

(a) after due inquiry, the trustee at any time is of the opinion that the
assets of the borrowing corporation and of any of its guarantor
corporations which are or should be available whether by way of
security or otherwise are insufficient or likely to become
insufficient to discharge the principal debt as and when the
principal debt becomes due; or
(b) the corporation contravenes or fails to comply with an order

made by the Minister under sub-s (3), the trustee may, and if the
borrowing corporation requires the trustee to do so, the trustee
shall apply to the court for an order.
Subsection (5) states that where an application is made to the court,

the court may, by order, after giving the borrowing corporation an
opportunity to be heard, do all or any of the following:
(a) direct the trustee—
(i) to convene a meeting of the debenture holders for the
purpose of placing the information before the debenture
holders relating to the interests and proposals for the
protection of the debenture holders as the trustee considers
necessary or appropriate;
(ii) to obtain directions of the debenture holders in relation to

the interests and proposals for the protection of the
debenture holders; and
(iii) to give any direction in relation to the conduct of the

meeting as the court thinks fit;
(b) stay all or any actions or proceedings before any court by or

against the borrowing corporation;
(c) restrain the payment of any moneys by the borrowing

corporation to the debenture holders of the corporation or to any
class of debenture holders;
(d) appoint a receiver or receiver and manager of such property

which constitutes the security, if any, for the debentures; and
(e) give further directions to the members of the borrowing

corporation or any of its guarantor corporations or the public as
may be necessary to protect the interests of the debenture
holders.
Subsection (6) states that the court shall consider the rights of all
creditors of the borrowing corporation upon making the order and may
vary or rescind any order made as the court thinks fit.
Subsection (7) states that upon making an application to the Minister
or to the court a trustee shall—
(a) consider the nature and kind of the security given when the
debentures are offered to the public; and
(b) if no security is given, consider the position of the debenture

holders as unsecured creditors of the borrowing corporation.
Subsection (8) states that a trustee may rely upon any certificate or
report given or statement made by any advocate, auditor or officer of
the borrowing corporation or guarantor corporation if the trustee has
reasonable grounds for believing that the advocate, auditor or officer
is competent to give or make the certificate, report or statement.
Loans and deposits to be immediately refundable on certain
events
To protect the interests of debenture holders, when it appears to the
trustee for the debenture holders that the purpose or project has not
been achieved within the time stated in the prospectus or, where no
such time was stated, within a reasonable time, the trustee may give
written notice to the corporation requiring it to refund the moneys. The
trustee must also within 30 days from the notice given, lodge with the
Registrar a copy of the notice. The trustee cannot give notice if the
purpose or project has been substantially achieved, or if the debenture
holders’ interests have not been materially prejudiced in spite of the
delay in completion, or if the failure to achieve the purpose or project
is due to circumstances beyond the control of the corporation that
could not reasonably have been foreseen by the corporation at the
time the prospectus is issued.
Upon receipt of the notice, the corporation shall immediately make the
refund.
Law: s 177, 184(3) and 184(4) of CA 2016.
¶12-210 Liability of trustees for debenture holders

Trustees for debenture holders occupy a fiduciary position and are
expected to carry out their duties with care and diligence. Trustees
may not be exempted or indemnified against liability for breach of trust
and any trust deed which attempts to do this will be void. However, the
debenture holders may still exempt or indemnify their trustee for
specific acts or omissions if at least 75% of them agree to the
arrangement at a meeting summoned specially for this purpose.
Section 185 of CA 2016 provides for the liability of trustee for
debenture holders:
• Any provision in a trust deed relating to or securing an issue of
debentures, or any contract with the debenture holders that
exempts a trustee from or indemnifies the trustee against liability
for breach of trust where the trustee fails to show the degree of
care and diligence required as trustee shall be void.
• However, it shall not invalidate—

(a) any release of the trust deed otherwise validly given in
respect of anything done or omitted to be done by a trustee
before the giving of the release; or
(b) any provision enabling the release of the trust deed to be

given—
(i) on the agreement of a majority of not less than three-
fourths in nominal value of the debenture holders
present and voting in person or, where proxies are
permitted, by proxy at a meeting summoned for the
purpose; and
(ii) either with respect to specific acts or omissions or on

the dissolution of the trustee or on the trustee ceasing to
act.
• The provision shall not operate—

(a) to invalidate any provision in force at the commencement of
CA 2016 so long as any trustee then entitled to the benefit of
that provision remains a trustee of the trust deed in question;
or
(b) to deprive any trustee of any exemption or right to be

indemnified in respect of anything done or omitted to be done
by the trustee while any such provision is in force.
Law: s 185 of CA 2016.

OBLIGATIONS OF A BORROWING COMPANY
¶12-250 Quarterly reporting
Whenever a trustee is appointed for the protection of the debenture
holders, a borrowing company must report quarterly to the ROC and
to the trustee. The report must be signed by two directors representing
all the directors. Failure to comply with the report requirements
constitutes an offence.
The report must detail any matter adversely affecting the security or
the debenture holders and must state:
• if borrowing limits have been exceeded, ie whether or not the
limitations on the amount that the company may borrow have
been exceeded. If they have been exceeded, particulars of the
borrowings exceeding those limitations must be stated;
• if the borrowing company and its guarantor corporations have

observed and performed all the covenants provided by the
debentures or trust deed;
• if the trust deed has become enforceable by any event, ie whether

or not any event has happened which has caused or could cause
the debenture or any provision of the relevant trust deed to
become enforceable and if so, particulars of that event;
• if the borrowing company’s security has been materially affected,

ie whether or not any circumstances affecting the borrowing
company, its subsidiaries or its guarantor corporations or any of
them have occurred which materially affect any security or charge
included in or created by the debentures or any trust deed, and if
so, particulars of those circumstances;
• if any substantial change has occurred in the nature of the

business of the borrowing company, ie whether or not there has
been any substantial change in the nature of the business of the
borrowing company or any of its subsidiaries or its guarantor
corporations since the debentures were first issued to the public,
which has not previously been reported upon as required by the
provisions of the Act and if so, particulars of that change;
• if loans or guarantees have been made in favour of related

companies, ie whether the borrowing company has deposited
with or lent money to or assumed any liability of its related
company, and if so, particulars of:
(a) the total amounts deposited or loaned and the extent of any
liability assumed during the period covered by the report; and
(b) the total amounts owing to the borrowing company in

respect of the money deposited or loaned and the extent of
the liability assumed as at the end of the period covered by
the report.
A distinction must be made between deposits, loans and

assumptions of liability which are secured and those which are
not. However any deposit, loan or liability assumed on behalf of a
related company need not be reflected in the report if the related
company has guaranteed the repayment of the borrowing
company’s debentures and has secured the guarantee by a
charge over its assets in favour of the trustee for the holders of
the borrowing company’s debentures;
• if a company has become or ceased to be a guarantor of the

borrowing company, ie where during the period to which the
report relates:
(a) the company has become a guarantor corporation;
(b) a guarantor corporation has ceased to be liable for the

payment of the whole or part of the moneys for which it was
liable under the guarantee; or
(c) a guarantor corporation has changed its name.
The report must state and give particulars of the change.

In addition, the borrowing company and each of its guarantor
corporations must furnish the trustee with particulars of any charge
created by the borrowing company or the guarantor corporations. This
must be done within 21 days of the creation of the charge.
¶12-255 Obligations of borrowing corporation

Section 182 of CA 2016 provides as follows:
Subsection (1) states that where there is a trustee for the debenture
holders of a borrowing corporation, the directors of the borrowing
corporation shall prepare a report—
(a) at the end of a period not exceeding three months ending on a
day, not later than six months after the date of the relevant
prospectus which the trustee is required to notify the borrowing
corporation in writing; and
(b) at the end of each succeeding period, being a period of three

months or such shorter time as the trustee may, in any special
circumstances allow.
Subsection (2) states that the report relating to the period referred to
sub-s (1) shall comply with sub-s (3) and a copy of the report shall be
lodged with the Registrar and the trustee within 30 days from the end
of each period.
Subsection (3) states that the report referred to in sub-s (1) shall be
signed by not less than two of the directors of the borrowing
corporation and shall set out in detail any matters adversely affecting
the security or the interests of the debenture holders as follows:
(a) whether or not the limitations on the amount that the corporation
may borrow have been exceeded;
(b) whether or not the borrowing corporation and each of its

guarantor corporations have observed and performed all the
covenants and provisions binding on the borrowing corporation
and each of its guarantor corporations respectively under the
debentures or any trust deed;
(c) whether or not any event has happened which has caused or
could cause the debentures or any provision of the relevant trust
deed to become enforceable and if so, particulars of that event;
(d) whether or not any circumstances affecting the borrowing

corporation, its subsidiaries or its guarantor corporations or any of
the corporation, its subsidiaries or its guarantor corporations have
occurred which materially affect any security or charge included in
or created by the debentures or any trust deed and if so, the
(e) whether or not there has been any substantial change in the
nature of the business of the borrowing corporation or any of its
subsidiaries or any of its guarantor corporations since the
debentures were first issued to the public which has not
previously been reported upon as required by this section and if
so, the particulars of such change; and
(f) where the borrowing corporation has deposited money with or

lent money to or assumed any liability of a corporation which is
deemed to be related to the borrowing corporation, the particulars
of—
(i) the total amounts deposited or loaned and the extent of any
liability assumed during the period covered by the report; and
(ii) the total amounts owing to the borrowing corporation in

respect of money deposited or loaned and the extent of any
liability assumed as at the end of the period covered by the
report, distinguishing between the secured and unsecured
deposits, loans and assumptions of liabilities.
Subsection (4) states that the moneys referred to in para 3(f) shall not
include any deposit with or loan to or any liability assumed on behalf
of a corporation if the corporation has guaranteed the repayment of
the debentures of the borrowing corporation and has secured the
guarantee by a charge over its assets in favour of the trustee for
debenture holders of the borrowing corporation.
Subsection (5) states that if there is a trustee for the debenture
holders, the borrowing corporation and each of the guarantor
corporations which has guaranteed the repayment of the moneys
raised by the issue of the debentures shall furnish the trustee—
(a) within 21 days from the date of the creation of any charge by the
corporation or the guarantor corporation, as the case requires, the
particulars of the charge created, whether or not any demand for
the repayment has been made; and
(b) if the amount to be advanced on the security of the charge is

indeterminate—
(i) within seven days of any advances made, the particulars of
the amount advanced; or
(ii) if the advances made are merged in a current account with

bankers or trade creditors, once every three months, the
particulars of the net amount outstanding in respect of any
such advances made.
Subsection (6) states that the directors of every borrowing corporation

and the directors of every guarantor corporation shall cause to be
prepared a financial statement for the period from the end of that
financial year until the expiration of six months after the end of that
financial year and lodged with the Registrar and trustee for the
debenture holders, if any, at some date not later than nine months
after the expiration of each financial year of the corporation.
Subsection (7) states that compliance with the general requirements
of the financial statements, subsidiaries to be consolidated, directors’
report and all powers of auditors shall, with such modifications as are
necessary, be applicable to every financial statement prepared for
lodgement with the Registrar as if that financial statement were a
financial statement referred to in those provisions stated.
Subsection (8) states that if the directors of a borrowing corporation do
not lodge with the trustee for the debenture holders a report as
required or if the directors of a borrowing corporation or the directors
of a guarantor corporation do not lodge with the trustee the financial
statement and reports as required within the time prescribed, the
trustee shall forthwith lodge notice stating the reasons and of that fact
with the Registrar.
Subsection (9) states that any director of the borrowing corporation
who fails to prepare a report relating to the period required for
lodgement with the Registrar commits an offence and shall, on
Subsection (10) states that any director of a borrowing corporation or
a guarantor corporation who fails to lodge the report within 30 days
from end of each period or fails to prepare financial statements for the
period from end of financial year until expiration of six months after the
end of financial year and lodge with the Registrar and trustee for the
debenture holders within nine months of the year end commits and
offence and shall on conviction be liable to a fine not exceeding
not exceeding five hundred ringgit (RM500) for each day during which
Law: s 182 of CA 2016.
¶12-260 Accounts to be made out and lodged

This paragraph should be read in conjunction with the ¶12-250 above.
Every borrowing company and guarantor company is under a statutory
duty to prepare a profit and loss account and balance sheet for each
financial year and to lodge the same with the ROC and trustee for the
debenture holders. Any company which fails to do this commits an
offence.
The following matters in relation to the accounts must also be
observed:
• The profit and loss account and the balance sheet of a borrowing
company must be audited before they are submitted to the
Registrar and trustee.
• A directors’ report must be attached to the balance sheet. This
report must contain details and explanations of the business
conducted by the company.
• The accounts must give a true and fair view of the state of affairs
and economic welfare of the company.
• The accounts must be accompanied by a statement (signed by

two directors on behalf of the directors of the company) verifying
that a true and fair view of the company’s business results and
affairs are reflected by the accounts.
• A report by the auditors of the company must be attached to the

accounts. The auditors must state in the report whether a true
and fair view of the company’s affairs is shown by the accounts.
• A statutory declaration by a director of the company must also

accompany the accounts. The declaration should set out the
director’s opinion as to the correctness of the accounts.
Obligation of guarantor corporation to furnish information

The guarantor corporation is obligated to furnish information in the
following manner:
• For the purposes of preparing a report required by CA 2016 to be
signed by or on behalf of the directors of a borrowing corporation
or any of the directors of a borrowing corporation, the corporation
may, by written notice require any of its guarantor corporations to
furnish the corporation with any information relating to the
guarantor corporation which is required to be contained in the
report.
• The guarantor corporation shall furnish the information referred to

above to the borrowing corporation not later than 14 days from
the date as specified in the notice.
• The corporation and every officer who contravene this requirement

exceeding RM20,000 and, in the case of a continuing offence, to
a further fine not exceeding RM1,000 for each day during which
Law: s 182 and 183 of CA 2016.
PRIVATE DEBENTURES
¶12-300 The nature of private debentures
The term “debenture” has a wide application and may be applied

equally to a private or public borrowing. The document which secures
a private loan may create a floating charge (see ¶12-370) over the
undertaking of the borrowing company or a fixed charge or both. A
floating charge becomes a fixed charge (see ¶12-360) on default with
the lender having the right to appoint a receiver for the secured
property of the company. The functions of a receiver appointed will be
stated under such a document. From the borrowing company’s
viewpoint, the advantage of a floating charge is that the company’s
assets may be used freely in the normal course of business whilst the
charge is in operation.
¶12-310 Contents of private debentures
The limitations imposed by CA 2016 in relation to public offerings of

debentures do not apply to private offerings of debentures. Section
43(1) of CA 2016 states that a private company limited by shares shall
not, amongst others, offer to the public any shares or debentures of
the company.
However, similar restraints are normally written into the document
securing the private loan. Perhaps the most significant clause in the
typical deed is the clause setting out the events which cause the loan
to become immediately repayable. The deed may also provide for the
lender to notify the company of the occurrence of the event of default
in which case, the loan becomes immediately repayable only after the
period of notice. These events of default vary with each individual loan
but generally occur:
• if default is made in payment of the loan as required by the deed;
• if any of the company’s assets are seized to satisfy a judgment

debt;
• if a resolution or order for winding up is made;
• if the company ceases to carry on its business;
• if a receiver of the company’s property is appointed.
The deed can also provide that the loan becomes automatically
repayable upon the happening of certain events (eg liquidation) and
only upon notice of other events (eg default in payment).
Note that the charge created by a private debenture must be
registered under CA 2016 (see (see ¶12-400 and following). This is
particularly important for the lender if he wants to ensure the priority of
his security.
A Memorandum of deposit which contains elements of an obligation,
covenant, undertaking or guarantee to pay has been held to be a
debenture because it is a security granted to the lender (Bensa Sdn
Bhd (In Liquidation) v Malayan Banking Berhad & Anor).
Section 179 of CA 2016 provides that where a corporation offers
debentures to the public for subscription in Malaysia, the debentures
or the relevant trust deed shall contain a limitation on the amount that
the borrowing corporation may borrow and shall contain covenants by
the borrowing corporation.
Law: s 43 and 179 of CA 2016.
FIXED CHARGES AND FLOATING CHARGES

¶12-350 General nature of fixed and floating charges
There is no legally expressed terminology for “a fixed charged” or a

“floating charge” as they are used commonly in the description of the
types of property or assets used as securities for securing the
borrowed money of the lender.
A company may borrow money on the security of a specific asset.
This arrangement is known as a “fixed charge” (see ¶12-360). In a
fixed charge arrangement, the asset is signed over to the creditor and
the borrower would need the lender’s permission to sell it. The lender
also registers a charge against the asset which remains in force until
the loan is repaid. A fixed charge is also sometimes called “fixed
debenture”.
A company may also borrow money on the security of a body of
changing assets (eg stocks) of a company or other artificial person,
which “floats” or “hovers” until the time which it is converted into a
fixed charge, at which point the charge attaches to specific assets of
the business. This arrangement is known as a “floating charge” (see
¶12-370). The floating charge is not secured on specific ascertainable
assets but rather upon a pool of assets (within a specified category)
that are being used during the operation of business on an on-going
basis. The company may, therefore, deal with the assets in the
ordinary course of its business unless or until the charge is enforced
at the point in time when the company fails to service the borrowed
money. The floating charge is a mechanism for the grant of security
which is open only to companies. [Note that a lien is different from a
charge. For example, a lien under the National Land Code existed
independent of a charge so that even if the charge was avoided for
non-compliance of the law, the lien need not also be avoided as long
as it complied with the law (Heap Huat Rubber Company Sdn Bhd v
United Overseas Bank Limited).]
The law on charges is found in Pt III (“Management of Company”), Div
7 (“Charges, Arrangements and Reconstruction and Receivership”),
Subdiv 1 of CA 2016.
¶12-360 Fixed charges

The grant of security for a loan by giving the creditor a right to recover
his capital sums from specific landed properties or fixed assets is
termed a “fixed charge”. At common law, fixed charges on the same
assets will rank in priority according to the dates of their creation.
However, where a company’s properties or fixed assets are charged,
the company is required to register the charge with the Registrar.
Such charges are void if unregistered and rank in priority according to
the date of registration. See further ¶12-400 and ¶12-470.
Fixed charges are usually created over landed properties by way of a
legal mortgage. The charge attaches to the land and the company
cannot dispose of the land (or other specific asset) without the
consent of the debenture holders.
¶12-370 Floating charges

The classic description of a floating charge was given in Illingworth v
Houldsworth as follows “… a floating charge … is ambulatory and
shifting in its nature, hovering over and so to speak floating with the
property which it is intended to affect until some event occurs or some
act is done which causes it to settle and fasten on the subject of the
charge within its reach and grasp”.
Floating charges are commonly granted over current assets such as
stock-in-trade and book debts in normal business operations. The
floating charge is not a legal charge as it does not fix on a specific
item of mortgageable or registrable property. It is possible for a
company to grant a floating charge over all of its assets and fixed
charges over specific assets at the same time. The holder of a floating
charge has no right to possession of the current assets covered by the
charge until occurrence of one of the events specified in the debenture
which enforces the security; very likely due to non-servicing of the
borrowed money. The way in which the security is enforced is either
by appointment of receiver who conducts the business of the company
to realise the current assets and recover the capital sum, or by the
trustee for debenture holders taking possession of the current assets,
which are considered to have “crystallised”.
When a floating charge crystallises
The events which trigger the operation of the floating charge, so as to
attach the equitable charge to the classes of assets mortgaged under
the loan agreement without any further act by the lender are not
clearly defined. The events which will definitely crystallise the charge
are:
• the winding up of the company (Re Colonial Trusts Corporation,
Ex parte Bradshaw);
• the appointment of a receiver (Re Panama, New Zealand and

Australian Royal Mail Co); and
• the cessation of business as a going concern (Governments Stock

& Other Securities Investment Co Limited v Manila Railway Co
Ltd).
In Re Brightlife Ltd, the court considered that a charge may crystallise

by agreement of the parties (such agreement being in the terms of the
charge, by the chargee giving notice to the chargor) rather than by
operation of law. The court was of the opinion that it was not open to
the courts to restrict that freedom without legislative authority.
There is some uncertainty as to whether the occurrence of other
events (such as the grant of subsequent charges on the same assets)
which are described in the loan agreement as crystallising the charge,
can have this effect, without intervention of the debenture holder.
There is authority for the view that this can be achieved if the event
which triggers crystallisation is the appointment of a receiver under an
earlier or later charge, and the latter event was expressly identified as
a trigger of the crytallisation of the said debenture (Re Woodroffes
Musical Instruments Ltd). It would appear that it is possible to effect an
automatic crystallisation on the occurrence of events other than the
appointment of a receiver under a separate charge as in Re
Manurewa Transport Ltd. It is possible for a debenture to create an
equitable fixed charge over “circulating” assets such as book debts by
restriction of the creditor company’s ability to dispose of them (Siebe
Gorman & Co Ltd v Barclays Bank Ltd).
Where floating charges are not registered, thus void, crystallising
events will not create new fixed charges (Dresdner Bank
Aktiengesellschaft & Ors v Ho Mun-Tuke Don & Anor).
Priority
Floating charges must be registered. If not, they will be void against
the liquidator and creditors of the company.
As a floating charge is not a legal charge over the assets covered by
the security, a subsequent legal charge over the same assets would
thus take priority over the floating charge. It is common for debentures
by which a floating charge is created, to prohibit the creation of
subsequent charges on the same assets. This strategy will not protect
the debenture holder against certain legal claims on the assets
covered by the floating charge which may arise prior to attachment of
the floating charge (eg by operation of rights of set-off, rights of
distraint under a lease or execution of judgment debts).
Certain preferred creditors under CA 2016 take priority over a floating
charge in the event of the winding up of the company. A legal charge
will take priority over a floating charge despite the prohibition of
creation of subsequent fixed charges in the floating charge debenture
if at the time of the creation of the former, the creditor who acquires
this fixed charge was unaware of either the floating charge or the
prohibition it contains (English and Scottish Mercantile Investment Co
v Brunton).
In ascertaining the priority of charges, the court will also take into
account the exact nature of the right of the chargor at the time of the
execution of the debenture (United Malayan Banking Corporation Bhd
v Aluminex (M) Sdn Bhd & Anor). This is important especially where
there is a series of financing operations competing for priority. A party
cannot charge more than what it had at the time of execution of the
debenture.
Notice of the creation of the charge is not necessarily notice of the
prohibition contained in the document creating the charge. It is
common for the forms lodged with the ROC to make reference to the
document creating the charge for details of the prohibition clauses
instead of expressly listing them out. This should be sufficient notice
for public searches. However, a prohibition will protect the first creditor
with a floating charge against claims under subsequent floating
charges over the same assets, even if the subsequent creditors have
no notice of the prohibition. It is possible to grant a fixed charge on
terms that it is subject to an earlier floating charge.
REGISTRATION OF CHARGES
¶12-400 Registration with the Registrar
Registration of charges with the ROC is designed to assist the

secured creditor and at the same time give notice to all those doing
business with the company of the full amount of the company’s debts.
The CA 2016 provides that certain charges given by companies must
be lodged for registration with the Registrar within 30 days after their
creation. The object of these provisions is to protect creditors who
extend credit to a company believing it has unencumbered assets
when in fact those assets have been charged in favour of another
creditor. Registration is to be done by the company secretary, together
payment of prescribed fee and a statement of particulars of the charge
in the form and manner as may be determined by the Registrar. This
is done via the lodgement of the e-form “Statement of particulars to be
lodged with charge” in Schedule B of MyCoID.1
Under CA 2016, the following 11 categories of charges must be
lodged with the Registrar for registration:
(1) charges to secure any issue of debentures;
(2) charges on uncalled share capital of a company. A charge of this

nature should precisely define its extent if it is to include uncalled
share capital of a company. Charges over the undertaking and ‘all
property whatsoever and wheresoever present and future’ of the
company (Re Streatham & General Estates Co), or over the
property of the company (Re Russian Spratts Patent Ltd) have
been held not to create a charge over the uncalled share capital
of the company. A charge over a company’s “assets” has been
held to include a charge over the uncalled share capital of the
company (Page v International Agency and Industrial Trust Ltd).
Note that the power to charge uncalled share capital includes the
power to charge uncalled share premiums (Re Phoenix Bessemer
Steel Co);
(3) charges on shares of a subsidiary of a company which are

owned by the company;
(4) charges created by an assignment created or evidenced by an

instrument which if executed by an individual within Peninsular
Malaysia and affecting property within Peninsular Malaysia would
be invalid or of limited effect if not filed or registered under the
Bills of Sale Act 1950;
(5) charges on land wherever situated or any interest in the land;
(6) charges on book debts of the company;
(7) floating charges on the undertaking or property of the company;
(8) charges on calls on shares made but not paid. The power to
pledge uncalled share capital includes the power to pledge (or
charge) the proceeds of a call already made out but not yet paid
(Re Sankey Brook Coal Co (No 2));
(9) charges on ships or aircrafts or any share in a ship or aircraft;
(10) charges on goodwill, patents or licence under a patent, trade

mark, or on a copyright or a licence under a copyright;
(11) charges on the credit balance of the company in any deposit or

account.
These charges rank in priority of payment according to the date of

their registration. If these charges are not registered, the security
conferred by them becomes void. However, the debt secured by an
unregistered charge is unaffected by the non-registration and is
immediately repayable upon the charge becoming void. See ¶12-470.
A sale and buy back of shares does not create a charge and need not
be registered. The object of the entire transaction should be looked at.
If the entire transaction is for the raising of funds and the mode or
nature of financing is not at the forefront in the minds of the parties,
the transaction falls outside the ambit of a registerable charge (Thai
Chee Ken & Ors v Banque Paribas).
Section 354 of CA 2016 states that if a charge created in Malaysia
affects property outside Malaysia, the statement of the particulars as
determined by the Registrar may be lodged for registration as required
by s 352 even if further proceedings may be necessary to make the
charge valid or effectual according to the law of the country in which
the property is situated.
Registration of charges in series of debentures
Fixed charges (also known as fixed debentures) may be issued singly
or in a series. Mostly debentures are issued in different series, with a
pari passu clause for each such series, which means that all
debentures of a particular series rank will equally without any priority
of one over another. A company is not allowed to create a new series
of debentures, which will rank pari passu with any old series of
debentures, unless with express authorisation.
Section 355(1) states that a series of debentures must be registered
with the ROC within 30 days from the date of execution of the
instrument containing the charge, or if there is no such instrument
after the execution of the first debenture of the series. The statement
must contain the following particulars:
(a) the total amount secured by the whole series;
(b) the dates of the resolutions authorising the issue of the series
and the date of the covering instrument, if any, by which the
security is created or defined;
(c) a general description of the property charged; and
(d) the names of the trustee, if any, for the debenture holders.
Registration is done via a statement furnished in the e-form
“Statement containing particulars of a series of debentures” in
Subsection (2) states that if more than one issues are made of
debenture in the series, particulars of the date and amount of each
issue shall be lodged within 30 days from each issue, but an omission
to do so shall not affect the validity of the debentures issued.
Subsection (3) states that if any commission, allowance or discount
has been paid or made either directly or indirectly by a company to
any person in consideration of his—
(a) subscribing or agreeing to subscribe; or
(b) procuring or agreeing to procure subscriptions,
whether absolute or conditional for any debentures, the particulars

required to be lodged under this section shall include particulars as to
the amount or rate per centum of the commission, allowance or
discount paid or made, but omission to do so shall not affect the
validity of the debentures issued.
Subsection (4) states that the deposit of any debentures as security
for any debt of the company shall not, for the purposes of the above
mentioned, be treated as the issue of the debentures at a discount.
Law: s 352, 353, 354, and 355 of CA 2016.
Footnotes
website.
¶12-405 Charges that need not be registered
Section 352(6) of CA 2016 states that registration is not required:

(a) for a charge created to secure payment or performance of a
financial obligation arising from any instruments or transactions
effected in the money market in such manner and to such extent
as may be specified by the Central Bank of Malaysia (“Bank
Negara”) under the Financial Services Act 2013 or the Islamic
Financial Services Act 2013; or
(b) for the person interested in the charge if it is Bank Negara.
¶12-410 Duty to register charges
The duty to register charges with the ROC is on the company. If the
registration requirements are not complied with, the company and its
defaulting officers will be guilty of an offence. Where the company fails
to register the charges as required, anybody interested in the charges
may register them and claim the registration fees incurred from the
company. To prevent their security from being invalidated for non-
registration within the prescribed time, it is common for lenders to
prepare and lodge the necessary forms rather than rely on the
borrowing company to do so.
Duty of a company to register charges existing on property
acquired
The duty of a company to register charges existing on property
acquired is provided in s 356 of CA 2016 as follows:
(a) a company acquires property which is subject to a charge and
which would, if it had been created by the company after the
acquisition of the property, have been required to be registered
under this requirement;
(b) a foreign company becomes registered in Malaysia and has prior

to such registration created a charge which would, if it had been
created by the company while it was registered in Malaysia, have
been required to be registered under this Subdivision; or
(c) a foreign company becomes registered in Malaysia and has prior

to such registration acquired property which is subject to a charge
of any such kind as would, if it had been created by the company
after the acquisition and while it was registered in Malaysia, have
been required to be registered as required,
the company or foreign company shall lodge a statement of the

particulars of the charge as determined by the Registrar within 30
days from the date on which the acquisition is completed or the date
of the registration of the foreign company in Malaysia, as the case
may be, with the Registrar for registration.
Subsection (2) states that the company or a foreign company and
every officer of the company or the foreign company who contravene
the requirement commit an offence, and shall, on conviction, be liable
offence, to a further fine not exceeding RM500 for each day during
Law: s 356 of CA 2016.
¶12-420 Registrar to keep register of charges

The ROC must keep a register of all the charges lodged with it for
registration. The register must contain in relation to each charge (other
than a charge in connection with a series of debentures):
• the date of its creation;
• the date of acquisition of the property, if the charge is a charge
existing on property acquired by the company;
• the amount secured by the charge;
• identification of the property charged; and
• the name of the person entitled to the charge.
Where a charge is created in relation to the issue of a series of

debentures, the following particulars have to be entered on the
register:
• the total amount secured by the whole series;
• the date of the resolution authorising the issue and the date of the
instrument by which the charge is created;
• a general description of the property charged; and
• the names of the trustees for the debenture holders.
The Registrar shall issue a certificate of registration of charge in the

form as the Registrar may determine and the certificate shall be
conclusive evidence that the requirements as to registration have
been complied with.
Law: s 357 of CA 2016.
¶12-430 Registration procedure

All registerable charges must be lodged with the ROC for registration
within 30 days after their creation, that is, within 30 days after the
execution of the charge, not 30 days after the date when money is
actually advanced. Therefore, a deed which is executed and delivered
undated to the person in whose favour it is intended to operate, is
complete even though it has no date on it, and the addition of the date
is not material to its operation (Esberger & Son Ltd v Capital and
Counties Bank). There is no need to file with the Registrar the
instrument of charge or a copy of it.
An extension of the time for registration may be granted by the court if
the court is satisfied:
• that the failure to lodge notice of a charge is accidental or due to
inadvertence or some other sufficient cause;
• that the failure is not of a nature to prejudice the position of

creditors or shareholders; or
• that it is just and equitable to grant relief.
A mistake of fact causing the failure to register has been held not to
represent a failure due to inadvertence (Commercial Banking Co of
Sydney Ltd v George Hudson Pty Ltd (in liq)). The fact that the
company was incorrectly advised (Re Mendip Press Ltd) and
confusion as to who should register between the company secretary
and a solicitor (Re Kris Cruisers Ltd) were reasons justifying an
extension. An important element in the court’s consideration is
whether the omission to register is likely to prejudice the position of
the creditors or shareholders (Re an Application by Queensland Co-
operative Credit Union League Ltd).
Where a registerable instrument or document is made or executed
outside the country, the time for registration of the document or
instrument is extended by seven days or by such further extensions as
may be allowed by the ROC.
A deed of variation of a registered charge is not itself registerable
unless the variation affects the creation of a fresh charge.
The application for registration of charges relating to property, series
of debentures, and acquisition of property are subject to a fee:
• for a private or a public company — RM100; and
• for a foreign company — RM300.
Law: s 352, 354, 355 and 356 of CA 2016; reg 8, No 24 of Companies

Regulations 2017.
¶12-440 Acquisition of charged property
If a company acquires property that is subject to a charge (being a

charge which would have been registerable if it had been created by a
company) then notice of that fact must be given to the ROC within 30
days after the acquisition of the property. If this requirement is not
complied with, the company and every of its defaulting officer will be
Law: s 356 of CA 2016.
¶12-450 Satisfaction and release of property from charge
If, in respect to a registered charge:

• the debt for which the charge was given has been paid or satisfied
in whole or in part; or
• the property or undertaking charged or any part of the property or

undertaking has been released from the charge or has been
ceased to form part of the company’s property or undertaking,
the company must lodge such particulars, supported with sufficient

evidence, with the Registrar within 14 days from the payment,
satisfaction, release or cessation, and the Registrar shall enter that
particulars in the register.
The secretarial procedure is for the company to pass a board
resolution to discharge the property charged and authorise the
common seal to be affixed onto the prescribed e-forms found in
MyCoID, Schedule B, ie
• “Memorandum where property or undertaking is released from
registered charge or has ceased to form part of company’s
property or undertaking”;
• “Statutory declaration verifying memorandum”;
• “Evidence of satisfaction of charge/release of property or part of

property from charge”.
The forms are to be signed by the holder of the charge and lodged
accordingly, and the relevant fee of RM50 (private and public
company) or RM150 (foreign company) must be paid.
Law: s 360 of CA 2016.
¶12-460 Assignment and variation of charge

The CA 2016 provides for the assignment and variation of charges.
Where a charge, registerable under the Act has been assigned, the
new holder of the charge should lodge with the Registrar a notice
stating that he has become the holder of the charge. The new holder
must also inform the company whose assets are subject to the
charge.
Where there is a variation in the terms of the charge such that it
results in the increase of the amount of debt; or a prohibition on the
creation of subsequent charges, there must be a notice given to the
Registrar. The notice should set out particulars of the charges.
Section 359 of CA 2016 provides that the new holder of the charge
upon assignment and variation of charge must give notice to the
Registrar of the assignment and variation as follows:
Subsection (1) states that if after a charge on property of a company
has been created and registered, a person other than the original
charge holder becomes the new holder of the charge, the new holder
of the charge shall, within 30 days and upon payment of a prescribed
fee—
(a) lodge with the Registrar a notice stating that he has become the
new holder of the charge and the notice shall contain the
information as may be determined by the Registrar; and
(b) give a copy of the notice to the company.
Subsection (2) states that if after a charge on the property of a

company has been created and registered, there is a variation in the
terms of the charge having the effect of—
(a) varying the amount of the debt or liabilities, whether present or
prospective, secured by the charge; or
(b) prohibiting or restricting the creation of subsequent charges on

the property, the company shall lodge with the Registrar a notice
setting out the particulars of the variation as may be determined
by the Registrar within 30 days from the variation occurs and
upon payment of a prescribed fee.
Subsection (3) states that for the purposes of sub-s (2), if the amount
of debt or liability secured by a registrable charge created by the
company is—
(a) unspecified; or
(b) specified with further advances, any payment or advance made

by the charge holder to the company in accordance with the
terms of the charge shall not be regarded to be a variation in the
terms of the charge.
Subsection (4) states that a reference in this section to the charge

holder in relation to a charge shall be construed as a reference to the
trustee for debenture holders if the charge is constituted by a
debenture or debentures and there is a trustee for the debenture
holders.
Subsection (5) states that the new holder of the charge who
contravenes this section commits an offence and shall, on conviction,
be liable to a fine not exceeding RM50,000 and, in the case of a
Law: s 359 of CA 2016.
¶12-470 Effect of non-registration

Registration of a charge acts as constructive notice of the existence of
the charge to all persons affected thereby (Wilson v Kelland).
However, registration is only constructive notice of the charge, and not
of the terms contained in the charge instrument. Thus notice of
prohibitions on creation of subsequent charges is not given by
registration.
Failure to register a charge within 30 days of its creation (ie the date
the agreement creating the charge is concluded) renders the charge
void as against a liquidator or creditor of the company. However, the
underlying debt is not avoided and the obligation to repay will remain,
but this obligation would rank only as an unsecured debt in the event
of the liquidation of the company. The loan becomes immediately
repayable upon avoidance of the charge. The importance of
avoidance of the charge is that the lender loses his security. Thus, for
example, preferential creditors, floating charges and fixed equitable
charges would rank higher in priority than the lender with a fixed
charge who had failed to register in the event of a liquidation.
The Registrar is unable to register a charge if either the particulars
required are not submitted to him within 30 days, subject to late
registration. Once the Registrar’s certificate of registration has been
issued, the charge is taken to have been properly registered,
regardless of whether or not this was the case. This is because the
Act provides that the Registrar’s certificate is “conclusive evidence”
that the requirements as to registration have been satisfied. Thus, the
charge is irrefutably valid from the date of registration as disclosed on
the Registrar’s certificate (R v Registrar of Companies, Ex parte Esal
(Commodities) Ltd).
The CA 2016 provides that if a company fails to register a charge, the
charge shall be void against the liquidator and any creditor of the
company, so far as any security on the company’s property or
undertaking is conferred. Also, nothing in the provision shall prejudice
any contract or obligation for the repayment of the money secured by
a charge and when a charge becomes void, the money secured shall
immediately become payable.
Law: s 352(2) and (3) of CA 2016.
¶12-480 Company obliged to keep register

Every company must keep at its registered office a register of charges
containing details of all charges affecting specific property of the
company and all floating charges on the undertaking of the company.
In addition, a company must keep at its registered office the
instruments creating registerable charges or copies thereof. Note here
the distinction between a company’s obligation to keep in the register
the details of all charges and its obligation to keep copies of
documents creating registerable charges. In the case of a series of
debentures, the keeping of a copy of one debenture in the series is
sufficient.
The register must contain the following details in relation to all
charges:
• a short description of the property charged;
• the amount of the charge;
• the names of the persons entitled thereto (except for bearer

securities).
These obligations apply to all companies within the country and to

foreign companies registered in the country. The register is open for
inspection to any creditor or member of the company. Other persons
may inspect the register on payment of a small fee. A company or any
of its officers who does not comply with these requirements commits
an offence.
Law: s 362 and 364 of CA 2016.
RECEIVERSHIP
¶12-500 Functions of receiver
A receiver is appointed to safeguard the interests of debenture holders

in the enforcement of the security for their loan. The appointment of a
receiver is only one of the remedies available to the debenture holders
who also have recourse to avenues of recovery open to creditors
generally. It is often necessary to consult the debenture deed to
establish whether a receiver can be appointed, and having been
appointed, the powers that the receiver actually has.
Notwithstanding the appointment of a receiver, the company remains
in existence and its legal personality continues to exist. This means
that although the directors (and ultimately the shareholders) lose the
right to control the company’s affairs and assets, no property is vested
in the receiver by virtue of his appointment. All property remains in the
company’s name (Re Sartoris’ Estate). In this regard, it makes no
difference whether the receiver is appointed by the court or appointed
privately. However, the difference in the source of the appointment
does result in some differences in other aspects of the receivership.
¶12-510 Appointment of receiver or receiver and

manager
There are two distinct ways for a receiver to be appointed:
(1) by the court (see ¶12-520);
(2) privately, under an instrument (see ¶12-530):

• that confers on a debenture holder or charge holder the power
to appoint a receiver or receiver and manager;
• that creates a charge in respect of property and undertaking

of a company that confers on the charge holder the power to
appoint a receiver or a receiver and manager
Law: s 374 of CA 2016.

manager by the court
Although the average debenture deed gives power to the debenture
holder to appoint a receiver, the existence of such a power does not
exclude the court’s power to appoint where the case warrants the
appointment (Re Slogger Automatic Feeder Co Ltd). The basic reason
for appointing any receiver is to protect and preserve property for the
benefit of those entitled to it (Tullet v Armstrong).
Whilst secured creditors whose security is in jeopardy are the obvious
persons on whose behalf a receiver may be appointed, they are
clearly not the only category of persons who might seek this
safeguard. An appointment by the court is usually made on the
application of mortgagees or debenture holders but not exclusively. A
receiver has been appointed where:
• disputes between directors have led to dereliction of duty
(Stanfield v Gibbon);
• there is no governing body in a company (Trade Auxiliary Co v

Vickers); and
• litigation is pending at the instance of a minority shareholder (Duffy

v Super Centre Development Corp Ltd).
Other grounds upon which the court may appoint a receiver include
the situation where:
• the principal amount under a debenture or trust deed has become
repayable (Hopkins v Worcester and Birmingham Canal
Proprietors);
• the interest is in arrears even though the principal is not payable

(Bissill v Bradford Tramways Co);
• an event has occurred by which the security has become

enforceable, for example, a breach of the terms of the debenture;
• a winding up order has been made by the court or where a

resolution to wind up has been passed (Hodson v Tea Co; Re
Panama, New Zealand and Australian Royal Mail Co);
• part or the whole of the company’s undertaking or assets has been

sold other than in the ordinary course of business and the
company has ceased to be a going concern (Forster v Borax Co).
A receiver may also be appointed to preserve the company’s status

quo while investigations, prosecutions or proceedings are going on
(Re Merchant Nurseries Pty Ltd (receivers and managers appointed);
Corporate Affairs Commission v Rowley & Ors).
Most debenture deeds allow the appointment of receivers out of court,
yet most receivers appointed by the court are appointed at the request
of debenture holders. The reason for this is that situations often arise
in the affairs of a company which though not mentioned in the
debenture deed nevertheless put the security for the loan at hazard.
Hence even though the event which has occurred has not been
covered by the words of the trust deed, the debenture holders may
succeed in having a receiver appointed on the general ground of
jeopardy (Re Tilt Cove Co).
Appointment under CA 2016
Section 376 stipulates the appointment of receiver or receiver and
manager by court as follows:
Subsection (1) states that the court may, after giving notice to the
company appoint a receiver or receiver and manager on the
application of a debenture holder or any other interested person and
give notice to the company, where the Court is satisfied that—
(a) the company has failed to pay a debt due to the debenture
holder or has otherwise failed to meet any obligation to the
debenture holder, or that any principal money borrowed by the
company or interest is in arrears;
(b) the company proposes to sell or otherwise dispose of the

secured property in breach of the terms of any instrument
creating the security or charge; or
(c) it is necessary to appoint a receiver or receiver and manager to

ensure the preservation of the secured property for the benefit of
the debenture holder.
Subsection (2) states that a person appointed as a receiver by the

court may act as a receiver and manager unless the court order
excludes the appointment as receiver and manager.
Subsection (3) states that if two or more receivers or receiver and
managers are appointed by the court, unless the court expressly
provides otherwise—
(a) the functions or the powers of the receivers or receiver and
managers may be performed or exercised by any one of them or
by both or all of them jointly; and
(b) a reference to the receiver or receiver and manager shall be a

reference to whichever one of the receivers or receiver and
managers.
Subsection (4) states that the right of any person to apply to the court
for the appointment of a receiver or receiver and manager under
common law is not abrogated by the operation of this section or
Subdivision.
Law: s 376 of CA 2016.

manager under an instrument
The terms of the average debenture, equitable mortgage, or other
loan document given by a company allow the lender in the event of
default to appoint a receiver. Provided the power is there and the
event giving rise to the power occurs, a receiver may be appointed
privately without application to the courts. The right to appoint must be
given by the loan document and the power to appoint must be
exercised strictly within its terms. For example, power to appoint a
receiver is not power to appoint a receiver cum manager (see ¶12-
560). The receiver’s power is limited by the terms of the instrument
under which he is appointed.
It is vital that the receiver be properly appointed. The High Court of
Malaya dismissed an application of a receiver and manager for the
release of goods seized under a writ of distress because the
appointment of the receiver and manager was not signed by the
person designated in the debenture (Marka Industrial Sdn Bhd v Elgi
Marka Sdn Bhd).
The privately appointed receiver is usually appointed by a debenture
holder. His function is to receive the income of the company for the
debenture holder. His primary duty is owed to the debenture holders
and not to the company (per Jenkins LJ in Re B Johnson & Co
(Builders) Ltd). His appointment does not end the life of the company,
it merely anaesthetises it (per Macotta J in George Barker (Transport)
Ltd v Eynon). Normally he makes an effort to restore the financial
prosperity of the company whose affairs he had been appointed to
administer (per Street J in Duffy v Super Centre Development Corp
Ltd).
The privately appointed receiver is not the agent of the company
unless the document under which he is appointed specifically states
so. It is, in any case, normal practice for this to be so.
Appointment under CA 2016
• If an instrument confers on the debenture holder the power to
appoint a receiver or receiver and manager, the debenture holder
may appoint a receiver or receiver and manager by an instrument
in writing signed by him or on his behalf.
• Unless the instrument expressly provides otherwise—

(a) a receiver or receiver and manager is the agent of the
company;
(b) a person appointed as a receiver may act as receiver and

manager; or
(c) a power conferred to appoint a receiver or receiver and

manager includes the power to appoint—
(i) two or more receivers or receiver and managers;
(ii) a receiver or receiver and manager additional to a

receiver or receiver and manager in office; and
(iii) a receiver or receiver and manager to replace a

receiver or receiver and manager whose office has
become vacant.
• If two or more receivers or receiver and managers are appointed

under one instrument, unless the instrument expressly provides
otherwise—
(a) the functions or the powers of the receivers or receiver and
managers may be performed or exercised by any one of
them or by both or all of them jointly; and
(b) a reference to the receiver or receiver and manager shall be

a reference to whichever one of the receivers or receiver and
managers.
Law: s 375 of CA 2016.
¶12-540 Receiver or receiver and manager

In acknowledgment of the fact that the realisation of a company’s
assets is easier if the business is allowed to continue, a debenture
document usually grants the debenture holder the right to appoint not
merely a receiver (see ¶12-550) but a receiver and manager (see ¶12-
560) who may continue the business of the company, whilst he seeks
to get in the amount due.
¶12-550 Receiver’s role

The role of the receiver is:
• to stop the operation of the company’s business;
• to take possession and protect the property over which he is

appointed;
• to get in the assets charged;
• to collect debts, rents, profits and other income; and

• to exercise any power of sale over the property of the company
given under the charge.
However, such a receiver cannot undertake any buying and selling in

the ordinary course of the company’s business. To prevent the
complete termination of the company’s business as a going concern,
the receiver must also be appointed a manager.
¶12-560 Receiver and manager’s role
The receiver vested with the dual roles of receiver and manager may
undertake the carrying-on of the company’s business as a going
concern. Without managerial power, a receiver appointed by and on
behalf of debenture holders is obliged only to realise the property of
the company which the debenture covers for the benefit of the
debenture holders (Re Manchester & Milford Railway Co). If the
purpose of the appointment is to preserve the company as a going
concern, the receiver must also be vested with the ancillary power to
manage.
Unless he is also a manager, a mere receiver who exercises
managerial power is a trespasser from the time he enters possession
of the company and any of his acts of management will be unlawful
(Harold Meggitt Ltd v Discount & Finance Ltd). As manager, the
powers of the receiver/manager supersede the powers of the
company itself to operate and control its own business. Therefore, the
powers of the directors and others in control of the company are
frozen during the receivership. In practice, receivers appointed by the
court are usually also vested with the powers of a manager. For
privately appointed receivers, it will depend on the terms of the
debenture deed. If the deed allows for a receiver only, then a
receiver/manager cannot be appointed. If the deed requires a
receiver/manager to be appointed, an appointment of receiver only is
invalid.
A receiver and manager may give a warranty and indemnity to the
purchaser of the company’s property, if such warranty and indemnity
is demanded, and is in accordance with the normal business practice
(In the Matter of Allied Cocoa Industries Pte Ltd).
¶12-570 Remuneration of receiver or receiver manager
The CA 2016 provides that the court may, on an application by the

liquidator of a company, by order fix the amount to be paid by way of
remuneration to any person who, under the powers contained in any
instrument, has been appointed as receiver or receiver and manager
of the property of the company.
The power of the court shall:
(a) extend to fixing the remuneration for any period before the
making of the order or the application;
(b) be exercisable notwithstanding that the receiver or receiver and

manager has died or ceased to act before the making of the order
or the application; and
(c) if the receiver or receiver and manager has been paid or has
retained for his remuneration for any period before the making of
the order any amount in excess of that fixed for that period,
extend to require him or his personal representatives to account
for the excess or such part of it as may be specified in the order, if
no previous order has been made with respect to it.
The power conferred shall not be exercised in respect of any period

before the making of the application for the order, unless in the
opinion of the court there are special circumstances making it proper
for the power to be so exercised.
The court may from time to time vary or amend an order made under
this section on an application made either by the liquidator or by the
receiver or receiver and manager.
Law: s 387 of CA 2016.
PROCESS OF APPOINTING RECEIVER

¶12-600 Eligibility for appointment
A receiver is an impartial person and the Act adopts this basic

principle by requiring that a receiver has no connection with the
company. More specifically, the Act provides that the following
persons must not act as receiver of the property of a company:
• a company. The purported appointment of a company as receiver
is a nullity (Portmen Building Society v Gallway);
• an undischarged bankrupt;
• a mortgagee of any property of the company;
• an officer of the company or of any corporation which is a

mortgagee of the property of the company;
• an auditor of the company;
• any person who is not an approved liquidator or the Official

Receiver.
Law: s 372 and 373 of CA 2016.
¶12-610 Notification of appointment
The CA 2016 requires that the notice of appointment of receiver or

receiver and manager must be lodged with the Registrar by any
person within seven days from the date he obtained the order for the
appointment or the date he appoints a receiver or receiver and
manager under any powers contained in any instrument.
Notification must be in the e-form “Notice of appointment of receiver or
manager” in Schedule B of MyCoID and is to be lodged by the person
who obtains the order (in a court appointment) or by the person
making the appointment (in a private appointment). More importantly
from the company’s point of view is the requirement that where a
receiver or manager of a company is appointed, he must immediately
send notice to the company of his appointment.
Any person who contravenes this provision commits an offence and,
shall, on conviction, be liable to a fine not exceeding RM50,000, and
conviction.
Law: s 377 of CA 2016.
¶12-620 General notice

Whenever a receiver or manager of a corporation has been appointed,
every invoice, order for goods or business letter issued by the
corporation or the receiver or manager (or the liquidator) which is a
document on which or in which the company’s name appears, must
contain a statement that a receiver or manager has been appointed.
Such a statement must appear immediately following the name of the
company, eg “XYZ Examples Pte Ltd (Receiver Appointed)” or “XYZ
Examples Ltd (In Receivership)”.
The CA 2016 provides that if a receiver or a receiver and manager of
the property has been appointed, every invoice, order for goods or
services, business letter or order form whether in hard copy or
electronic form issued by or on behalf of the corporation or the
receiver or receiver and manager or the liquidator of the corporation
and on which the name of the corporation appears, and every official
website of the corporation where the name of the corporation appears
shall contain a statement that a receiver or receiver and manager has
been appointed.
However, a failure to comply with the above shall not affect the validity
of such document, but the company and every officer who contravene
this section commit an offence.
Law: s 380 of CA 2016.
APPOINTMENT OF RECEIVER BY THE COURT

¶12-700 General position
The court-appointed receiver is an officer of the court. He is not the
agent of the debenture holder nor of the company (per Lord Haldane
in Parsons v Sovereign Bank of Canada). Accordingly, interference
with him constitutes contempt of the court (Ames v Birkenhead Docks
(Trustees)). The court exercises control over him in determining for
example what legal proceedings he may or may not take (Viola v
Anglo-American Cold Storage Co). This does not extend to an
exercise of control over his day-to-day actions but the court will be
involved where there are real and substantial grounds for questioning
the correctness of an important decision in the company’s affairs. The
court will consider what directions ought to be given to him (per Street
J in Duffy v Super Centre Developments Corp Ltd).
The specific powers and duties of a receiver may vary and will depend
on the reason for his appointment (for example, to preserve property
pending litigation, or for debenture holders, etc.). His particular powers
in any given case must be ascertained from and interpreted in
accordance with the order under which he is appointed. See further
¶12-710, ¶12-720 and ¶12-730.
¶12-710 Discharge of staff

The facts of each case determine whether or not the appointment of a
receiver by the court has the effect of terminating the contracts of
employment between the company and its employees. If the court
order indicates that a company in receivership carries on the whole of
its business undertaking without a breach of continuity, then it follows
that the employees remain the employees of the company
notwithstanding the appointment of a receiver and manager
(International Harvester Export Co v International Harvester Australia
Ltd). On the other hand, the appointment of a receiver and manager at
the instigation of debenture holders and mortgagees discharges the
servants of the company (Reid v The Explosives Co Ltd). Therefore, a
receiver so appointed does not have to dismiss the staff of the
company but he must re-employ those he requires.
¶12-720 Determination of board’s powers

The usual position created by the appointment of a receiver by the
court is that he is given such full power and control over the
company’s assets that the directors are left with very little, if anything
to control. However, in every case the receiver’s powers must be
examined in order to ascertain if any power remains with the directors.
The apparent powerlessness of the directors does not mean that they
are relieved of their statutory duties as directors. These they must
continue to carry out. A receiver should therefore provide the directors
with such information as is necessary for them to comply with their
obligations under the Act. He is not under any obligation, other than
for preparing and verifying the statement of affairs (see ¶12-800), to
pay anything to the directors towards the cost of the said directors
meeting their obligations under the Act.
¶12-730 Prior contracts are not terminated

Contracts entered into by the company prior to the appointment of the
receiver by the court are not automatically terminated by the
appointment.
The receiver who is also a manager is under a positive duty to
preserve the goodwill and property of the company (Re Newdigate
Colliery Ltd) and he must therefore fulfil company trading contracts
entered into before his appointment (George Barker (Transport) Ltd v
Eynon). The receiver appointed by the court who is not also a
manager is in a different position and his obligation to continue
contracts entered into by the company prior to his appointment will
depend on the terms of the order appointing him.
A receiver is entitled to take possession of the property and assets of
the company (or such of it as the order relates). If such possession is
refused, he may apply to the court for assistance (Savage v Bentley).
APPOINTMENT OF RECEIVER OUT OF COURT

¶12-750 General position
The receiver appointed out of court is not an agent of the company
unless it is so stated in the document under which he is appointed.
Despite this, the receiver’s powers as agent for the company may be
inferred as a matter of construction (Cully v Parsons). His primary
duties are to the debenture holders and not to the company. A
receiver also has the powers of management if he is also appointed
as manager. He is not however, a person appointed to manage the
company’s affairs for the benefit of the company.
A receiver cum manager of any part of the undertaking of a company
is an officer of the company. A receiver and manager is therefore
subject to CA 2016’s provisions relating to the meaning of “officers”.
Although a company’s legal personality continues to exist despite the
appointment of a receiver or receiver cum manager, the company will
nevertheless be affected in some ways by the appointment.
Law: s 2(1) of CA 2016.
¶12-755 Date of appointment

A written appointment of a receiver takes effect when the document is
handed to the receiver and the receiver accepts the profferred
appointment (RA Cripps & Son Ltd v Wickendon). The circumstances
of the proffering must make it clear that the person passing the
document over actually has the authority to do so. It must also be
understood that he is in fact appointing the receiver.
The need for this certainty arises because it is possible for the
appointment document to be prepared and signed before it is actually
intended to be used. It is not improper for the document to be signed
before it is to take effect, and to be kept in custody until it is delivered
to the appointed receiver (Windsor Refrigerator Co Ltd v Branch
Nominees Ltd). When the document is delivered in this way, the
appointee-receiver must fully appreciate that the post of receiver is
being offered to him. He must know that he has been appointed and
he must make it clear that he has accepted the post unconditionally.
The appointment operates from the time of acceptance.
¶12-760 Employment with company is not terminated
The appointment by debenture holders of a receiver and manager as

agent of the company does not of itself automatically terminate
contracts of employment previously made and subsisting between the
company and its employees (Griffiths v Secretary of State for Social
Services). There are, however, three exceptions to this general
proposition:
• when the company business is sold (Re Foster Clark Ltd’s
Indenture Trusts, Loveland v Horscroft);
• when a new contract of employment is entered into between the

receiver and an employee (Re Mack Trucks (Britain) Ltd);
• when the continued employment of an employee (for example, a

managing director) is inconsistent with the role and functions of
the receiver and manager (Griffiths v Secretary of State for Social
Services).
¶12-765 Diminution of directors’ powers
In most cases, the appointment of a receiver and manager out of court

deprives the directors of most if not all of their real power over the
affairs and undertaking of the company. To obtain a proper
assessment of what power is left to the directors, it is necessary to go
to the instrument under which the appointment is made. Despite the
diminution of the directors’ powers, they are not relieved of their
statutory duties.
In practice, it is necessary for the directors to continue to hold board
meetings although perhaps not as regularly as when they were in
control. The function of these meetings may well be to seek ways to
restructure the company with the ultimate goal of terminating the
receivership. The retention of their statutory duties places the directors
in a position which is not adequately provided by CA 2016. Two
particular problems confronting the directors are:
• lack of funds to enable the obligations to be satisfied. The officers
must provide the funds to satisfy the statutory obligations if the
receiver refuses to make such funds available;
• there is no obligation on the receiver to prepare the company’s

annual accounts. The accounts required of the receiver are not
the same as those which the board of directors are required to
prepare.
In addition to statutory duties, the board retains a general duty of care

towards the company. A typical manifestation of this obligation is the
directors’ duty, if necessary, to challenge the debenture under which
the receiver is appointed, and the receiver’s appointment. Another is
the continuing need to ensure that the company is not unjustifiably
wound up.
¶12-770 Prior contracts are not terminated

The private appointment of a receiver does not terminate contracts
entered into by the company prior to his appointment. The receiver is
bound to complete those contracts entered into before his
appointment provided the completion thereof will help in preserving
the company’s goodwill (Re Newdigate Colliery Ltd) but not otherwise
(Re Thames Ironworks, Shipbuilding & Engineering Co Ltd). If a
receiver as agent of the company decides to complete an existing
contract, he does so without incurring personal liability (unless he
expressly commits himself).
¶12-780 Set-off of mutual debts

Debts owed by a company to a creditor before the appointment of a
receiver can be set off against debts owed before that date by the
same creditor to the company (Biggerstaff v Rowatt’s Wharf Ltd). For
there to be a right to set off, the debts concerned must be mutual. If
there is no mutuality in beneficial interest, there is no right to set off
(NW Robbie & Co Ltd v Whitney Warehouse Co Ltd).
If the goods or services which give rise to a claim for set-off are
supplied after the date of the appointment of the receiver, the right to
set off exists provided that supply is in pursuance of a contractual
obligation created before the appointment of the receiver (Rother Iron
Works Ltd v Canterbury Precision Engineers Ltd; George Barker
(Transport) Ltd v Eynon).
POWERS, DUTIES AND LIABILITIES OF

RECEIVER
¶12-800 Receiver to receive statement of affairs and
information
To enable the receiver to obtain a complete picture of the company’s

affairs, CA 2016 arms him with the power to call for a report on such
matters. This report must be made out and delivered to him within 14
days (this time period may be extended by the court or the receiver) of
his having given notice of his appointment to the company. The form
of this report is prescribed by the e-form “Statement of affairs” in
The obligation to deliver and prepare this report falls on those persons
who were the directors and secretary of the company at the time of
the receiver’s appointment. Alternatively, the receiver may require the
submission of the statement and its verification by any of the following
persons:
• persons who are or who have been officers of the company;
• persons who had taken part in the formation of the company within
a year before the receiver’s appointment;
• persons who are or who were in the employment of the company,

and who in the opinion of the receiver are capable of giving the
information required;
• persons who are in the employment of a corporation, who is an

officer of the company to which the receiver is appointed.
The statement must include the following information as at the date of
the receiver’s appointment:
• particulars of the company’s debts, assets and liabilities;
• the names and addresses of its creditors and the securities held
by them; and
• the dates the securities were given.
Within 30 days of receiving the report, the receiver has to lodge a

copy of it with the ROC. He may add any comments to it if he wishes
but he must let the company know what those comments are. The
company must also be informed if no comments are added. He is also
obliged to send a copy of the report and his comments (if any) to the
trustee for the debenture holders within a month of his receiving the
report.
The persons preparing and verifying the report are entitled to be
reimbursed by the receiver for the reasonable costs and expenses
incurred in the making of the report. The payments are to be made out
of the receiver’s receipts.
Submission of statement of affairs
This is stipulated in s 390 of CA 2016 as follows:
Subsection (1) states that the statement as to the affairs of a company
shall state as at the date of the appointment of a receiver or receiver
and manager—
(a) the particulars of the company’s assets, debts and liabilities;
(b) the names and addresses of its creditors;
(c) securities held by creditors respectively;
(d) the dates when the securities were respectively created; and
(e) such other information as may be required by the Registrar.
Subsection (2) states that the statement shall be submitted by, and be
verified by affidavit of, one or more of the persons who were at the
date of the appointment of a receiver or receiver and manager, the
directors of the company or by such of the persons in this subsection
mentioned as the receiver or receiver and manager may require to
submit and verify the statement, stating—
(a) persons who are or have been officers;
(b) persons who have taken part in the formation of the company at
any time within one year before the date of the appointment of a
receiver or receiver and manager;
(c) persons who are in the employment of the company, or have

been in the employment of the company within that year, and are
in the opinion of the receiver or receiver and manager capable of
giving the information required;
(d) persons who are or have been within that year officers of or in
the employment of a corporation which is, or within that year was,
an officer of the company to which the statement relates.
Subsection (3) states that any person making the statement and
affidavit shall be allowed and shall be paid by the receiver or receiver
and manager out of his receipts such costs and expenses incurred in
and about the preparation and making of the statement and affidavit
as the receiver or receiver and manager may consider reasonable,
subject to an appeal to the court.
Subsection (4) states that any person who contravenes the provision
commits an offence and in the case of a continuing offence, to a
Provision as to information if receiver or receiver and manager
appointed
Subsection (1) states that if a receiver or receiver and manager of the
property of a company is appointed, the receiver or receiver and
manager shall send a notice on his appointment to the company and
the company shall, submit to the receiver or receiver and manager a
statement as to the affairs of the company in accordance with this
section within fourteen days from receipt of the notice or such longer
period as may be allowed by the Court.
Subsection (2) states that the receiver or receiver and manager shall
within 30 days from the receipt of the statement as required or such
longer period as the court may allow—
(a) lodge with the Registrar a copy of the statement and any
comments the receiver thinks fit to make on the statement;
(b) send to the company a copy any such comments or, if the
receiver does not think fit to make any comment, a notice to that
effect; and
(c) if the receiver or receiver and manager is appointed by or on

behalf of debenture holders, send to the debenture holders’
representative a copy of the statement and his comments in the
statement or, if the receiver or receiver and manager does not
think fit to make any comment, a notice to that effect.
Subsection (3) states that sub-s (1) and (2) shall not apply in relation
to the appointment of a receiver or receiver and manager to act—
(a) with an existing receiver or receiver and manager; or
(b) in place of a receiver or receiver and manager ceasing to act,
except that, where sub-s (1) and (2) apply a receiver or receiver and
manager who dies or ceases to act before the subsections have been
fully complied with, the references in sub-s (1) and (2) to the receiver
or receiver and manager shall be, subject to sub-s (4) include
references to his successor and to any continuing receiver or receiver
and manager.
Subsection (4) states that if the company is being wound up, this
section and s 389, 390, 391 and 392 shall apply notwithstanding that
the receiver or the receiver and manager and the liquidator are the
same person, but with any necessary modifications arising from the
fact.
Subsection (5) states that the receiver or receiver and manager who
contravene this section commits an offence, and in the case of a
Obligations of the company and directors to provide information
to receiver or receiver and manager
Section 389 of CA 2016 provides that:
If a receiver or receiver and manager is appointed in respect of the
property or undertaking of a company, the company and every director
of the company shall—
(a) make available to the receiver or receiver and manager all
books, documents and information relating to the property or
undertaking in receivership in the company’s possession or under
the company’s control within seven days after the receipt of
notice;
(b) if required to do so by the receiver or receiver and manager,

verify by way of an affidavit that the books, documents and
information are complete and correct;
(c) give the receiver or receiver and manager such assistance as he

may reasonably require; and
(d) if the company has a seal, make the seal available for use by the
Any person who contravenes s 389 commits an offence and shall, on

conviction, be liable to a fine not exceeding RM50,000, and in the
Law: s 388, 389 and 390 of CA 2016.
¶12-810 Duty to lodge accounts

Section 391 of CA 2016 provides that every receiver or receiver and
manager of the property of a company or of the property within
Malaysia of any other corporation shall—
(a) within 30 days from the expiration of the period of six months
from the date of his appointment and of every subsequent period
of six months and within 30 days from his ceasing to act as
receiver or receiver and manager, lodge with the Registrar a
detailed account showing—
(i) his receipts and his payments during each period of six
months, or, where he ceases to act as receiver or receiver
and manager, during the period from the end of the period to
which the last preceding account related or from the date of
his appointment, as the case may be, up to the date he
ceased to act as receiver or receiver and manager;
(ii) the aggregate amount of those receipts and payments

during all preceding periods since his appointment; and
(iii) where he has been appointed under the powers contained

in any instrument, the amount owing under that instrument at
the time of his appointment, in the case of the first account,
and at the expiration of every six months after his
appointment and, where he has ceased to act as receiver or
receiver and manager at the date he ceased to act as
receiver or receiver and manager, and his estimate of the
total value of all assets of the company or other corporation
which are subject to that instrument; and
(b) before lodging the account, verify by affidavit all accounts and
statements referred to in the account.
The Registrar may require the accounts to be audited by an approved

company auditor appointed by the Registrar at his own motion or on
the application of the company or other corporation or a creditor.
For the purpose of audit, the receiver or receiver and manager shall
furnish the auditor with such vouchers and information as the receiver
or receiver and manager requires and the auditor may at any time
require the production of and inspect any books of account kept by the
receiver or receiver and manager or any document or other records
relating to the audit.
The Registrar may require the applicant to give security for the
payment of the cost of the audit, which shall be fixed by the Registrar
and be paid by the receiver or receiver and manager unless the
Registrar otherwise determines.
Every receiver or receiver and manager who contravenes s 391
commits an offence and in the case of a continuing offence, to a
Law: s 391 of CA 2016.
¶12-815 Duty to inform Registrar of cessation of office

Pursuant to s 379 of CA 2016, a notice of cessation of office must be
lodged with the Registrar within 14 days when a person ceases to act
as receiver or receiver and manager, ie when he:
(a) resigns;
(b) dies;
(c) becomes disqualified by reason of being an undischarged

bankrupt, a mortgagee of any of the company’s property, the
company’s auditor or the company’s officer;
(d) is terminated or removed under the instrument appointing a

receiver or receiver and manager or where there is no instrument
appointing a receiver or receiver and manager, by the court;
(e) assigns his estate for the benefit of his creditors or makes an
arrangement with his creditors under any laws relating to
bankruptcy; or
(f) is convicted of an offence involving fraud or dishonesty

punishable on conviction by imprisonment for three months or
more; or
(g) obtained leave to resign from the court.
The notice must be lodged using the e-form “Notice of cessation of

office by receiver or manager” in Schedule B of MyCoID.
If a vacancy is caused by death, the notice shall be lodged to the
Registrar by the personal representative or debenture holder of a
If a vacancy is caused by conviction of an offence involving fraud, or
dishonesty the notice shall be lodged with the Registrar by the
debenture holder within 14 days from the relevant facts have come to
the knowledge of the debenture holder.
Any person who contravenes this provision commits an offence and,
conviction.
Law: s 379 of CA 2016.
¶12-820 Priority payment to certain creditors

Pursuant s 392 of CA 2016, the payments of certain debts subject to
floating charge in priority to claims under charge must be done in the
following manner:
• If a receiver or receiver and manager is appointed on behalf of the
holders of any debentures of a company secured by a floating
charge or possession is taken by or on behalf of debenture
holders of any property comprised in or subject to floating charge,
then if the company is not wound up at the time, there shall be
paid out of the assets coming into the hands of receiver or
receiver and manager or other person taking possession in
priority to the debenture holders the following:
(a) firstly, the costs, expenses and remuneration of the receiver
or receiver and manager and any indemnity to which the
receiver or receiver and manager is entitled to from or out of
the property of the company;
(b) secondly, all wages or salaries, including any amount

payable by way of allowance or reimbursement under any
contract of employment or award or agreement regulating
conditions of employment, whether or not earned wholly or in
part by way of commission, of any employee in respect of
services rendered by him to the company for a period of four
months before the date of the appointment of the receiver or
receiver and manager up to an amount not exceeding
RM15,000;
(c) thirdly, all remuneration payable to any employee in respect

of vacation leave, or in the case of the employee’s death to
any other person in his right, accrued in respect of any period
before the date of the appointment of the receiver or receiver
and manager; and
(d) fourthly, all amounts due in respect of contributions payable,

including employee’s portion which has been deducted but
not paid, during the next 12 months before the date of the
appointment of the receiver or receiver and manager, by the
company as the employer of any person under any written
law relating to employees social security contribution and
superannuation or provident funds or under any scheme of
superannuation or retirement benefit which is an approved
scheme under the federal law relating to income tax.
• The debts in each class specified above shall rank in the order but
as between debts of the same class shall rank pari passu
between the debts, and shall be paid in full, unless the property of
the company is insufficient to meet the debts, in which case the
debts shall diminish in equal proportions.
• If any payment has been made to any employee of the company

on account of wages, salary or vacation leave out of money
advanced by a person for that purpose, the person by whom the
money was advanced shall, in a receivership, have a right of
priority in respect of the money advanced and paid, up to the
amount by which the sum in respect of which the employee would
have been entitled to priority in the receivership has been
diminished by reason of the payment, and shall have the same
right of priority in respect of that amount as the employee would
have had if the payment had not been made.
• If the company is under a contract of insurance, entered into

before the date of appointment of the receiver or receiver and
manager, insured against liability to third parties, then if any such
liability is incurred by the company, either before or after the date
of appointment of the receiver or receiver and manager, and an
amount in respect of that liability is or has been received by the
company or the receiver or receiver and manager from the
insurer, the amount shall, after deducting any expenses of or
incidental to getting in the amount, be paid by the receiver or
receiver and manager to the third party in respect of whom the
liability was incurred to the extent necessary to discharge that
liability or any part of that liability remaining undischarged in
priority to all payments in respect of the debts referred to in the
above mentioned.
• Any payment made under s 392 shall be recovered as far as may

be out of the assets of the company available for payment of
general creditors.
• If a request is made by or with the concurrence of the receiver or

receiver and manager for the giving of any of the supplies
including water, electricity, gas and telecommunications, after the
appointment of the receiver or receiver and manager, the supplier
may make it a condition of the giving of the supply that the
receiver or receiver and manager personally guarantees the
payment of any charges in respect of the supply given after his
appointment.
• The supplier shall not make it a condition of the giving of the

supply, or do anything which has the effect of making it a
condition of the giving of the supply, that any outstanding charges
in respect of a supply given to the company before the
appointment of receiver or receiver and manager are paid.
Law: s 392 of CA 2016.
¶12-830 Scope of liabilities of receiver or receiver and

manager
The general rule is that any receiver who assumes control of property
of a company in order to enforce a charge is liable for the debts he
incurs in the course of the receivership in relation to the following
matters:
• services rendered;
• goods purchased;
• property hired, leased, used or occupied.
Section 381 of CA 2016 provides for the liability of receiver or receiver

and manager is provided as follows:
Subsection (1) provides that any receiver or receiver and manager or
other authorised person entering into possession of any assets of a
company for the purpose of enforcing any charge shall, without
prejudice to his rights against the company or any other person, be
liable for debts incurred by him or other authorised person in the
course of the receivership or possession, for services rendered, goods
purchased or property hired, leased, used or occupied unless
otherwise provided in the instrument appointing the receiver or
receiver and manager or other authorised person.
Subsection (2) provides that sub-s (1) shall not be construed as to
constitute the charge holder, as to be a mortgagee in possession.
Subsection (3) provides that for the purposes of this section, “a
mortgagee in possession” means a charge holder who personally or
as through an agent exercises a power to—
(a) receive income from a charged property;
(b) enter into possession or assume control of a charged property;

or
(c) sell or otherwise alienate a charged property.
In the case of liability for a contract, s 382 provides that a receiver or

receiver and manager is personally liable for a contract entered into by
him in the exercise of any of his powers unless specifically provided
otherwise in the instrument appointing the receiver or receiver and
manager. The terms of the said contract may exclude or limit the
personal liability of the receiver or receiver and manager other than a
receiver or receiver and manager appointed by the court.
Indemnity against liability
A receiver may be indemnified against liability. A receiver who is
privately appointed by a debenture holder may look to his principal
and request to be indemnified out of the proceeds of the charged
assets of the company. This right may however be forfeited by
improper conduct on the receiver’s part (Williams v Lister & Co). The
receiver appointed by the court has the right to be indemnified out of
the assets for all liability properly incurred (Burt, Boulton and Hayward
v Bull).
Liability for contract (s 382)
Subsection (1) states that a receiver or receiver and manager is
personally liable for a contract entered into by him in the exercise of
any of his powers unless specifically provided otherwise in the
instrument appointing the receiver or receiver and manager.
Subsection (2) states that the terms of a contract referred to in sub-s
(1) may exclude or limit the personal liability of the receiver or receiver
and manager other than a receiver or receiver and manager appointed
by the court.
Power of receiver or received and manager (s 383)
Subsection (1) states that a receiver or receiver and manager shall
have the powers and authorities expressly or impliedly conferred by
the instrument or by the order of the court, by or under which the
appointment was made.
Subsection (2) states that subject to the instrument or order of the
court by or under which the appointment is made, a receiver or
receiver and manager shall have the powers set out in Sch 6.
(Reproduced in Appendix 12.1.)
Application to court for direction (s 384)
Subsection (1) states that a receiver or receiver and manager of the
property of a company may apply to the court for directions in relation
to any matter arising in connection with the performance of the
functions of the receiver or receiver and manager.
Subsection (2) states that if a receiver or receiver and manager has
been appointed to enforce any charge for the benefit of debenture
holders of the company, any such debenture holder may apply to the
court for directions in relation to any matter arising in connection with
the performance of the functions of the receiver or receiver and
manager.
Law: s 381, 382, 383 and 384 of CA 2016.
¶12-840 Powers in winding up

The powers of receiver or receiver and manager on liquidation of a
company are provided in s 386 of CA 2016 as follows:
• After the commencement of winding up of a company—
(a) a receiver may continue to act as a receiver and exercise all
the powers of a receiver in respect of property or assets
secured under the debenture appointing the receiver; and
(b) a receiver and manager may continue to act as a receiver

as referred to in para (a) above and a receiver and manager
may exercise all the powers of a receiver and manager for
the purpose of carrying on the business of the company
provided that the receiver and manager obtains consent from
the liquidator or if the liquidator withholds his consent, the
consent of the court.
• A receiver or receiver and manager holding office referred to

above shall continue to act as the agent of the company.
• A debt or liability incurred by a company through the acts of a

receiver or receiver and manager who is acting as the agent of
the company in accordance with the above is not regarded as a
cost, charge or expense of liquidation.
Law: s 386 of CA 2016.
VACANCY OF OFFICE OF RECEIVER

¶12-900 Office of receiver being vacant
The position of a receiver is generally given to the person who has the
power of appointment under the instrument. Liquidation does not of
itself terminate a receivership. A receiver may be appointed even
though the company is in the course of being wound up. Vacancy of
the position as receiver may occur in many occasions. The Act
acknowledges this stipulates that a notice must be filed with the
Registrar when the position is vacated.
Vacancy in the office of receiver or receiver and manager
This provided in s 378 of CA 2016:
Subsection (1) states that the office of a receiver or receiver and
manager shall become vacant if the person holding the office—
(a) resigns;
(b) dies;
(c) becomes disqualified by reason of being an undischarged

bankrupt, a mortgagee of any of the company’s property, the
company’s auditor or the company’s officer;
(d) is terminated or removed under the instrument appointing a
receiver or receiver and manager or where there is no instrument
appointing a receiver or receiver and manager, by the court;
(e) assigns his estate for the benefit of his creditors or makes an
arrangement with his creditors under any laws relating to
bankruptcy; or
(f) is convicted of an offence involving fraud or dishonesty

more.
Subsection (2) states that a receiver or receiver and manager

appointed under a power conferred by an instrument may resign from
office by giving written notice not less than 14 days of his intention to
resign to the person by whom he was appointed.
Subsection (3) states that a receiver or receiver and manager
appointed by the court shall not resign without first obtaining the leave
of the court to do so.
Subsection (4) states that a person vacating the office of receiver or
receiver and manager shall, where practicable, provide such
information and give such assistance in the conduct of the
receivership to his successor as that person reasonably requires.
Subsection (5) states that on the application of a person appointed to
fill a vacancy in the office of receiver or receiver and manager, the
court may make any order that the court considers necessary or
desirable to facilitate the performance of his duties.
For the notice of cessation, see ¶12-815
Law: s 378 and 379 of CA 2016.

1. Explain what is a debenture.
2. What types of debentures could be created?

3. List and explain the duties of trustees for holders of debentures.
4. What are the differences between a fixed charge and a floating

charge?
5. Who has the power to appoint a receiver and what are the
receiver’s functions?
¶12-1001 Appendix 12.1 Sixth Schedule of CA 2016

SIXTH SCHEDULE
[Section 383]
POWERS OF RECEIVER OR RECEIVER AND MANAGER
1. Subject to the provisions of this Schedule, a receiver or receiver
and manager of the property of a company has the powers to do
all things necessary or convenient to be done for or in connection
with, or as incidental to, the attainment of the objectives for which
the receiver was appointed.
2. Without limiting the generality of paragraph 1, but subject to any

provision of the Court order by which, or the instrument under
which, the receiver was appointed, being a provision that limits
the receiver or receiver and manager’s powers in any way, a
receiver or receiver and manager of the property of the company
has, in addition to any powers conferred by that order or
instrument, as the case may be, or by any other law, power, for
the purpose of attaining the objectives for which the receiver or
receiver and manager was appointed—
(a) to take possession and control of the property of the
company in accordance with the terms of that order or
instrument;
(b) to lease, let on hire or dispose of the property of the

company;
(c) to grant options over the property of the company on such

conditions as the receiver thinks fit;
(d) to borrow money on the security of the property of the

company;
(e) to insure the property of the company;
(f) to repair, renew or enlarge the property of the company;
(g) to convert the property of the company into money;
(h) to carry on any business of the company;
(i) to take on lease or on hire, or to acquire, any property

necessary or convenient in connection with the carrying on of
a the business of the company;
(j) to demand and recover, by action or otherwise, income of

the property in receivership;
(k) to issue receipts for income recovered;
(l) to inspect at any reasonable time books or documents that

relate to the property in receivership and that are in the
possession or under the control of the company;
(m) to exercise, on behalf of the company, the right to inspect

books or documents that relate to the property in receivership
and that are in the possession or under the control of a
person other than the company;
(n) to change the registered office or address for service of the

company;
(o) to execute any document, bring or defend any proceedings

or do any other act or thing in the name of and on behalf of
the company;
(p) to draw, accept, make and endorse a bill of exchange or

promissory note;
(q) to use a seal of the company;
(r) to engage or discharge employees on behalf of the

company;
(s) to appoint a solicitor, accountant or other professionally

qualified person to assist the receiver or receiver and
manager;
(t) to appoint an agent to do any business that the receiver or

receiver and manager is unable to do, or that it is
unreasonable to expect the receiver to do, in person;
(u) where a debt or liability is owed to the company, to prove

the debt or liability in a bankruptcy, insolvency or winding up
and, in connection with the bankruptcy, insolvency or winding
up, to receive dividends and to assent to a proposal for a
composition or a scheme of arrangement;
(v) to make or defend an application for the winding up of the

company; and
(w) to refer to arbitration any question affecting the company.
3. The conferring by this Schedule on a receiver or receiver and

manager of powers in relation to the property of the company
does not affect any rights in relation to that property of any person
other than the company.
4. In this Schedule, a reference, in relation to a receiver or receiver

and manager, to property of a company is, unless the context
otherwise requires, a reference to the property of the company in
relation to which the receiver or receiver and manager was
appointed.
CHAPTER 13:
WINDING UP AND STRIKE OFF
Winding up framework ¶13-000
Voluntary winding up ¶13-100
Compulsory winding up ¶13-200
Duties and functions of liquidators ¶13-300
Powers of liquidators ¶13-400
Effects of winding up ¶13-500
Settling debts and liabilities ¶13-600
Distribution in compulsory winding up ¶13-700
Distribution in voluntary winding up ¶13-750
Deregistration of a company (“strike off”) ¶13-800
Appendix 13.1: Tenth Schedule, CA 2016 ¶13-1001
Appendix 13.2: E-forms in MyCoID relevant to
voluntary winding up ¶13-1002
Appendix 13.3: Eleventh Schedule, CA 2016 ¶13-1003
Appendix 13.4: Twelfth Schedule, CA 2016 ¶13-1004
WINDING UP FRAMEWORK
¶13-000 Mechanics of winding up
Winding up (or liquidation) is the process of selling all the assets of a
business, paying off creditors, distributing any remaining assets to the
partners or shareholders and then dissolving the business.
Modes of winding up
There are two methods or modes of winding up:
(1) Compulsory winding up by the court; and
(2) Voluntary winding up, which is further classified into two

categories:
(a) Members’ voluntary winding up; and
(b) Creditors’ voluntary winding up.
A compulsory winding is winding up by an order of the court when the

company is unable to pay its debts or under certain statutorily defined
circumstances. A petition for winding up may be initiated by:
• the company;
• any creditor;
• contributory;
• the liquidator;
• Minister;
• licensed financial institution;
• the Central Bank of Malaysia (Bank Negara);
• Registrar of Companies (“ROC” or “Registrar”); or
• the Malaysia Deposit Insurance Corporation.
A voluntary winding up, however, may be instigated by the company’s

members, or by creditors agreeing at a creditors’ meeting summoned
by the company’s directors after they have declared that the company
cannot carry on its business due to its liabilities.
The Companies Act 2016 (CA 2016) provides the framework within
which companies are wound up under the two modes of winding up
and eventually dissolved.
Although the modes of winding up (see also ¶13-010) may differ
(depending on whether the company is solvent or insolvent) the
general procedure is much the same:
(1) a resolution is passed, or the court makes an order, that the
company be wound up (see ¶13-110 and ¶13-275);
(2) a liquidator is appointed by the shareholders and/or the creditors

or by the court (see ¶13-300);
(3) the company’s assets and affairs generally pass into the hands
of the liquidator (see ¶13-370);
(4) the liquidator converts the company’s assets into cash, calls in
any uncalled capital and pays the company’s creditors in order of
priority (see ¶13-415);
(5) any surplus left after payment is made to the creditors is

distributed to the company’s members (see ¶13-700);
(6) the company is dissolved.
A winding up order of the court or resolution of the company puts the

company into a winding up state but a long time may pass before its
final dissolution. During this time the company remains a legal entity.
Once a winding up petition is filed in court, it cannot be discontinued
(Peer Mohamed bin Abdul Aleez v Pahang Investments Public Ltd
Co). The Companies Act though, does empower the court to dismiss
the petition, adjourn the hearing, or make any interim or other order.
The CA 2016 in Pt IV (“Cessation of Companies”), Div 1 provides for
procedures that relate to “Voluntary and Compulsory Winding Up”.
Section 431 of CA 2016 states that the provisions of winding up in the
CA 2016 shall apply to both a compulsory winding up and a voluntary
winding up of a company, unless the context otherwise requires.
Law: s 431 and s 464(1) of CA 2016.
¶13-010 Modes of winding up

There are two modes of winding up, namely:
• a (compulsory) winding up by the court (see ¶13-200);
• a voluntary winding up, either by creditors or members (see ¶13-

100).
There are some practical differences between the two modes of

winding up in that all compulsory windings up must also comply with
the Companies (Winding-up) Rules which impose more detailed
requirements on the handling of funds by liquidators. There is also
more formality in the distribution of any surplus assets among the
members. The essential feature is that the court conducts the
administration and so it retains a much greater degree of control than
would be in the case of a voluntary winding up, which is purely under
CA 2016, and where the jurisdiction of the court is not invoked.
Law: r 65 of Companies (Winding-up) Rules 1972.
¶13-020 Differences in voluntary windings up
A voluntary winding up can be either a members’ voluntary winding up

or a creditors’ voluntary winding up. In either case, the initial step is
the passing of a special resolution that the company be wound up.
Section 432 of CA 2016 stipulates the modes of winding up as follows:
• the winding up of a company may be effected either—
(a) by way of a winding up order made by the court; or
(b) by way of a voluntary winding up.
• a voluntary winding up may be effected by a resolution either—

(a) by a members’ voluntary winding up where the company is
solvent and the liquidator is appointed by the members at the
members’ meeting; or
(b) by a creditors’ voluntary winding up where the company is

insolvent and the liquidator is appointed by the creditors at
the creditors’ meeting.
Members’ voluntary winding up

In a members’ voluntary winding up, the company must be solvent
while in a creditors’ voluntary winding up it is usually insolvent and the
company is unable to pay its debts or liabilities. A members’ voluntary
winding up is often the result of the directors-controlled private
company wishing to close and terminate their business even though it
is solvent; or by dormant companies. A creditors’ winding up is
brought about by a resolution of the company resolving that by
reasons of its liabilities, the business can no longer be carried on and
the company should be wound up.
See also ¶13-120.
Creditors’ voluntary winding up
In a creditors’ voluntary winding up, the creditors through their
committee of inspection, are in control; whereas in the case of a
members’ voluntary winding up, the members are in control. Creditors’
voluntary winding up is normally carried out without going to the court
for directions, but the approved liquidators working closely with the
appointed committee of inspection, comprising creditors and the
directors. However in certain cases, the directors may apply to the
court to be given a degree of jurisdiction in certain cases of voluntary
winding up. In both modes of voluntary winding, up the court is in the
background to be referred to, should the need arise [Re Phoenix Oil
and Transport Co Ltd (No 2)].
¶13-030 Parties in a winding up

The parties involved in a winding up are described in terms which are
peculiar to the winding up process. The most important parties are the
liquidator (see ¶13-032), the Official Receiver (see ¶13-034), creditors
(see ¶13-036), contributories (see ¶13-038) and the committee of
inspection (see ¶13-060).
¶13-032 Liquidator and qualification of liquidator

The liquidator is the person (who must be a natural person) appointed
in a general meeting to carry out the winding up of a company. When
a company is in liquidation, all powers of the directors to run the
business cease, except for the residue powers to carry out certain
statutory duties as required by the liquidators. The liquidator is then
vested with the power to administer the company. His function is to
obtain the company’s properties and other assets, realise them by
converting them into cash, use the proceeds of that conversion to pay
the company’s debts and liabilities, and to distribute the surplus (if
any) among the company’s members, known as contributories.
The liquidator in a voluntary winding up is not an officer of the court
(Re TH Knitwear (Wholesale) Ltd).
The giving of personal advice by a person to a director before that
person is appointed a liquidator of the company is inconsistent with
the requirement that the liquidator should be independent [Re Club
Superstores Australia Pty Ltd (In Liq)].
The CA 2016 confers powers on the liquidator to enable him to
perform these functions. In addition, CA 2016 also imposes duties and
obligations on the liquidator.
The term “liquidator” includes the Official Receiver when acting as the
liquidator of a corporation.
Qualification of a liquidator
The qualification of a liquidator is stipulated in s 433 in the following
manner:
Subsection (1) states that subject to this section, a person other than
the Official Receiver who is appointed interim liquidator or liquidator in
a winding up by the court shall not, except with the leave of the court,
be qualified for an appointment as an interim liquidator or liquidator of
a company if—
(a) he is not an approved liquidator;
(b) he is indebted to the company or to a corporation that is deemed

to be related to the company by virtue of s 7 in an amount
exceeding RM25,000;
(c) he is an officer of the company;
(d) he is a partner, employer or employee of an officer of the

company;
(e) he is a partner or employee of an employee of an officer of the

company;
(f) he assigns his estate for the benefit of his creditors or has made
an arrangement with his creditors under any law relating to
bankruptcy;
(g) if he becomes bankrupt; or
(h) if he is convicted of an offence involving fraud or dishonesty

more.
Subsection (2) states that para (1)(a) and (c) shall not apply to—
(a) a members’ voluntary winding up; or
(b) a creditors’ voluntary winding up if, by a resolution carried by a

majority of the creditors in number and value present in person or
by proxy and voting at a meeting of which seven days’ notice has
been given to every creditor stating the object of the meeting, it is
determined that para (1)(a) and (c), or either of that paragraph
shall not apply.
Subsection (3) states that for the purposes of para (1)(a) above, any
person who is a member of a recognised professional body may apply
to the Minister charged with the responsibility for finance to be
approved as a liquidator for the purposes of this Act.
Subsection (4) states that the Minister may approve such person as a
liquidator if satisfied with experience and capacity of the person and
upon payment of the prescribed fee by such person.
Subsection (5) states that for the purposes of sub-s (4), the Minister
may, in consultation with the Minister charged with the responsibility
for finance, prescribe a body to be a recognised professional body.
Subsection (6) states that for the purposes of sub-s (1), a person shall
be deemed to be an officer of a company if—
(a) the person is an officer of a corporation that is deemed to be
related to the company by virtue of s 7; or
(b) the person has been an officer or promoter of the company or of

such a corporation at any time within the preceding period of 24
months.
Subsection (7) states that a person shall not be appointed as

liquidator of a company unless he has consented in writing prior to the
appointment to act as such liquidator.
Subsection (8) states that nothing in this section shall affect any
appointment of a liquidator made before the commencement of this
Act.
Auditor as a liquidator
Any approved company auditor may apply to the Minister of Finance
for a licence to be an approved liquidator for the purposes of CA 2016.
Law: s 433 of CA 2016.
¶13-034 Interim liquidator

An interim liquidator is usually appointed to preserve the assets of the
company pending the hearing of the winding up petition and to
maintain the status quo.
The court may also appoint the Official Receiver or an approved
liquidator as an interim liquidator at any time after the presentation of
a winding up petition and before making of a winding up order (s 476,
CA 2016). The “Official Receiver” is the Director General of Insolvency
(previously known as “Official Assignee”) appointed under the
Bankruptcy Act. A provisional liquidator must notify the Registrar of his
appointment and address.
Notwithstanding the appointment of an interim liquidator on a winding
up, the board of directors of a company retain the residuary power to
instruct solicitors and counsel to oppose the petition, to appeal against
the order and to act in interlocutory proceedings, including a motion to
discharge the provisional liquidator (Re Union Accident Insurance Co
Ltd).
The powers of the court to determine the remuneration of an interim
liquidator can be exercised before or after the termination of his
appointment. Interim liquidators other than the Official Receiver shall
be entitled to receive such salary or remuneration by way of
percentage or otherwise as is determined by the court [s 479(1), CA
2016].
Subject to any order of the court, the Official Receiver when acting as
interim liquidator of a company shall be entitled to receive such salary
or remuneration by way of percentage or otherwise as is prescribed [s
479(5), CA 2016].
Section 440(1) of CA 2016 stipulates that directors shall appoint an
approved liquidator to be the interim liquidator after they have lodged
a statutory declaration with the Registrar and with the Official Receiver
stating that:
(a) the company cannot continue its business due to its liabilities;
and
(b) meetings of the company and of its creditors have been

summoned for a date within 30 days of the date of the
declaration.
An interim liquidator has all the functions and powers of a liquidator in

a creditors’ winding up subject to such limitations and restrictions as
may be prescribed by the rules relating to winding up. In the case of a
compulsory winding up, the court may also specify further limitations
and restrictions in the order appointing him.
An interim liquidator’s appointment continues for 30 days from the
date of his appointment or for such period as the Official Receiver
allows or until the appointment of a liquidator, whichever occurs first.
Notice of appointment of an interim liquidator together with a copy of
the declaration lodged with the Registrar must be advertised in a
major newspaper in Bahasa Malaysia and a major newspaper in the
English language, in Malaysia.
An interim liquidator shall be entitled to receive salary or remuneration
by way of percentage or otherwise as is prescribed under the winding
up rules.
The interim liquidator in the case of a voluntary winding up is specified
in s 440 CA 2016 while in the case of a compulsory winding up, it is in
s 476.
Law: s 440 and 476 of CA 2016.
¶13-036 Creditors and arrangement binding on them

A creditor is any person to whom the company owes a debt. The sum
must be ascertained and due for payment (Jurupakat Sdn Bhd v
Kumpulan Good Earth (1973) Sdn Bhd). Pursuant to s 465(1)(e) of CA
2016, creditors are entitled to petition for a compulsory winding up if it
is proven that the company they traded with is insolvent, and unable to
settle the debts.
Section 460 of CA 2016 provides that an arrangement is binding on
creditors:
Subsection (1) states that any arrangement entered into between a
company about to be or in the course of being wound up and its
creditors shall, subject to the right of appeal under this section, be
binding on—
(a) the company if sanctioned by a special resolution; and
(b) the creditors if acceded to by three-fourth in value and one-half

in number of the creditors, every creditor for under RM500 being
reckoned in value only.
Subsection (2) states that a creditor shall be accounted a creditor for

value for such sum as upon an account fairly stated, after allowing the
value of security or liens held by the creditor and the amount of any
debt or set off owing by the creditor to the debtor, appears to be the
balance due to the creditor.
Subsection (3) states that any dispute with regards to the value of any
such security or lien or the amount of such debt or set off may be
settled by the court on the application of the company, liquidator or
creditor.
Subsection (4) states that any creditor or contributory may appeal to
the court against the arrangement, within three weeks from the
completion of the arrangement, and the court may amend, vary or
confirm the arrangement as it thinks just.
Law: s 460 and 465(1)(e) of CA 2016.
¶13-038 Contributory
A contributory is a person who is required to contribute to the assets
of the company in the event of its being wound up. Every past and
present member is liable to contribute to the property of the company
to an amount sufficient for payment of its debts and liabilities and the
costs, charges and expenses of the winding up and for the adjustment
of the rights of the contributories among themselves, subject to the
following qualifications:
• A past member is not liable to contribute if he has ceased to be a
member for one year or more before commencement of the
winding up.
• A past member is not liable to contribute in respect of any debt or

liability of the company contracted after he ceased to be a
member.
• A past member shall not be liable to contribute unless it appears to

the court that the existing members are unable to satisfy the
contributions required to be made by them in pursuance of CA
2016.
• In the case of a company limited by shares, no contribution is

required from a member exceeding the amount (if any) unpaid on
the shares in respect of which he is liable as a present or past
member.
• In the case of a company limited by guarantee, no contribution is

required from a member exceeding the amount undertaken to be
contributed by him to the property of the company in the event of
its being wound up.
• Nothing in CA 2016 shall invalidate any provision contained in any

policy of insurance or other contract where—
(i) the liability of the individual members on the policy or
contract is restricted; or
(ii) the funds of the company are alone made liable in respect of
the policy or contract; or
• A sum due to a member in his capacity as a member by way of

dividends, profits or otherwise shall not to be treated as a debt of
the company, payable to that member, but any such sum may be
taken into account for the purpose of the final adjustment of the
rights of the contributories among the members.
See further ¶13-050 and ¶13-055.

The liability of a contributory shall create a debt accruing due from him
at the time when his liability commenced but payable at the times
when calls are made for enforcing the liability: s 436.
A contributory may be ordered by the court to inspect a company’s
books and papers. A contributory who is about to leave the jurisdiction
or otherwise abscond or remove or conceal his property to evade
payment of calls may be arrested. His books and movable personal
property will be seized and kept until a court order releases them.
Law: s 435(1), (2), (3) and 436 of CA 2016.
¶13-040 Absconding contributory

At any time before or after making a winding up order, the court, on
proof of probable cause for believing that a contributory, director or
former director of the company—
(a) is in hiding;
(b) has absconded;
(c) is about to leave Malaysia or otherwise to abscond;
(d) is about to remove any of his property; or
(e) is about to conceal any of his property,

for the purpose of evading payment of calls; avoiding examination
of the company’s affairs; or avoiding, delaying or embarrassing
proceedings in the winding up, may cause the contributory,
director or former director to be arrested and his books and
papers and movable personal property to be seized and safely
kept until such time as the court orders.
Law: s 504 of CA 2016.
¶13-050 Unlimited liability of directors

The CA 2016 provides that in the winding up of a limited company,
any director, whether past or present, whose liability is unlimited shall
be liable to make a further contribution as if he were a member of an
unlimited company in addition to his liability, if any, to contribute as an
ordinary member.
A past director shall not be liable to make a further contribution if he
has ceased to hold office for a year or more before the
commencement of the winding up. He shall also not be liable to make
a further contribution in respect of any debt or liability of the company
contracted after he ceased to hold office.
Subject to the constitution, a director shall not be liable to make a
further contribution, unless the court deems it necessary to require
that contribution in order to satisfy the debts and liabilities of the
company and the costs, charges and expenses of the winding up.
Law: s 435(3) and (4) of CA 2016.
¶13-055 Death or bankruptcy of contributory

Death
One of the functions of a liquidator is to prepare a list of members
liable to contribute. If a contributory dies either before or after he has
been placed on that list, his personal representatives are liable in due
course of administration to contribute in discharge of his liability. The
liability of a personal representative placed on the list of contributories
as representative is limited to the assets of the estate in his hands [Re
Agriculturist Cattle Insurance Co (Baird’s case)]. If a personal
representative defaults in paying any money which he is ordered to
pay, proceedings may be taken out against him to compel payment
out of the assets of the estate.
Bankruptcy
A member who becomes bankrupt or who assigns his estate to his
creditors before or after his name is listed as a contributory will be
represented by his trustee for all purposes of the winding up. The
trustee will be considered a contributory. In addition, there may be
proved against the member’s estate the estimated value of his liability
to future calls as well as calls already made.
This provision does not entitle the trustee in bankruptcy to present a
petition for the compulsory winding up of the company because it
takes effect after the winding up has begun. The trustee stands in the
bankrupt’s shoes “for all the purposes of the winding up” and not for a
winding up (Re HL Bolton Engineering Co Ltd). The provision also
does not operate to render the trustee a contributory when the
bankruptcy occurs before the winding up and the trustee has
disclaimed (Re West of England Bank, Ex parte Budden and Roberts).
If a contributory dies before or after he is placed on the list of
contributories, his personal representatives shall be liable to discharge
of the liability of the contributory and the personal representatives
shall be the contributories accordingly. If the personal representatives
defaults in discharging such liability, proceedings may be taken for
administering the estate of the deceased contributory and for
compelling payment of the money due.
If a contributory becomes bankrupt or assigns his estate for the benefit
of his creditors before or after the contributory has been placed on the
list of contributories:
(a) his trustee shall represent him for all the purposes of the winding
up and shall be a contributory accordingly; and
(b) there may be proved against his estate the estimated value of
his liability to future calls as well as calls already made.
Law: s 437 and 438 of CA 2016.
¶13-060 Committee of inspection
A committee of inspection is a committee that represents the interests

of all the creditors of a company going into liquidation.
Although the liquidator is charged with the ultimate responsibility of
administering the winding up, he may be assisted in the performance
of this duty by a committee of inspection. A committee of inspection is
a representative group of creditors and contributories appointed to
superintend the liquidator’s administration of the company’s property
and to give him directions which he is bound to obey.
In a creditors’ voluntary winding up, a contributory or a creditor may
request the liquidator to convene separate meetings of creditors and
contributories to determine whether or not there should be a
committee of inspection. If the decision of those at the meetings is to
have a committee, the next decision is to determine the number of
members on the committee and who they should be. If there is a
difference between the determinations of the meetings of the creditors
and the contributories, the court must decide which will prevail and
give its order.
Creditors at their meeting may appoint representatives to the
committee and may resolve that only their representatives may act as
members of the committee. In such cases, only the creditors’
appointees and not the representatives appointed by the company will
sit on the committee. The maximum number of persons that may be
appointed is five.
The committee has powers to:
• sanction certain powers of the liquidator (including the power to
invest the company’s surplus funds);
• sanction the continuance of directors’ powers in a creditors’

voluntary winding up;
• fix the liquidators’ remuneration in a creditors’ voluntary winding

up.
Liquidators in creditors’ voluntary winding up

In a creditors’ voluntary winding up, the liquidator may on his own or if
requested by any creditor or contributory summon separate meetings
of the creditors and contributors to determine whether the creditors or
contributories require the appointment of a committee of inspection as
provided in Sch 10, CA 2016 to act with the liquidator, and if so who
are to be members of the committee. (Sch 10 is reproduced in
Appendix 13.1 at the end of this chapter.)
The committee of inspection may fix the liquidator’s remuneration. If
there is no such committee, the creditors may fix the remuneration.
On the appointment of a liquidator, all the powers of the directors shall
cease unless the committee of inspection approves the continuance of
the powers, and if there is no such committee, the creditors.
If a liquidator, other than a liquidator appointed by or by the direction
of the court dies, resigns or vacates the office, the creditors may fill
the vacancy. For this purpose, a meeting of the creditors may be
summoned by any two of the creditors.
Law: s 450(4) and Sch 10, CA 2016.
VOLUNTARY WINDING UP
¶13-100 Grounds for voluntary winding up
The majority of companies that are wound up are wound up

voluntarily. This is in line with CA 2016’s intention, which contemplates
voluntary winding up as the normal mode. A company may be wound
up voluntarily:
• when the period (if any) fixed for the duration of the company by
the constitution expires, or an event (if stipulated in the
constitution) occurs that provides that the company is to be
dissolved and the company in general meeting has passed a
resolution requiring the company to be wound up voluntarily; or
• if the company resolves by special resolution to wind up

voluntarily.
The procedure to be followed, after the initial resolution, differs

between a members’ voluntary winding up and a creditors’ winding up.
It is a members’ winding up if a declaration of solvency is made,
whereas it is a creditors’ winding up if no such declaration is made.
Distinction between “members” and “creditors” voluntary
winding up
Section 444 states the distinction between “members” and “creditors”
voluntary winding up as a winding up in the case of which a directors’
declaration under section 443 has been made, is a “members’
voluntary winding up”; and a winding up in the case of which such a
declaration has not been made is a “creditors’ voluntary winding up”.
Law: s 439 of CA 2016.
¶13-110 Particulars relating to resolution
If a company passes a special resolution to wind up voluntarily and

the company is not legally limited from doing so, then it has taken an
irrevocable step towards liquidation.
The resolution must be properly passed, that is, as a special
resolution. This means that 21 days’ notice (the 21 days must be
calculated exclusive of both the day of service and the day of the
meeting) of the meeting must be given. The notice must be a written
notice. The notice must clearly disclose the intention to propose the
resolution as a special resolution at the meeting. For private
companies, it is possible for a written resolution signified by 75%
shareholdings of the members to be passed without the members
being physically present at a general meeting [s 306(4), CA 2016].
If a general meeting is held, the resolution must also be passed by a
majority of at least 75% of the members present and entitled to vote.
As for a shorter period of notice, a majority of these members, being a
majority holding at least 95% of the nominal share value or the total
voting rights may agree that less than 21 days’ notice be required for
passing the special resolution at the general meeting.
Given that the notice of the meeting is correct and that the resolution
is passed with the required majority, then the winding up commences
at the time the resolution is passed. Once a special resolution is
passed there is no way thereafter of reversing the process.
After the special resolution for voluntary winding up is passed, the
company must:
• within seven days lodge a printed copy of the resolution with the
Registrar; and
• within ten days give notice of the resolution in a local newspaper,

one in Bahasa Malaysia and another English language.
Law: s 292 and 306(4) of CA 2016.
¶13-120 Members’ voluntary winding up

A members’ voluntary winding up is a winding up in which a
declaration of solvency by the directors has been made and delivered
in accordance with the requirements of CA 2016. This declaration is a
formal acknowledgment that the company is solvent. Solvency is the
essential characteristic of a members’ voluntary winding up. So long
as solvency continues, the law recognises the right of the company in
general meeting to control its affairs. A declaration of solvency is thus
a critical document in the voluntary winding up process. The CA 2016
has strict controls on the procedures by which a declaration of
solvency is made, together with a heavy onus and/or penalties on
those involved in a situation where the solvency evidenced by the
declaration does not continue through to dissolution.
Declaration of solvency (s 443)
Where it is proposed to wind up a company voluntarily, the majority of
the directors may make a written statutory declaration to the effect that
they have inquired into the affairs of the company and have formed an
opinion that the company is able to pay its debts in full within 12
months after the commencement of the winding up.
The declaration has no effect unless:
• it is made at the meeting of directors;
• it is made within five weeks immediately preceding the passing of

the resolution for voluntary winding up;
• it has attached to it a statement of the company’s assets and the

total amount expected to be realised therefrom and liabilities and
the estimated expenses of winding up as at the latest practicable
date before the making of the declaration;
• it is lodged with the Registrar before the date on which the notices
of the meeting at which the resolution for the winding up of the
company is to be proposed, is sent out.
The form of the declaration is prescribed in the Companies

Regulations Act 2017 (e-form “Declaration of solvency”) in Schedule B
of MyCoID1. The declaration itself states that the named directors,
being a majority of the directors of the company and being present at
a meeting of the directors, declare that:
• they have made an inquiry into the affairs of the company; and
• at this meeting, have formed the opinion that the company will be
able to pay its debts in full within 12 months from the
commencement of the winding up.
Section 443 does not impute a standard of perfection. As long as the

directors produce something that can be reasonably and fairly
described as a statement of the company’s assets and liabilities, the
discovery later of errors and omissions in it does not prevent it from
being a statement within the terms of the section (De Courcy v
Clement).
The penalty for a director making a declaration without having
reasonable grounds for his opinion that the company will be able to
pay its debts in full within the stated period is heavy, ie RM3 million or
imprisonment for five years or to both, and in the case of a continuing
offence, to a further fine not exceeding RM500 for each day during
which the offence continues after conviction. In addition, there is a
statutory presumption against the director. If the company is wound up
pursuant to a resolution for voluntary winding up passed within five
weeks of the making of the declaration, but its debts are not paid or
provided in full within the period stated in the declaration, it shall be
presumed, unless the contrary is shown, that a director who made the
declaration did not have reasonable grounds for his opinion.
Appointment of liquidators in members’ voluntary winding up
In a members’ voluntary winding up the liquidator is appointed by the
company in general meeting. More than one liquidator may be
appointed for the purpose of winding up the company’s affairs and
distributing its assets. If a vacancy occurs in the office of the liquidator,
eg by death or resignation, the company may fill the vacancy at a
general meeting.
Law: s 443 and 445 of CA 2016.
Footnotes
Footnotes
website.
¶13-123 Conversion to creditors’ voluntary winding up
If a company has commenced members’ voluntary winding up and

subsequently became insolvent then s 448 of CA 2016 treats it as
becoming a creditors’ voluntary winding up.
Law: s 443 and 448 of CA 2016.
¶13-130 Creditors’ voluntary winding up
A creditors’ voluntary winding up is a procedure in which the

company’s directors choose to voluntarily bring the business to an end
by appointing an approved liquidator to liquidate all of its assets. This
differs from a compulsory liquidation, which is forced upon an
insolvent company via a winding up order made by the court.
In a creditors’ voluntary winding up, the company directors do not
make a declaration of solvency. Rather, the company’s directors make
a statutory declaration beforehand that the company is unable to pay
its debts and continue its business, and a meeting of the company and
its creditors have been called for a date within 30 days of the
declaration. The directors shall appoint an interim liquidator (see ¶13-
032 and ¶13-034) after the statutory declaration has been lodged with
the Registrar and with the Official Receiver. At the creditors’ meeting
they are required to participate in the winding up from the beginning
and also to decide whether they shall appoint the interim liquidator to
be the liquidator. The following will explain in greater detail.
Meeting of the company
If the directors of a company make a statutory declaration that the
company’s financial state is insolvent, it is unable to carry on business
and should be wound up by creditors’ voluntary winding up, the matter
may be reported to its members. The members at the meeting
specifically called to consider the matter may:
• resolve by special resolution that the company be wound up; and
• appoint a liquidator.
Meeting of creditors
A creditors’ meeting must be held on the same day or the day
following the general meeting of the company called to consider a
resolution for the voluntary winding up. The creditors’ meeting must be
convened at a date, time and place most convenient to the majority of
the creditors.
At the meeting, a statement of the company’s affairs must be tabled.
The statement should show the method and manner in which the
valuation of the assets was arrived at, list the creditors and the
estimated amount of their claims. A director and the company
secretary must attend the meeting to disclose the company’s affairs
and the circumstances leading up to the proposed winding up.
Another function of the creditors’ meeting is to confirm the
appointment of the liquidator nominated at the earlier members’
meeting or to nominate a liquidator of the creditors’ own choice. If the
latter course is adopted, that is, if the members and the creditors
disagree on who should be the liquidator, the creditors’ nominee
prevails. Any director, member or creditor may apply to the court for
an order directing that the person nominated as liquidator by the
company shall be the liquidator instead of the creditors’ nominee. This
application must be made within seven days after the date on which
the nomination was made by the creditors. The creditors may also
appoint a committee of inspection.
See ¶9-640 and ¶9-645 for more details of a creditors’ meeting.
Liquidators in creditors’ voluntary winding up
The company and the creditors at their respective meetings will
nominate a person to be a liquidator for the purpose of winding up the
affairs and distributing the assets of the company. If the creditors and
the company nominate different persons, the person nominated by the
creditors shall be liquidator. If the creditors do not nominate any one,
the person nominated by the company shall be liquidator.
Nonetheless, where different persons are nominated, any director,
member or creditor may apply to the court to order that the person
nominated as liquidator by the company shall be the liquidator or
jointly with the person nominated by the creditors within seven days
from the date on which the nomination was made by the creditors. In
such instance, the court may appoint the person nominated by the
company to act as the liquidator or jointly with the person nominated
by the creditors. The court may also appoint some other person to be
liquidator instead of the person appointed by the creditors. Any
vacancy occurring in the office of the liquidator may be filled by the
creditors. If the court has appointed the liquidator then any vacancy
occurring in that office must be filled by the court.
See also ¶13-060.
Property and proceedings
Section 451 of CA 2016 provides that any attachment, sequestration,
distress or execution put in force against the estate or effects of the
company after the commencement of a creditors’ voluntary winding up
shall be void. Furthermore, once winding up has commenced, no
action or proceeding shall be proceeded with or commenced against
the company except by leave of the Court and subject to such terms
as the Court may impose.
For the e-forms relevant to voluntary winding up, see Appendix 13.2 at
Law: s 450 and 451 of CA 2016.
COMPULSORY WINDING UP
¶13-200 Commencement of a compulsory winding up
Grounds for compulsory winding up

The court may order the winding up if—
(a) the company has by special resolution resolved that it be wound
up by the court;
(b) the company defaults in lodging the statutory declaration in s

190(3), ie before commencing any business or exercising any
borrowing powers;
(c) the company does not commence business within a year from its
incorporation or suspends its business for a whole year;
(d) the company has no member;
(e) the company is unable to pay its debts;
(f) the directors have acted in their own interests, or unfairly or

unjustly to other members in the conduct of the company’s affairs;
(g) where the constitution fixes a duration for the company and the
duration expires, or where the constitution stipulates that the
company will dissolve if a certain event occurs and the event
occurs;
(h) the court is of opinion that it is just and equitable that the
company be wound up;
(i) the company’s licence under the Financial Services Act 2013 or
the Islamic Financial Services Act 2013 is surrendered or
revoked;
(j) the company carried on a licensed business when it does not

have the licence, or the company has accepted, received or taken
deposits in Malaysia under the Financial Services Act 2013 or the
Islamic Financial Services Act 2013, as the case may be;
(k) the company is being used for unlawful purposes or any purpose
order, good order or morality in Malaysia;
(l) the Minister has made a declaration under s 590 (“Investigation

of affairs of company at direction of Minister”).
The more common grounds are explained below (see ¶13-271 to ¶13-
280).
Who may petition the court for winding up a company?
See ¶13-000. Unless the applicant falls within one of these categories,
he may not petition for the winding up of the company (Re HL Bolton
Engineering Co Ltd).
Commencement of winding up by the court
The commencement of winding up shall be at the date of the winding
up order.
The exception to this is where the company has passed a resolution
for voluntary winding up before the winding up petition was made the
court. In such instance, the commencement date is at the time the
resolution was passed, and unless the court on proof of fraud or
mistake thinks it fit to direct otherwise, all proceedings taken in the
voluntary winding up shall be deemed to have been validly taken.
Law: s 465 and 467 of CA 2016.
¶13-210 Contributory’s petition

A contributory does not have any claim against the company’s assets.
It makes no difference to the quantum of the company’s assets
whether the contributory succeeds or fails in his claim to be a
shareholder. It is therefore important that there is no dispute as to the
contributory’s status, for example, where he is not on the share
register.
If a petitioner can show a judgment of the court to the effect that he is
entitled to be registered as a shareholder, he will be allowed to
proceed with his petition (Re Patent Steam Engine Co). If his right to
be a shareholder of the company is in dispute, that dispute must be
settled before the company is brought on to the scene by the
presentation of a petition (Re JN2 Ltd).
One of the factors which make petitions by contributories fairly rare is
that the company may apply to strike out the petition. The company
may succeed in such an application if it can show that the petitioner
has an adequate alternative remedy to correct his alleged injustice; for
example a petition for relief against oppression as a minority
shareholder, including in particular the remedy of a compulsory share
acquisition order, or proceedings for equitable relief such as
rectification of the share register, declarations of trust and, depending
on the circumstances, a common law action for judgment on a debt
(Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd).
The High Court of Singapore has, however, held otherwise. It believes
that a member’s right to present a winding up petition cannot be
restrained even if his complaint is sufficient to enable another action
for which another remedy is available, so long as the complaint is also
sufficient ground to wind up the company (Tang Choon Keng Really
(Pte) Ltd & Ors v Tang Wee Cheng).
A contributory cannot petition for winding up where:
• the company has by special resolution resolved for a winding up
by the court;
• default is made by the company in lodging a statutory declaration

under s 190(3) to enable a public company to commence
business and carry out borrowing powers;
• the company does not commence business within a year from its
incorporation;
• the company suspends its business for a whole year;
• the company is unable to pay its debts; or
• the court thinks it is just and equitable to wind up the company,
unless—
– there are less than two members of the company and the
company is not a subsidiary company; or
– the shares in respect of which the contributory is a contributory, or

some of them were originally allotted to him, or have been held by
him and registered in his name for at least six months during the
18 months before the presentation of the petition or have
devolved on him through the death or bankruptcy of a former
holder.
Law: s 464 of CA 2016.
¶13-220 Creditor’s petition

A creditor is a person to whom the company owes a valid debt which
has not been extinguished by payment (Re William Hockley Ltd). It is
not only the ordinary creditor who may bring a petition seeking the
company’s liquidation for the payment of his debt. A creditor may also
be secured (see ¶13-240), contingent or prospective (see ¶13-250).
¶13-230 Judgment creditor
The most common type of creditor-petitioner is the judgment creditor2

(Re United Stock Exchange Co Ltd). A judgment creditor who has
attached a debt due from the company may not petition (Re Combined
Weighing and Advertising Machine Co).
Who may petition?
• The assignee of a debt or part of a debt provided the assignment
is not made when the petition is pending (Re Paris Skating Rink
Co).
• The executor of a creditor (Re Masonic & General Life Assurance

Co).
• A creditor to whom a debt was incurred by the liquidator during a

voluntary winding up (Re Bank of South Australia).
• The holder of a debenture (Re Olathe Silver Mining Co).
• A seller who has obtained court order for specific performance of a

sale and purchase agreement where the buyer fails to complete
the sale (Ganda Holdings Bhd v Pamaron Holdings Sdn Bhd).
Footnotes
2 A judgment creditor is the party a money judgment is issued
to and is entitled to enforcement of the judgment through
liens, execution and levy. Simply put, the judgment creditor
is the person who receives the money in a judgment ruling.
¶13-240 Secured creditor
A secured creditor is entitled, entirely at his option, to file a proof of

debt along with unsecured creditors, provided that he gives up his
security to the liquidator for the benefit of all creditors. It is not
obligatory for a secured creditor to do so, and he may if he wishes
remain aloof from the winding up proceeding altogether and simply
realise his security against the specific property secured. As a result of
the very special position he is in, it is arguable that the court may, in
the exercise of its discretion, consider whether an order should be
made if the petitioner can be regarded as having an adequate remedy,
in the form of his security, for the recovery of his debt and it would be
otherwise unjust or unreasonable to wind up the company.
A court hearing a petition is undoubtedly entitled to determine whether
the petitioner is a creditor. It can do this even when the facts and the
law applicable to the facts are complex. However, it is well established
that the same court (which is normally one exercising an equity
jurisdiction) is not to be put in the position of having to determine what
is in essence a common law proceeding when hearing a petition to
wind up by a person claiming to be a creditor (Strata Welding Alloys
Pte Ltd v Heinrich Pty Ltd).
One of the key matters in determining whether the petitioner is a
creditor of the company is the question of whether there is a “valid
debt”. If there is no valid debt the petitioner does not have the
standing of a creditor (Jurupakat Sdn Bhd v Kumpulan Good Earth
(1973) Sdn Bhd). Accordingly, it is common for the company (whose
liquidation is sought) to dispute the existence of the debt as the means
of resisting the petition. The general rule is that if there is a bona fide
dispute as to the existence of a debt, the petition must be stayed or,
more often, dismissed (Re Mechanised Construction Pte Ltd).
The court may, however, decide that the presentation of a winding up
petition is not an abuse of court even though a disputed claim has
been lodged. Consequently, it may allow the winding up proceedings
to continue (Mageleine Investments Pte Ltd v Swiss Levingston
(Property Consultants) Pte Ltd). The High Court of Malaya has struck
out a winding-up petition filed by a creditor of a company where the
petition was based on a disputed debt and where the parties had
entered into an agreement which provided that all disputes between
the parties be arbitrated (Liew Yin Construction Sdn Bhd v Yata
Enterprise Sdn Bhd).
As a general rule, the court dealing with the petition will not itself
determine whether or not there is a debt owing, once the company
has established that it genuinely disputes the debt. That is usually
regarded as a matter to be determined in other proceedings such as
an action on the debt itself. Conversely, if the petitioning creditor has
already commenced other proceedings designed to establish his debt,
the court may determine that he should continue with those
proceedings and dismiss the winding up petition (FJ Reddacliffe &
Associates Pty Ltd v ARC Engineering Pty Ltd).
The wishes of unsecured creditors to wind up a company have
prevailed over those of secured creditors to allow the company to
operate (Cetico Sdn Bhd v The Tropical Veneer Co Bhd).
¶13-250 Contingent or prospective creditor

A contingent or prospective creditor is specifically empowered by CA
2016 to apply for a winding up. However, the court may not hear such
a petition until security for costs has been given (the amount of such
security being as the court thinks reasonable) and a prima facie case
for winding up has been established.
Although the terms “contingent” and “prospective” are not defined by
CA 2016, cases have suggested the meanings of the terms. The
expression “contingent creditor” has been described as denoting a
person towards whom (under an existing obligation) the company may
or will become subject to a present liability on the happening of some
future event or at some future date (Re SBA Properties Ltd). So where
a petition was presented on 7 February but the petitioning creditor’s
solicitors received a letter (dated 7 February) from the sheriff informing
them that the amount due to the petitioning creditor had been
recovered and that a cheque would be sent on 21 February (which
was at the end of the 14-day period during which the sheriff was
required to retain the money), the judgment debt (as far as the
company was concerned) was actually extinguished by payment to
the sheriff; but the court held that during the 14 days the judgment
creditor was a contingent creditor of the company (Re William Hockley
Ltd).
The terms ‘contingent’ and ‘prospective’ denote similar meanings.
They are, however, not synonymous. A contingent debt is one which
will only become due in an event which might or might not occur; a
prospective debt is one which will certainly become due in the future,
either on a date already determined or on some date determinable by
reference to future events (Stonegate Securities Ltd v Gregory).
¶13-260 Liquidator’s petition
A company may be wound up under an order of the court even though

it is being wound up voluntarily. This is available to the liquidator in a
voluntary winding up to petition for a compulsory winding up.
However, he may carry the onus of showing why a compulsory court-
controlled winding up would be preferable.
Law: s 464(1)(d) of CA 2016.
¶13-265 Payment of preliminary costs by the petitioner
This provided in s 468 as follows:

Subsection (1) states that where a person, other than a company itself
or a liquidator, presents a petition under s 464 (“Circumstances in
which company may be wound up by court”) and a winding up order is
made, that person shall at his own cost, conduct all the proceedings in
the winding up until a liquidator has been appointed under this
Division.
Subsection (2) states that the liquidator shall reimburse the petitioner
out of the assets of the company the taxed costs incurred by the
petitioner in any such proceedings unless the court orders otherwise.
Subsection (3) states that where the company has no assets or
insufficient assets, and in the opinion of the Minister any fraud has
been committed by any person in the promotion or formation of the
company or by any officer of the company in relation to the company
since the formation, the taxed costs or so much of the taxed costs as
is not so reimbursed may be reimbursed to the petitioner out of
moneys provided by the Parliament for the purpose, with the approval
specified by the Minister in writing to an amount not exceeding
RM3,000.
Subsection (4) states that where any winding up order is made upon
the petition of the company or the liquidator the costs incurred shall,
subject to any order of the court, be paid out of the assets of the
company in like manner as if they were the costs of any other
petitioner.
Law: s 468 of CA 2016.
¶13-271 Company’s own resolution
The court may order the winding up of a company if the company

resolves by special resolution that it be wound up by the court. The
company may be solvent or insolvent. This is common for joint-
venture companies that have a provision in their constitution that upon
completion of the venture project, the company shall be wound up.
Law: s 464(1)(a) of CA 2016.
¶13-272 Failure to file statutory report (declaration)3

Section 469(4) states that where a petition is presented on the ground
of default in lodging the statutory report (declaration), the court may
instead of making a winding up order, direct that the statutory report
(declaration) be lodged and may order costs to be paid by the
person(s) responsible for the default.
Law: s 469(4) of CA 2016.
Footnotes
3 The term “statutory report“ is no longer relevant under s
465(1)(b) because there is no statutory meeting to be held;
instead the term “statutory declaration“ is used under s
465(1)(b) as one of the grounds for a court winding up.
¶13-273 Failure to commence business
The court may order the winding up of a company if it does not

commence business within a year of its incorporation or suspends its
business for a whole year. If a company fails to commence business
within a year it is a fair indication that it has no intention of carrying on
a business and is unlikely to do so (Re Metropolitan Railway
Warehousing Co Ltd). It is therefore reasonable that the investors
should be able to recover their investment through a winding up. If the
reason for non-commencement is satisfactorily explained or if a
genuine intention to commence business is shown to the court then it
will not make an order (Re Capital Fire Insurance Association; Re
Petersburgh and Viborg Gas Co; Princess Reuss v Bos). The mere
making of calls, allotting of shares or incurring of debts do not
constitute a commencement of business (Re Shelbourne Cheese
Manufacturing & Produce Co; Re The South Luipaards Vlei Gold
Mines Ltd, Re Caementium (Parent) Co Ltd).
Suspension of business
The test of whether or not a company has suspended its business for
a year (applied in order to determine if a winding up should be
ordered) is, whether there is no longer an intention to carry on the
business or whether there is an inability to carry on the main objects of
the company. An order will not be made if it can be shown that there is
a genuine intention to proceed with the business (Re Middlesborough
Assembly Rooms Co; Re Tomlin Patent Horse Shoe Co Ltd; East
Rand Deep Ltd v Joel).
An abandonment of part of a company’s business does not constitute
a suspension of its business (Re Norwegian Titanic Iron Co Ltd; Re
New Gas Co; Re Patent Bread New Machinery Co).
The court should not ignore the wishes of a large majority of the
shareholders who oppose a winding up on this ground; unless they
are being unreasonable or tyrannous (Re Middlesborough Assembly
Rooms Co).
Law: s 465(1)(c) of CA 2016.
¶13-275 Reduction of members

Under CA 2016, the court may order (except in the case of a company
the whole of the issued shares of which are held by a holding
company) the winding up of a company if the company has no
member. A substantial ground (such as a suspicion of fraud) needs to
be established before the court will make an order under this ground
(Re New Gas Generator Co).
Law: s 465(1)(d) of CA 2016.
¶13-276 Inability to pay debts

The court may order a winding up of a company if the company is
unable to pay its debts. This is the most common ground for winding
up. For practical purposes the petitioner whose debt is not in dispute
will have little difficulty in obtaining an order. The fact that the
company has neglected to pay, in the face of several applications,
constitutes cogent proof of inability to pay. Virtually the only answer to
the company is to show that there is a bona fide dispute as to this
claim but where there is no such dispute it is futile for the company to
say that it is able to settle its debts but just that it does not wish to do
so.
If a debt is bona fide in dispute, it is an abuse of the court’s process to
bring a petition on this ground (Re a Company; Re Parker Davies &
Hughes). A late claim by the company that the debt is in dispute will
naturally be viewed with suspicion by the court (Re Anglo Bavarian
Steel Ball Co). Whether or not a company is unable to pay its debts is
often a difficult question to answer. A debtor need not be insolvent
merely because his immediately available funds are limited. On
realisation of his assets he may be far from insolvent. Each case is in
reality a question of fact to be determined by all the circumstances
including the nature of the debtor company’s business and a
consideration of its borrowing capacity (Re Amour, Ex parte Official
Receiver v Commonwealth Trading Bank of Australia). A winding up
may be made on this ground even where the creditor has not
exhausted alternative remedies available to it (Re Hong Huat Realty
(M) Sdn Bhd). The High Court of Malaya allowed a company to be
wound up on this ground although the exact amount claimed by the
company’s creditor was not quantified (The Oriental Bank Berhad v
CSJ Pengangkutan Sdn Bhd).
Deemed inability to pay debts
A company is deemed unable to pay its debts in three circumstances.
The three circumstances are mutually exclusive (Teck Yow Brothers
Hand-Bag Trading Company v Maharani Supermarket Sdn Bhd):
• If a creditor, by assignment or otherwise, to whom the company is
indebted for more than RM500 then due, has served on the
company a demand, signed by or on behalf of the creditor,
requiring the company to pay the sum so due and the company
has, for three weeks after the service, failed to pay the sum or to
secure or compound for it to the reasonable satisfaction of the
creditor. A statutory notice of demand which has been withdrawn
before the end of the period of compliance loses its effect
(Cempro Pty Ltd & Anor v Dennis M Brown Pty Ltd & Anor).
The procedure is regarded as a somewhat artificial test in that
failure to pay becomes the test (not inability to pay) the courts
require strict compliance with the provision (Re Mannum Haulage
Pty Ltd).
The formalities must be carefully observed:
(a) Service must be effected at the registered office of the
company. A demand sent by registered post is valid so long
as the sender provides adequate proof of physical delivery
(Weng Wah Construction Co Sdn Bhd v Yik Foong Sdn Bhd).
(b) A petition cannot be presented until the three-week period

prescribed has elapsed.
(c) The name of the company must be correctly stated (Re

Willes Trading Pty Ltd).
(d) The debt must be presently payable at the time of the notice
and must not be a prospective liability (New Travellers’
Chambers Ltd v Cheese & Green; Syd Mannix Pty Ltd v
Leserv Constructions Pty Ltd).
(e) The debt must be due to the creditor even if by assignment

(but not by equitable assignment) (Re Steel Wing Co Ltd).
(f) The notice must be signed by the creditor or his authorised

agent (Re Willes Trading Pty Ltd).
(g) The sum due must be stated accurately as an arithmetical

error can be fatal (Re Madison Avenue Carpets Pty Ltd). An
overstatement of the amount due in itself may not destroy the
validity of the notice nor create a bona fide dispute as to the
existence of the debt provided the amount not in dispute
would entitle the petition to a winding up order (Re Convere
Pty Ltd; Cardiff Preserved Coal & Coke Co v Norton; Re
Tweeds Garages Ltd; In the Matter of Makin Nominees Pte
Ltd). Some courts are of the view that the notice must strictly
comply with s 218(2)(a) — if not, the notice is invalid (Re
Perusahacm Jenwatt Sdn Bhd; Processed Sand Pty Ltd v
Thiess Contractors Pty Ltd). Interest demanded must be
quantified and not merely stated as a percentage (Lim Tok
Chiow & Anor v Diam Tong Credit & Development Sdn Bhd).
(h) The process cannot be exploited and the court cannot be

used as a debt-collecting agency or as a means of bringing
improper pressure on a company (Re Lympne Investments
Ltd). This is particularly so where a genuine dispute exists in
relation to the debt claimed whether as to quantum or
otherwise. The position is that where such a dispute does
exist the matter cannot be properly decided on petition (Re
London & Paris Banking Corporation; Re Tweeds Garages
Ltd; Re Welsh Brick Industries Ltd).
• If execution or other process issued on a judgment, decree or

order of any court in favour of a creditor of the company is
returned unsatisfied in whole or in part.
The court has the jurisdiction to go behind a judgment and
enquire into the validity of a debt. It may do so to decide whether
the judgment (on which the petition was based) was obtained by
fraud or collusion (Re United Stock Exchange Co) or in
circumstances which tended to show a miscarriage of justice (Re
Derrygarrif Investments Pty Ltd). The court has the discretion to
accept or reject the judgment as satisfactory proof of debt (Re
Derrygarrif Investments Pty Ltd; Bowes v The Hope Life
Insurance and Guarantee Co; Corney v Brien).
• If the court, after taking into account any contingent and

prospective liabilities of the company, is satisfied that the
company is unable to pay its debts (see ¶13-250).
In practical terms, this will be difficult because the court will be
required to make some sort of assessment as to whether the
company is likely to be called upon to honour a contingent
obligation, such as a guarantee, and there is always likely to be a
lack of evidence on such matters. The court, has in accordance
with this paragraph, been satisfied that a company is insolvent
when:
(a) that company has dishonoured a bill (Re Globe New Patent
Iron & Steel Co);
(b) that company has a large number of outstanding debts (Re

Tweed Garages Ltd);
(c) that company’s solicitor has admitted to a judgment creditor

that there are no assets on which to levy execution (Re
Flagstaff Silver Mining of Utah; Re Yate Collieries and
Limeworks Co).
Definition under CA 2016

The definition of inability to pay debts is stipulated in s 466 as follows:
Subsection (1) states that a company shall be deemed to be unable to
pay its debts if—
(a) the company is indebted in a sum exceeding the amount as may
be prescribed by the Minister and a creditor by assignment or
otherwise has served a notice of demand, by himself or his agent,
requiring the company to pay the sum due by leaving the notice at
the registered office of the company, and the company has for 21
days after the service of the demand neglected to pay the sum or
to secure or compound for it to the satisfaction of the creditor;
(b) execution or other process issued on a judgment, decree or
order of any court in favour of a creditor of the company is
returned unsatisfied in whole or in part; or
(c) it is proved to the satisfaction of the court that the company is

unable to pay its debts and in determining whether a company is
unable to pay its debts the court shall take into account the
contingent and prospective liabilities of the company.
Subsection (2) states that a petition to wind up a company shall be

filed in the court within six months from the expiry date of the notice of
demand issued under para (1)(a).
Law: s 465(1)(e) and 466 of CA 2016.
¶13-277 Directors unjust and unfair

The court may order the winding up of a company if the directors have
acted, in the affairs of the company, in their own interests rather than
in the interests of the members as a whole, or in any other manner
whatsoever that appears to be unfair or unjust to other members.
This ground is not a creditor’s weapon and is more appropriate to a
petitioning contributory than a petitioning creditor. In broad terms, a
petitioner basing his application to the court on this ground, must show
a substantial case of departure from the proper standards of
commercial morality before he is entitled to relief. The departure from
those standards must have resulted in acts which were unfair or unjust
to him as a shareholder (Re Eastern Copper Mines NL). A
shareholder who was appointed a director and later removed from the
latter position was granted a winding up order on this ground. The
Privy Council said that the other shareholders were not entitled to use
their voting powers in the company to oust the shareholder from his
position without due cause (Tay Bok Choon v Tahansan Sdn Bhd).
In any event, a shareholder relying on this ground must not delay in
presenting his petition. An inordinate delay may indicate acquiescence
in the conduct complained of and bar the petitioner from claiming relief
(Re Senson Auto Supplies Sdn Bhd).
The Privy Council has said that to wind up a successful and
prosperous company (being properly managed) because the directors
are acting in their own interests and in ways which are unfair and
unjust, is an extreme step and a strong case has to be made out
(Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd).
Some points of interpretation were noted by Bowen CJ in the decision
of this case:
• The word “directors” in the provision is not limited in its application
to the case where the whole board acts unanimously; it will apply
where it is shown that the effective majority has acted in its own
interests or in the interests of one or more of those board
members, or even where one director, by some means or other,
has caused his will to be carried into effect by the board, with the
result that his personal interest has been preferred.
The words “the affairs of the company” are very wide. They are
not limited to business or trade matters, but encompass capital
structure, dividend policy, voting rights, consideration of take-over
offers and all matters which may come before the board for
consideration.
• Directors may be held to have acted in their “own interests” when

they have acted in the interests of another company of which they
are also directors and shareholders (Re National Discounts Ltd).
• The words “the interests of the members as a whole” means a

situation where directors are shown to have preferred their own
interests to the interests of one, or more or perhaps some
significant section of the members so that the action of directors
may be open to challenge notwithstanding that it coincides with
the interests of the majority shareholder. This interpretation has
been endorsed in Foo Yin Shung & Ors v Foo Nyit Tse & Brothers
Sdn Bhd. The words are difficult to apply when the interests of the
members are diverse or conflicting. This may happen when there
are different classes of members or within one class of members
where the interests of particular members differ.
• Conduct does not have to be shown to be “unfair or unjust” to

members as a whole. It is sufficient if it is unfair or unjust at least
to any significant body of other members and perhaps to any
member.
Law: s 465(1)(f) of CA 2016.
¶13-278 Investigation at Minister’s direction

Section 590 provides that the Minister of Domestic Trade,
Consumerism and Co-operatives may on his own motion or
application declare the affairs of a company or a foreign company to
be investigated. Where such investigation finds that the company
cannot pay its debts and should be wound up or that it is in the
interests of the public, the shareholders or the creditors that the
company should be wound up, the court shall order the winding up of
the company.
It is not necessary for the petitioner to allege those facts upon which
the inspector was entitled to reach that opinion (Re General Mutual
Insurance Co Ltd; Re Motorists Mutual Insurance Co Ltd). There is
some division of judicial opinion on who has the right to produce
evidence tending to impugn the inspector’s report, with some judges
saying that such evidence would be inadmissible, and others allowing
what represents a challenge to the inspector’s report (Maxwell v
Department of Trade and Industry, Same and Stable; Re Alco Homes
Pty Ltd; Re Armvent Ltd; Re St Piran Ltd).
The court has a discretion in this regard. Although proof of the report
is a prima facie justification for the court to make the winding up order,
the court may withhold the order to wind up if there is something which
points to the conclusion that the order should not be made; for
example, if the report is stale or the opinion that the company cannot
pay its debts is qualified by the statement that the deficiency was
minimal and of a temporary nature (Menhennit J in Re General Mutual
Insurance Co Ltd; Re Motorists Mutual Insurance Co Ltd).
Law: s 465(1)(l) and 590 of CA 2016.
¶13-280 Just and equitable

The court may order the winding up of a company if it is of the opinion
that it is just and equitable for the company to be wound up.
The words “just and equitable” give the court a wide discretion. The
question of whether it is just and equitable to order a winding up is a
question of fact and all the circumstances must be looked at (Loch v
John Blackwood Ltd; Re Bleriot Manufacturing Air Craft Co Ltd). There
have been attempts to group the decisions of the courts into an
exhaustive set of categories. It is wrong to attempt to do so, because
the generality of the words “just and equitable” must not be limited in
any way (Ebrahimi v Westbourne Galleries Ltd).
It is just and equitable to wind up the company if:
• the company engages in acts which are entirely outside what can
fairly be regarded as having been within the general intention and
common understanding of the members when they became
members (HA Stephenson & Sons Ltd v Gilanders, Arbuthnot &
Co).
The question is: “Are the shareholders who have taken up
contributing shares being asked to leave their money in a venture
different altogether from that to which they have subscribed (Re
The National Portland Cement Co Ltd)?” A radical change of
object amounting in fact, if not law, to an abandonment of the
main object may not constitute a failure of the substratum. It is,
however, a relevant and material fact which must be taken into
consideration in determining finally whether it is just and equitable
in all the circumstances to order the winding up of the company
(Re Southland Woollen Mills Ltd). A shareholder who has
invested his money in the shares of the company on the footing
that it is going to carry out some particular object, cannot be
forced against his will by the votes of his fellow shareholders to
continue to adventure his money on some quite different project
or speculation (Re Eastern Telegraph Co Ltd; Re Haven Gold
Mining Co).
A company’s main object (or the general intention and common
understanding of the members) is to be ascertained by reference
to the company’s Memorandum which among other things states
its objects. The authorities also recognise the distinction between
the objects of the company strictly so called and what are really
powers although they may be termed objects (Re German Date
Coffee Co; Re Red Rock Gold Mining Co Ltd; Re Johnson
Corporation Ltd; Re Tivoli Freeholds Ltd);
• the company suffers failure of substratum. The term ‘failure of

substratum’ has been interpreted not just as a discontinuance of
business activities for a lengthy period but rather a final and
conclusive abandonment of the business (Galbraith v Merito
Shipping Co Ltd). All the cases on this point have insisted on the
demonstrated and concluded finality of such an event by requiring
that, before the substratum should be found to have been
withdrawn, business within the objects of incorporation should
have become, at least in a practical sense, impossible (Re Ah
Yee Contractors (Pte) Ltd).
The courts have refused to wind up companies where a main or
paramount object was still capable of being carried on, by
carrying on some business of the same kind as the original
business, even though the original business had ceased. It has
been stressed that whatever intention existed at the time of the
petition was irrelevant because it was still open to the company to
carry on business within the original object and the absence of a
concrete scheme as to what the company proposed to do was no
ground for winding up the company. Where, even though a
company could still pursue its original objects, whether main or
paramount objects or not, if in fact, the matter has gone beyond
intention and the company had in fact embarked upon a course
which, even though it is within its power, is quite outside and
different from what was commonly intended and understood, then
it may be just and equitable to wind up the company;
• where the company was a “sham or a bubble”, formed for the

purpose of defrauding the investing public (Re London and
County Coal Co);
• where the company has been unable to carry on profitably and

there is no reasonable hope that the object of trading at a profit
can be obtained (Re The Cheltenham Hotel Co; Davis & Co Ltd v
Brunswick (Australia) Ltd);
• where the company is a quasi-partnership and where applying

analogous partnership law, the partnership would be dissolved
(Ebrahimi v Westbourne Galleries Ltd; In the Matter of La Mar
Diamant (Oversea) Pte Ltd);
• where there is fraud, misconduct or oppression in management

which is more than merely lack of confidence (Loch v John
Blackwood Ltd; Re Nestor Pty Ltd; Re North End Motels (Huntly)
Ltd);
• where the directors and controllers have misappropriated company

funds by making fraudulent payments (Re Bleriot Manufacturing
Air Craft Co Ltd);
• where the directors have used their powers in their own interests,
for example, by issuing shares in their own interests to gain
control (Re Lundie Brothers Ltd);
• where there was a repudiation of a management-participation

agreement (Re A & BC Chewing Gum Ltd, Topps Chewing Gum
Inc v Coakley & Ors);
• where the Articles provided for a winding up upon the event which
had happened (Re American Pioneer Leather Co Ltd).
Law: s 465(1)(h) and (I) of CA 2016.
¶13-290 Powers of the court on hearing petition for

winding up
The court has wide powers to either dismiss, adjourn, make an interim
offer regarding, or pass the winding up petition.
The court shall order a winding up solely on the following grounds:
(a) the assets of the company have been mortgaged to an amount
equal to or in excess of those assets;
(b) the company has no assets; or
(c) in the case of a petition by a contributory, that there will be no

assets available for distribution amongst the contributories.
The court may, at the hearing of the petition or at any time on the
application of the petitioner, the company or any person attending the
hearing of the petition:
(a) direct that any notice be given or any steps is taken before or
after the hearing of the petition;
(b) dispense with any notices being given or steps being taken
which are required by this act, or by the rules, or by any prior
order of the court;
(c) direct that oral evidence be taken on the petition or any matter
relating to the petition;
(d) direct a speedy hearing or trial of the petition or any issue or

matter;
(e) allow the petition to be amended or withdrawn; and
(f) give such directions as to the proceedings as the court thinks fit.
Where the petition is presented on the ground of default in lodging the

statutory report, the court may instead of making a winding up order,
direct that the statutory report shall be lodged and may order the costs
to be paid by any persons who, in the opinion of the court, are
responsible for the default.
Power of court to stay or restrain proceedings against company
prior to order of winding up
At any time after a winding up petition has been presented and before
a winding up order is made, the company, any creditor or contributory
may, where any action or proceeding against the company is pending,
apply to the court for an order to stay or restrain further proceedings in
the action or proceeding, and the court may stay or restrain the action
or proceeding accordingly on such terms as it thinks fit.
The applicant must lodge with the Registrar the office copy of the
order within 14 days from the making of the above order.
Law: s 469 and 470 of CA 2016.
DUTIES AND FUNCTIONS OF LIQUIDATORS

¶13-300 Status of liquidator
The liquidator is the person appointed to carry out the winding up of

the company. The company’s affairs and assets pass into the
liquidator’s hands upon the commencement of the winding up.
There are two types of liquidators, ie those appointed in a voluntary
winding up and those appointed by the court. The chief difference
between them is that the court-appointed liquidator cannot as a rule
take any important step in the winding up without the sanction of the
court. He is not regarded as an “officer” of a corporation by definition
in s 2(1) of CA 2016, unlike a liquidator appointed in a voluntary
winding up. The fiduciary nature of the liquidator’s role is true in both
kinds of winding up — voluntary and compulsory. Although in some
respects he is like a trustee, on balance the liquidator is undoubtedly
an agent of the company (Re Windsor Steam Coal Co (1901) Ltd).
Compulsory winding up
The liquidator appointed in a compulsory winding up is an officer of
the court, and not an officer of the corporation. As the winding up is by
the court, the nature of the appointment makes the liquidator a
representative of the court. The decisions that an official liquidator
makes from time to time are in effect made under the authority of the
court itself (Duffy v Super Centre Development Corp Ltd). The
liquidator is directly answerable to the court for the manner in which
he discharges his duties.
The powers of a liquidator in a winding up by the court is be guided by
Sch 12 of CA 2016.
Voluntary winding up
The liquidator in a voluntary winding up is neither for the creditors nor
contributories but is an agent of the company (Knowles v Scott). He is
not an officer of the court (Re Hills Waterfall Estate and Gold Mining
Co) but is an officer to a corporation.
The powers of a liquidator in voluntary winding up is be guided by Sch
11 of CA 2016. (Schedule 11 of CA 2016 is reproduced in Appendix
13.3 at the end of this chapter.)
¶13-310 Legislative framework

The winding up of the company’s affairs is undertaken by the
liquidator. As CA 2016 governs the manner in which a company is
wound up and eventually dissolved, the legislation ensures that the
liquidator has the statutory power to perform this function. The
liquidator’s task is to realise the assets of the company and to ensure
an orderly distribution of proceeds arising from realisation to those
persons entitled. In order to perform this function the legislation gives
to the liquidator certain powers. In addition, the legislation imposes on
the liquidator certain duties and obligations which he must perform.
Failure to perform the duties and obligations properly may render the
liquidator liable to civil and criminal sanctions.
Law: s 456 and 472(2) of CA 2016.
¶13-320 Consent to act as liquidator

A person cannot be appointed as liquidator of a company unless he
has consented in writing prior to the appointment to act as such
liquidator.
See ¶13-032 for the qualifications of a liquidator.
Law: s 433(7) of CA 2016.
¶13-330 Appointment of liquidators by court
Upon a winding up order being made by the court, the court may
appoint the Official Receiver or an approved liquidator as an interim
liquidator at any time after the presentation of a winding up petition
and before the making of a winding up order. The interim liquidator
has all the functions and powers of a liquidator subject to such
limitations and restrictions as may be prescribed in the winding up
rules or as the court may specify in the order appointing him.
If a person other than the Official Receiver is appointed interim
liquidator or liquidator that person must before acting as a liquidator,
inform the Registrar and the Official Receiver in writing of his
appointment and give security in the prescribed manner to the
satisfaction of the Official Receiver. He must also give the Official
Receiver information and access to the books and documents which
are necessary to enable that officer to perform his duties.
See also ¶13-034.
Appointment, style, etc, of liquidators
Subsection (1) states that the following provisions with respect to
liquidators shall have effect on a winding up order being made:
(a) if an approved liquidator other than the Official Receiver is not
appointed to be the liquidator of the company, the Official
Receiver shall by virtue of his office become the interim liquidator
and shall continue to act as such until he or another person
becomes liquidator and is capable of acting as such;
(b) if there is no liquidator appointed, the Official Receiver shall

summon separate meetings of the creditors and contributories of
the company for the purpose of determining whether or not an
application is to be made to the court for appointing a liquidator in
the place of the Official Receiver;
(c) the court may make any appointment and order required to give
effect to any such determination, and, if there is a difference
between the determinations of the meetings of the creditors and
contributories in respect of the matter aforesaid, the Court shall
decide the difference and make such order as the court may think
fit;
(d) in a case where a liquidator is not appointed by the court, the

Official Receiver shall be the liquidator of the company;
(e) the Official Receiver shall by virtue of his office be the liquidator
during any vacancy;
(f) any vacancy in the office of a liquidator appointed by the court

may be filled by the Court;
(g) a liquidator shall be described, where a person other than the

Official Receiver is the liquidator, by the style of “the liquidator”,
and, where the Official Receiver is the liquidator, by the style of
“the Official Receiver and liquidator”, of the particular company in
respect of which he is appointed, and not by his individual name.
Appointment of other person as liquidator other than Official

Receiver
Subsection (1) states that where a person other than the Official
Receiver is an appointed interim liquidator or liquidator in a winding up
of a company by the court, that person—
(a) shall not act as such until he has given—
(i) written notice of his appointment to the Registrar and the
Official Receiver; and
(ii) security in the prescribed manner to the satisfaction of the

Official Receiver; and
(b) shall give the Official Receiver such information and such
access to and facilities for inspecting the books of the company,
and any assistance as may be required for enabling that officer to
perform his duties under this Act.
Subsection (2) states that if two or more liquidators are appointed by

the court, unless the court expressly provides otherwise—
(a) the functions or the powers of the liquidators may be performed
or exercised by any one of them or by both or all of them jointly;
and
(b) a reference to the liquidator shall be a reference to any one of

the liquidators.
Subsection (3) states that subject to this Act, the act of a liquidator
shall be valid notwithstanding any defects that may afterwards be
discovered in his appointment or qualification.
Law: s 476, 477 and 478 of CA 2016.
¶13-335 Liquidators’ power

Power conferred in Part I of Sch 12, CA 2016: Exempt disposition
The general powers of a liquidator appointed by the court is provided
in s 472, which states that “exempt disposition” means a disposition
made by a liquidator or an interim liquidator of the company in
exercise of the power conferred on him under Pt I, Sch 12 or the rules
that appointed him or an order of the court.
Any disposition of the property of the company, other than an exempt
disposition, including any transfer of shares or alteration in the status
of the members of the company made after the presentation of the
winding up petition shall, unless the court otherwise orders, be void.
Any attachment, sequestration, distress or execution put in force
against the estate or effects of the company after the presentation of
the winding up petition shall be void.
Powers of liquidator in winding up by court
Section 486 states that where a company is being wound up by the
court, the liquidator may:
(a) without the authority under para (b) below, exercise any of the
general powers specified in Pt I of Sch 12; and
(b) with the authority of the court or the committee of inspection,

exercise any of the powers specified in Pt II of Sch 12.
The exercise of powers conferred by s 486 in a compulsory winding

up is subject to the control of the court and any creditor or contributory
may apply to the court with respect to any exercise or proposed
exercise of any of those powers.
Schedule 12 of CA 2016 is reproduced in Appendix 13.4 at the end of
this chapter.
¶13-340 Removal of liquidator

Section 453 of CA 2016 gives the court the power to appoint or
remove liquidator in every voluntary winding up.
A liquidator appointed by the court in a compulsory winding up may
resign or be removed by the court (s 482, CA 2016). The court will
order the removal of a liquidator where it is considered in the best
interests of the liquidation to do so. This requires some “unfitness” of
the personal character, associates or circumstances indicating an
“unfitness” in a wide sense of the term (Re Sir John Moore Gold
Mining Co).
The court has the power to remove a person without showing any
personal misconduct if it is satisfied on the evidence that it is in the
interests of all those concerned in the company’s assets to do so (Re
Adam Eyton Ltd; Re Rubber Produce Investment Trust). A liquidator
was removed in the absence of any misconduct where all the creditors
and bond-holders desired another liquidator be appointed (Re Oxford
Building and Investment Co; Re Devonshire Silkstone Coal Co).
Voluntary winding up (s 445)
The liquidator in a voluntary winding up may resign.
He may also be removed by the company in general meeting and by
the court. The company may, in general meeting convened by any
contributory by special resolution of which special notice has been
given to the creditors and the liquidators, remove any liquidator.
However, a resolution to remove a liquidator will not be effective if the
court on the application of the liquidator or a creditor has ordered that
the liquidator may not be removed.
Law: s 445, 453 and 482 of the CA 2016.
¶13-342 Power to fill vacancy in office of liquidator in a

members’ voluntary winding up
The power to fill vacancy in office of liquidator is provided in s 446,
which states that the company in a meeting of members may fill the
vacancy, subject to any arrangement with its creditors. The meeting
may be convened by any contributory or, if there is more than one
liquidator, by the continuing liquidators. The conduct of the meeting is
to be in accordance to CA 2016, or the constitution, or in such manner
as may be determined by the court, on application by any contributory
or by the continuing liquidators.
Law: s 446 of the CA 2016.
¶13-345 Liquidator’s duty to call for meeting of creditors

in an insolvency
When a company is in a members’ voluntary winding up process, and
the company becomes unable to pay its debts in full, it is the duty of
the liquidator to call for creditors’ meeting in case of insolvency.
Section 447 provides:
Subsection (1) states that if the liquidator is of the opinion that the
company will not be able to pay or provide for the payment of its debts
in full within the period stated in the declaration made under s 443
(“Declaration of solvency”), the liquidator shall forthwith summon a
meeting of the creditors and lay before the meeting a statement of the
assets and liabilities of the company and the notice summoning the
meeting shall draw the attention of the creditors to the right conferred
upon the creditors below.
Subsection (2) states that the creditors may at the meeting summoned
under sub-s (1), appoint—
(a) the liquidator appointed by the company; or
(b) any other person to be the liquidator,
for the purpose of winding up the affairs and distributing the assets of
the company.
Subsection (3) states that once a meeting of creditors is held under
sub-s (1), the winding up shall thereafter proceed as if the winding up
were a creditors’ voluntary winding up.
Subsection (4) states that the liquidator or if some other person has
been appointed by the creditors to be the liquidator, the person so
appointed shall lodge with the Registrar and with the Official Receiver
a notice containing information as may be determined by the Registrar
within seven days from a meeting has been held under sub-s (1). The
lodgement is in the e-form “Notice of holding of meeting of creditors” in
Subsection (5) states that where a members’ voluntary winding up has
become a creditors’ voluntary winding up, and the creditors’ meeting
under sub-s (3) is held three months or less before the end of the first
year from the commencement of the winding up, the liquidator is not
required by this section to summon a meeting of creditors at the end
of that year if the liquidator is the liquidator appointed by the company.
Subsection (6) states that the liquidator or the person appointed as a
liquidator by the creditors who contravenes by not lodging the required
notification within seven days to the Registrar, commits an offence
and shall, on conviction, be liable to a fine not exceeding RM10,000
and, in the case of a continuing offence, to a further fine not exceeding
conviction.
Law: s 447 of CA 2016.
¶13-350 Liquidators’ remuneration

Compulsory winding up (s 479)
In a compulsory winding up, a liquidator is entitled to receive
remuneration by way of a percentage or otherwise as determined by
the court. His remuneration may be determined by:
(a) an agreement between the liquidator and a committee of
inspection;
(b) where there is no agreement or no committee of inspection, by a

resolution passed at a meeting of creditors by a majority (of not
less than 75% in value and 50% in number) of the creditors
present and voting, either in person or by proxy. The creditors’
debts must have been admitted to proof; or
(c) if (a) or (b) fails, the court.
Where the remuneration is fixed by agreement between the liquidator

and the committee of inspection then it may be reviewed by the court
on the application of a member or members whose shareholding(s)
represent(s) in the aggregate not less than 10% of the issued capital
of the company. Where the remuneration is fixed by a resolution at the
creditors’ meeting, the liquidator may also apply for a review of the
salary. In either case, the court may confirm, increase or reduce that
remuneration.
Voluntary winding up (s 454)
In a members’ voluntary winding up, the general meeting of the
company which appoints the liquidator will fix the liquidator’s
remuneration.
In a creditors’ voluntary winding up, it is the committee of inspection,
and if there is no such committee, then the creditors may fix the
remuneration to be paid to the liquidator.
In both types of voluntary winding up, any member or creditor, or the
liquidator himself, may at any time before dissolution apply to the court
to review the amount of the remuneration of the liquidator and in this
regard the decision of the court is final and conclusive.
In the case of a company which is an insurer, only the Central Bank of
Malaysia (Bank Negara) may apply to the court to review the
remuneration of the liquidator and the court shall determine the
remuneration of the liquidator on the recommendation of the Central
Bank.
When funds insufficient
The liquidator’s remuneration must be met from the assets of the
company. When these are insufficient to meet the costs, charges and
expenses of the winding up (which include outgoings as solicitors’
fees and the provisional liquidator’s remuneration) then the liquidator’s
remuneration, those costs, charges and expenses will have priority
(Re Massey; Re Freehold Land and Brickmaking Co; Re Sanitary
Burial Association).
All the expenses of the winding up ought to be paid before the
remuneration of the liquidator. Expenses which the liquidator has
incurred, whether by the employment of agents or, for example, in
respect of gas and electric light or for rents, or any other of the
numerous expenses which he may incur in the winding up of the
company, are things for which he is bound to provide out of the assets
of the company as far as he is able to recover them. If his position is
that, having provided for them, there will be no remuneration left for
him, then he is entitled to refuse to continue unless the creditors or
shareholders or others put up a fund for his benefit. The liquidator is in
the best position to evaluate the situation. The people to whom the
company in liquidation has incurred a liability for expenses, do not
have the information which he has for ascertaining the true position
(per Maugham J. in Re Beni-Felkai Mining Co Ltd). Expenses incurred
unnecessarily by the liquidator, eg in order to determine dividend
entitlements, will not be approved by the court [Re Kal Assay
Southern Cross Pty Ltd (in liq)].
Section 519 provides as follows as regard to expenses of winding up
where assets are insufficient to cover:
• Unless expressly directed by the court, a liquidator shall not be
liable to incur any expense in relation to the winding up of a
company unless there are sufficient available assets.
• On the application of a creditor or a contributory, the court may

direct a liquidator to incur a particular expense on condition that
the creditor or contributory indemnifies the liquidator in respect of
the recovery of the amount expended and if the court so directs,
gives such security to secure the amount of the indemnity as the
court thinks reasonable.
Law: s 454, 462, 479 and 519 of CA 2016.
¶13-360 Fiduciary duty of liquidators

There flows from the fiduciary position of a liquidator a common law
responsibility to act honestly in the exercise of his powers and the
discharge of his duties and generally to act bona fide in the interests
of the company and particularly the creditors and contributories.
Another aspect of the fiduciary duty is the avoidance of any conflict
between the liquidator’s own interests and the company’s creditors’ or
contributories’ interests.
¶13-362 Duty to maintain impartiality
A liquidator should maintain an even and impartial hand between all

the individuals whose interests are involved in the winding up. This
must particularly be true of the court-appointed liquidator who, as an
officer of the court should maintain this impartiality. It is his duty to the
whole body of creditors and to the court, to make himself thoroughly
acquainted with the whole body of creditors and to neither suppress
nor conceal anything which has come to his knowledge in the course
of his investigation [James LJ in Re Contract Corporation (Gooch’s
case)].
¶13-364 Exercise of skill
The liquidator has a duty to exercise skill, ie skill that can reasonably
be expected from the type of person who may apply to be a liquidator
— an approved company auditor. As a liquidator is paid professionally
to wind up the company, he must exercise a high standard of care and
diligence which commensurate with his professionalism (Vasudevan
s/o Narayan Nair v ICAB Private Limited). More is expected of the
liquidator than from the ordinary (non-paid) trustee. A liquidator may,
for example, be deprived of his costs for a mistake or blunder or for
something which, in the opinion of the court, is the result of ignorance
of the law or gross want of care (Re Silver Valley Mines).
¶13-366 Liquidator may seek court’s assistance
Under CA 2016, the liquidator has the opportunity of going to court to

obtain protection in any difficult circumstance in which he may be
placed. It is within the power of the liquidator to:
• in a compulsory winding up, apply to the court for directions in
relation to any particular matter arising under the winding up;
• in a voluntary winding up, apply to the court to determine any

question arising in the winding up;
• the liquidator or any contributory or creditor may apply to court to

exercise all or any of the powers which the court might exercise if
the company were being wound up by the court.
If there is a difficulty at any stage of the administration, it is the clear

duty of the liquidator to inform the court and take directions [Peter
Harvey case (Commissioner of Corporate Affairs v Peter William
Harvey)]. In all extraordinary cases the liquidator can take the
directions of the court on the course to be adopted (Re Tavistock
Ironworks Co). The liquidator who takes upon himself the burden of
deciding on the validity of the claim and thereby takes upon himself
the risk of it turning out that such payment was a misapplication of the
funds under his control has, with the ready availability of access to the
court for assistance, no grounds for complaint.
It is a breach of duty for a liquidator to delegate all his discretions
(Rendall v Conroy). This does not mean that the liquidator who is a
member of a company cannot use the company’s employees and
facilities.
Law: s 461 of CA 2016.
¶13-370 General functions of liquidators
The general functions of all liquidators are (Re Partridge, Ex parte

McDonald):
• to take over the company’s assets and to protect them;
• to prepare a list of contributories;
• to adjudicate (or have adjudicated by the court) matters in dispute

such as the validity of the company’s debts;
• to realise the assets;
• to apply the proceeds of that realisation amongst the creditors and

contributories.
The liquidator must perform these functions strictly in accordance with

the duties and obligations imposed upon him by CA 2016 and the
rules of court.
In protecting the company’s property the liquidator must do all he can
to augment the disposable assets but in so doing he is not entitled to
do anything that will put them at unnecessary risk (Re Tavistock
Ironworks Co). His main duty here is to preserve and not to
jeopardise.
Liquidator to pay moneys received into bank account
A liquidator is required to pay moneys received into bank account, as
prescribed by s 488 of CA 2016:
Subsection (1) states that every liquidator shall, in the manner and at
the time prescribed by the rules, pay the money received by him into
such bank account as is prescribed by the rules or as is specified by
the court.
Subsection (2) states that if any liquidator retains for more than ten
days a sum exceeding RM10,000, or such other amount as the court
in any particular case authorises him to retain, then unless he explains
the retention to the satisfaction of the court he shall pay interest on the
amount so retained in excess computed from the expiration of the ten
days until he has complied with sub-s (1) at the rate of 20% per
annum, and shall be liable:
(a) to disallowance of all or such part of his remuneration as the
court thinks just;
(b) to be removed from his office by the court; and
(c) to pay any expenses occasioned by reason of his default.
Subsection (3) states that any liquidator who pays any sums received
by him as liquidator into any bank or account other than the bank or
account prescribed or as specified under sub-s (1) commits an
offence.
Law: s 488 of CA 2016.
¶13-375 Statutory functions
The duties and functions of a liquidator are set out in detailed terms by
CA 2016 generally cover the following:
• For remuneration. A liquidator’s salary may be by way of
percentage or otherwise. Where there is no agreement between
the liquidator and a committee of inspection, then the liquidator
must have his mode of remuneration determined by the court — s
479.
• For the custody of company property. On the winding up, the

liquidator must take into his custody or under his control all the
property to which the company is or appears to be entitled — s
483(1).
• For a statement of affairs. A past or present officer of the

company, a company’s promoter (if the company was formed
within a year before the winding up order) or a past or present
employee of a company (if the company was formed within a year
before the winding up order) must submit and verify to the
liquidator a statement as to the affairs of the company as at the
date of the winding up order. The statement must be submitted
within 14 days from the date of the winding up order or within
such extended time as the Official Receiver, the liquidator or the
court may specify — s 484(3). Within seven days from the receipt
of the statement:
(a) the liquidator including the Official Receiver shall cause a
copy of the statement to be filed with the court and lodged
with the Registrar; and
(b) where the Official Receiver is not the liquidator, the

liquidator shall cause a copy of the statement to be lodged
with the Official Receiver — s 484(4).
The e-forms to be lodged are “Affidavit verifying statement of

affairs” and “Statement of affairs” of Schedule B in MyCoID.
Failure by the directors to co-operate in this matter will not justify
continuing with a winding up if there are already sufficient
circumstances to stay the winding up (Yap Kim Kee & Sons
Holdings Sdn Bhd v Goh Joon Hai & Ors).
• For the business to be carried on. The liquidator may, with the
authority of the court or a committee of inspection carry on the
business of the company so far as is necessary for the beneficial
winding up of the company. However, the authority shall not be
necessary to so carry on the business during the 180 days after
the date of the winding up order. The liquidator may also exercise
powers without the court’s authority to:
– appoint a solicitor to assist him in his duties;
– compromise any debt due to the company which does not
exceed RM10,000;
– appoint an agent to do any business which the liquidator is

unable to do himself;
– raise any money required on the security of the company’s

assets;
– sell the company’s movable and immovable property.

These powers of liquidator in winding up by the court are
stipulated in Sch 12 of CA 2016 in:
– Pt I (under s 472) for powers exercisable without
authority; and
– Pt II (under s 486) for powers exercisable with authority.
• For the appointment of a special manager. The liquidator may

apply to the court for a special manager to be appointed if he is
satisfied that the nature of the estate or business of the company,
or the interests of the creditors or contributories generally, require
the appointment of a special manager other than himself. The
special manager will act during such time as the court directs with
such powers including any of the powers of a receiver or receiver
and manager as are entrusted to the liquidator by the court. The
special manager:
(a) shall give such security and account in such manner as the
court directs;
(b) shall receive such remuneration as is fixed by the court; and
(c) may at any time resign after giving not less than 30 days’
notice in writing to the liquidator, or on cause shown, be
removed by the court — s 499.
• Costs of winding up and insufficiency of assets. All costs,

charges and expenses properly incurred in the winding up,
including the remuneration of the liquidator shall be payable out of
the assets of the company in priority to all other claims — s 462.
Unless expressly directed to do so by the court, a liquidator shall
not be liable to incur any expense in relation to the winding up of
a company unless there are sufficient available assets.
However, on the application of a creditor or a contributory, the
court may direct a liquidator to incur a particular expense on the
condition that the creditor or contributory indemnifies the
liquidator in respect of the recovery of the amount expended and
if the court so directs, gives such security to secure the amount of
the indemnity as the Court thinks reasonable — s 519.
• For the liquidator’s six-monthly reports. Every liquidator must,

within 30 days after the expiration of the period of six months from
the date of his appointment and of every subsequent period of six
months and within 30 days after he ceases to be a liquidator, or
after obtaining an order of release, lodge with the Registrar and
with the Official Receiver, an account of the liquidator’s receipts
and payments and a statement of the position in the winding up
and verified by statutory declaration in a manner as may be
determined by the Registrar — s 514(1).
The e-form “Liquidator’s account of receipts and payments and
statements” in Schedule B of MyCoID is to be lodged with the
Registrar.
• For annual meeting of members and creditors. If the winding

up continues for more than one year, the liquidator shall summon:
(a) in the case of a members’ voluntary winding up, a meeting
of members of the company; and
(b) in the case of a creditors’ voluntary winding up, a meeting of

members of the company and the meeting of creditors,
at the end of the first year from the commencement of the winding
up and of each succeeding year or not more than three months
after the succeeding year, and shall lay before the meeting an
account of the acts of the liquidator and dealings and of the
conduct of the winding up during the preceding year. The
liquidator shall cause the notices of the meeting of creditors to be
delivered by post to the creditors simultaneously with the delivery
of the notices of the meeting of the company — s 458.
• For a final meeting and dissolution. As soon as the affairs of the

company are fully wound up, the liquidator shall prepare an
account showing how the winding up has been conducted and the
property of the company has been disposed of; and call for a
meeting of members of the company, or in the case of a creditor’s
voluntary winding up, a meeting of members of the company and
the creditors, for the purpose of laying before the meeting the
account and for giving any explanation. The meeting shall be
called by an advertisement published in one widely circulated
newspaper in Malaysia in the national language and one widely
circulated newspaper in Malaysia in the English language, which
the advertisement shall specify the time, place and object of the
meeting and shall be published at least 30 days before the
meeting. The liquidator shall lodge with the Registrar and with the
Official Receiver a return of the holding of the meeting and of its
date with a copy of the account attached to such return, within
seven days from the meeting.
The quorum at a meeting of the company shall be two members,
and at a meeting of the company and the creditors shall be two
members and two creditors. If a quorum is not present at the
meeting, the liquidator shall in lieu of the return mentioned, lodge
a return with the account attached, that the meeting was duly
summoned and that no quorum was present, and upon such a
return being lodged, the provisions of quorum is deemed met. As
to the lodging of the return, it shall be deemed to have been
complied with. Subsequently, on the expiration of three months
after the lodging of the return with the Registrar and with the
Official Receiver, the company shall be dissolved — s 459.
For the lodgement of final meeting, the e-form “Return by
liquidator relating to final meeting” in Schedule B of MyCoID is to
be lodged with the Registrar within seven days of the final
meeting.
• For auditing a liquidator’s account. The Official Receiver may

have any liquidation account audited by an approved company
auditor. For this purpose, the liquidator shall furnish the auditor
with such vouchers and information as the auditor requires, and
the auditor may at any time require the production of and inspect
any books or accounts kept by the liquidator. A copy of the
account or, if audited, a copy of the audited account shall be kept
by the liquidator and the copy shall be open to the inspection of
any creditor or of any person interested at the office of the
liquidator — s 514(2) and (3).
• For the priority of payments. The priority of payments to

creditors depends on whether they are a secured or unsecured
creditor, with the former holding priority. The priority in payment
in a winding up is as follows:
(a) firstly, the costs and expenses of the winding up including
the taxed costs of a petitioner payable under s 468, the
remuneration of the liquidator and the costs of any audit
carried out under s 514;
(b) secondly, all wages or salary, whether or not earned wholly

or in part by way of commission, including any amount
payable by way of allowance or reimbursement under any
contract of employment or award or agreement regulating
conditions of employment, of any employee not exceeding
RM15,000 or such other amount as may be prescribed
whether for time or piecework in respect of services rendered
by him to the company within a period of four months before
the commencement of the winding up;
(c) thirdly, all amounts due in respect of worker’s compensation

under any written law relating to worker’s compensation
accrued before the commencement of the winding up;
(d) fourthly, all remuneration payable to any employee in
respect of vacation leave, or in the case of his death to any
other person in his right, accrued in respect of any period
before the commencement of the winding up;
(e) fifthly, all amounts due in respect of contributions payable

during the twelve months next before the commencement of
the winding up by the company as the employer of any
person under any written law relating to employees social
security contribution and superannuation or provident funds
or under any scheme of superannuation or retirement benefit
which is an approved scheme under the federal law relating
to income tax; and
(f) sixthly, the amount of all federal tax assessed under any
written law before the date of the commencement of the
winding up or assessed at any time before the time fixed for
the proving of debts has expired.
The debts in each class specified above shall rank in the order
specified but debts of the same class shall rank pari passu and
shall be paid in full, unless the property of the company is
insufficient to meet the debts, in which case the payment shall be
reduced and the rate of reduction shall be in equal proportion: s
527(1) and (2).
• For other payments under contract. Where the company is

under a contract of insurance, entered into before the
commencement of the winding up, insured against liability to third
parties, then if any such liability is incurred by the company, either
before or after the commencement of the winding up, and an
amount in respect of that liability is or has been received by the
company or the liquidator from the insurer, the amount shall, after
deducting any expenses of or incidental to getting in the amount,
be paid by the liquidator to the third party in respect of whom the
liability was incurred to the extent necessary to discharge that
liability or any part of that liability remaining undischarged in
priority to all payments in respect of the debts referred to in s
527(1). Where in any winding up assets have been recovered
under an indemnity for costs of litigation given by certain
creditors, or have been protected or preserved by the payment of
moneys or the giving of indemnity by creditors, or where
expenses in relation to which a creditor has indemnified a
liquidator, have been recovered, the court may make such order
as it deems just with respect to the distribution of those assets
and the amount of those expenses so recovered with a view to
giving those creditors an advantage over others in consideration
of the risk run by the creditors in so doing: s 527(5) and (9).
Law: s 458, 459, 462, 479, 483(1), 484(3), 484(4), 499, 527(5),
527(9), 519, 514, 527(1), 527(2) and Sch 12 of CA 2016.
POWERS OF LIQUIDATORS
¶13-400 Source of powers
The liquidator is not a servant of the company. He assumes the

powers of the directors (unless in a members’ voluntary winding up,
the company reserves some powers for the directors). In most cases,
he is properly regarded as the company’s governing body (Hillman v
Crystal Bowl Amusements Ltd). The liquidator’s powers are vested in
him by common law and by CA 2016.
Common law powers
A liquidator may exercise powers as agent for the company. His acts
are those of the company acting through him and all the common law
principles of agency apply (Re Farrow’s Bank Ltd).
Statutory powers
Differences exist between the powers of the court-appointed liquidator
and the liquidator in a voluntary winding up (see ¶13-410 and
following). Statutory powers concerning court-appointed liquidators
are of two kinds: those which require authorisation by the court, by the
committee of inspection or by a creditors’ resolution before they may
be exercised (eg power to carry on the business) and those which do
not require any authorisation but may be exercised by the liquidator at
his own discretion (eg the power to sell).
In CA 2016, the powers of liquidator in a voluntary winding up is
stipulated in s 456, which states that the liquidator may exercise any
power and duty specified under Sch 11 of CA 2016 in a voluntary
winding up. (Schedule 11 of CA 2016 is reproduced in Appendix 13.3
at the end of this chapter.)
In a compulsory winding up, the powers of liquidator is provided in s
486 as follows:
• Where a company is being wound up by the court, the liquidator
may—
(a) without the authority of the court, exercise any of the
general powers specified in Pt I of Sch 12; and
(b) with the authority of the court or the committee of

inspection, exercise any of the powers specified in Pt II of
Sch 12.
• The liquidator’s power in a winding up by the court conferred by s

486 is subject to the control of the court and any creditor or
contributory may apply to the court with respect to any exercise or
proposed exercise of any of those powers.
Avoidance of dispositions of property or certain attachment, etc

The power conferred on a liquidator may relate to an exempt
disposition as provided in s 472 which provides as follows:
Subsection (1) states that any disposition of the property of the
company, other than an exempt disposition, including any transfer of
shares or alteration in the status of the members of the company
made after the presentation of the winding up petition shall, unless the
Court otherwise orders, be void.
Subsection (2) states that in sub-s (1), “exempt disposition” means a
disposition made by a liquidator, or by an interim liquidator of the
company in exercise of the power conferred on him under Pt I of Sch
12 or the rules that appointed him or an order of the court.
Subsection (3) states that any attachment, sequestration, distress or
execution put in force against the estate or effects of the company
after the presentation of the winding up petition shall be void.
Law: s 456, 472 and 486; Sch 11 and Sch 12 of CA 2016.
¶13-405 Restraint on exercise of power

The exercise of a liquidator’s powers is always subject to the control of
the court and any creditor or contributory may apply to the court
challenging the exercise or the proposed exercise of them.
If it is alleged that a liquidator has exceeded his powers (for example,
by selling an asset for what is claimed to be an inadequate
consideration), a heavy onus rests on the person alleging it (Hire
Purchase Furnishing Co Ltd v Richens). This is because the winding
up machinery imposes on the liquidator the responsibility for
exercising his powers properly and he is recognised by the court as
having both the qualifications and access to the information which
may be necessary in order to make the commercial decisions in the
winding up. The court will not interfere unless the liquidator has acted
in a manner in which no reasonable liquidator should have acted (Re
Peters, Ex parte Lloyd; Leon v York-o-Matic Ltd).
¶13-410 Carrying on business
The effect of voluntary winding up is that the company shall cease to

carry on its business from the commencement of the winding up,
except so far as is required in the opinion of the liquidator for the
beneficial winding up [s 442(1), CA 2016].
The court-appointed liquidator has the power to carry on the
company’s business, but it is a power which requires the authorisation
of the court, or the committee of inspection to carry on the business of
the company so far as is necessary for the beneficial winding up of the
company; but the authority is not necessary during the 180 days after
the date of the winding up order. This power is exercisable with
authority of the court and prescribed in Pt II of Sch 12 (s 486, CA
2016).
In this context, the word “necessary” means that it must be something
more than merely beneficial (Re Wreck Recovery & Salvage Co).
Provided the liquidator is bona fide and reasonably forms the opinion
that the carrying on of the business is necessary for the beneficial
winding up, then that opinion is normally accepted as sufficient by the
court, even though with the benefit of hindsight, the opinion is shown
by subsequent events to have been incorrect (Re Great Eastern
Electric Co Ltd).
Law: s 442, 486 and Pt II of Sch 12 of CA 2016.
¶13-415 Making calls on contributories

In a winding up by the court, the court is empowered to make calls on
all or any of the contributories for payment of the company’s debts and
liabilities and the costs, charges and expenses of the winding up. This
power may, by regulations or rules, be delegated to the liquidator as
an officer of the court but a liquidator must not make any call without
either special leave of the court or the sanction of the committee of
inspection.
In a voluntary winding up the power for the liquidator to make calls
may exercise the court’s power of making calls as prescribed in para 4
of Sch 11.
Law: s 456 and 496, para 4 of Eleventh Schedule of CA 2016.
¶13-420 Priority payments in full

The liquidator has the power to pay any class of creditors in full. This
power is subject to s 527 of CA 2016, which enumerates the priority
payments (see ¶13-375). By making the exercise of the power to pay
a debt a class of creditors subject to s 527, payment to creditors under
this power cannot be made over the requirement to pay the
preferential creditors.
In a creditor’s voluntary winding up, the grant of this power is subject
to the approval of the court or of the committee of inspection. In a
members’ voluntary winding up, the liquidator has a free hand to pay
debts proven because of the company’s solvency.
Law: s 527 para 1(b) of Pt II, Sch 12 of CA 2016.
¶13-425 Compromising and making creditor

arrangements
In a winding up by the court and a voluntary winding up, the
liquidator’s power to make a compromise or an arrangement with
creditors is subject to the same requirements as the power to
compromise debts. The power extends beyond creditors to persons:
• claiming to be creditors; or
• having or alleging to have any claim (present or future, certain or

contingent, ascertained or sounding only in damages) against the
company; or
• having or alleging to have any claim for which the company may
be rendered liable.
An unsecured creditor has successfully applied for the setting aside of

an order to convene a creditors’ meeting to approve a scheme of
arrangement. The unsecured creditor argued that the scheme
provided no safeguards to protect the interests of the unsecured
creditors. The High Court of Malaysia agreed (Sri-Hartamas
Development Sdn Bhd v MBF Finance Berhad).
Law: s 366, 369 and para 1(c) of Pt II, Sch 2 of CA 2016.
¶13-430 Compromising and recovering debts

The court appointed liquidator has the power to compromise debts
due to the company without the court’s authority as prescribed in para
(b), Pt I of Sch 12, provided the debt does not exceed RM10,000. The
liquidator’s exercise of power to make any compromise or
arrangement with creditors, or any calls and liabilities to calls where
the amount exceeds RM10,000 requires authorisation from the court
or the committee of inspection, as prescribed in Pt II of Sch 12 under
para (1)(c), (d) and (e).
In a members’ voluntary winding up, the exercise of the power of the
liquidator is with the approval of a special resolution, while in a
creditors’ voluntary winding up, the approval of the court and the
committee of inspection is required, and exercised under Sch 12 in the
winding up by the court.
Subject to the relevant approval, the liquidator may compromise any
calls and liabilities to calls, debts and liabilities capable of resulting in
debts and any claims (present or future, certain or contingent,
ascertained or sounding only in damages) subsisting or supposed to
subsist between the company and a contributory or other debtor or
person apprehending liability to the company. The liquidator cannot
delegate his power to compromise as agent (Rendall v Conroy).
In a winding up by the court and in a voluntary winding up the
liquidator also has power to prove in the bankruptcy of any
contributory or debtor and to take out representation of the estate of a
deceased contributory or debtor. The amount due by the deceased to
the company is deemed to be due to the liquidator himself for the
purpose of taking out letters of administration.
Law: s 456, 472(2) and 486 of CA 2016.
¶13-435 Bringing and defending legal proceedings

The liquidator has the power to institute legal proceedings to assist in
his function of protecting the property he is given the power to defend.
This power to bring or defend any action or other legal proceedings in
the name and on behalf of the company is prescribed in para (a) of Pt
I, Sch 12. The actual grant of power is not limited. In both a winding up
by the court and a voluntary winding up, the liquidator may bring or
defend any legal proceedings in the company’s name and on its
behalf. His powers extend to ratifying the proceedings brought in the
name of the company but without authority at the time before the
liquidation. Such ratification is actually ratification by the company
acting through the company (Alexander Ward & Co Ltd v Samyang
Navigation Co Ltd).
Law: s 472, Sch 12 of CA 2016.
¶13-440 Selling company property

The liquidator in a winding up by the court or in a voluntary winding up
has the power to sell all or any part of the company’s property, both
immovable and movable. He may do so by public auction, public
tender or private contract with power to transfer the whole immovable
and movable property and things to any person or company or to sell
the same in parcels. In most cases, prudence requires that the sale of
the company’s property be effected as quickly as possible. This power
is prescribed in para (c) of Pt I, Sch 12.
The liquidator may engage auctioneers, brokers and other agents and
remunerate them. Contracts for sale, conveyances and similar deeds
can be executed by the liquidator in the name of the company.
A liquidator can negotiate for the sale of an asset otherwise than for
cash (Re Mineral Securities Australia Ltd (in liq)). In a voluntary
winding up, special provision is made for the liquidator, with the
sanction of a special resolution, to accept shares, debentures, policies
or similar interests as consideration for the sale of the whole or part of
the business or property of the company.
Law: para (c) of Pt I, Sch 12 of CA 2016.
¶13-445 Executing documents

The liquidator may do all acts and execute all deeds, receipts and
other documents in the company’s name and on its behalf in both a
winding up by the court and a voluntary winding up. When necessary
for these purposes, he may also use the company’s common seal.
Law: para (d) of Pt I, Sch 12 of CA 2016.
¶13-450 Drawing and accepting cheques

In both winding up by the court and a voluntary winding up, the
liquidator may draw, accept, make and indorse any bill of exchange or
promissory note in the company’s name and on its behalf, with the
same effect with respect to the liability of the company as if the bill or
note had been drawn, accepted, made or indorsed by or on behalf of
the company in the course of its business..
Law: para (f) of Pt I, Sch 12 of CA 2016.
¶13-455 Borrowing on security
In a winding up by the court and in a voluntary winding up, the

liquidator may obtain credit on the security of the company’s property.
This power is subject to the rights of any secured creditors over the
property (Re Allied Glass Manufacturers Ltd)
Law: para (g) of Pt I, Sch 12 of CA 2016.
¶13-460 Convening meetings

The court-appointed liquidator has a statutory obligation to have
regard to any directions given by the creditors, the contributories or
the committee of inspection. The directions of the creditors or
contributories override the directions of the committee of inspection.
The liquidator may convene a general meeting of creditors or
contributories to ascertain the wishes of the creditors or contributories.
He is also under a statutory duty to convene meetings if so directed by
a resolution of the creditors or contributories or by a written request. In
the case of creditors, regard shall be had to the value of each
creditor’s debt. In the case of contributories, regard shall be had to the
number of votes conferred on each contributory by CA 2016 or the
constitution.
Law: s 521 of CA 2016.
¶13-465 Obtaining delivery of property

In a winding up by the court, the court may order any contributory,
trustee, receiver, banker, agent or officer of the company to pay,
deliver, convey, surrender or transfer to the liquidator or interim
liquidator forthwith or within such time as the court directs any money,
property, books and papers in his hands to which the company is
prima facie entitled. In a creditors’ voluntary winding up, the court may
require the payment, delivery or transfer of any money, property or
books in the hands of any contributory, trustee, receiver, banker,
agent or officer of the company to the liquidator; such money, property
or books being property to which the company is prima facie entitled.
Law: s 511 of CA 2016.
¶13-470 Access to company books and books kept by

liquidator
The liquidator has power to inspect the books and papers relevant to
the affairs of the company, at or after the start of the winding up. Every
liquidator must keep proper books and papers, making entries or
minutes of proceedings at meetings and of such other matters as are
prescribed. Any creditor or contributory may, subject to the control of
the court, personally or by his agent inspect the books and papers.
The records contained in book and papers that are relevant to the
affairs of the company at or subsequent to the company’s winding up
are taken to be prima facie evidence of the truth of all matters in
respect of the contributories and the company. When a company has
been wound up, the liquidator has to keep these books and papers for
five years from the date of the company’s dissolution. He may destroy
them at the end of that period. The liquidator may destroy the books
within the five-year period if:
• in a compulsory winding up, the court has ordered their
destruction;
• in a members’ voluntary winding up, the company by resolution

directs;
• in a creditors’ voluntary winding up, the committee of inspection or,

if there is no such committee, the creditors of the company direct.
The company or the liquidator shall not be responsible to any person
claiming to have interest in any book or paper destroyed in
accordance with this section.
Law: s 509 and 518 of CA 2016.
¶13-475 Incidental powers

The CA 2016 gives the liquidator power to do any other thing which is
necessary for winding up the affairs of the company and distributing
the property. This is regarded as a “mopping-up” provision, coming at
the end of the long list of powers which the liquidator is required to
exercise in connection with the administration of the particular
company’s affairs. It does not give more power than that (Re Phoenix
Oil and Transport Co Ltd (No 2)).
Liquidator’s right to recover in respect of certain sales to or by
company
This is stipulated in s 530 of CA 2016 as follows:
Subsection (1) states that where any property, business or
undertaking has been acquired by a company for a cash
consideration, the liquidator may recover any amount by which the
cash consideration for the acquisition exceeded the value of the
property, business or undertaking at the time of its acquisition from—
(a) a person who was at the time of the sale, a director of the
company or a person connected with a director; or
(b) a company of which, at the time of the sale, a person was a

director who was also a director of the first-mentioned company
or a person connected with a director.
Subsection (2) states that where any property, business or

undertaking has been sold by a company for a cash consideration, the
liquidator may recover any amount by which the value of the property,
business or undertaking exceeded the cash consideration at the time
of its sale from—
(a) a person who was at the time of the sale a director of the
company or a person connected with a director; or
(b) a company of which, at the time of the sale, a person was a

director who was also a director of the first-mentioned company
or a person connected with a director.
Subsection (3) states that the amount to be recovered in sub-s (1) or

(2) shall refer to the acquisition or sale, as the case may be, made
within a period of two years before—
(a) in the case of a winding up by Court, the presentation of the
winding up petition against the company; or
(b) in the case of a voluntary winding up, the passing of the

resolution to wind up the company.
Subsection (4) states that for the purposes of this section, the value of
the property, business or undertaking includes the value of any
goodwill or profits which might have been made from the business or
undertaking or similar considerations.
Subsection (5) states that in this section, “cash consideration”, in
relation to an acquisition or sale by a company, means consideration
for the acquisition or sale payable otherwise than by the issue of
shares in the company.
Law: 530 of CA 2016.
EFFECTS OF WINDING UP
¶13-500 Implications of winding up
The commencement of a winding up triggers off several events:

• It terminates the directors’ management and administrative
powers, and transfers their powers to the liquidator.
• It checks the disposition of company property except by the

liquidator.
• It determines the employment of staff (in a compulsory winding up
and not a voluntary winding up).
• It acts as a restraint on the initiation of civil process and the

execution of judgments.
• It voids share transfers unless they have court or liquidator

approval.
• It restricts the right of members to inspect the company books and

registers.
The main effect is that the company ceases from carrying on its
business except to the extent necessary to wind up that business. A
winding up order or a winding up resolution do not have the effect of
changing the corporate personality. There is no transfer from the
company itself to its liquidator, and the entity of the company
continuing with at least two directors and a secretary must be
maintained and complied with.
Effect of voluntary winding up
Section 442 of CA 2016 provides that the company shall cease to
carry on its business from the commencement of the voluntary
winding up except so far as is required in the opinion of the liquidator
for the beneficial winding up. Notwithstanding anything to the contrary
in the constitution, the corporate state and corporate powers of the
company shall continue until it is dissolved.
Any transfer of shares, not being a transfer made to or with the
sanction of the liquidator, and any alteration in the status of the
members made after the commencement of the winding up, shall be
void.
Effect of winding up order
Section 475 of CA 2016 provides that an order for winding up a
company shall operate in favour of all the creditors and contributories
of the company as if made on the joint petition of a creditor and of a
contributory.
Law: s 442 and 475 of CA 2016.
¶13-505 Company business
The company’s business may be continued by the liquidator, where
necessary, for the beneficial purpose of winding up (see ¶13-410).
The liquidator may apply to the court for the appointment of a special
manager with the purpose of carrying on the business of the company,
subject to whatever restrictions the court might impose. For the
appointment of special manager, see ¶13-375.
A company which has a winding up petition lodged against it may be
allowed to carry on business if it is probable that unsecured creditors
will benefit in the event of a liquidation (Re Triden Corporation).
From the commencement of a voluntary winding up, either by
members’ or creditors’, the company ceases to carry on its business
except so far as is, in the liquidator’s opinion, required for the
beneficial winding up of that business. The corporate status and
powers continue until the company is dissolved. Any transfer of
shares, not being a transfer made to or with the sanction of the
liquidator, and any alteration in the status of the members made after
the commencement of the winding up, shall be void.
Law: s 442 and 499 of CA 2016.
¶13-510 Directors’ powers

In a winding up by the court, the board becomes functus officio (that
is, an official who has discharged his duty) and its powers are
assumed by the liquidator (per Plowman J in Re Union Accident
Insurance Co Ltd).
The appointment of an interim liquidator has a similar result but,
notwithstanding such an appointment, the board has certain residuary
powers; for example, it can instruct solicitors to oppose a winding up
petition. The test of how far this residuary power extends may be to
enquire whether the power which the board is said to have lost, is one
which can be said to have been assumed by the interim liquidator (Re
Mawcon Ltd).
On the appointment of a liquidator in a members’ voluntary winding
up, all powers of the directors cease except so far as the liquidator or
the company in general meeting with the liquidator’s consent,
approves the continuance of those powers. Such approval does not
have to be immediate. An approval some 18 years after the
commencement of the liquidation has been held to be in order (Ladd’s
case). Normally the approval is not forthcoming but where the
business of the company is complex and technical, requiring specialist
knowledge, such approval may well be necessary to ensure an
effective winding up.
In a creditors’ voluntary winding up, CA 2016 provides for a similar
position. On the appointment of a liquidator, the powers of the
directors cease except so far as the committee of inspection or, if
there is no such committee, the creditors, approve the continuance of
those powers.
Law: s 445 of CA 2016.
¶13-515 Disposal of property

In a winding up by the court, any transfer or alienation of the
company’s property made after the making of the winding up order is
void, unless the court orders otherwise.
The basic legislative purpose of this provision is to prevent a
dissipation of company assets to the prejudice of the general body of
creditors by the prohibition of dispositions of those assets other than
by the liquidator. Accordingly, on making the winding up order, the
liquidator becomes the only person able to authorise the alienation by
the company of the property. By stipulating that dispositions otherwise
than on the liquidator’s authority are void, CA 2016 enables the
liquidator to recover such property from the person on whom it was
transferred.
The discretion given to the court by CA 2016 enables it to declare that
a particular disposition, for example one made by the company after
the commencement of the winding up is not void. As no particular
principles have been nominated by the legislature to govern the
exercise by the court of its discretion, it must be assumed that the
discretion has been left entirely at large, to be controlled only by those
general principles which apply to every kind of judicial discretion [Re
Steane’s (Bournemouth) Ltd]. Thus, in exercising this discretion the
court will decide what is just and fair in the circumstances of each
case, having special regard to the question of the good faith and
honest intentions of the persons concerned (Re Park Ward & Co Ltd;
Re AI Levy (Holdings) Ltd; Re J Leslie Engineers Co Ltd).
The powers of liquidators in winding up by the court are prescribed in
Sch 12 of CA 2016.
¶13-520 Contracts of employment

In a winding up by the court, the winding up order acts as a notice of
dismissal of all the company’s employees (Re Chapman’s case). The
liquidator may continue to employ them, or some of them, if he
continues the company’s business (Re English Joint Stock Bank, Ex
parte Harding).
The rule in Re Chapman’s case does not apply to the employees of a
company which goes into voluntary liquidation. Although there is some
authority for the view that the resolution for winding up automatically
puts an end to the employees’ service (Fowler v Commercial Timber
Co), the better view seems to be that the resolution does not
necessarily operate to determine all employment (Midland Counties
District Bank Ltd v Attwood; MacDowall’s case; Reigate v Union
Manufacturing Co).
In a case concerning the claim for damages brought by a governing
director, the court, accepting the existence of doubt on this point, was
relieved of making a decision because the liquidator had dispensed
with the services of the plaintiff. It seems, therefore, that if the
liquidator in a voluntary winding up wants to terminate the services of
employees, he must make a positive move in that regard (Re TN
Farrer Ltd).
¶13-525 Legal process
There are important rules which apply in respect of legal process

against a company being wound up. These are described in the
following paragraphs.
Commencement and continuation of process
Any time after the filing of the winding up application and before the
winding up order is made, the company itself or any creditor may, in
cases where any action or proceeding is pending, apply to the court to
stay or restrain further proceeding. In exercising its discretion, the
court may, in order to ensure equal distribution of assets, stay such
action or proceeding unless there are special circumstances (Bowkett
v Fuller’s United Electric Works Ltd; Re Rio Grande Do Sul Steamship
Co; Re a Company).
Where the winding up order has been made or an interim liquidator
has been appointed, no action or proceeding may be commenced or
proceeded with except with the court’s approval and in accordance
with terms that the court imposes. This rule applying to “action” or
“proceeding” is restricted to civil causes and the enforcement of civil
rights and does not apply to the prosecution of the company for
offences, for example, under CA 2016 (Re Keystone Knitting Mills
Trade Mark; Re Timberland Ltd and Equitable Forestry Services Pty
Ltd).
In a creditors’ voluntary winding up, no action or other proceeding may
be started or proceeded with except with the leave of the court and
subject to the terms imposed by the court. The rule applies only to civil
causes (Re Keystone Knitting Mills Trade Mark; Re Timberland Ltd
and Equitable Forestry Services Pty Ltd).
Execution restrained
In both a compulsory winding up and a creditors’ winding up, any
attachment, sequestration, distress or execution put in force against
the estate or effects of the company after the commencement of the
winding up, is void.
Executions which have been levied prior to both a compulsory or
voluntary winding up order are defeated unless the execution or
attachment is completed before the date of commencement of the
winding up. In such cases, the creditor cannot retain the benefit of the
execution against the liquidator. Note, however, that:
• if a creditor has had notice of a meeting being called at which a
resolution for voluntary winding up is to be proposed, the date on
which the creditor had notice shall be substituted for the date of
winding up;
• a person who buys, in good faith, any goods of a company on

which an execution has been levied from the bailiff shall acquire a
good title to them against the liquidator;
• the court may set aside the liquidator’s rights in favour of the
creditor subject to terms as the court thinks fit.
Doctrine of lis pendens

The application to the court for an order to wind up a company
constitutes a pending suit or a lis pendens in relation to real property.
The effect of this is that any purchaser or mortgagee involved in
dealing with the property at the time takes subject to and with notice of
the order.
Section 473 of CA 2016 provides that any petition for winding up a
company shall constitute a lis pendens within the meaning of any law
relating to the effect of a lis pendens upon purchasers or mortgagees.
Law: 473 of CA 2016.
¶13-530 Share transfers

The Act contains provisions designed to maintain the status quo in
respect of the members’ register. The provisions prevent the
shareholder from evading his possible liability to contribute in the
event of the company being wound up.
In a winding up by the court, the transfer of shares or the alteration of
the status of a member made after the commencement of the winding
up is void unless the court orders otherwise. Before the court gives
such leave it should be satisfied that there is some benefit to the
company. This discretion is exercised only when there are very good
reasons to do so (Re Onward Building Society).
In any voluntary winding up, the transfer of shares or the alteration of
the status of a member made after the passing of the winding up
resolution is void unless the transfer is to the liquidator or with the
liquidator’s sanction. In giving his approval to a share transfer the
liquidator’s main consideration has to be that the transfer is for the
company’s benefit (Cleve v Financial Corporation).
Section 457 of CA 2016 provides for the power of liquidator to accept
shares, etc, as consideration for sale of property of company in a
voluntary winding up as follows:
Subsection (1) states that where it is proposed that the whole or part
of the business or property of a company is to be transferred or sold to
another corporation, with the sanction of a special resolution of the
company conferring either a general authority on the liquidator or an
authority in respect of any particular arrangement, the liquidator of the
company may—
(a) receive in compensation or part compensation for the transfer or
sale of the shares, debentures, policies or other like interests in
the corporation for distribution among the members of the
company; or
(b) enter into any other arrangement whereby the members of the
company may, in lieu of receiving cash, shares, debentures,
policies or other like interests or in addition to the arrangement,
participate in the profits of or receive any other benefit from the
corporation, and any such transfer, sale or arrangement shall be
binding on the members of the company.
Subsection (2) states that if any member of the company expresses

his dissent on matters referred to in sub-s (1) in writing addressed to
the liquidator and delivered to the registered office of the liquidator
within seven days from the passing of the resolution, the member may
require the liquidator to either to abstain from carrying the resolution
into effect or to purchase his interest at a price to be determined by an
agreement or by arbitration in the manner provided under this section.
Subsection (3) states that if the liquidator elects to purchase the
member’s interest, the purchase money shall be paid before the
company is dissolved and be raised by the liquidator in such manner
as is determined by special resolution.
Subsection (4) states that a special resolution shall only be valid for
the purposes of this section if it is passed before or concurrently with a
resolution for voluntary winding up or for appointing liquidators, but if
an order for winding up the company by the court is made within a
year after the passing of the resolution, the resolution shall not be
valid unless sanctioned by the court.
Subsection (5) states that for the purposes of an arbitration under this
section, the Arbitration Act 2005 shall apply as if there were a
submission for reference to two arbitrators, one to be appointed by
each party and the appointment of an arbitrator may be made by the
liquidator, or if there is more than one liquidator then by any two or
more of the liquidators.
Subsection (6) states that for the purpose of sub-s (5), the Court may
give any directions necessary for the initiation and conduct of the
arbitration and any such directions shall be binding on the parties.
Subsection (7) states that in the case of a creditors’ voluntary winding
up, the powers of the liquidator under this section shall not be
exercised except with the approval of the court or the committee of
inspection.
Law: s 457 of CA 2016.
¶13-535 Right to inspect
In normal circumstances, members have a statutory right to inspect
the company’s books, records and registers. The order to wind up a
company denies those automatic rights. From that time the position is
that any book in the possession of the company may be inspected
only by creditors or contributories and then, only on an order of the
court.
The right to inspect will ordinarily be granted where good cause, and
not necessarily special circumstances, can be shown. It has been
granted where the company’s liabilities were extensive and its
business complex (Re Birmingham Banking Co, Ex parte Brinsley).
The court will not allow inspection to be made for any improper
purpose such as fishing for evidence (Re North Brazilian Sugar
Factories; Re West Devon Great Consols Mine).
Section 501 of CA 2016 provides that the court may make such order
for inspection of the books and papers of the company by creditors
and contributories as it thinks just, and any books and papers in the
possession of the company may be inspected by creditors or
contributories accordingly.
Creditors’ voluntary winding up
In a creditors’ voluntary winding up the custody of the company’s
assets, and thus its books and records, would be with the liquidator.
General rights of inspection of these records are displaced (Re Kent
Coalfields Syndicate Ltd). The rights of creditors and contributories to
inspect the records in the custody of the liquidator rests with the
liquidator who should exercise his power keeping in mind the attitude
of the courts in exercising their discretion in a compulsory winding up.
Section 509 provides that every liquidator shall keep proper books and
papers in which he shall cause to be made entries or minutes of
proceedings at meetings and of such other matters as are prescribed,
and any creditor or contributory may, subject to the control of the
court, personally or by his agent inspect the proper books and papers.
Liquidator’s books
The liquidator is required to keep books on proceedings of meetings
and other matters. Any creditor or contributory may inspect these
books either personally or by his agent subject to the control of the
court.
When a company has been wound up the liquidator shall retain the
books and papers that is relevant to the affairs of the company at or
subsequent to the commencement of the winding up for a period of
five years from the date of dissolution of the company and at the
expiration of that period determined by the final meeting for destroying
them.
Section 518 of CA 2016 provides for the books and papers of
company being wound up as follows:
Subsection (1) states that where a company is being wound up, all
books and papers of the company and of the liquidator that are
relevant to the affairs of the company at or subsequent to the
commencement of the winding up of the company shall be prima facie
evidence of the truth of all matters recorded in the books or papers in
respect of the contributories and the company.
Subsection (2) states that when a company has been wound up, the
liquidator shall retain the books and papers referred to in sub-s (1) for
a period of five years from the date of the dissolution of the company
and at the expiration of that period, may destroy the books and
papers.
Subsection (3) states that notwithstanding sub-s (2), the books and
papers referred to in sub-s (1) may be destroyed within a period of five
years after the dissolution of the company—
(a) in the case of a winding up by the court, in accordance with the
directions of the court;
(b) in the case of a members’ voluntary winding up, as the company

by resolution directs; and
(c) in the case of a creditors’ voluntary winding up, as the committee

of inspection, or, if there is no such committee, as the creditors of
the company direct.
Subsection (4) states that the company or the liquidator shall not be
responsible to any person claiming to have interest in any book or
paper destroyed in accordance with this section.
exceeding RM10,000.
Law: s 501, 509 and 518 of CA 2016.
SETTLING DEBTS AND LIABILITIES

¶13-600 Priority of payment of debts
In preparing his list of creditors, the liquidator is guided by the proofs

of debt submitted by the creditors which are received in accordance
with a notice. Briefly, the order of priorities of debts, under CA 2016, is
as follows:
Secured creditors and their rights and duties
A secured creditor is one who holds a mortgage, charge or lien over
the company’s property. The usual forms of a company’s secured
debts are real property mortgages, assignments of debts, debentures,
floating charges and liens such as the lien of a solicitor on the
documents of a company for his costs against the company (Re
Safety Explosives Ltd).
Section 524 of CA 2016 provides for the rights and duties of secured
creditors as follows:
Subsection (1) provides that a secured creditor may carry out the
following—
(a) realise a property subject to a charge, if entitled to do so;
(b) value the property subject to the charge and claim in the winding
up as an unsecured creditor for the balance due, if any; or
(c) surrender the charge to the liquidator for the general benefit of
creditors and claim in the winding up as an unsecured creditor for
the whole debt.
Subsection (2) provides that a secured creditor may exercise the

power referred to in para 1(a) whether or not the secured creditor has
exercised the power referred to in para 1(b).
Subsection (3) provides that a secured creditor who realises a
property subject to a charge under para 1(a)—
(i) may, unless the liquidator has accepted a valuation and claim by
the secured creditor under sub-s (7), claim as an unsecured
creditor for any balance due after deducting the net amount
realised;
(ii) shall account to the liquidator for any surplus remaining from the
net amount realised after the satisfaction of the debt, including
interest payable but which shall not exceed six months, in respect
of that debt up to the time of its satisfaction, and after making any
proper payments to the holder of any other charge over the
property subject to the charge.
Subsection (4) provides that if a secured creditor values the security

and claims as an unsecured creditor for the balance due under para
1(a) and (b), if any, the valuation and any claim shall be made in the
manner to be determined by the Registrar and—
(a) contain full particulars of the valuation and any claim;
(b) contain full particulars of the charge including the date on which
it was given; and
(c) identify any documents that substantiate the claim and the
charge.
Subsection (5) provides that the liquidator may require the production
of any document referred to in para 4(c).
Subsection (6) provides that where a claim is made by a secured
creditor under sub-s (4), the liquidator shall—
(a) accept the valuation and claim; or
(b) reject the valuation and claim in whole or in part, but—

(i) where a valuation and claim is rejected in whole or in part,
the creditor may make a revised valuation and claim within
fourteen days of receiving notice of the rejection; and
(ii) the liquidator may, if he subsequently considers that a

valuation and claim was wrongly rejected in whole or in part,
revoke or amend that decision.
Subsection (7) provides that where the liquidator—

(a) accepts a valuation and claim under para 6(a);
(b) accepts a revised valuation and claim under para 6(b)(i); or
(c) accepts a valuation and claim on revoking or amending a

decision to reject a claim under para 6(b)(ii),
the liquidator may, unless the secured creditor has realised the
property, at any time, redeem the security on payment of the
assessed value.
Subsection (8) provides that the liquidator may at any time, by notice
in writing, require a secured creditor, within 21 days from the receipt of
the notice, to—
(a) elect which of the powers referred to in sub-s (1) the creditor
wishes to exercise; and
(b) if the creditor elects to exercise the power referred to in para

1(b) or (c), exercise the power within that period.
Subsection (9) provides that a secured creditor on whom notice has

been served under sub-s (8)) who fails to comply with the notice is to
be taken as having surrendered the charge to the liquidator under
para 1(c) for the general benefit of creditors, and may claim in the
liquidation as an unsecured creditor for the whole debt.
Subsection (10) provides that a secured creditor who has surrendered
a charge under para 1(c) or who is taken as having surrendered a
charge under sub-s (9) may, with the leave of the court or the
liquidator and subject to such terms and conditions as the court or the
liquidator thinks fit, at any time before the liquidator has realised the
property charged—
(a) withdraw the surrender and rely on the charge; or
(b) submit a new claim under this section.
Subsection (11) provides that every person who—

(a) makes, or authorise the making of, a claim under sub-s (4) that
is false or misleading in a material particular knowing it to be false
or misleading; or
(b) omits, or authorise the omission, from a claim under that

subsection of any matter knowing that the omission makes the
claim false or misleading in a material particular,
commits an offence and shall, on conviction, be liable to a fine not less

than RM1 million or to imprisonment for a term not exceeding five
years or to both.
Preferential creditors4
Preferential creditors are paid in the following order:
(a) costs and expenses of winding up including the taxed costs of a
petitioner, the remuneration of the liquidator and audit costs;
(b) wages and salaries (whether or not earned wholly or in part by

way of commission) including any amount payable by way of
allowance or reimbursement under any contract of employment or
award or agreement regulating conditions of employment, of any
employee not exceeding RM1,500 or such other amount as may
be prescribed from time to time whether for time or piecework in
respect of services rendered by him to the company within a
period of four months before the commencement of the winding
up. This claim ranks prior to any claim under a floating charge
(Yip Hock Chye & Ors v Santan Engineering Pte Ltd (In
Receivership) & Anor);
(c) all amounts due in respect of worker’s compensation under any

written law relating to worker’s compensation accrued before the
commencement of winding up;
(d) all remuneration payable to the employee in respect of accrued

vacation leave or in the case of his death to any other person in
his right;
(e) all contributions payable under any written law relating to

employees’ superannuation or retirement benefit during the 12
months next before the commencement of the winding up;
(f) tax assessed before the commencement of the winding up or

before the expiry of the time fixed for proof of debts (RA bin TU &
Anor v DG of LR).
Unsecured creditors and their rights and duties

Section 525 of CA 2016 provides for the rights and duties of
unsecured creditors as follows:
• Every creditor shall prove his debt immediately after the making of
a winding up order.
• A debt may be proved by delivering or sending an affidavit through

the post in a prepaid letter to the liquidator. The affidavit shall—
(a) verify the debt;
(b) be made by the creditor himself or by any person authorised
by or on behalf of the creditor or his estate and if made by a
person so authorised, it shall state his authority and means of
knowledge;
(c) contain or refer to a statement of account showing the

particulars of the debt and shall specify the vouchers, if any,
by which the statement of account can be substantiated; and
(d) state whether the creditor is or is not a secured creditor.
• The liquidator may at any time call for the production of the
vouchers or books of account.
• A creditor shall bear the cost of proving the creditor’s debt unless
the court otherwise specially orders.
• Every creditor who has lodged a proof shall be entitled to see and
examine the proofs of other creditors at all reasonable times.
• A creditor proving his debt shall deduct from his debt all trade
discounts, but he shall not be compelled to deduct any discount
not exceeding 5% on the net amount of his claim, which he has
agreed to allow for payment in cash
Law: s 524 and 525 of CA 2016.
Footnotes
4 In most legal systems, some creditors are given priority
over ordinary creditors, either for the whole amount of their
claims or up to a certain value. In some legal systems,
preferential creditors take priority over all other creditors,
including creditors holding security, but more commonly,
the preferential creditors are only given priority over
unsecured creditors. Some legal systems operate a hybrid
approach, eg in the UK, preferential creditors have priority
over secured creditors whose security is in the nature of a
floating charge, but creditors with fixed security take ahead
of the preferential creditors generally. Preferential creditors
include employees entitled to arrears of wages, holiday pay,
redundancy pay, and other statutory payments up to a
certain limit. Revenue authorities may be included as well
since where a government is owed taxes, they are on the
top of the list to get paid.
¶13-605 Property available for distribution
One of the main reasons why a company is wound up, is to ensure the
just division among the creditors and members of the assets of the
company. The distinction between solvent and insolvent companies is
important. In the case of insolvent companies it is rarely the position
that any surplus remains after payment of the creditors for distribution
to the members. In either case, the principle remains that the assets
available for division and distribution comprise all property which
belongs to the company at the commencement of the winding up (Re
United Ports Insurance Co).
“Property” includes property, rights and powers of any description
(Nokes v Doncaster Amalgamated Collieries Ltd). It includes all real
and personal property of the company; books, papers and
correspondence and “choses in action” such as goodwill (Re Leas
Hotel Co; Salter v Leas Hotel Co). In Australia, it has been held to
include unpaid calls on shares (Re Australian Group & General
Assurance Co Ltd).
Property which is the subject of antecedent transactions, that is, those
within a period of two years of the commencement of the liquidation, is
also included within the company’s property. Such transactions are
void against the liquidator because they are dispositions giving a
creditor an undue preference or dispositions to defraud. Property of
the company which would otherwise be properly part of the company’s
property but which is burdened with onerous conditions, may be
disclaimed by the liquidator.
¶13-610 Charged property
Insolvent companies are prevented by CA 2016 from creating floating

charges to secure past debts. The main purpose of the provision is to
provide greater protection to unsecured creditors.
The provision states that a floating charge created within six months
before the commencement of the winding up becomes invalid if the
company is not solvent immediately after the creation of that charge;
except to the amount of any cash paid to the company at the time of
the charge’s creation (or subsequent to it) in consideration for the
giving of the charge (with interest on the amount at 5% per annum). A
charge has been held to have been created on the date of its
execution (Esberger & Sons Ltd v Capital and Counties Bank;
Transport & General Credit Corporation Ltd v Morgan). A company is
not solvent in this context unless it can pay its debts as they become
due [Re Patrick and Lyon Ltd; Expo International Pty Ltd (in liq) v
Chant].
Assume, for example, that a company owes money to its bank. To
secure the debt owing at the time and to secure fresh current
advances, the company executes debentures in the bank’s favour. If
the company goes into liquidation in the ensuing six months, the
debentures are invalid so far as they are issued for the past debt. So
far as they are issued for the fresh advance on current account, they
are valid only to the extent of the money actually owing on that
account at the date of the winding up (Re Hayman, Christy & Lilly Ltd).
The exception applies as follows. Money is advanced to the company.
The company later goes into liquidation within the six months’ period,
having taken the security of a debenture on such terms that part of the
money so advanced must be applied by the company in the discharge
of one of its existing liabilities, or in the acquisition of an asset which
the company does not at that moment own. It has been argued that
such a payment (with conditions attached) cannot be regarded as
coming within the exception as cash paid because cash paid in this
context is to be cash paid over without conditions (Re Matthew Ellis
Ltd). Such a rigid rule does not apply. The ultimate rule is whether the
transaction is one intended bona fide for the benefit of the company as
opposed to a transaction which is intended to benefit certain of the
company’s creditors (Re Destone Fabrics Ltd).
Effect of a floating charge
Section 529 of CA 2016 states that a floating charge on the
undertaking or property of the company created within six months of—
(a) the presentation of the winding up petition in the case of winding
up by court; or
(b) the passing of the resolution in the case of voluntary winding up,
shall be invalid except to the amount of any cash paid to the company
at the time of or subsequently to the creation of and in consideration
for the charge together with interest or return on that amount at the
rate of 5% per annum unless it is proved that the company is solvent
immediately after the creation of the charge.
Law: s 529 of CA 2016.
¶13-615 Antecedent transactions

One of the key rules of the law of bankruptcy is that upon the making
of the sequestration order, the bankruptcy is regarded as having
commenced at the time the earliest act of bankruptcy was committed
within the previous six months. The bankruptcy dates back to the
earliest act of bankruptcy within the six months preceding the order,
thereby catching within the net of the bankrupt’s estate property
assigned, etc., within the relation back period.
As companies do not commit acts of bankruptcy, the doctrine does not
apply to companies in liquidation. The Act, nonetheless, attacks
certain antecedent transactions by reference to bankruptcy law. The
purpose of the relevant provision is to render an undue preference
void against the liquidator. The provision specifically states that a
transfer, mortgage, delivery of goods, payment, execution or other act
relating to property which, if made by a natural person would be void
under the law of bankruptcy, is similarly void against the liquidator if
made by a company which is being wound up. Any transfer or
assignment by a company of all its property to trustees, for the benefit
of all its creditors is also void.
Translated into company law terms, the bankruptcy provisions render
void a conveyance or transfer of property, a charge on property, or a
payment made, or an obligation incurred, by a company which is
unable to pay its debts as they become due from its own funds, in
favour of a creditor. This has the effect of giving that creditor a
preference, priority or advantage over the other creditors, if the
transaction occurs within three months preceding:
• in the case of a compulsory winding up:
(a) the date of the presentation of the petition; or
(b) where before the presentation of the petition a resolution

has been passed by the company for voluntary winding up
the date upon which the resolution to wind up the company
voluntarily is passed,
whichever is the earlier;
• in the case of a voluntary winding up the date on which the

winding up is deemed to have commenced.
The provision does not affect the rights of a person who obtains his
title in good faith and for valuable consideration (see ¶13-625).
Law: s 293 of the CA 1965; s 47(1), 53 and 54, Bankruptcy Act 1967.
¶13-620 Undue preferences

Applying the bankruptcy provisions, a conveyance or transfer of
property, a charge on property, a payment already made, or a liability
actually incurred may be avoided as a preference in certain
circumstances:
• The person receiving the benefit of the transaction (that is the
person preferred) must be a creditor or a trustee of the creditor.
The broad test of whether a person is or is not a creditor is
whether he was entitled to prove in the winding up at the moment
before the transaction was completed (Court and Evans v
Hewett).
• The transaction must confer a preference, priority or advantage

over the other creditors. This is a question of fact and must be
judged by the result. There must be a discrimination between the
creditors of a final or ultimate character (Re Price (No 6),
Richardson v Commercial Banking Co of Sydney Ltd). An
intention on the part of the company to prefer is necessary (Abdul
Samad bin Haji Alias (liquidator of Palmservice Sdn Bhd) v Apex
Engineering Sdn Bhd, Lin Securities (Pte) (In Liquidation) & Ors v
Royal Trust Bank (Asia) Ltd).
• The company must be insolvent and unable to pay its debts as

they became due at the time of the transaction. To determine
whether the company is insolvent it is necessary to look at all the
surrounding circumstances, the nature of the company’s
business, the manner or method of payment of debts in that type
of business, the time when the proceeds of such a business will
be forthcoming, the manner or method of obtaining credit and the
nature of its assets (Re EC Smith, Ex parte Official Receiver).
Insolvency is not to be assumed simply from evidence of a
temporary lack of liquidity (Expo International Pty Ltd (in liq) v
Chant; Re Timbatec Pty Ltd). Lack of liquidity must be
distinguished from an endemic shortage of working capital (Hymix
Concrete Pty Ltd v Garrity). Statutory obligations like the payment
of insurance premiums for workmen’s compensation and payment
of taxes are debts of a company which cannot be ignored when
assessing the overall solvency of the company (State
Government Insurance Corporation & Ors v Pollock). The
question is not whether the debtor’s assets exceed his liabilities
as appeared in the books of the debtor, but whether there are
moneys presently available to the debtor which he is able to
realise in time, to meet the debts as they become due. It is not
sufficient that the assets may be realisable at some future date
after the debts have become due and payable (Lian Keow Sdn
Bhd & Anor v Overseas Credit Finance (M) Bhd & Ors).
• The act is done within six months preceding the date of the
resolution for voluntary winding up or the date of the presentation
of the petition (in the case of a winding up by the court); or the
commencement date of the winding up (in the case of a voluntary
winding up) (Lian Keow Sdn Bhd & Anor v Overseas Credit
Finance (M) Bhd & Ors).
Undue preference under CA 2016

In CA 2016, undue preference is stipulated in s 528 as follows:
Subsection (1) states that any transfer, mortgage, delivery of goods,
payment, execution or other act relating to property made or done by
or against a company which is unable to pay its debts, as the debts
become due, from its own money in favour of any creditor or any
person in trust for any creditor shall be deemed to have given such
creditor a preference over other creditors in the event of the company
being wound up on a winding up petition presented within six months
from the date of making or doing the same and every such act shall be
deemed fraudulent and void.
Subsection (2) states that the date of presentation of the winding up
petition shall be—
(a) in the case of winding up by Court—
(i) the date of the presentation of petition; or
(ii) where prior to the presentation of the petition a resolution

has been passed by the company for voluntary winding up,
the date upon which the resolution to wind up the company
voluntarily is passed; and
(b) in the case of voluntary winding up, the date upon which the
winding up is deemed by CA 2016 to have commenced.
Subsection (3) states that any transfer or assignment by a company of

all its property to the trustees for the benefit of all its creditors shall be
void.
Subsection (4) states that any transfer, mortgage, delivery of goods,
payment, execution or other act relating to property made or done by
or against a company in contravention of this section shall be void
except if it is in favour of any person dealing with the company for
valuable consideration and without any actual notice of the
contravention.
Subsection (5) states that for the purposes of this section, “valuable
consideration” means a consideration fair and reasonable money
value in relation to—
(a) the value of the property conveyed, assigned or transferred; or
(b) the known or reasonably anticipated benefits of the contract,

dealing or transaction.
Subsection (6) states that for the purposes of this section, “notice”
includes knowledge of inability to pay a debt by the company or any
winding up proceedings against the company or of the facts sufficient
to indicate to the person dealing with the wound up company.
Law: s 528 of CA 2016; s 47(1), 53 and 54, Bankruptcy Act 1967.
¶13-625 Exceptions to fraudulent disposition

The interests of a person who has purchased or acquired property in
good faith and for valuable consideration are not prejudiced by the
application of the undue preference principle.
In good faith
A person who takes the property, mortgage, etc. from a company
must do so without knowing (or having reason to suspect) that the
company from which he takes is insolvent and that the transaction has
the effect of conferring a preference on him over other creditors (Re
Weiss, Ex parte White v John Vicars & Co Ltd). For example, a bank
whose overdraft facilities to a company were substantially reduced
within a two-month period prior to the company’s being wound up, was
adjudged unable to retain the payments so received because it knew
that the company was overtrading; that the whole of its takings were
being deposited in the overdrawn account and that the company’s
trading debts were not being met. The bank was thus seen as having
accepted the reduction of its overdraft with at least a suspicion (if not
the positive knowledge) of the company’s insolvency and that the
reduction as it took place involved a preference, priority or advantage
of the bank over those other creditors whose debts were not being
met. In such circumstances, the bank could not be considered to be a
payee in good faith (Rees v Bank of New South Wales).
For valuable consideration
A purchaser for valuable consideration does not mean a purchase in
the strict sense of a contract of purchase and sale, but rather suggests
a person who in a commercial sense provides a quid pro quo (Re
Windle, Ex parte The Trustee of the Bankrupt v Windle). The
existence of a previous debt is not sufficient valuable consideration
(Wigan v English Scottish Law and Life Assurance Association; Re
Hyams, Official Receiver v Hyams). A forbearance to sue for a
previous debt is, however, sufficient valuable consideration. Such a
forbearance might be implied even though the stated consideration in
a settlement is ‘natural love and affection’ (Re Dundas, Moss v
Dundas).
¶13-630 Disclaimer by liquidator

A liquidator may, with the leave of the court or the committee of
inspection, disclaim any part of the property of the company that
consists of:
• any estate or interest in land which is burdened with onerous
covenants;
• shares in corporations;
• property that is unsaleable or is not readily saleable;
• unprofitable contracts.
This power may be exercised even though the liquidator has

endeavoured to sell or has taken possession of the property or has
exercised an act of ownership in relation to it.
The purpose of providing for disclaimer by a liquidator is to enable him
to rid the company of burdensome financial obligations which might
otherwise continue to the detriment of those interested in the
administration. It enables the liquidator to advance the prompt, orderly
and beneficial administration of the winding up of the company’s
affairs (Re Clarke, Ex parte East and West India Dock Co).
Disclaimer of onerous property
Subsection (1) provides that where any part of the property of a
company consists of—
(a) any estate or interest in land which is burdened with onerous
covenants;
(b) shares in corporations;
(c) unprofitable contracts; or
(d) any other property that is unsaleable, or not readily saleable, by

reason of its binding the possessor of the property to the
performance of any onerous act, or to the payment of any sum of
money,
the liquidator of the company, notwithstanding that he has

endeavoured to sell or has taken possession of the property or
exercised any act of ownership in relation to the property, may, with
the leave of the court or committee of inspection and subject to this
section, in writing signed by him, at any time within 12 months after
the commencement of the winding up or such extended period as is
allowed by the court, disclaim the property.
Subsection (2) provides that where any such property under sub-s (1)
has not come to the knowledge of the liquidator within 30 days from
the commencement of the winding up, the power of disclaiming may
be exercised at any time within 12 months after he has become aware
of the property or such extended period as is allowed by the court.
Subsection (3) provides that the disclaimer shall operate to determine,
as from the date of disclaimer, the rights, interest and liabilities of the
company and the property of the company in or in respect of the
property disclaimed, but shall not, except so far as is necessary for the
purpose of releasing the company and the property of the company
from liability, affect the rights or liabilities of any other person.
Subsection (4) provides that the Court or committee before or on
granting leave to disclaim may require such notices to be given to
persons interested, and impose such terms as a condition of granting
leave, and make such other order on the matter as the Court or
committee thinks just.
Subsection (5) provides that the liquidator shall not be entitled to
disclaim if an application in writing has been made to the liquidator by
any person interested in the property requiring him to decide whether
he will or will not disclaim, and the liquidator has not, within a period of
28 days from the receipt of the application or such further period as is
allowed by the court or committee, given notice to the applicant that
he intends to apply to the court or committee for leave to disclaim,
and, in the case of a contract, if the liquidator after such an application
in writing does not within that period or further period disclaim the
contract, the liquidator shall be deemed to have adopted it.
Subsection (6) provides that the court may, on the application of a
person who is, as against the liquidator, entitled to the benefit or
subject to the burden of a contract made with the company, make an
order rescinding the contract on such terms as to the payment by or to
either party of damages for the non-performance of the contract, or
otherwise as the court thinks just, and any damages payable under
the order to that person may be proved by him as a debt in the
winding up.
Subsection (7) provides that the court may, on the application of a
person who either—
(a) claims any interest in any disclaimed property; or
(b) is under any liability not discharged by CA 2016 in respect of any

disclaimed property,
and on hearing such persons as it thinks fit, make an order for the
vesting of the property in or the delivery of the property to any person
entitled to the property, or to whom it seems just that the property
should be delivered by way of compensation for such liability, or a
trustee for him, and on such terms as the court thinks just.
Subsection (8) provides that on the lodgement of an office copy of the
vesting order with the Registrar and with the Official Receiver and if
the order relates to land, with the appropriate authority concerned with
the recording or registration of dealings in that land, as the case
requires, the property comprised in the order shall vest accordingly in
the person named in the order in that behalf without any further
conveyance, transfer or assignment.
Subsection (9) provides that notwithstanding sub-s (7) and (8), where
the property disclaimed is of a leasehold nature, the court shall not
make a vesting order in favour of any person claiming under the
company, whether as under-lessee or as mortgagee, except upon the
terms of making that person—
(a) subject to the same liabilities and obligations as those to which
the company was subject under the lease in respect of the
property at the commencement of the winding up; or
(b) if the court thinks fit, subject only to the same liabilities and
obligations as if the lease had been assigned to that person at
that date,
and in either event, if the case so requires, as if the lease had

comprised only the property comprised in the vesting order, and any
mortgagee or under-lessee declining to accept a vesting order upon
those terms shall be excluded from all the interest in and the security
upon the property, and, if there is no person claiming under the
company who is willing to accept an order upon those terms, the court
may vest the estate and interest of the company in the property in any
person liable personally or in a representative character and either
alone or jointly with the company to perform the lessee’s covenants in
the lease, freed and discharged from all the estates, encumbrances
and interest created in the vesting order by the company.
Subsection (10) provides that any person aggrieved by the operation
of a disclaimer under this section shall be deemed to be a creditor of
the company to the amount of the grievances, and may accordingly
prove the amount as a debt in the winding up.
Law: s 531 of CA 2016.
¶13-635 Time limit for disclaiming
A disclaimer must be made within 12 months after the commencement

of the winding up or within 12 months after the property has come to
the liquidator’s knowledge. The court has the discretion to allow an
extension of time but in order to obtain the court’s indulgence in this
regard, the liquidator must give a good reason. The court will consider
whether the rights of other parties will be prejudiced by grant of an
extension of time (Re Price, Ex parte Foreman). If it appears to the
court (having regard to the property involved, its general nature and
the difficulties experienced in relation to its sale) that the liquidator has
acted reasonably and that an extension of time will not prejudice other
parties in such a way as might lead the court to refuse it, then the
extension will be granted [Re Middle Harbour Investments Ltd (in liq)].
Law: s 531(2) of CA 2016.
¶13-640 Effect of disclaimer

A disclaimer operates to determine, from the date of the disclaimer,
the rights, interests and liabilities of the company and the property of
the company in, or in respect of, the property disclaimed. It does not,
except so far as is necessary for the purpose of releasing the
company and its property from liability, affect the rights or liabilities of
any other person. The Act supports the view that the court should take
into consideration the effect of the disclaimer upon interested parties.
Case law also supports this view (Re Katherine et Cie; Re Nottingham
General Cemetery Co).
Note that the court has the power to make a vesting order of the
property in favour of:
• a person claiming an interest in the disclaimed property;
• a person who is under a liability not discharged by CA 2016 in

respect of disclaimed property.
Law: S 531(7) and (8) of CA 2016.
¶13-645 When disclaimer not permitted
A liquidator is not entitled to disclaim if:

• an application in writing has been made to him by any person
interested in the property requiring him to decide whether he will
or will not disclaim the property; and
• he has not, for a period of 28 days after the receipt of the

application (or an extended period allowed by the court or the
committee of inspection), given notice to the applicant that he
intends to apply for leave to disclaim.
In the case of contract, the liquidator will be deemed to have adopted

the contract if he does not within 28 days (or such extended period)
disclaim the contract.
Law: s 531(5) of CA 2016.
¶13-647 Rescission of contract

The court has the power to rescind outstanding contracts. An
application to the court may be made by a person who is, as against
the liquidator, entitled to the benefit or subject to the burden of a
contract made with the company. The court may rescind the contract
on such terms as to payment by or to either party of damages for the
non-performance of the contract, or otherwise, as the court thinks just.
Any damages payable under the court order may be proved as a debt
in the winding up.
Law: s 531(6) of CA 2016.
¶13-650 Person injured by disclaimer

Any person who is aggrieved by the operation of a disclaimer is
deemed to be a creditor of the company to the extent of any loss
suffered by reason of the disclaimer. He may prove the loss as a debt
in the winding up.
Law: s 531(10) of CA 2016.
DISTRIBUTION IN COMPULSORY WINDING UP

¶13-700 Distribution among members
In a compulsory winding up, the court is directed to adjust the rights of

the contributories among themselves and to distribute any surplus
among the persons entitled to it. The two actions are mandatory [Re
Phoenix Oil and Transport Co Ltd (No 2)]. The persons entitled are
determined according to the company’s Constitution, in the absence of
any such provision, pursuant to the general law, which imports a
presumption of equality.
In a compulsory liquidation of an insolvent company, more often than
not, there is no question of the distribution of a surplus because there
is no surplus. However, if in the case of a compulsory liquidation the
question of the distribution of the surplus assets does arise, the
liquidator is not entitled to distribute without an order of the court (Re
Phoenix Oil and Transport Co Ltd (No 2); Re Paragon Holdings Ltd).
Liquidator to settle a list of contributories
A liquidator of a company that is being wound up by the court shall
settle a list of contributories if it appears to him it is likely that—
(a) either
(i) there are persons liable as members or past members to
contribute to the company’s property on the winding up; or
(ii) there will be a surplus available for distribution; and
(b) it will be necessary to

(i) make calls on contributories; or
(ii) adjust the right of the contributories among themselves.
Law: s 489(2) of CA 2016.
¶13-710 Adjusting rights of contributories

The general rule is that after the payment of debts and expenses of a
winding up the surplus assets are divided and the losses are borne in
proportion to the nominal amounts of the shares and not in proportion
to the amounts paid up; provided there is nothing in the constitution
stating otherwise. Where some shareholders have paid up more than
others, the court adjusts the amounts by notional calls until all have
been paid up in the same proportion. The surplus arrived at is then
distributed in proportion to the nominal amount of capital held, subject
to the special terms on which the capital has been issued. This is the
principle of equality (Re Hodges’ Distillery Co, Ex parte Maude; Birch
v Cropper; King v Tait).
In a winding up, shareholders cannot be relieved of their statutory
liability to pay the amounts unpaid on their shares and to contribute to
the payment of the debts of the company, the expenses of the winding
up and the adjustment of the mutual rights of the shareholders. The
constitution may provide the manner in which those mutual rights are
to be adjusted and by those means provide for an adjustment which
excludes the need to resort to the uncalled capital for such a purpose
(King v Tait).
Law: s 489(2)(b) of CA 2016.
¶13-720 Whether amount raised by call forms part of

assets for distribution
Where the constitution does not support an argument that the
expressions “surplus assets” or “assets available for distribution”
exclude uncalled capital so as to make the capital paid up at the
commencement of the winding up the basis of distribution, it has been
held that calls for the purpose of adjusting members’ rights are
thereby excluded (Re Kinatan (Borneo) Rubber Ltd). The practical
consequence of such decisions has been that call moneys collected in
excess of the amount required for the payment of debts and expenses
were to be returned to the shareholders who paid the call (Re
Australian Group & General Assurance Co Ltd).
Power of court to make calls
The court may, either before or after it has ascertained the sufficiency
of the assets of the company make calls on all or any of the
contributories for the time being on the list of contributories, to the
extent of their liability, for payment of any money which the court
considers necessary—
• to satisfy the debts and liabilities of the company;
• to satisfy the costs, charges and expenses of winding up; and
• for the adjustment of the rights of the contributories among

themselves,
and make an order for payment of any calls so made. In making the
call, the court may take into consideration the probability that some of
the contributories may partly or wholly fail to pay the call.
Payment of money
The court may order any contributory, purchaser or other person from
whom money is due to the company to pay the amount due into the
bank named in the order to the account of the liquidator instead of to
the liquidator, and any such order may be enforced in the same
manner as if it had directed payment to the liquidator. All moneys and
securities paid or delivered into any bank shall be subject to the order
of the court.
Law: s 496 and 497(1) of CA 2016.
¶13-730 When constitution exclude principle of equality
Where the constitution provides that, in the case of surplus assets

being insufficient to repay the whole of the paid-up capital, the excess
is to be distributed among the members in proportion to the capital
paid, or which ought to have been paid, on the shares held by them
respectively at the commencement of the winding up, it has been held
that the expression ‘at the commencement of the winding up’ refers
only to the shares held, and not to the capital paid up; and hence that
the principle of equality was displaced only in relation to amounts over
and above what is required for returning the paid-up capital (Re
Sheppard’s Corn Malting Co, Ex parte Lowenfield; Re New Transvaal
Co; Re Anglo-Continental Corporation of Western Australia).
The above is a case, as no such provision is found in CA 2016.
DISTRIBUTION IN VOLUNTARY WINDING UP

¶13-750 Distribution among members
In a voluntary winding up the distribution of the assets among the

members is often the main reason for the whole exercise. In such
cases the liquidator, without any reference to the court, is charged
with the duty of distributing the assets. He also has the duty of
adjusting the rights of the contributories amongst themselves. The
assets are, after payment of all liabilities, distributed among the
members according to their interests in the company; unless the
constitution provide otherwise.
On a company being wound up under a members’ voluntary winding
up, each member becomes entitled to a share of the company’s
assets after all the liabilities have been discharged. The members do
not have vested in them any actual beneficial interest in the assets.
They have the right to compel the liquidator to administer those assets
in accordance with the law [Re Calgary and Edmonton Land Co Ltd (in
liq)]. A resolution that liquidators be authorised to set off amounts due
by shareholders (contributories) as against the distribution to be
declared by the liquidator is valid in law (Re Tay Koh Yat Bus Co Pte
Ltd).
Subject to the provisions of CA 2016 as to preferential payments, the
company’s property on its winding up is to be applied in satisfaction of
its liabilities equally and then is to be distributed among the members
according to their rights and interests in the company, unless the
Articles provide otherwise. Where the Articles do provide that the
surplus is not to be distributed among the members, the members
have no rights and interests in terms of the provision of CA 2016
(Liverpool and District Hospital for Diseases of the Heart v Attorney-
General).
If the assets available for distribution are sufficient, or more than
sufficient, to pay off the whole of the paid-up capital, they are applied
first in paying off such paid-up capital and the balance is distributed
among the members in proportion to the nominal amount of the share
capital held by them.
Distribution of property of company
Subject to the provisions relating to the preferential payments under
CA 2016, the property of a company on its winding up, shall be
applied equally in satisfaction of its liabilities, and shall subject to that
application, be distributed among the members according to their
rights and interests in the company, unless the constitution otherwise
provides.
Law: s 452 of CA 2016.
¶13-760 Presumption of equality

The main rule in the distribution of surplus assets is the presumption
of equality. That is, when all entitlements to dividend participation
have been met and all capital repaid, any surplus is distributable
among the members in proportion to the amount of their shares
regardless of the amount paid up on them. The fact that more is paid
up on some shares than on others is recognised by the repayment to
the holders of the former of the excess amount paid up on their shares
before any distribution is made to the holders of the other shares (Re
Driffield Gas Light Co). This rule of equality of participation in the
surplus assets is explained on the ground that the uncalled capital is
also an asset of the company and a valuable promise contributed by
the shareholder.
The rule is always subject to any provision in the Articles which might,
by way of example, provide that holders of certain classes of shares
are not to participate beyond the amount of their paid-up capital (Re
New Zealand Hardware Co Ltd). The presumption of equality may
also be displaced by the nature of a contributory’s claim. For example,
a shareholder who has paid calls in advance is entitled to repayment
of those calls, together with interest thereon to the date of repayment
and not the date of winding up (Re Exchange Drapery Co); this is in
priority to any repayment of capital on other shares of the same class
(Re Wakefield Rolling Stock Co).
¶13-770 Arrears in preferential dividends
The position with regard to arrears of dividends of preference

shareholders is that unless the dividends have already been declared,
it is not possible during the winding up to do so. Accordingly, there is
no entitlement (Re Odessa Waterworks Co Ltd; Re Crichton’s Oil Co;
Re W Foster & Son Ltd). Preference shareholders should participate
pro rata in surplus assets only when no provision whatsoever is made
for the respective entitlements of preference and ordinary
shareholders beyond a reference to the preferential dividend. In any
other case, the presumption is that the preference shareholders are
entitled to their preference dividend and a return of the paid-up capital
but to no further participation (Birch v Cropper; Scottish Insurance
Corporation Ltd v Wilsons and Clyde Coal Co Ltd; Re Isle of Thanet
Electricity Supply Co Ltd).
DEREGISTRATION OF A COMPANY (“STRIKE

OFF”)
¶13-800 Defunct company
When a company is defunct it may be struck off or deregistered. The

Registrar may send a letter to a company if it has reasonable cause to
believe that the company is not carrying on business or is not in
operation. If an answer to the contrary is not received within a month
from the date of the letter, the Registrar will publish a notice in the
Gazette and send to the company by registered post a notice that at
the expiration of three months from the date of that notice, the name
of the company will be struck off the register. The purpose of the
relevant provision is to enable the Registrar to strike off the register a
company which has in practice become defunct or has lapsed into
inaction (Tyman’s Ltd v Craven).
Power of Registrar to strike off company
Section 549 gives the Registrar the power to strike off a company if:
(a) the company is not carrying on business or is not in operation;
(b) the company has contravened CA 2016;
(c) the company is being used for unlawful purposes or any purpose
interest, public order, good order or morality in Malaysia;
(d) in any case where the company is being wound up and the
Registrar has reasonable cause to believe that—
(i) no liquidator is acting;
(ii) the affairs of the company are fully wound up and for a
period of six months the liquidator has been in default in
lodging any return he is required to make; or
(iii) the affairs of the company has been fully wound up under a
court winding up and there are no assets or the assets
available are not sufficient to pay the costs of obtaining an
order of the court dissolving the company.
The Registrar may also strike a company off the register either on his
own motion or upon an application by a director, member or liquidator
of the company (s 550, CA 2016).
Law: s 549 and 550 of CA 2016.
¶13-805 Notice of intention to strike off company

• Before the name of a company can be struck off from the register
under s 549, the Registrar may serve on the company or the
liquidator, a notice, stating that if an answer showing cause to the
contrary is not received within 30 days from the date of the notice,
a notification to the public will be published in the manner
determined by the Registrar, with a view to striking the name of
the company off the register.
• The Registrar may strike the name of the company off the register
after the expiration of 30 days of the publication of the notification
if he—
(a) receives a confirmation that the company is no longer
carrying on business or is not in operation;
(b) receives no reply from the company to the notice;
(c) receives no objection to the notice and public notification; or
(d) is not satisfied with the reasons as to why the company

should not be struck off.
• Upon publication in the Gazette by the Registrar that the name of

the company has been struck off, the company shall be dissolved.
• A notice to be sent under this section to a liquidator may sent to
the liquidator at his last known place of business; and a letter or
notice to be sent to a company may sent to the company at its
registered office or, if no office has been registered, to an officer
of the company, or if there is no officer of the company whose
name and address are known to the Registrar, may be sent to
each of the persons who formed the company, addressed to him
at the last known address.
Objection to striking off

• Where a notice of intention to strike off a company from the
Register is received, any person may, together with the payment
of a prescribed fee, lodge with the Registrar, within 30 days from
the date specified in the notice, an objection to the striking off on
any of the following grounds:
(a) that the company is still carrying on business or there is
other reason for it to continue in existence;
(b) that the company is a party to legal proceedings;
(c) that the company is in receivership or liquidation, or both;
(d) that the person is a creditor or a member or a person who

has an undischarged claim against the company;
(e) that the person believes that there exists, and intends to
pursue, a right of action on behalf of the company under Div
6 (“Conversion of Company Status”) of Pt II (“Formation and
Adminstration of Companies”); or
(f) that, for any other reason, it would not be just and equitable
to remove the company from the register.
• For the purposes of para (d) above—

(a) a claim by a creditor against a company is not an
undischarged claim if—
(i) the claim has been paid in full; or
(ii) the claim has been paid in full or in part by a receiver or

a liquidator in the course of a completed receivership or
liquidation; or
(iii) a receiver or a liquidator has notified the creditor that

the assets of the company are not sufficient to enable
any payment to be made to the creditor; and
(b) a claim by a member or any other person against a

company is not an undischarged claim if—
(i) payment has been made to the shareholder or that
person in accordance with a right under the constitution
or CA 2016 to receive or share in the company’s surplus
assets; or
(ii) a receiver or liquidator has notified the member or that

person that the company has no surplus assets.
• The Registrar shall proceed with the striking off if the objection is
withdrawn, or if the facts of the objection are incorrect, or if the
objection is frivolous and vexatious.
• The Registrar shall send a notice to the objector and the company
if he decides to suspend or to continue with the process of striking
off the company.
An objection to the striking off a company done by lodging the e-form

“Notice of intention to object the striking off of a company” in Schedule
B of MyCoID with the Registrar and paying a fee of RM300, per reg
8(28) of Companies Regulations 2017.
Withdrawal of striking off
The application to strike off a company may be withdrawn by the
applicant by lodging a notice of withdrawal with the Registrar. For this
purpose, the e-form “Notice to withdraw striking off application” in
Schedule B of MyCoID shall be lodged with the Registrar together with
the prescribed fee of RM500.
Law: s 551, 552 and 553 of CA 2016; reg 28(29) of Companies
Regulations 2017.
¶13-807 The effect of striking off

Section 554(1) states that where a company is struck off from the
register under s 549 (see ¶13-801), the company shall be dissolved,
but—
(a) the liability, if any, of every director or officer and member of the
company continues and may be enforced as if the company had
not been dissolved; and
(b) nothing in s 550 (“Application to strike off company”) shall affect

the power of the court to wind up a company, the name of which
has been struck off from the register provided that there is proof
that the company has a property which can be realised.
Where the court has issued a winding up order, the liquidator shall
only be required to discover and realise any assets of the company.
Law: s 554 of CA 2016.
¶13-820 Reinstatement of a deregistered company

A company that has been deregistered as a defunct company may be
reinstated. A person who is aggrieved by the cancellation of a
company’s name from the register may apply for it to be reinstated.
The application must be done within seven years of the striking off and
the court must be satisfied that the company was, at the time of
striking off, carrying on business or in operation. Alternatively, the
court must be satisfied that it is just that the name of the company be
restored to the register and upon an office copy of the order being
lodged with the Registrar, the company shall be deemed to have
continued in existence as if its name had not been struck off and the
court may order such directions and provisions for placing the
company and all other persons in the same position as nearly as if the
name of the company had not been struck off.
A person aggrieved in this context means a person who has suffered
some sort of legal grievance. The term “grievance” connotes
something more than a dissatisfied person (Ealing Corporation v
Jones), a mere busybody (Attorney-General for Gambia v N’Jie) or an
officious interloper (Re New Timbiqui Gold Mines Ltd).
Power of court to reinstate a struck off company into register
• Any person who is aggrieved by the decision of the Registrar to
strike off the company may, within seven years after the name of
the company has been struck off, apply to the court to reinstate
the name of the company into the register.
• If the court is satisfied that the company was at the time of the
striking off, carrying on business or in operation or otherwise that
it is just that the name of the company be reinstated in the
register, the court may order that—
(a) the name of the company be reinstated; and
(b) give such directions and make such provisions as seem just
for placing the company and all other persons in the same
position as nearly as may be as if the name of the company
had not been struck off.
• Upon lodgement of an office copy of the order with the Registrar,

the company shall be deemed to have continued in existence as if
its name had not been struck off.
Law: s 555 of CA 2016.
¶13-830 Management of assets of dissolved companies

Power of Registrar to represent dissolved company in certain
circumstances
• Where after a company has been dissolved, and the Registrar
finds that the company is legally or equitably bound to carry out
some dealing, transaction or matter, the Registrar may represent
the dissolved company or its liquidator to do or cause any such
act to be done.
• The Registrar may execute or sign any relevant instrument or

document stating that he has done so under s 556, and the
execution or signature shall have the same force, validity and
effect as if the company, if existing, had duly executed such
instrument or document.
Outstanding assets of dissolved or struck off company to vest in

Registrar
• Where after a company has been dissolved, there remains any
outstanding property, movable or immovable, including things in
action and whether within or outside Malaysia which was vested
in the company or to which it was entitled, or over which it had a
disposing power at the time it was dissolved—
(a) was vested in the company;
(b) the company entitled to it; or
(c) the company had a disposing power,
but which was not got in, realised upon or otherwise disposed of
or dealt with by the company or its liquidator before the
dissolution, the property, except called and uncalled capital, shall
be vested in the Registrar for all the estate and interest, legal or
equitable, of the company or its liquidator at the date the
company was dissolved, together with all claims, rights and
remedies which the company or its liquidator had at that time.
• For the purposes of the above, where any claim, right or remedy of
the liquidator may, under CA 2016, be made, exercised or availed
of only with the approval or concurrence of the court or some
other person, the Registrar may make, exercise or avail himself of
that claim, right or remedy without that approval or concurrence.
Disposal of outstanding interests in property

• If the Registrar is satisfied that he is vested under s 557 with any
estate or interest in property of the dissolved company, whether
solely or together with any other person, of a beneficial nature
and not merely held in trust, the Registrar may sell or otherwise
dispose of or deal with such estate or interest or any part of the
estate or interest in property as he deems fit.
• The Registrar may sell, dispose of or deal with the property either
solely or in concurrence with any other person in such manner for
such consideration by public auction, public tender or private
contract upon such terms and conditions as he thinks fit, with
power to rescind any contract and resell or otherwise dispose of
or deal with such property as he thinks expedient and may make,
execute, sign and give such contracts, instruments and
documents as he thinks necessary.
• The Registrar shall be remunerated by the commission whether by

way of percentage or otherwise, as prescribed.
• The moneys received by the Registrar in the exercise of any of the

powers conferred on him shall be applied in defraying all costs,
expenses, commission and fees incidental to the dissolution and
subsequently to any authorised payment, and the surplus, if any,
shall be dealt with as if they were unclaimed moneys under the
laws relating to unclaimed moneys.
Liability of Registrar and Government as to property vested in

Registrar
• The property vested in the Registrar shall be liable and subject to
all charges, claims and liabilities imposed thereon or affecting the
property by reason of any statutory provision as to rates, taxes,
charges or any other matter or thing to which the property would
have been liable or subject had the property continued in the
possession, ownership or occupation of the company.
• Notwithstanding above, there shall not be imposed on the

Registrar or the Government any duty, obligation or liability
whatsoever to do or suffer any act or thing required by any such
statutory provision to be done or suffered by the owner or
occupier other than the satisfaction or payment of any such
charges, claims or liabilities out of the assets of the company so
far as the charges, claims or liabilities are in the opinion of the
Registrar properly available for and applicable to the payment.
Accounts kept by Registrar

• The Registrar shall—
(a) record in the register a statement of any property coming to
his hand or under his control or to his knowledge vested in
him and of his dealings;
(b) keep accounts of all moneys arising and of how the moneys
have been disposed of; and
(c) keep all accounts, vouchers, receipts and papers relating to

the property and moneys.
• The Auditor General shall have all the powers in respect of those
accounts as are conferred upon him by any Act relating to audit of
public accounts.
Law: s 556, 557, 558, 559 and 560 of CA 2016.

1. What are the different types of winding up procedures permitted

under the Companies Act 2016?
2. In a members’ voluntary winding up, what is meant by

“Declaration of solvency”? Explain.
3. What are the similarities and differences between a liquidator and

a receiver?
4. What are the statutory duties of a liquidator?
5. State and explain five (5) different circumstances, amongst

others, under s 465 of the Companies Act 2016 whereby a
company may be wound up by the court.
¶13-1001 Appendix 13.1:
Tenth Schedule
[Subsection 450(4)]
COMMITTEE OF INSPECTION
Appointment of committee of inspection in winding up by Court
1. The liquidator may, and shall if requested by any creditor or
contributory, summon separate meetings of the creditors and
contributories for the purpose of determining whether or not the
creditors or contributories require the appointment of a committee of
inspection to act with the liquidator, and if so elect members of the
committee.
2. If there is a difference between the determination of the meetings of
the creditors and contributories, the Court shall decide the difference
and make such order as the Court thinks fit.
Appointment of committee of inspection in voluntary winding up
3. The creditors at the meeting summoned under section 447 or 449
or at any subsequent meeting may, if the creditors think fit, appoint a
committee of inspection consisting of not more than five persons,
whether creditors or not and if such a committee is appointed the
company may, either at the meeting at which the resolution for
voluntary winding up is passed or at any time subsequently after the
resolution for winding up is passed in a general meeting, appoint any
not more than five persons as the company thinks fit to act as
members of the committee.
4. Notwithstanding paragraph 3, the creditors may, if the creditors
think fit, resolve that all or any of the persons appointed by the
company ought not to be a member of the committee of inspection
and if the creditors resolve as such the person mentioned in the
resolution shall not, unless the Court otherwise directs, act as member
of the committee, and on any application to the Court under this
paragraph the Court may, if the Court thinks fit, appoint other persons
to act as a member in place of the person mentioned in the resolution.
Constitution of committee
5. The committee of inspection shall consist of creditors or
contributories of the company or persons holding—
(a) general powers of attorney from creditors or contributories; or
(b) special authority from creditors or contributories, to act on such a

committee, appointed in a meeting of creditors and contributories
in such proportions as are agreed or in case of difference as are
determined by the Court.
Proceedings
6. The committee shall meet at such times and places as the
committee from time to time appoint, and the liquidator or any member
of the committee may also call a meeting of the committee as the
liquidator or the member thinks necessary.
7. The committee may act by a majority of the members present at a
meeting, but shall not act unless a majority of the committee is
present.
Resignation and removal of member
8. A member of the committee may resign by notice in writing signed
by him and delivered to the liquidator.
9. A member of the committee may be removed by an ordinary
resolution at a meeting of creditors, if he represents creditors, or of
contributories, if he represents contributories, of which meeting seven
days’ notice has been given stating the object of the meeting.
Vacation of office
10. If a member of the committee becomes bankrupt or assigns his
estate for the benefit of his creditors or makes an arrangement with
his creditors under any written law relating to bankruptcy or is absent
from five consecutive meetings of the committee without the leave of
those members who together with himself represent the creditors or
contributories, as the case may be, his office shall become vacant.
Vacancy
11. A vacancy in the committee shall be filled through an appointment
by the committee of the same or another creditor or contributory or
person holding a general power or special authority as specified in
paragraph 5.
12. The liquidator, may at any time of his own motion and shall, within
seven days from a request in writing of a creditor or contributory,
summon a meeting of creditors or of contributories, as the case may
be, to consider any appointment made under paragraph 11 and the
meeting may confirm or revoke the appointment and appoint another
creditor or contributory or person holding a general power or special
authority as specified in paragraph 5, as the case may be, in his
stead.
13. Notwithstanding any vacancy in the committee, the continuing
members may act if there are at least two continuing members.
¶13-1002 Appendix 13.2:

E-forms in MyCoID relevant to voluntary winding up
Schedule B —
Section Form When to file

in CA
2016
443 Declaration of solvency (by After board
directors) meeting
439(2)(a) Notice of resolution (members’ After general
winding up) meeting
440(1) Statutory declaration of inability of Before holding
company to continue business and members’ and
that meeting of the company and creditors’ meeting
creditors have been summoned
447(4) Notice of holding of meeting of —
creditors
439(2)(a) Notice of resolution (creditors’ Within 7 days from
winding up) passing resolution
513(1) Notice of appointment and address Within 14 days of
of liquidator (creditors’ winding up) date of change
513(1) Notice of appointment and address Within 14 days of
of liquidator (voluntary winding up) date of change
513(1) Notice of change of liquidator’s Within 14 days of
address date of change
513(1) Notice by liquidator of resignation or Within 14 days of
removal from office date of change
514(1) Liquidator’s account of receipts and Every 6 months,
payments and statements within 30 days
459(3) Return by liquidator relating to final Within 7 days from
meeting date of final
meeting
491 Orders of release of dissolution Within 14 days of
(release) date of release
491 Orders of release of dissolution Within 14 days of

order
It is advisable to download and lodge the above e-forms via the

CCM’s MyCoID electronic platform.
¶13-1003 Appendix 13.3:
Eleventh Schedule
[Section 456]
POWERS OF LIQUIDATOR IN VOLUNTARY WINDING UP
1. The liquidator may in the case of a members’ voluntary winding
up, with the approval of a special resolution of the company and,
in the case of a creditors’ voluntary winding up, with the approval
of the Court or the committee of inspection, exercise any of the
powers given to a liquidator under the Twelfth Schedule in a
winding up by the Court.
2. The liquidator may exercise any of the other powers by this Act
given to the liquidator in a winding up by the Court.
3. The liquidator may exercise the power of the Court under this Act
of settling a list of contributories, and the list of contributories shall
be prima facie evidence of the liabilities of the persons named in
the list as contributories.
4. The liquidator may exercise the power of the Court of making

calls or summon general meetings of the company for the
purpose of obtaining the sanction of the company by special
resolution in respect of any matter or for any other purpose as the
liquidator thinks fit.
5. The liquidator may pay the debts of the company and adjust the
rights of the contributories among themselves.
6. When several liquidators are appointed, any power given by this

Act may be exercised by one or more of the liquidators as is
determined at the time of their appointment, or in the absence of
such determination by at least two (2) of the liquidators.
¶13-1004 Appendix 13.4:

Twelfth Schedule
POWERS OF LIQUIDATOR IN WINDING UP BY COURT
PART I
[Section 472]
Powers exercisable without authority
The liquidator may—
(a) bring or defend any action or other legal proceedings in the
name and on behalf of the company;
(b) compromise any debt due to the company other than calls and
liabilities for calls and a debt where the amount claimed by the
company to be due to the company does not exceed ten
thousand ringgit;
(c) sell the immovable and movable property and things in action of
the company by public auction, public tender or private contract
with power to transfer the whole immovable and movable property
and things to any person or company or to sell the same in
parcels;
(d) do all acts and execute in the name and on behalf of the
company all deeds, receipts and other documents and for that
purpose use when necessary, the company’s seal;
(e) prove rank and claim in the bankruptcy of any contributory or

debtor for any balance against his estate, and receive dividends
in the bankruptcy in respect of that balance as a separate debt
due from the bankrupt and rateably with the other separate
creditors;
(f) draw, accept, make and indorse any bill of exchange or

promissory note in the name and on behalf of the company with
the same effect with respect to the liability of the company as if
the bill or note had been drawn, accepted, made or indorsed by or
on behalf of the company in the course of its business;
(g) raise on the security of the assets of the company any money
requisite;
(h) take out letters of administration of the estate of any deceased

contributory or debtor, and do any other act necessary for
obtaining payment of any money due from a contributory or
debtor or his estate which cannot be conveniently done in the
name of the company, and in all such cases the money due shall,
for the purposes of enabling the liquidator to take out the letters of
administration or recover the money, be deemed due to the
liquidator;
(i) make any payment as necessary in carrying on the affairs of the

company in its ordinary course of business including payment of
utility bills, statutory fees and all other such payments;
(j) appoint an agent to do any business which the liquidator is

unable to do;
(k) appoint an advocate to assist him in his duties; and
(l) do all such other things as are necessary for winding up the
affairs of the company and distributing its assets.
Part II
[Section 486]
Powers exercisable with authority
1. The liquidator may, with the authority either of the Court or of the
committee of inspection—
(a) carry on the business of the company so far as is necessary
for the beneficial winding up of the company, but the
authority shall not be necessary to so carry on the business
during the one hundred and eighty days after the date of the
winding up order;
(b) subject to the priorities under section 527, pay any class of
creditors in full;
(c) make any compromise or arrangement with creditors or

persons claiming to be creditors or having or alleging
themselves to have any claim, present or future, certain or
contingent, ascertained or sounding only in damages against
the company, or where the company may be rendered liable;
(d) compromise any calls and liabilities to calls, debts and

liabilities capable of resulting in debts and any claims,
present or future, certain or contingent, ascertained or
sounding only in damages subsisting or supposed to subsist
between the company and a contributory or other debtor or
person apprehending liability to the company, and all
questions in any way relating to or affecting the assets or the
winding up of the company, on such terms as are agreed,
and take any security for the discharge of any such call, debt,
liability or claim, and give a complete discharge in respect of
the call, debt, liability or claim; and
(e) compromise any debt due to the company other than calls
and liabilities for calls and a debt where the amount claimed
by the company to be due to the company exceeds ten
thousand ringgit.
2. The liquidator may apply to the Court or the committee of

inspection for the authority given for the purpose of subparagraph
1(e) without additional approval provided that the debts referred
to in that paragraph does not exceed fifty thousand ringgit.
CHAPTER 14:
REGULATORY OBLIGATIONS
OF LISTED COMPANIES
The Malaysian Stock Exchange ¶14-000
Listing on Bursa Malaysia ¶14-200
Corporate disclosures ¶14-300
Immediate disclosure requirements ¶14-400
Directors’ disclosures ¶14-600
Periodic disclosure obligations ¶14-650
Disciplinary actions by Bursa Malaysia ¶14-700
Take-overs, mergers and schemes of arrangement ¶14-750
Appendix 14.1: Schedule 5, CMSA 2007 ¶14-1001
Appendix 14.2: Schedule 6, CMSA 2007 ¶14-1002
THE MALAYSIAN STOCK EXCHANGE

¶14-000 The Stock Exchange
Some public companies with share capital may elect to have their
securities listed for quotation on a stock market conducted by Bursa
Securities Malaysia Berhad (Bursa Malaysia)1. Listing means that the
company’s securities (shares, loan stocks, options and derivatives)
can be traded by investors through the stock market. By virtue of their
listed status, the public company is imposed with additional
requirements to be complied with under the Bursa Malaysia Listing
Requirements (BMLR). The purpose of the BMLR is to ensure the
capital market is traded with transparency and information is given on
a timely, relevant and material manner. Directors of listed companies
have a much higher level of compliance in their disclosures of share
interests, participatory interests, share dealings and accountability, as
well as ensuring that corporate governance practices are in line with
the Malaysian Code on Corporate Governance. The listed company
has also to adhere to stricter and higher standards of management
and disclosure of information on a regular and timely basis.
Arising from the demutualisation of the Kuala Lumpur Stock Exchange
(KLSE) from a non-profit “mutual” entity limited by guarantee of its
members, into a public company limited by shares, KLSE has vested
and transferred its stock exchange business to wholly-owned
subsidiary Bursa Malaysia Securities Berhad.
On 5 January 2004, the demutualised KLSE Berhad was approved as
an exchange holding company known as Bursa Malaysia Berhad
(Bursa Malaysia). The listing of Bursa Malaysia facilitates greater
diversity of the Bursa Malaysia ownership, thus allowing for enhanced
public representation in the governance of the demutualised
Exchange. Upon listing, Bursa Malaysia will have a wider capital base
with which to expand and further develop its scope and scale of
operations. Bursa Malaysia would also be subject to high levels of
transparency and accountability, to the benefit of its stakeholders.
Footnotes
1 Previously known as the Kuala Lumpur Stock Exchange
(KLSE).
¶14-010 Bursa Malaysia Berhad
Bursa Malaysia is the frontline regulator of the Malaysian capital

market and has the duty to maintain a fair and orderly market in the
securities and derivatives that are traded through its facilities. As an
integrated exchange, Bursa Malaysia also has the duty to ensure
orderly dealings in the securities deposited with Bursa Malaysia, and
orderly, clear and efficient clearing and settlement arrangements for
transactions cleared and settled through its facilities. In furtherance of
these duties, Bursa Malaysia has put in place a comprehensive
regulatory and supervisory framework to regulate the market and its
participants, including the listed issuers and their directors and
advisers, Participating Organisations, Trading Participants, Clearing
Participants, Authorised Depository Agents and Authorised Direct
Members.
In this respect, Bursa Malaysia has issued various sets of rules to
stipulate the requirements that need to be met by the regulated
entities either upon admission and/or on a continuing basis. It
administers and monitors compliance with these rules and takes strict,
prompt and objective enforcement action for breaches of these rules.
Bursa Malaysia actively supervises the listed issuers and the brokers.
It also undertakes surveillance over the trading activities in the
marketplace.
Bursa Malaysia’s overriding objectives, in addition to discharging its
statutory duties, are investor protection, transparency, high standards
of conduct and governance, market integrity and that all relevant
persons can participate in our market with confidence.
The regulatory functions are performed and managed by Regulation
Functional Group which is helmed by the Chief Regulatory Officer. As
a measure to ensure independence of the regulatory function, the
Chief Regulatory Officer provides the Board with a regulatory report
on a regular basis and the regulatory plan, which includes the
regulatory budget, is approved by the Board.
The subsidiaries under Bursa Malaysia and their functions are:
• Bursa Malaysia Securities Berhad (Bursa Securities): provide,
operate and maintain securities exchange.
• Bursa Malaysia Derivatives Berhad (Bursa Derivatives): provide,

operate and maintain a futures and options exchange.
• Bursa Malaysia Derivatives Clearing Berhad [Bursa Clearing (D)]:
provide, operate and maintain a clearing house for the futures
and option exchange.
• Labuan International Financial Exchange Inc: provide, operate and

maintain an offshore financial exchange.
• Bursa Malaysia Securities Clearing Sdn Bhd [Bursa Clearing (S)]:

provide, operate and maintain a clearing house for the securities
exchange.
• Bursa Malaysia Depository Sdn Bhd (Bursa Depository): provide,

operate and maintain a central depository [called the Central
Depository System (CDS)] for securities on the securities
exchange. The CDS, by effecting the immobilisation of
certificates, has created a scripless trading environment for the
Bursa Malaysia.
• Bursa Malaysia Depository Nominees Sdn Bhd: act as a nominee

for Bursa Malaysia Depository and receives securities on deposit
or for safe-custody or management.
• Bursa Malaysia Information Sdn Bhd: provide and disseminate

prices and other information relating to securities quoted on
exchanges within the Group.
• Bursa Malaysia Bonds Sdn Bhd: provide, operate and maintain an

electronic trading platform for the bond market.
• Bursa Malaysia Islamic Services Sdn Bhd: provide, operate and

maintain a Shari’ah compliant commodity trading platform.
The role of Bursa Malaysia (through its subsidiaries) in terms of

regulating the markets and participants under its purview in line with
its “overriding” frontline regulatory responsibilities is to ensure:
• markets are transparent, fair and orderly;
• investors’ interest are safeguarded and protected; and

• participants comply with rules and regulations (covering the listing
and business rules/regulations issued by exchanges, clearing
houses and depository institutions).
¶14-020 Regulatory functions of Bursa Malaysia

• Legal advisory services. Bursa Malaysia is responsible for
providing legal advisory services to its subsidiaries [Bursa
Securities, Bursa Derivatives, Bursa Clearing (S), Bursa Clearing
(D) and Bursa Depository] and administering the enforcement of
the listing and business rules/regulations.
• Issues and listing. Bursa Malaysia is also responsible for

overseeing the listing approval process of companies, and
ensuring that public-listed companies compliance with the Listing
Requirements of Bursa Malaysia. It is also responsible for
disseminating corporate information of public-listed companies via
Bursa Malaysia Link, the internet based public-listed companies
information dissemination system.
• Listing compliance. Bursa Malaysia is responsible for monitoring

public-listed companies’ compliance with the listing requirements
of Bursa Malaysia and taking enforcement actions for breaches of
the listing requirements.
• Intermediary supervision. Bursa Malaysia is responsible for

supervising and monitoring activities of market intermediaries in
the securities and futures markets operated by Bursa Securities
and Bursa Derivatives respectively, and also enforcing the rules
and regulations applicable to the market intermediaries.
• Market surveillance and investigation. Bursa Malaysia is also

responsible for surveillance and investigation of trading and
market activities on all markets (securities and futures) under
Bursa Malaysia’s subsidiaries.
• Group risk management. Bursa Malaysia is also responsible for

ensuring that the risks faced by Bursa Malaysia group are
effectively managed.
¶14-030 Responsibilities of Bursa Malaysia and the

Securities Commission
In providing clarity, consistency and transparency on the regulatory
responsibilities of the respective parties, Bursa Malaysia and the
Securities Commission (SC) had agreed to re-align their
responsibilities in the following manner.
Bursa Malaysia’s responsibilities
• Responsible for frontline regulation.
• Responsible for screening of applicants of trading activities of the

market in relation to fit and proper criteria for participants in the
market-operated licensing or registration by Bursa Securities and
Bursa Derivatives.
• Monitors the financial and systemic risks of market intermediaries.
• Performs inspection and audits of market intermediaries with a

focus on notices, circulars, conditions and financial and systemic
risks exposures as well as compliance with the rules/regulations
of its subsidiaries.
• Conducts daily real-time surveillance of the markets operated by

Bursa Securities and Bursa Derivatives and inter-market
activities.
• Performs investigation and enforcement functions with regards to

the rules/regulations of its subsidiaries.
• Ensures that its subsidiaries, directors, officers, employees and

advisors comply with the listing requirements.
• Works with the securities and futures industries to foster

innovation in the development and promotion of new products
and market development initiatives.
Securities Commission’s responsibilities
• Responsible for the screening of applicants in relation to the fit and
proper criteria for licensing or registration under the Securities
and Futures laws, and the rules of Bursa Securities and its
subsidiaries.
• Administers relevant provisions of securities laws, the Malaysian

Code on Take-overs and Mergers, and written notices, circulars,
conditions and guidelines.
• Monitors the compliance of listing rules and regulations by public-

listed companies as well as compliance with the Malaysian
Accounting Standards Board standards of accounting.
• Carries out investigation and enforcement activities to ensure

compliance of securities and futures laws.
• Administer the Listing Requirements on Bursa Malaysia, its

directors, officers, employees and advisors and to ensure that
there will not be a conflict of interest.
LISTING ON BURSA MALAYSIA
¶14-200 Going public
Going public is a process where a private company has to convert into

a public company before it becomes a listed public company. It is one
of the ways in which a company can raise finance for its operation or
for expansion by offering securities to the public and transacted via
the stocks exchange mechanism, operated by Bursa Malaysia.
The factors to be considered when going public include:
• whether the company has achieved the requisite profit track
record;
• whether the company has a foreseeable good future in profit

performance;
• whether the company considers itself and its related business to

have good future prospects; and
• whether market conditions are favourable.
The companies listed on Bursa Malaysia may be listed on the Main

Market or the ACE Market or the LEAP Market.
The ACE market is meant for small public companies in the high
technology businesses to go for quotation.
The LEAP Market is a new market offered by Bursa Malaysia which
will provide companies, mainly SMEs, with greater fund raising access
and visibility via the capital market; and will be accessible only to
Sophisticated Investors.
The LEAP Market aims to bring together SMEs and companies,
intermediaries, Sophisticated Investors and Advisers onto a single
platform to create a conducive marketplace to raise funds. It is a
marketplace that provides for efficient and transparent capital
formation and price discovery mechanisms, as compared to a private
market.
Only Sophisticated Investors, as defined under Sch 6 and Sch 7 of the
Capital Markets and Services Act 2007 (CMSA 2007) are allowed to
invest in companies listed on the LEAP Market. Sophisticated
Investors are categorised as:
• Accredited investors;
• High net-worth entities; and
• High net-worth individuals.
Examples include:
• an individual whose total net personal assets exceeds RM3 million
or equivalent in foreign currencies; or
• an individual who has a gross annual income exceeding

RM300,000 or equivalent in foreign currencies in the preceding
12 months; or
• an individual who, jointly with his or her spouse, has a gross

annual income exceeding RM400,000 or equivalent in foreign
currencies in the preceding 12 months; or
• a corporation with total net assets exceeding RM10 million or

equivalent in foreign currencies based on last audited accounts;
or
• a partnership with total net assets exceeding RM10 million or its

equivalent in foreign currencies; or
• a company that is registered as a trust company under the Trust

Companies Act 1949 which has assets exceeding RM10 million
under management; or
• a corporation that is a public company under the Malaysia

Companies Act 2016 (CA 2016) which is approved by the SC to
be a trustee under CMSA 2007 and has assets exceeding RM10
million under management.
¶14-210 Reasons for listing on Bursa Malaysia

Companies have different reasons for seeking a listing on Bursa
Malaysia but the primary reason is to raise capital. Getting listed is
regarded as an efficient and cost-effective way to raise funds (which
are interest-free) for the expansion of business operations as an
alternative to borrowing from banks.
Some of the other reasons for obtaining listing are as follows:
• Increased profile. A listed company has greater visibility and a
higher profile than one that is not listed. Publicity is generated by
stockbroking companies which will disseminate information on
public-listed companies through the mass media featuring daily
stock market reports. This will ultimately help to stimulate growth
in the company and attract new business.
• Confidence. Investors tend to have greater confidence in public-

listed companies. Once listed, the reputation and credibility of a
company is enhanced. This is justifiable as the company would
have to first fulfil the stringent listing requirements of Bursa
Malaysia before being admitted to the Main Board of Bursa
Malaysia.
• Additional funds. Another major advantage for companies listed

on Bursa Malaysia is the provision of liquidity for investors and an
efficient valuation system. By being listed, investors will be able to
sell their shares anytime on the market and there will be a market
value for the shares. In addition, a listed company that is well-
managed and displays strong responsibility towards its
shareholders has the potential to raise more funds from the
existing shareholders via rights issues and debt securities (eg
loan stocks). The proceeds can be used for expansion, new
projects or reducing debt.
• Expansion. Listed companies will be in a better position to expand

their operations overseas. This is because listed companies have
greater recognition as there is more publicity regarding their
activities.
¶14-220 Disadvantages of listing

However, there are also disadvantages of companies going public,
namely:
• The listing process is tedious and costly. Substantial cost will
have to be incurred for the application for listing, ie fees to be paid
for the advice and consultation of merchant bankers and the
issuing house, cost for the printing of prospectus and the listing
fees to be paid to Bursa Malaysia and the Companies
Commission of Malaysia (CCM).
• Loss of privacy. The conduct of fair and orderly market requires

every listed company to make available to the public information
necessary to make informed investment decisions. Listed
companies are required to take reasonable steps to ensure that
all who invest in their securities enjoy equal access to such
information.
• Risk of eventual dilution of control. The once entrepreneurial or

family concern will have to be shared with the shareholders at
large and the directors will have to share control of the company
with shareholders.
• Stringent accountability to the public. The company has a

greater responsibility in promoting share performance and
ensuring better return on investment by way of dividends.
• Disclosure requirements. The investors will have to be informed

of the company’s performance through bi-annual press release on
the company’s six months profit performance or annual reports,
annual general meetings and extraordinary general meetings.
• Volatility of market conditions. If the market is volatile, share

prices may fluctuate considerably and this will affect the
company’s value or net worth.
¶14-230 Pre-requisites for listing

A company may apply for listing on:
• the Main Market of Bursa Malaysia; or
• the ACE market which has lower entry requirements, enabling

companies that do not meet the requirements for a Main Market
listing to raise funds from the stock market; and
• The LEAP Market for Sophisticated Investors, as defined under

Sch 6 and Sch 7 of CMSA 2017.
Bursa Malaysia will exercise discretion over the admission and

continued listing of securities on its Official List and may approve or
reject applications for listing, as it deems fit. An applicant must first
obtain approvals from the SC and other relevant authorities (where
applicable) before listing and quotation of any security will be
considered by Bursa Malaysia.
The pre-requisites for listing on the Main Market are shown in Table
14.1.
Table 14.1: Pre-requisites for Main Market listing
Main Board
Issued and Minimum issued and paid-up capital of RM60
paid up million.
capital (para
3.04, BMLR)
Shareholding • An applicant must ensure that at least 25% of
Spread (para its total listed shares are in the hands of a
3.05 and 8.15, minimum of 1,000 public shareholders holding
BMLR) not less than 100 shares each.
• For applicant which have or will be having
shares listed on another stock exchange, these
shares are included for the purpose of
computing the 25% and 1,000 public
shareholders.
• The employees of an applicant, its subsidiaries
and holding company are not excluded from the
minimum number of public shareholders.
• All the shares of an applicant which are held by
employees and Bumiputera investors for the
purpose of compliance with the National
Development Policy can make up the 25%
public spread.
Profit track (i) Profit Test
record
• An uninterrupted after-tax profit record for the
past three to five full financial years.
• An aggregate after-tax profit of at least RM20
million over the 3 to 5 full financial years of
uninterrupted after-tax profit.
• A minimum after-tax profit of RM6 million for
the most recent full financial year.
(ii) Market Capitalisation Test
• A total market capitalisation of at least RM500
million upon listing; and
• Incorporated and generated operating
revenue for at least one full FY prior to
submission.
(iii) Infrastructure Project Corporation Test
• Must have the right to build and operate an
infrastructure project in or outside Malaysia,
with project costs of not less than RM500
million; and
• The concession or licence for the
infrastructure project has been awarded by a
government or a state agency, in or outside
Malaysia, with remaining concession or
licence period of at least 15 years
Details of these tests can be found in the SC’s
“Policies and Guidelines on the Issue/Offer of
Securities”.
The following are the two types of listing:

• direct listing, where the public company will be listed directly on
the Main Market of Bursa Malaysia; or
• indirect listing, where the public company will be listed either by

way of:
(a) reverse take-over which relates to a situation whereby a
public-listed company acquires other
assets/businesses/interests and, as a result, there is a
change in control in the public-listed company through the
introduction of a new major shareholder or group of
shareholders; or
(b) back-door listing relates to a situation whereby a public-

listed company acquires assets/businesses/interests of a
non-listed company either by cash or issue of securities
which result in a very significant change in the direction of the
public-listed company and the non-listed company indirectly
get listed.
Law: para 3.04 and 3.05 of BMLR.
¶14-240 Application procedure and admission process

Bursa Malaysia’s Practice Note 21 lists the procedure for initial listing.
The process flowchart is shown in Figure 14.2.
The following procedures apply to the admission of an applicant to the
Official List, with the necessary modifications, as may be applicable:
(a) The applicant submits a listing application to the SC;
(b) The SC approves listing;
(c) The applicant files with the Exchange a listing application

together with supporting documents;
(d) The applicant files the final copy of prospectus with the relevant
authorities;
(e) The Exchange grants approval for the admission of securities;
(f) The applicant—

(i) issues the prospectus or introductory document and the offer
period opens, if the listing entails an offer of securities to the
public;
(ii) advertises the prospectus or introductory document;
(iii) provides the Exchange with such number of copies of the

printed prospectus or introductory document as may be
determined by the Exchange from time to time; and
(iv) announces to the Exchange, the indicative timetable of the

initial public offering containing the information set out in
paragraph 8.1 below;
(g) If the listing entails an offer of securities to the public, the

applicant announces the level of subscription and the basis of
allocation;
(h) The applicant issues securities and notices of allotment;
(i) The applicant announces to the Exchange the relevant

information in accordance with para 8.2 below; and
(j) The securities are admitted to the Official List and quoted on the
Exchange.
Paragraph 8.0 Announcements to the Exchange

8.1 An applicant must announce the indicative timetable of the
initial public offering as follows upon the issuance of the
prospectus and before the listing date:
(a) the opening and closing date of the offer period;
(b) the balloting date;
(c) the allotment date of the initial public offering securities;

and
(d) the tentative listing date.
8.2 An applicant must immediately announce the following to

the Exchange upon receipt of confirmation from the
Depository that the securities are ready to be credited into
the respective securities accounts:
(a) actual date of listing;
(b) enlarged issued and paid-up capital of the listed issuer

indicating the number of shares and their par value, if
any;
(c) stock short name, stock code, ISIN code; and
(d) sector and market under which the securities will be

listed.
NOTE:
Section 232(1) of CMSA 2007 states that a person shall not
issue, offer for subscription or purchase, make an invitation to
subscribe for or purchase securities or in the case of an initial
listing of securities, make an application for the quotation of the
securities on a stock market of a stock exchange unless—
(a) a prospectus in relation to the securities has been
registered by the Commission under s 233; and
(b) the prospectus complies with the requirements or provisions

of this Act.
Law: s 232 of CMSA 2007; para 3.07 of BMLR.

¶14-250 Prospectus
An applicant seeking a listing on the Main Board must publish in full its
prospectus in widely circulated local newspapers.
The CMSA 2007 defines “prospectus” as a notice, circular,
advertisement or document inviting applications or offers to subscribe
for or purchase securities, or offering any securities for subscription or
purchase and, unless expressly specified, includes a supplementary
prospectus, replacement prospectus, shelf prospectus, short form
prospectus, profile statement, supplementary shelf prospectus and
abridged prospectus.
¶14-260 Applicability and lodgement of prospectus
Since the SC had taken over the supervision of the issuing of

securities relating to the offer or invitation of the public to subscribe,
only prospectus and supplementary prospectus of this type of issue
need to be submitted to the SC, and a copy of the prospectus and any
supplementary prospectus and a copy of the application form
accompanying or attached to the prospectus with the Registrar of
Companies (“ROC” or “Registrar). However, the issue of prospectus
relating to unlisted recreational clubs will still be lodged with the ROC.
Section 171(2) of CA 2016 states that Subdiv 10 (“Debentures”) of Div
1 in Pt III shall not apply to an offer or invitation to subscribe for or
purchase of securities of a corporation, including any excluded offer or
excluded invitation as provided for in CMSA 2007.
The provisions of Subdiv 10 shall apply to an offer or invitation in
respect of shares or debenture made to the public in regard to:
(a) an offer or invitation in respect of shares or debentures made by
an unlisted recreational club; and
(b) an offer or invitation to deposit money with or lend money to a

corporation as specified under s 158 on invitation to the public to
deposit money with or lend money to a corporation.
Every company in respect of whose securities a prospectus or
supplementary prospectus has been registered under the CMSA 2007
shall lodge a copy of the prospectus and any supplementary
prospectus and a copy of the application form accompanying or
attached to the prospectus with the ROC on or before the date of its
issue.
Law: s 171 of CA 2016.
¶14-270 Exempted categories of transactions or

securities from the SC
Schedule 5 of CMSA 2007 lists down Proposals not requiring

approval, authorisation or recognition and Categories of transactions
not subject to the requirements of sub-s 212(2), (3), (4) and (6) and
para 212(5)(a). The Schedule is reproduced in Appendix 14.1 at the
end of this chapter.
Law: s 212(8), Sch 5 of CMSA 2007.
¶14-280 Excluded offer or invitations

Schedule 6 of CMSA 2007 lists all excluded offers or excluded
invitations. The Schedule is reproduced in Appendix 14.2 at the end of
this chapter.
¶14-290 Form and content of prospectus

The form and content of a prospectus are set out in Sch 1 of CA 2016.
The Schedule is divided into three parts and are summarised as
follows:
Part I: General
• Number of founders or management or deferred shares;
• Number of qualification shares;

• Names, descriptions and addresses of directors or proposed
directors;
• Particulars of shares;
• Nature of company’s business;
• Time of the opening of the subscription lists;
• Amount payable on application and allotment;
• Particulars of option;
• Number and amount of shares and debentures issued within the

two preceding years;
• Particulars of property transactions;
• Amount of commissions payable;
• Amount of preliminary expenses;
• Any amount or benefit paid within two preceding years or intended

to be paid to any promoter and the consideration for the payment
or benefit;
• Dates, parties and general nature of every material contract;
• Names and addresses of the auditors of the corporation;
• Full particulars of the nature and extent of the interest, direct and
indirect of every director and of every expert in the promotion or in
the property proposed to be acquired by the company;
• Rights of voting at meetings of classes of shares respectively.
• In case of a company which has been carrying on business for

less than three years, the length of time during which the
business of the company to be acquired.
Part II: Matters to be stated
• A report by an approved company auditor with respect to the
profits and losses, assets and liabilities, and the rates of
dividends for each of the five financial years preceding the issue
of the prospectus;
• A report by the directors as to whether after due inquiry by them in

relation to the interval between the date to which the last
accounts have been made up and a date not earlier than 14 days
before the issue of the prospectus: (i) the business of the
corporation and its subsidiaries has in their opinion been
satisfactorily maintained; (ii) in their opinion there are no
circumstances which had arisen, that will adversely affect the
trading or the value of the assets of the corporation or its
subsidiaries; (iii) the current assets of the corporation or its
subsidiaries appear in the books at values which are believed to
be realisable in the ordinary course of business; (iv) there are any
contingent liabilities by reason of any guarantees given by the
corporation or any of its subsidiaries; or (v) there are changes in
published reserves or any unusual factors affecting the profit of
the corporation and its subsidiaries.
Part III: Reports to be set out

• A statement to the effect that the repayment of all moneys that
have been or may be deposited with or lent to the corporation in
response to the invitation is secured by a first charge given to the
trustee for the holders of the debentures to be issued in relation to
the deposit or loan over land vested in the corporation;
• A copy of a written valuation of the corporation’s interest in the

land so mortgaged showing the nature and extent of the
corporation’s interest;
• A summary made by the approved company auditor who has

made for inclusion in the prospectus the report with respect to the
assets and liabilities of the borrowings corporation showing in
tabular form the aggregate values of the tangible assets of the
borrowing corporation;
• In every prospectus which relates to debentures there shall be

included:
(i) particulars of the limitations on the amount that the
corporation may borrow;
(ii) a statement as to the amount of subscriptions that are being

sought;
(iii) a statement as to whether or not the corporation reserves

the right to accept or retain over-subscriptions and, if the
corporation reserves such a right, the limit on the right so
reserved expressed as a sum of money; and
(iv) where applicable, a statement as to whether or not the

corporation has any right to create additional charges over
any of the assets charged to secure the repayment of the
deposits or loans which will rank in priority to pari passu with
that charge and if there is such a right particulars of its nature
and extent.
CORPORATE DISCLOSURES
¶14-300 Corporate disclosure policy
A public-listed company must disclose to the public all material

information necessary for informed investing and take reasonable
steps to ensure that all who invest in its securities enjoy equal access
to such information. A public-listed company must adhere to the
following disclosure policies:
(a) immediate disclosure of material information (see ¶14-310);
(b) thorough public dissemination (see ¶14-320);

(c) clarification, confirmation or denial of rumours or reports (see
¶14-330);
(d) response to unusual market activity (see ¶14-340);
(e) unwarranted promotional disclosure activity (see ¶14-350);
(f) insider trading (see ¶14-360).
Bursa Malaysia issued a Corporate Disclosure Guide (CD Guide) in

2011 to assist listed issuers elevate their standards of disclosure
which emphasises on both timeliness and quality of disclosure.
Previously, in July 2004, Bursa Malaysia had issued a document on
Best Practices in Corporate Disclosure. The 2011 CD Guide also
incorporates the applicable best practices recommended in the 2004
edition and also clarifies and illustrates the application of the
disclosure requirements under the BMLR. The CD Guide does not in
any way amend or vary a listed issuer’s obligations under the BMLR.
A copy of the CD Guide could be downloaded from
www.bursamalaysia.com
Law: para 9.02 of BMLR.
¶14-310 Immediate disclosure of material information

Information is considered material, if it is reasonably expected to have
a material effect on:
• the price, value or market activity of any of the public-listed
company’s securities; or
• the decision of a holder of securities of the public-listed company

or an investor in determining his choice of action;
• material information may include information which:

(a) concerns the public-listed company’s assets and liabilities,
business, financial condition or prospects;
(b) relates to dealings with employees, suppliers, customers
and others;
(c) relates to any event affecting the present or potential dilution

of the rights or interests of the public-listed company’s
securities; or
(d) relates to any event materially affecting the size of the

public holding of its securities.
Some examples of events which require immediate disclosure by the

public-listed company are:
• the entry into a joint venture agreement or merger;
• the acquisition or loss of a contract, franchise or distributorship

rights;
• the introduction of a new product or discovery;
• a change in management;
• the borrowing of funds;
• the commencement of or the involvement in litigation and any

material development arising therefrom;
• the commencement of arbitration proceedings or proceedings

involving alternative dispute resolution methods and any material
development arising therefrom;
• the purchase or sale of an asset;
• a change in capital investment plans;
• the occurrence of a labour dispute or disputes with subcontractors

or suppliers;
• the making of a tender offer for another company’s securities;

• the occurrence of an event of default on interest and/or principal
payments in respect of loans;
• a change in general business direction;
• a change of intellectual property rights;
• the entry into a memorandum of understanding;
• the entry into any call or put option or financial futures contract.
¶14-320 Thorough public dissemination

A public-listed company must release material information to the
public in a manner designed to obtain its fullest possible public
dissemination. It has to ensure that no disclosure of material
information is made on an individual or selective basis to analysts,
shareholders, journalists or other persons unless such information has
previously been fully disclosed and disseminated to the public.
Disclosure of material information can often be made after the market
closes. Any public disclosure of material information must be made by
an announcement first to Bursa Malaysia or simultaneously to Bursa
Malaysia, the press and newswire services.
¶14-330 Clarification, confirmation or denial of rumours

or reports
Whenever a public-listed company becomes aware of any rumour or
report, true or false, that contains material information, it must make
due enquiry and immediately publicly clarify, confirm or deny the
rumour or report. In the case of a rumour or report containing
erroneous material information which has been circulated, the public-
listed company must immediately make an announcement to Bursa
Malaysia denying or clarifying the rumour or report and setting forth
facts sufficient to support the denial or to clarify any misleading
aspects of the rumour or report.
¶14-340 Response to unusual market activity

Where an unusual price movement, trading activity, or both occur, the
public-listed company must immediately undertake a due enquiry to
seek the cause of the unusual market activity in its securities. The
public-listed company must consider in particular whether there is any
information which would account for the unusual market activity that:
• has recently been publicly disclosed;
• has not been publicly disclosed (in which case the unusual market
activity may signify that a “leak” has occurred); or
• is the subject matter of a rumour or report.
Law: para 9.11(1) of BMLR.
¶14-350 Unwarranted promotional disclosure activity

A public-listed company must refrain from promotional disclosure
activity in any form which may mislead investors or cause
unwarranted price movement and activity in a public-listed company’s
securities. Such activity includes news releases, public
announcements, predictions, reports or advertisements which are:
• not justified by actual developments concerning a public-listed
company;
• exaggerated;
• flamboyant;
• overstated; or
• over-zealous.
Frequent hallmarks of promotional activity are:

• a series of public announcements unrelated in volume or
frequency to the materiality of actual developments concerning a
public-listed company;
• announcement of products still in the development stage with

unproven commercial prospects;
• promotion and expense-paid trips, or the seeking out of meetings

or interviews with analysts and financial writers, which could have
the effect of unduly influencing the market activity;
• press releases or other public announcements of a one-sided or

unbalanced nature; or
• product advertisement which in effect promote the public-listed

company’s securities.
¶14-360 Insider trading

The CMSA 2007 defines a person to be an “insider” if that person:
• possesses information that is not generally available which on
becoming generally available would expect the information to
have a material effect on the price or the value of securities; and
• who knows or ought reasonably to know that the information is not

Principal officers, employees, company secretaries and substantial

security holders who hold inside information are presumed to hold that
information by reason of their position unless they can prove to the
contrary.
Insiders must not trade on the basis of material information which is
not known to the investing public. Insiders must refrain from trading,
even after material information has been released to the press and
other media, for a period sufficient to permit thorough public
dissemination and evaluation of the information.
Prohibited conduct of person in possession of inside information
This is stipulated in s 188 of CMSA 2007 as follows:
Subsection (1) states that a person is an “insider” if that person—
(a) possesses information that is not generally available which on
becoming generally available a reasonable person would expect it
to have a material effect on the price or the value of securities;
and
(b) knows or ought reasonably to know that the information is not

Subsection (2) states that an insider shall not, whether as principal or

agent, in respect of any securities to which information in sub-s (1)
relates—
(a) acquire or dispose of, or enter into an agreement for or with a
view to the acquisition or disposal of such securities; or
(b) procure, directly or indirectly, an acquisition or disposal of, or the

entering into an agreement for or with a view to the acquisition or
disposal of such securities.
Subsection (3) states that where trading in the securities to which the
information in sub-s (1) relates is permitted on a stock market of a
stock exchange, the insider shall not, directly or indirectly,
communicate the information referred to in sub-s (1), or cause such
information to be communicated, to another person, if the insider
knows, or ought reasonably to know, that the other person would or
would tend to—
(a) acquire, dispose of, or enter into an agreement with a view to the
acquisition or disposal of, any securities to which the information
in sub-s (1) relates; or
(b) procure a third person to acquire, dispose of or enter into an
agreement with a view to the acquisition or disposal of, any
securities to which the information in sub-s (1) relates.
Subsection (4) states that a person who contravenes sub-s (2) or (3)
commits an offence and shall be punished on conviction to
imprisonment for a term not exceeding ten years and to a fine of not
less than one million ringgit.
Subsection (5) states that the Minister may make regulations in
respect of any particular class, category or description of persons or
any particular class, category or description of transactions, relating to
securities, to whom or which this section does not apply.
Law: s 188 of the CMSA 2007.
IMMEDIATE DISCLOSURE REQUIREMENTS

¶14-400 Immediate announcements to the Exchange
It is an obligation for listed companies to make an immediate

announcement to Bursa Malaysia upon the occurrence of the following
events:
• any intention to fix a book’s closing date and the reason therefore,
stating the books closing date, which shall be at least ten clear
market days after the date of announcement to Bursa Malaysia;
• any recommendation or declaration of a dividend or distribution.

The announcement shall include the rate and amount per share
and date of payment which shall be within one month from the
books closing date;
• any recommendation or decision that a dividend will not be

declared;
• any change in the terms of a debt security or a convertible

security;
• any re-organisation of the group structure;
• any general meeting (other than a meeting convened to pass a

special resolution or an annual general meeting);
• all resolutions put to a general meeting and immediately after such

meeting whether or not the resolutions were carried;
• any call to be made upon any of the partly paid share capital;
• any change of address or telephone numbers or facsimile number

of the registered office or of any office at which the register of
securities is kept;
• any proposed change of name;
• any change in the financial year end;
• any change in the composition of the board of directors;
• any change in the composition of the Audit Committee;
• any change in the chief executive officer;
• any change in the company secretary or external auditors;
• any proposed alteration of the constitution;
• any notice relating to substantial shareholdings;
• any notice relating to directors’ disclosure of interests;
• any commencement of winding-up proceedings or winding-up

order made against the company and any of its subsidiaries or
major associated companies;
• the appointment of a receiver, manager, liquidator or special

administrator in the company and any of its subsidiaries or major
associated companies;
• the procurement of a court order restraining proceedings against
the company and any of its subsidiaries or major associated
companies;
• any transaction under Chapter 10 of BMLR requiring

announcement to be made;
• any acquisition (including subscription) of shares in another

company or any other event which results in such company
becoming a subsidiary;
• any disposal of shares in another company resulting in such

company ceasing to be a subsidiary of the company;
• any acquisition of shares in another listed company which results

in the holding being 5% or more of the issued and paid-up capital
of the company;
• any disposal of shares in another listed company resulting in the

holding falling below 5% of the issued and paid-up capital of the
company;
• any proposed issue or offer of securities;
• any scheme of compromise, arrangement, amalgamation or

reconstruction;
• any variation of the rights attaching to a class of securities;
• the level of subscription in relation to an issue or offer of securities;
• the decision to allocate excess securities in relation to a rights

issue by the company and the basis of such allocation;
• any change to the utilisation of the proceeds raised from the

issuance of securities that deviates by 5% or more from the
original utilisation of proceeds;
• a share split or consolidation;

• any deviation of 10% or more between the profit after tax and
minority interest stated in a profit estimate, forecast or projection
previously announced and the announced unaudited accounts,
giving an explanation of the deviation and the reconciliation
thereof;
• any deviation of 10% or more between the profit/loss after tax and
minority interest stated in the announced unaudited accounts and
the audited accounts, giving an explanation of the deviation and
the reconciliation thereof;
• any circumstances or development which are likely to materially

affect the results or outcome of any prospects, revenue or profit
estimate, forecast, projection or internal targets of the company
previously announced or disclosed in a public document, giving
an explanation of the possible outcome arising from such
circumstances or development;
• any qualification in an external auditors’ report giving full details of

such qualification;
• a call of securities for redemption;
• any listing of any part of the securities of a listed issuer or any of

its subsidiaries on any other Recognised Stock Exchange, stating
which other Recognised Stock Exchange;
• any material information or financial documents that is released to

or lodged with any other stock exchange or other regulator which
is available to the public;
• any change of control in the listed issuer;
• any agreement to sponsor an American Depository Receipt (ADR)

or a Global Depository Receipt (GDR) programme;
• any material amendment of the terms of the agreement for the

sponsorship of an ADR or a GDR programme of the termination
thereof stating the reasons and consequences of the termination;
• any discovery of mineralisation or hydrocarbons by the listed

issuer or its subsidiaries whose activities include exploration for
natural resources;
• any pending litigation or occurrence of circumstances of a material

nature in which the listed issuer being a mining, plantation or
timber or any of its subsidiaries may be involved which may affect
its income derived from title to or possession of any of its
properties, licences, concessions from governmental authorities;
• any valuation which has been conducted on the non-current

assets of the group, where the valuation surplus or deficit will be
incorporated in the financial statements of the listed issuer;
• any material development to corporate proposals previously

announced, including the following—
(a) variation of terms, including any extension of time agreed to
or granted by the relevant party to the transaction;
(b) lapse of any timeframe stipulated under the agreement for

the performance of certain obligations;
(c) submission of the proposal and any variation to regulatory

authorities for approval;
(d) receipt of any decision from regulatory authorities, stating

amongst others, conditions imposed or reasons for rejection,
where applicable;
(e) submission of any application to the regulatory authorities

for variation of conditions;
(f) lapse of timeframe imposed by the relevant regulatory

authorities, within which the corporate proposal must be
completed and the submission of any application for
extension of time to complete implementation of the
corporate proposal; and
(g) termination or completion of the corporate proposals.
¶14-410 Announcement of corporate proposals

A public-listed company must ensure that an immediate
announcement to Bursa Malaysia be made with respect to any one of
the following types of corporate proposals which is made by a
merchant bank acting on its behalf:
• a fund-raising proposal, including but not limited to a public issue,
rights issue, special issue, private placement and an issue of debt
securities;
• an acquisition or disposal proposal whether involving the issue of

securities or otherwise;
• a restructuring proposal, whether involving the issue of securities

or otherwise;
• a reverse take-over and/or back-door listing, whether involving the

issue of securities or otherwise.
¶14-420 Dealings in quoted securities

By the company
A public-listed company must make an immediate announcement to
Bursa Malaysia in respect of purchases or sales of securities quoted
on Bursa Malaysia or any other stock exchange. The announcement
shall include the following:
• the aggregate purchase or sale consideration within the preceding
12 months which have not been previously announced and such
amount as a percentage of the latest audited consolidated net
assets of the listed issuer;
• the total cost, book value and market value of all investments in
quoted securities as at the date of the announcement; and
• any profit or loss arising from the sales in quoted securities during
the current financial year.
By directors and principal officers

Directors and principal officers of listed companies have numerous
responsibilities in relation to their holding securities of listed
companies. Chapter 12 of the BMLR (“Share Buy Backs”) apply to the
following category of a director’s dealings in securities:
• Prohibition of trading in “closed period”. A “closed period” is
described as the period during which the affected person cannot
trade in the stock market. If he really wants to trade he must
follow certain procedures of announcing his intention to trade and
the quantum of securities to be traded, send his intention to the
company secretary who will table the intention before the board of
directors for notation and upon trading to make an immediate
announcement to the Bursa. A “closed period” occurs in the
following situations:
(a) During the period commencing from the time information is
obtained up to the date of announcement to the Exchange of
a matter that involves price-sensitive information in relation to
the securities concerned; and
(b) During the period commencing from one month prior to the
targeted date of announcement to the Exchange of a listed
issuer’s quarterly results.
¶14-430 Procedures for securities dealings during

closed period
The following steps and procedures should be taken if a director or
principal officer wants to deal in securities during the closed period:
(1) The affected person (director or principal officer) must give
notice of intention to the company in writing of his intention and
number of shares to be traded;
(2) The company must make an immediate announcement to the

Exchange, stating the affected person’s current shareholding and
the intention to trade his securities;
(3) Dealing of the securities can be effected after one full Market
Day of the announcement;
(4) After the dealing of the securities the director must give written
details of his number of shares traded to the company secretary;
(5) The company will make immediate announcement to the

Exchange of the directors’ dealings by stating the date of trading
that had occurred, the consideration and number of shares
involved;
(6) The record of the shares traded shall be kept properly in the
director’s register;
(7) The company secretary, at each meeting of the board of

directors, is required to table a summary of dealings notified to
the company (ie the listed issuer) since the last board meeting.
DIRECTORS’ DISCLOSURES
¶14-600 Substantial shareholdings disclosures
A person (directors, corporations, individuals) who is a substantial

shareholder is required under s137, 138 and 139 of CA 2016 to make
the following disclosures via the e-forms available in Schedule C of
MyCoID2:
(a) e-form “Notice of interest of substantial shareholder” relating to
becoming a substantial shareholder;
(b) e-form “Change in Interest of Substantial Shareholder” relating

to any buying or selling of shares while a substantial shareholder;
and
(c) e-form “Notice of person ceasing to be a substantial

shareholder” when the person ceases to be substantial
shareholder.
When these e-forms are lodged for filing with the company, a copy is
to be furnished to the Registrar on the day such person gives that
notice: s 141.
For a non-resident who is not residing in Malaysia or a body corporate
not incorporated in Malaysia having an interest in voting shares as a
substantial shareholder in a company, the person must give notice to
the non-resident in the e-form “Notice to non-resident as to
requirements relating to the disclosure of substantial shareholders”
directing the non-resident to give notice, or a copy of the notice to that
other person.
The notice shall be given by the person within 14 days from becoming
the holder of the voting shares as substantial shareholder: s 142.
Law: s 137, 138, 139, 141 and 142 of CA 2016.
Footnotes
website.
¶14-610 Disclosure of shares interest to the Securities

Commission (SC)
Under the BMLR and CMSA 2007, a director or chief executive of a

listed company is required to disclose shares interests to the SC in a
pro forma.
PERIODIC DISCLOSURE OBLIGATIONS

¶14-650 Quarterly report
A public-listed company must give Bursa Malaysia for public release,
a quarterly report which is on a consolidated basis, where applicable,
as soon as the figures have been approved by the board of directors,
and not later than two months after the end of each quarter of the
financial year. The quarterly report shall be formatted in accordance
with Part A, Appendix 9B of Chapter 7 of BMLR, comprising generally
the following:
(i) income statement;
(ii) balance sheet; and
(iii) explanatory notes.
The quarterly report must be prepared based on the accounting

policies and measurement bases which are consistent with those in
the most recent annual audited accounts.
¶14-660 Submission of annual audited accounts and

annual report
A public-listed company must ensure that the issuance of the annual
audited accounts and annual report shall be as follows:
(i) the annual report shall be issued to the shareholders and given to
Bursa Malaysia within a period not exceeding six months from the
close of the financial year;
(ii) the annual audited accounts together with the auditors’ and
directors’ report shall be given to Bursa Malaysia for public
release, within a period not exceeding four months from the close
of the financial year.
DISCIPLINARY ACTIONS BY BURSA

MALAYSIA
¶14-700 Disciplinary actions by the Bursa
The Bursa Malaysia Committee may, depending on the gravity of the

offence, impose the following disciplinary actions against members
and member companies violating the Rules:
• reprimand;
• suspension of trading;
• withdrawal of recognition;
• expulsion.
TAKE-OVERS, MERGERS AND SCHEMES OF

ARRANGEMENT
¶14-750 Take-overs and mergers
A take-over is the acquisition by a company of the whole, or a majority
of the share capital of another company in exchange for an issue of
shares, cash payment or a combination of the two.
Malaysian Code on Take-overs and Mergers 2016 comes under the
jurisdiction of CMSA 2007.
Section 217 of the CMSA stipulates as follows:
• the Minister may, on the recommendation of the SC, prescribe a
Code which shall be published in the Gazette.
• the Minister may, from time to time, on the recommendation of the

SC, amend any of the provisions of the Code and any
amendment thereto shall be published in the Gazette.
• the Code shall contain principles and rules governing the conduct
of all persons or parties involved in a take-over offer, merger or
compulsory acquisition, including an acquirer, offeror, offeree and
their officers and associates.
• the SC shall administer the Code according to the objectives and

may do all such things as may be necessary or expedient to give
full effect to the provisions of this Division and the Code and
without limiting the generality of the foregoing, may—
(a) issue rulings from time to time, interpreting the Code;
(b) issue rulings on the practice and conduct of persons

involved in or affected by any take-over offer, merger or
compulsory acquisition, or in the course of any take-over,
merger or compulsory acquisition; and
(c) enquire into any matter relating to any take-over offer,

merger or compulsory acquisition whether potential or
otherwise, and for this purpose, may issue public statements
as the SC thinks fit with respect thereto.
• in making any recommendation as stated above, and in

administering the Code and exercising its powers under this Act,
the SC shall take into account the desirability of ensuring that the
acquisition of voting shares or control of companies takes place in
an efficient, competitive and informed market and, without limiting
the generality of the foregoing, shall have regard to the need to
ensure—
(a) that the shareholders and directors of an offeree and the
market for the shares that are the subject of the take-over
offer—
(i) are aware of the identity of the acquirer and offeror;
(ii) have reasonable time in which to consider a take-over

offer; and
(iii) are supplied with sufficient information necessary to

enable them to assess the merits of any take-over offer;
(b) that, so far as practicable, all shareholders of an offeree

have equal opportunities to participate in benefits accruing
from the take-over offer, including in the premium payable for
control;
(c) that fair and equal treatment of all shareholders, in

particular, minority shareholders, in relation to the take-over
offer, merger or compulsory acquisition would be achieved;
and
(d) in its response to, or making recommendations with respect

to any take-over offer, merger or compulsory acquisition, the
directors of the offeree and acquirer shall act in good faith to
observe the objects, and the manner in which they observe
the objects, specified in this subsection, and that minority
shareholders are not subject to oppression or disadvantaged
by the treatment and conduct of the directors of the offeree or
the acquirer.
The general principles of the Code are that:

• all shareholders of the same class must be treated similarly;
• during the course of the take-over, if information is made available

to any group of shareholders, it must be made available to all
shareholders, apart from information which is given in confidence
by an offeree (subject of take-over bid) to a bona fide offeror
(bidding company) or vice versa;
• an offeror or its financial adviser should only announce an offer

when it has reasonable grounds for believing the bid will succeed;
• shareholders must be given sufficient information and advice to

enable them to reach a properly informed decision and sufficient
time to consider it;
• any document or advertisement addressed to shareholders,

offering information or advice from an offeror or an offeree and
their respective advisers must be prepared to high standards of
care and accuracy;
• all parties to an offer must attempt to prevent the creation of a

false market in the shares. Care should be taken to avoid
misleading statements to shareholders or the market;
• to avoid an offer being frustrated, and to avoid shareholders being

denied the opportunity to consider it, once an offer has been
communicated to the board of an offeree company, or if it has
reason to believe an offer might soon be made, the company
must not take any action relating to the company’s affairs without
the approval of the shareholders in general meeting;
• rights of control must be exercised in good faith;
• directors of all companies involved must act only in their capacity

as directors and ignore any personal or family shareholdings or
their personal relationships with the companies. The interests of
the shareholders as a whole, the employees and creditors should
be considered when advising shareholders;
• where control of a company is acquired by a group acting in

concert, a general offer to all other shareholders is required.
For more on take-overs and mergers, see Chapter 15.

¶14-760 Compulsory acquisition

If the bidding company, within four months of the offer being made,
has acquired or contracted to acquire at least 90% of the value of the
shares in the target company, s 371(2) of CA 2016 provides for the
bidder to give notice. The transferee company may at any time within
two months after the offer has been approved under s 371(1) give
notice to any dissenting shareholder in the transferor company that
the transferee company desires to acquire the dissenting
shareholder’s shares in the form and manner as determined by the
Registrar.
The offeror company sends a copy of the notice to the offeree
company together with an instrument of transfer executed on behalf of
the shareholder concerned by a person appointed by the offeror
company for that purpose with a cheque or certificate, drawn in favour
of the offeree company for the purchase consideration.
Law: s 371(2) of the CA 2016.
¶14-780 Compromise or arrangement with creditors and

members
Section 366 of CA 2016 provides for companies facing financial
difficulties to carry out a scheme of corporate rationalisation which will
take place in an interim period or moratorium period. During this
period, the creditors and members will consider a scheme of
compromise or arrangement with creditors to take up a compromise
and agree to convert their debts into shares or any other
considerations of accepting payments of lesser amount.
Arrangement would include the reorganisation of share capital by
consolidation of different classes of shares or by the division of shares
into different classes or by both methods. Thus the scheme may alter
the rights of particular shareholders.
The scheme may even employ a transfer of assets of one company to
another controlled by the same shareholders, involving the
cancellation of shares in the original company coupled with new issue
of shares of varying classes in the new company. This is referred to as
a reconstruction.
An amalgamation occurs when two or more companies or the whole of
any part of their undertakings are merged by the scheme of
arrangement. The companies agree to merge by transferring their
assets to a new company, which in turn issue shares to the members
of the merging companies.
Schemes of arrangement can make possible mergers and other
restructurings which would not otherwise be possible, eg where a
bidder wants to acquire 100% ownership of a business but where it is
not possible to obtain the required 90% level of acceptance necessary
for compulsory acquisition. A scheme of arrangement which provides
for a “compromise or arrangement” with members and creditors
requires approval of the court and a resolution of members and/or
creditors of the company passed by a 75% majority.
The court is given powers under s 368 of CA 2016 to grant a
restraining order to a company for a period of not more than three
months, and on the application of the company may extend it to a
maximum nine months if:
• it is satisfied that there is a proposal for a scheme of compromise
or arrangement between the company and its creditors or any
class of creditors representing at least one-half in value of all the
creditors;
• the restraining order is necessary to enable the company and its

creditors to formalise the scheme for the approval of the creditors
or members;
• a statement of particulars as to the affairs of the company made

up to the date not more than three days before the application is
lodged together with the application to court;
• a director or a person to be appointed as director is appointed by a

majority of the creditors in the application of the company.
This court-appointed director shall have the power of access to the

accounting and other records and registers of the company and any
information and explanations as he may require from time to time.
During the period of the restraining order the company is prohibited
from any disposition of the property of the company, including things
in action and any acquisition of property by the company, other than
those made in the ordinary course of business. Otherwise these
transactions shall be void. In addition, every officer of the company
who is in default shall be guilty of an offence against the Act.
For more on schemes of arrangement and reorganisation, see
Chapter 15.
Law: s 366 and 368 of CA 2016.
1. What are the advantages and disadvantages for a company to go

for listing with Bursa Malaysia?
2. Explain the meaning of “shareholding spread”.
3. Explain what constitutes a “prospectus”.
4. Explain the meaning of “closed period” and the procedure for a

person who wishes to trade during the closed period.
5. Explain the objective of a corporate compromise or arrangement

with creditors and members.
¶14-1001 Appendix 14.1
SCHEDULE 53
[Subsection 212(8)]
Proposals not requiring approval, authorization or recognition
1. Any proposal, scheme, transaction, arrangement or activity, or
issuance of securities or offer for subscription or purchase of
securities, or issuance of an invitation to subscribe for or
purchase securities in relation to—
(a) the listing or quotation of securities issued or guaranteed by
the Federal Government or Bank Negara on a stock market
of the stock exchange;
(b) the listing or quotation of securities of a corporation on an

alternative market of the stock exchange, except for
debentures, sukuk and Islamic structured products;
(c) an acquisition or disposal of assets which results in a

significant change in the business direction or policy of a
corporation—
(i) that is listed on the alternative market of the stock
exchange except where such acquisition or disposal is
carried out in conjunction with paragraph 212(2)(b); or
(ii) where only its debentures, sukuk or Islamic structured

product are listed on a stock market of the stock
exchange;
(d) a disposal of assets which results in a significant change in

the business direction or policy of a corporation that is listed
on the main market of the stock exchange except where the
disposal forms part of a proposal falling under paragraph
212(2)(d) or subsection 212(3);
(e) the acquisition or disposal of assets which results in a

significant change in the business direction or policy of a unit
trust scheme that is listed on the main market of the stock
exchange other than a business trust; and
(f) quotation of structured warrants on a stock market of the

stock exchange provided that the issuer complies with
eligibility requirements specified by the Commission.
2. Making available, offering for subscription or purchase, or issuing

an invitation to subscribe for or purchase—
(a) securities or guaranteed by the Federal Government or
Bank Negara;
(b) securities or derivatives or guaranteed by any State

Government;
(c) securities of a company to existing members of a company

within the meaning of section 457 of the Companies Act
2016;
(d) securities or derivatives of any entity established or

registered under the laws of Labuan—
(i) exclusively to person outside Malaysia; or
(ii) to another entity established or registered under the

laws of Labuan;
(e) securities of a foreign corporation that is listed on an

exchange outside Malaysia pursuant to—
(i) an employee share or employee share option scheme;
(ii) a bonus issue;
(iii) a distribution of shares in lieu of dividends;
(iv) a distribution of shares held by the foreign corporation

in its subsidiary in lieu of dividends;
(v) a rights issue;
(vi) the exercise of a warrant, option or transferable

subscription right, conversion of a convertible note or
preference share, or the exchange of an exchangeable
note;
(vii) an entitlement in respect of a warrant, option or right

without consideration;
(viii) a subdivision or consolidation of shares; or
(ix) any other corporate exercise as may be specified by

the Commission, except debentures, sukuk or Islamic
structured product, unit trust and prescribed
investments;
(f) securities, except debentures, sukuk or Islamic structured

product, unit trust and prescribed investments, of a foreign
corporation that is not listed on the stock exchange or an
exchange outside Malaysia pursuant to—
(i) an employee share or employee share option scheme;
(ii) a bonus issue;
(iii) a distribution of shares in lieu of dividends; or
(iv) a non-renounceable rights issue;
(g) securities listed or approved for listing and quotation on an

exchange outside Malaysia, except debentures, sukuk or
Islamic structured product, shares in a closed end fund, units
in a unit trust scheme and prescribed investments, to the
following persons:
(i) a closed end fund approved by the Commission;
(ii) a holder of a Capital Markets Services Licence;

(iii) a person who acquires securities pursuant to an offer,
as principal, if the offer is on terms that the securities
may only be acquired at a consideration of not less than
two hundred and fifty thousand ringgit or its equivalent in
foreign currencies for each transaction whether such
amount is paid for in cash or otherwise;
(iv) an individual whose total net personal assets, or total

net joint assets with his or her spouse, exceeds three
million ringgit or its equivalent in foreign currencies,
excluding the value of the primary residence of the
individual;
(v) an individual who has a gross annual income exceeding

three hundred thousand ringgit or its equivalent in
foreign currencies per annum in the preceding twelve
months;
(vi) an individual who, jointly with his or her spouse, has a

gross annual income of four hundred thousand ringgit or
its equivalent in foreign currencies per annum in the
preceding twelve months;
(vii) a corporation with total net assets exceeding ten

million ringgit or its equivalent in foreign currencies
based on the last audited accounts;
(viii) a partnership with total net assets exceeding ten

million ringgit or its equivalent in foreign currencies;
(ix) a bank licensee or insurance licensee as defined in the

Labuan Financial Services and Securities Act 2010 [Act
704];
(x) an Islamic bank licensee or takaful licensee as defined

in the Labuan Islamic Financial Services and Securities
Act 2010 [Act 705]; or
(xi) any other person as may be specified by the
Commission,
provided that—
(A) such exchange is specified by the Commission;
and
(B) the distribution of such securities is made by a

holder of a Capital Markets Services License who
carries on the business of dealing in securities;
(h) units in a unit trust scheme or prescribed investments by a

personal representative, liquidator, receiver or trustee in
bankruptcy or liquidation, as the case may be, in the normal
course of realisation of assets;
(i) securities, except debentures, sukuk of a foreign corporation,

Islamic structured products, unit trusts and prescribed
investments, that is not listed on the stock exchange or an
exchange outside Malaysia to existing holders of those
securities or any other person as may be specified by the
Commission in any guideline issued under section 377;
(j) securities, except debentures, sukuk or Islamic structured

product, unit trust and prescribed investments, of—
(i) a private company; or
(ii) a public company that is not listed on the stock

exchange and is not seeking listing on the main market
of the stock exchange; and
(k) debentures, sukuk or Islamic structured product by a

corporation to its related corporation where such debentures,
sukuk or Islamic structured product shall include a term that
prohibits the transfer of such debentures, sukuk or Islamic
structured product, as the case may be, to any other person.
3. All secondary trading of debentures, sukuk or Islamic structured

products.
4. Invitation or offering to underwrite or sub-underwrite securities

pursuant to an underwriting agreement in relation to the listing
and quotation of securities of a corporation on a stock market of
the stock exchange.
5. Issuance or allotment of securities to an underwriter or sub-

underwriter pursuant to an underwriting agreement in relation to
the listing and quotation of securities of a corporation on a stock
market of the stock exchange.
6. In relation to subsection 212(4)—

(a) any proposal of a listed corporation where only its
debentures, sukuk or Islamic structured products are listed
on a stock market of the stock exchange; or
(b) any proposal of a listed corporation whose shares are

already listed on an exchange outside Malaysia.
7. In respect of a corporation that is listed on the main market of the

stock exchange, the issuance and subsequent listing and
quotation of its securities on the main market pursuant to—
(a) the exercise of a warrant, option or transferable subscription
right, conversion of a convertible note or preference share, or
the exchange of an exchangeable note;
(b) an entitlement in respect of a warrant, option or right without

consideration;
(c) a subdivision or consolidation of shares;
(d) an employee share or employee share option scheme;
(e) a bonus issue;
(f) a rights issue;

(g) a private placement exercise; or
(h) any other corporate exercise under the rules of the stock
exchange as may be specified by the Commission,
except—
(A) for debentures, sukuk or Islamic structured product,
unit trust schemes other than business trusts and
prescribed investments; or
(B) where it forms part of a proposal falling under

paragraph 212(2)(d) or subsection 212(3).
8. In respect of a unit trust scheme that is listed on the main market

of the stock exchange, the issuance and subsequent listing and
quotation of its units on the main market pursuant to a bonus
issue or a rights issue.
9. Making available, offering for subscription or purchase, or issuing

an invitation to subscribe for or purchase of or dealing in over-the-
counter derivatives by any person except where—
(a) the over-the-counter derivative is proposed to be made
available, offered for subscription or purchase to;
(b) an invitation to subscribe for or purchase the over-the-

counter derivative is made to; or
(c) the dealing in the over-the-counter derivatives involves,

a retail investor as specified by the Commission.
Note:
Retail investors means any person other than—
(a) the Central Bank of Malaysia established under Central Bank of
Malaysia Act 2009; or
(b) persons specified under Part I of Schedule 6 or 7 of this Act.

[Subs. P.U.(A) 287/2009; Subs. P.U.(A) 481/2012]
Footnotes
3 In this Appendix 14.1, the references to Companies Act
1965 in the actual Sch 5 in CMSA 2007 have been updated
to Companies Act 2016.
¶14-1002 Appendix 14.2:
SCHEDULE 64
[Section 229]
Excluded offers or excluded invitations
Part I
A. Excluded offers or excluded invitations made to accredited
investors
1. An offer or invitation made to a unit trust scheme, prescribed
investment scheme or private retirement scheme.
2. [Deleted]
3. An offer or invitation made to—
(a) a holder of a Capital Markets Services License; or
(b) an executive director or a chief executive officer of a holder of a

Capital Markets Services License.
4. An offer or invitation made to a closed end fund approved by the

Commission.
5. An offer or invitation made to a bank licensee or insurance licensee
as defined under the Labuan Financial Services and Securities Act
2010.
6. An offer or invitation made to an Islamic bank licensee or takaful
licensee as defined under the Labuan Islamic Financial Services and
Securities Act 2010.
7. An offer or invitation made to a licensed institution as defined in the
Banking and Financial Institutions Act 1989 or an Islamic bank as
defined in the Islamic Banking Act 1983.
8. An offer or invitation made to an insurance company registered
under the Insurance Act 1996 or a takaful operator registered under
the Takaful Act 1984.
B. Excluded offers or excluded invitations made to high net worth
entity
(a) a company that is registered as a trust company under the Trust
Companies Act 1949 which has assets under management
exceeding ten million ringgit or its equivalent in foreign currencies;
or
(b) a corporation that is a public company under the Companies Act

2016 which is approved by the Commission to be a trustee under
the Act and has assets under management exceeding ten million
ringgit or its equivalent in foreign currencies.

(a) a corporation with total net assets exceeding ten million ringgit or
its equivalent in foreign currencies based on the last audited
accounts; or
(b) a partnership with total net assets exceeding ten million ringgit or
its equivalent in foreign currencies.
11. An offer or invitation made to a statutory body established by an

Act of Parliament or an enactment of any State.
12. An offer or invitation made to a pension fund approved by the
Director General of Inland Revenue under section 150 of the Income
Tax Act 1967 [Act 53].
C. Excluded offers or excluded invitations made to high net worth
individual
13. An offer or invitation made to an individual—
(a) whose total net personal assets, or total net joint assets with his
or her spouse, exceed three million ringgit or its equivalent in
foreign currencies, excluding the value of the individual’s primary
residence;
(b) who has a gross annual income exceeding three hundred

thousand ringgit or its equivalent in foreign currencies per annum
in the preceding twelve months; or
(c) who, jointly with his or her spouse, has a gross annual income
exceeding four hundred thousand ringgit or its equivalent in
foreign currencies per annum in the preceding twelve months.
Part II
D. Other types of excluded offers or excluded invitations
14. An offer or invitation made with respect to any sale of a unit in a
unit trust scheme or a prescribed investment scheme by a personal
representative, liquidator, receiver or trustee in bankruptcy or
liquidation, as the case may be, in the normal course of realisation of
assets.
15. All trades in securities, except for debentures, effected on a stock
market of a stock exchange which is approved by the Minister
pursuant to subsection 8(2) or such other exchange outside Malaysia
which is recognised under the rules of the stock exchange.
16. An offer or invitation of securities made or guaranteed by the
Federal Government or any State Government or Bank Negara.
17. An offer or invitation in respect of securities of a private company.
18. An offer or invitation pursuant to a take-over offer which complies
with the relevant law applicable to such offers.
19. All secondary trades in debentures except for secondary trades of
debentures that involves retail investors and a prospectus has not
been issued.
20. An offer or invitation made to employees or directors of a
corporation or its related corporation pursuant to an employee share
or employee share option scheme.
21. An offer or invitation made to any creditor or holder of securities of
a company undergoing a scheme of arrangement or compromise
under section 366 of the Companies Act 2016 [Act 777] or a
restructuring scheme under the Pengurusan Danaharta Nasional
Berhad Act 1998 [Act 587] which may not be renounced to any person
other than a creditor or holder of securities of the company.
22. An offer or invitation made exclusively to persons outside
Malaysia.
23. An offer or invitation to enter into an underwriting or sub-
underwriting agreement or an offer or invitation made to an
underwriter under such an agreement.
24. An offer or invitation made to a person who acquires securities
pursuant to a private placement if the aggregate consideration for the
acquisition is not less than two hundred and fifty thousand ringgit or its
equivalent in foreign currencies for each transaction whether such
amount is paid for in cash or otherwise.
25. [Deleted]
26. An offer or invitation made by or to Danamodal Nasional Bhd.
27. An offer or invitation in respect of securities of a corporation made
to existing members of a company within the meaning of section 44 of
the Companies Act 2016.
28. An offer or invitation in respect of securities of a foreign
corporation whose securities or any class of securities having gained
admission on such other exchange outside Malaysia which is
recognised under the rules of a stock exchange, made to existing
members or debenture holders of such foreign corporation by means
of a rights issue provided that such offer of invitation has been
accompanied by a prospectus or disclosure document approved by
the foreign supervisory authority of such foreign corporation.
29. With respect to the securities of a corporation which are not listed,
an offer or invitation made to existing members or debenture holders
of such corporation by means of a rights issue and is not an offer to
which section 75 of Companies Act 2016 applies.
Part III
Non-application
Excluded offers or excluded invitations to which sections 232, 233,
234, 235, 236, 237, 238, 239, 240, 241 and 244 of Division 3 of Part
VI shall not apply.
[Subs. P.U.(A) 481/2012]
Footnotes
4 In this Appendix 14.2, the references to Companies Act
1965 in the actual Sch 6 in CMSA 2007 have been updated
to Companies Act 2016.
CHAPTER 15:
ARRANGEMENTS,
RECONSTRUCTIONS AND
CORPORATE RESCUE
MECHANISM
Corporate restructuring ¶15-000
Compromises and arrangements ¶15-100
Take-overs ¶15-200
Corporate rescue mechanism ¶15-400
Corporate voluntary arrangement (CVA) ¶15-405
Judicial management ¶15-500
Appendix 15.1: Malaysian Code on Take-overs and
Mergers 2016 ¶15-1001
Appendix 15.2: Notice to dissenting shareholder (Sch
5, Rule 2 of Rules on Take-overs, Mergers and
Compulsory Acquisitions ¶15-1002
Appendix 15.3: Seventh Schedule, CA 2016 ¶15-1003
Appendix 15.4: Eighth Schedule, CA 2016 ¶15-1004
Appendix 15.5: Ninth Schedule, CA 2016 ¶15-1005
CORPORATE RESTRUCTURING
¶15-000 Schemes of restructuring
It is not uncommon for a company, or a group of companies to

undergo changes in corporate structure. The change may be due to
the take-over by one company of another, the transfer of the whole or
part of a company’s undertaking to a new company, the merger of two
or more companies into a new company, or a split of one company
into two or more companies (a de-merger). These corporate
transformations are termed “arrangements”, “reconstructions” and
“amalgamations”. Subdivision 2, Div 7 of Pt III of the Companies Act
2016 (CA 2016) deals with arrangements, reconstructions and
amalgamations. This Subdivision (ie s 365 to s 371) of the CA 2016:
• provides power for the court on application by the company, any
creditor, any member of the company, the liquidator or the judicial
manager to make a compromise with its creditors and members,
and stipulates the information to be provided;
• makes provisions for the facilitation of the reconstruction and

amalgamation of companies; and
• provides for the acquisition of shares of dissenting shareholders.
An “arrangement” includes a re-organisation of the share capital by

the consolidation of shares of different classes or by the division of
shares of different classes or by both these methods: s 365, CA 2016.
The terms “compromise”, “reconstruction” and “amalgamation” are not
defined in CA 2016 and thus their normal commercial meanings apply:
• a compromise is an adjustment of conflicting interests by
modification of each, an implication of some element of
accommodation on each side;
• a reconstruction involves a resuscitation of a company effected by

substantially the same persons as before (per Buckley J in Re
South African Supply & Cold Storage Co). It may constitute the
transfer by a company of its assets to a new company, or an
alteration to the capital structure of a company or group of
companies;
• an amalgamation involves the welding together of two

undertakings under common control.
Law: s 365 and 366 of CA 2016
¶15-010 Reconstruction and amalgamation

The difference between a reconstruction and an amalgamation is that
the former is a continuation of substantially the same concern
whereas the latter is a blending of two concerns, one with the other.
However, when one small company joins a larger one on the basis
that the shareholders in the smaller receive shares in the larger, that is
not reconstruction of the smaller company (per Chitty J in Hooper v
Western Counties & South Wales Telephone Co Ltd). Each form of
arrangement, reconstruction or amalgamation may involve difficult
issues of taxation, employment law and accounting disclosure.
Transformation of corporate structure raises many different issues and
considerations of company law as well. The first of these is the
machinery by which the change is to be effected. The CA 2016
provides a framework for undertaking internal reconstructions and also
amalgamations of separate corporate entities. There are regulatory
provisions to consider, both statutory and extra-statutory. Take-overs
are an increasingly common feature of commercial life, and often
involve consideration of factors not common to other forms of
reconstruction.
Section 370 of CA 2016 provides for the reconstruction and
amalgamation of companies as follows:
Subsection (1) states that where an application is made to the court
under this Subdivision for the approval of a compromise or
arrangement and it is proved to the court that—
(a) the compromise or arrangement has been proposed for the
purposes of, or in connection with, a scheme for the
reconstruction of any company or the amalgamation of any two or
more companies; and
(b) under the scheme the whole or any part of the undertaking or
the property of any company concerned in the scheme,
“transferor company”, is to be transferred to another company,
“transferee company”.
Subsection (2) states that the court may, either by the order approving
the compromise or arrangement or by any subsequent order, make
provision for all or any of the following matters—
(a) the transfer to the transferee company of the whole or any part
of the undertaking and of the property or liabilities of the
transferor company;
(b) the allotting or appropriation by the transferee company of any

shares, debentures, policies or other similar interests in that
company which under the compromise or arrangement are to be
allotted or appropriated by that company to or for any person;
(c) the continuation by or against the transferee company of any

legal proceedings pending by or against the transferor company;
(d) the dissolution without winding up of the transferor company;
(e) the provision to be made for any persons who, within such time
and in such manner as the Court directs, dissent from the
compromise or arrangement; and
(f) such incidental, consequential and supplemental matters as are

necessary to secure that the reconstruction or amalgamation shall
be fully and effectively carried out.
Subsection (3) states that if an order made under this section provides
for the transfer of property or liabilities, the property shall, by virtue of
the order, be transferred to and vest in the transferee company; and
the liabilities shall, by virtue of the order, be transferred to and become
the liabilities of the transferee company, and in the case of any
particular property if the order directs free from any charge which is by
virtue of the compromise or arrangement to cease to have effect.
Subsection (4) states that every company in relation to which an order
is made under this section shall lodge an office copy of the order with
the Registrar within seven days of the making of the order; and if the
order relates to land, with the appropriate authority concerned with the
registration or recording of dealings in that land.
Subsection (5) states that no vesting order referred to in this section
shall have any effect or operation in transferring or otherwise vesting
land until the appropriate entries are made with respect to the vesting
of that land by the appropriate authority.
(a) “liabilities” includes duties;
(b) “property” includes all rights and powers relating to the property.
Law: s 370 of CA 2016.
¶15-015 Right of offeror to buy out

Subsection (1) states that if a scheme or contract involving the
transfer of all the shares or all the shares in any particular class in a
transferor company, to a “transferee company”, whose transfer involve
the holders of not less than 90% of the nominal value shares or of the
shares of that class, other than shares already held at the date of the
offer by, or by a nominee for, the transferee company or its subsidiary,
have been approved, the transferor company on behalf of the
transferee company has within four months to make offer to buy out
the share.
Subsection (2) states that the transferee company may at any time
within two months after the offer has been approved under sub-s (1),
give notice to any dissenting shareholder in the transferor company
that the transferee company desires to acquire the dissenting
shareholder’s shares in the form and manner as determined by the
registrar.
Subsection (3) states that if a notice has been given by the transferee
company, the transferee company shall be entitled and bound to
acquire those shares on the terms which, under the scheme or
contract, the shares of the approving shareholders are to be
transferred to the transferee company or if the offer contained two or
more alternative sets of terms, upon the terms which were specified in
the offer as being applicable to dissenting shareholders, unless on an
application made by the dissenting shareholder within one month from
the date on which the notice was given or within seven days of a
statement being supplied to a dissenting shareholder under sub-s (4),
whichever is the later, as the court thinks fit to order otherwise.
Subsection (4) states that if a transferee company has given notice to
any dissenting shareholder that the transferee company desires to
acquire his shares, the dissenting shareholder shall be entitled to
require the company to supply to him a statement in writing of the
names and addresses of all other dissenting shareholders as shown in
the register of members, by a demand in writing served on that
company within one month from the date on which the notice was
given to the dissenting shareholder.
Subsection (5) states that subject to sub-s (4), the transferee company
shall not be entitled or bound to acquire the shares of the dissenting
shareholders until 14 days after the posting of the statement of the
names and addresses to the dissenting shareholder.
Subsection (6) states that if, under any such scheme or contract,
shares in a company are transferred to another company or its
nominee and those shares together with any other shares in the
transferor company held by, or by a nominee for, the transferee
company or its subsidiary at the date of the transfer, comprise or
include 90% of the shares in the transferor company or any class of
those shares, then—
(a) the transferee company shall give notice of that fact in the form
and manner as determined by the registrar to the remaining
shareholder or the remaining shares of that class who have not
assented to the scheme or contract, within one month from the
date of the transfer unless on a previous transfer under the
scheme or contract, the transferee company has complied with
this requirement; and
(b) any shareholder may require the transferee company to acquire

the shares in question within three months from the giving of the
notice to him,
and if a shareholder gives notice under para (b) with respect to any
shares, the transferee company shall be entitled and bound to acquire
those shares on the terms on which under the scheme or contract the
shares of the approving shareholders were transferred to the
transferee company, or on such other terms as are agreed or as the
court thinks fit to order, on the application of either the transferee
company or the shareholder.
Subsection (7) states that if a notice has been given by the transferee
company under sub-s (1) and the court has not, on an application
made by the dissenting shareholder, ordered to the contrary, the
transferee company shall, transmit a copy of the notice to the
transferor company together with an instrument of transfer executed,
on behalf of the shareholder by any person appointed by the
transferee company, and on its own behalf by the transferee company
—
(a) after the expiration of one month after the date on which the
notice has been given;
(b) after 14 days a statement has been supplied to a dissenting

shareholder under sub-s (4); or
(c) if an application to the court by the dissenting shareholder is

then pending, after that application has been disposed of.
Subsection (8) states that in relation to sub-s (7) the transferee
company shall pay, allot or transfer the amount or other consideration
representing the price payable by the transferee company for the
shares which by virtue of this section that company is entitled to
acquire to the transferor company, and the transferor company shall
register the transferee company as the shareholder.
Subsection (9) states that any sums received by the transferor
company under this section shall be paid into a separate bank
account, and any sums and any other consideration received shall be
held by that transferor company in trust for the several persons
entitled to the shares in respect of the sums received by the transferor
company, respectively.
Subsection (10) states that if any consideration other than cash is held
in trust by a company for any person under this section or under any
corresponding previous written law, such consideration other than
cash may, after the expiration of two years and shall before the
expiration of ten years from the date on which the consideration was
allotted or transferred to the company, be transferred to the minister
charged with the responsibility for finance.
Subsection (11) states that the Minister charged with the responsibility
for finance shall sell or dispose of any consideration received under
sub-s (10) as he thinks fit and shall deal with the proceeds of the sale
or disposal as if it were moneys paid to the Minister under the law
relating to unclaimed moneys.
Subsection (12) states that in this section, “dissenting shareholder”
includes a shareholder who has not assented to the scheme or
contract and any shareholder who has failed or refused to transfer his
shares to the transferee company in accordance with the scheme or
contract.
Law: s 371 of CA 2016.
COMPROMISES AND ARRANGEMENTS

¶15-100 Scheme of arrangement
A scheme of arrangement is a statute-approved procedure permitting
a company to make a compromise or arrangement binding on all its
creditors and/or members, or classes of either or both. It may be
proposed by creditors, members or the company. It can be proposed
as between the company and its creditors or any class of creditors, or
between the company and its members or any class of them.
It is inevitable that there will be persons who will not agree or wish to
be bound by the scheme. The CA 2016 overcomes these difficulties
by providing for a compromise or arrangement can be made between
a company and its creditors (or any class of them) and its members
(or any class of them), and by granting the court power to approve a
scheme and thereby validate it. The compromise or arrangement will
be binding on the creditors/members and the company, and also on
the dissenting majority. “Compromise” and “arrangement” implies
mutual benefit, and not abandonment of rights (Re NFU Development
Trust Ltd). Once a scheme has been agreed on between the company
and a sufficient number of creditors or members, and has been
approved by the court, the scheme derives its operative force from the
provisions of the section (per Hogarth J in Trocko v Renlita Products
Pty Ltd).
Section 365 of CA 2016 stipulates that unless the context otherwise
requires:
• “arrangement” includes a reorganisation of the share capital of a
company by the consolidation of shares of different classes or by
the division of shares into shares of different classes or by both of
these methods;
• “company” means any corporation or society liable to be wound up

under CA 2016 with the exception of s 370 (“Reconstruction and
amalgamation of companies”);
• “transferee company” means—

(a) in s 370, a company to which the whole or any part of the
undertaking or property of the transferor company is
transferred to; and
(b) in s 371 (“Right of offeror to buy out”), a company to which
all of the shares or all of the shares in any particular class of
the transferor company is transferred to;
• “transferor company” means—

(a) in s 370, a company which transfers the whole or any part of
the undertaking or property of the company; and
(b) in s 371, a company which transfers all of the shares or all

of the shares in any particular class of the company.
Power of court to order compromise or arrangement with

creditors and members (s 366)
When a compromise or arrangement is proposed, the company, any
creditor or member of the company, the liquidator (if the company is
being wound up) or the judicial manager (if the company is under
judicial management), may apply to the court in a summary way for a
meeting to be called. The court has the discretion whether or not to
call the meeting. The court may order a meeting of the relevant parties
to be summoned in such manner as the court directs. The meeting
may be adjourned from time to time pursuant to an order of the court,
which may be given only if the resolution for adjournment is approved
by 75% of the total value of creditors or class of creditors or the
members or class of members present and voting either in person or
by proxy at the meeting.
If the resolution so directs, the directors must instruct the accountants
or solicitors (or both) as named in the resolution to report on the
proposals and to forward them to the directors as soon as possible.
Such report(s) must be made available at the registered office of the
company and the report(s) must be available for inspection by
shareholders and creditors of the company at least seven days before
the date of any meeting ordered by the court. This is to ensure that
creditors/members voting at the meeting know what the scheme is
about and how their rights would be modified. Furthermore, every
notice summoning the meeting must be accompanied by a statement
explaining the effect of the compromise or arrangement and in
particular stating any material interests of the directors, and the effect
on their interests of the compromise or arrangement in so far as it is
different from the effect on the similar interests of other persons. Every
notice given in the form of an advertisement must include a statement
or notification of the place at which and the manner in which the
creditors/members entitled to attend the meeting may obtain copies of
such a statement.
If a majority in number representing 75% of the value of the
creditors/members present and voting do not approve of the scheme,
then the propose scheme fails. If 75% or more approve of the scheme,
then the next step would be to apply for the court’s sanction.
The court may grant its approval to a compromise or arrangement
subject to such alterations or conditions as the court thinks just.
The compromise or arrangement that has been approved by a court
order shall be binding on—
(a) all the creditors or class of creditors;
(b) the members or class of members;
(c) the company; or
(d) the liquidator and contributories, if the company is being wound

up.
An order given is not effective until an office copy of the order is

lodged with the Registrar, and upon being such lodgement, the order
shall take effect on and from the date of lodgement or such earlier
date as the court may determine and as may be specified in the order.
A copy of every order made by the court shall be annexed to every
copy of the constitution of the company issued after the order has
been made, or in the case of a company not having a constitution, to
every copy of the instrument issued constituting or defining the
constitution of the company.
The court may, by order, exempt a company from complying with the
requirements of annexing to every copy of the constitution of the
company or determine the period during which the company shall
comply with the requirements.
The company and every officer who contravene the requirement to
annex to every copy of the constitution or for the directors to comply
with reporting the proposals and make available at the registered
office for inspection by shareholders and creditors at seven days
before the meeting ordered by the court to be summoned, commit an
offence.
Law: s 365, 366 and 369 of CA 2016.
¶15-110 Steps in effecting a scheme of arrangement

The following steps must be taken to effect a scheme under CA 2016:
(1) An application to the court must be made by any member,
creditor or the liquidator (if the company is being wound up), for
an order that a meeting of creditors or members be called (see
¶15-120).
(2) The terms of the scheme are submitted to the court with the
latter application.
(3) If the court considers the proposals suitable it will order that the
appropriate meetings be held. The schemes will be considered at
these meetings.
(4) Once a compromise or arrangement has been proposed the

directors are bound to carry out the following:
(a) if a meeting of members so directs, instruct the company’s
accountants or solicitors (or both) as named in the members’
resolution, to report on the proposals and forward such report
to the directors as soon as may be; and
(b) make such reports available at the company’s registered

office for inspection by shareholders and creditors at least
seven days before any meeting ordered by the court.
(5) It is necessary for the proposed scheme to obtain the support of
a majority in number of the class of shareholders and/or creditors
affected representing three-quarters of those present and voting
at the meeting (see ¶15-140). A “class” is those persons whose
rights are not so dissimilar as to make it impossible for them to
consult together with a view to their common interest (Sovereign
Life Assurance Co v Dodd).
(6) Disclosure of the effect of the compromise upon directors’

interests is called for. This includes compensation for loss of
office which may result.
(7) If the scheme receives the appropriate support, application is

made to the court to sanction the scheme.
(8) Once approved, the parties who agreed to the compromise are
bound by its terms.
¶15-113 Power of court to appoint an approved liquidator

The court may, on an application, appoint an approved liquidator to
assess the viability of the scheme proposed for the compromise or
arrangement and the approved liquidator appointed shall prepare a
report for submission to the applicant. The report prepared shall be
tabled at the meeting of creditors or members held under s 366 of CA
2016 (see ¶15-100).
Law: s 367 of CA 2016.
¶15-116 Information as to compromise or arrangement

with creditors and members
• Every notice summoning the meeting with creditors and members
regarding a compromise or scheme of arrangement—
(a) which is sent to a creditor or member shall be accompanied
with a statement explaining the effect of the compromise or
arrangement and in particular stating any material interests of
the directors, whether as directors or as members or as
creditors of the company or otherwise, and the effect of the
compromise or arrangement so far as it is different from the
effect on the similar interests of other persons; and
(b) which is given by advertisement shall either contain the

statement referred to in para (a) or a notification of the place
at which and the manner in which the creditors or members
entitled to attend the meeting may obtain copies of such a
statement.
• Where the compromise or arrangement affects the rights of

debenture holders, the statement shall give the like explanation
with respect to the trustee for the debenture holders as required,
and a statement to be given with respect to the directors.
• If a notice given by advertisement includes a notification that

copies of a statement can be obtained, every creditor or member
entitled to attend the meeting shall on making an application in
the manner indicated in the notice, be furnished with a copy of the
statement free of charge by the company.
• Each director and each trustee for debenture holders shall provide
the necessary information on matters relating to each director and
each trustee for debenture holders within seven days of the
receipt of a request by the company in writing.
• The company and every officer who contravene s 369 commit an

offence and shall, on conviction, be liable to imprisonment for a
term not exceeding five years or to a fine not exceeding RM1
million or to both. “Officer” of the company includes any liquidator
of the company and any trustee for debenture holders. However,
a person shall not be liable if he shows that the default was due to
the refusal of any director or trustee for debenture holders, to
supply the necessary particulars as to the interests of the
directors or trustee for the debenture holders.
Law: s 369 of CA 2016.
¶15-120 The first hearing
At the first hearing, the court is asked to order the necessary meeting.
At this point the court must be satisfied that the proposed scheme is
one that should be considered by the members and creditors. Under a
similar provision in Australia, for example, the court did not order a
meeting:
• where the proposed scheme was not bona fide — where the
scheme was a ploy to delay a liquidator’s investigation of the
company’s affairs (Re K Rees Emporiums Ltd);
• where it was pointless — where an objecting creditor had a debt

worth more than 25% of the total (Re Jax Marine Pty Ltd);
• where it was unnecessary — where a particular class of

shareholder was not affected by the proposed scheme (Re
Brownfields Guild Pottery Society);
• where the proposal was contrary to public policy (Re Mascot

Home Furnishers Pty Ltd (in liq); Re Denistone Real Estate Pty
Ltd).
¶15-130 Explanatory statement
Given that the court is satisfied that the meeting should be convened
to consider a scheme, the next step is to give notice of the meetings to
the members and creditors. When making the order, the court may
approve the explanatory statement which must accompany the notice
of the meeting.
The function of the statement is to explain the effect of the
compromise or arrangement and to state any material interests of the
directors (whether as directors, members or creditors).
¶15-140 Majority approval

At each meeting ordered to be held by the court, the scheme must be
agreed to by a majority in number representing three-quarters in value
of the creditors or class of creditors or members or class of members
present and voting. The obvious purpose for making the required
majority one of three-quarters in value is to prevent a numerical
majority with a small stake outvoting a minority with a large stake (Re
NFU Development Trust Ltd).
¶15-150 Court’s power to make orders
Where the proposed scheme involves the transfer of the whole or part
of the undertaking of one company to another, the court is given the
power under CA 2016 to make the following orders, when asked to
sanction a compromise or arrangement:
• The transfer of the whole or any part of the undertaking, liabilities
and property from the transferor company to the transferee
company.
• The allotment of shares, debentures or similar interests by the

transferee company.
• Continuation of legal proceedings by or against the transferee

company which originated with the transferor company.
• Dissolution of the transferor company without winding up.
• Provision for persons who dissent from the scheme.
• Any incidental, consequential and supplemental orders which the

court considers necessary to carry out the scheme fully and
effectively.
The sanction of the court for the proposed arrangements will be

granted if the resolutions are supported by the appropriate majority
and if an intelligent and honest man might reasonably approve the
proposals (Re National Bank Ltd).
Note that in Malaysia, a petitioner seeking a s 176, CA 1965 (now s
366, CA 2016) sanction may have to provide security for costs in
respect of his petition (Gula Perak Berhad (In Receivership) v Agri-
Projects (M) Sdn Bhd).
¶15-155 Power of court to restrain proceedings

Subsection (1) states that if no order has been made or resolution
passed for the winding up of a company and a compromise or
arrangement has been proposed between the company and its
creditors or any class of those creditors, the court may, in addition to
any of its powers, on the application in a summary way of the
company or any member or creditor of the company, restrain further
proceedings in any action or proceeding against the company except
by leave of the court and subject to any terms as the court may
impose.
Subsection (2) states that the court may grant a restraining order
under sub-s (1) to a company for a period of not more than three
months and the court may on the application of the company, extend
this period for not more than nine months if—
(a) the court is satisfied that there is a proposal for a scheme of
compromise or arrangement between the company and its
creditors or any class of creditors representing at least one-half in
value of all the creditors;
(b) the court is satisfied that the restraining order is necessary to

enable the company and its creditors to formalise the scheme of
compromise or arrangement for the approval of the creditors or
members under s 366 (see ¶15-100);
(c) a statement of particulars as to the affairs of the company made

up to a date not more than three days before the application is
lodged together with the application; and
(d) the court approves the person nominated by a majority of the

creditors in the application by the company under sub-s (1) to act
as a director or if that person is not already a director, appoints
that person to act as a director notwithstanding the provisions of
this Act or the constitution of the company.
Subsection (3) states that the person approved or appointed by the

court to act as a director of the company under para 2(d) shall have
the right—
(a) of access to the accounting and other records including registers
of the company at all reasonable times; and
(b) to be entitled to require from any officer of the company any

information and explanation as he may require for the purposes of
his duty.
Subsection (4) states that unless the court otherwise orders, any
disposition of the property of the company including things in action
and any acquisition of property by the company, other than in the
ordinary course of business, made after the grant of the restraining
order by the court shall be void.
Subsection (5) states that where an order is made under sub-s (1),
every company in relation to which the order is made shall, within
seven days—
(a) lodge an office copy of the order with the Registrar; and
(b) publish a notice of the order in one widely circulated newspaper

newspaper in Malaysia in the English language,
and the company and every officer who contravene this section
exceeding RM100,000 and in the case of a continuing offence, to a
Subsection (6) states that an order made by the court shall not have
the effect of restraining—
(a) further proceedings in any action or proceeding that should be
taken against the company by the Registrar or the Securities
Commission (SC); or
(b) further proceedings in any action or proceeding against any

person including the guarantor of the company but does not
include the company that had applied for the restraining order.
Subsection (7) states that if a company disposes or acquires any

property other than in the ordinary course of its business, without
leave of the court, the company and every officer who contravene this
section commit an offence and shall, on conviction, be liable to
imprisonment for a term not less than five years or to a fine not
exceeding RM3 million or to both.
Law: s 368 of CA 2016.
¶15-160 Triggering of mandatory offer provisions under

the Malaysian Code on Take-overs and Mergers
All the above mentioned schemes of arrangement, restructuring and
reorganisations or merger and amalgamation may trigger mandatory
offer provisions of the Malaysian Code on Take-overs and Mergers
2016 (see “General principle 3” at para 5 of the Code).
TAKE-OVERS
¶15-200 Legislative framework
Take-overs, mergers and acquisitions in Malaysia are primarily

governed by the:
(a) Capital Markets and Services Act 2007 (CMSA 2007);
(b) Malaysian Code on Take-Overs and Mergers 2016 (the Code).

Made in accordance with s 217 of the CMSA 2007, the Code sets
out the broad principles to be adhered to by all parties involved in
any take-over or merger transactions. It include amongst others
that all shareholders must be treated equally in any take-over or
merger transaction and should not be disadvantaged by the
treatment or conduct of any relevant party to a take-over ; and
(c) Rules on Take-Overs, Mergers and Compulsory Acquisitions

2016 (the Code Rules). The Code Rules stipulates operational
and conduct requirements in relation to take-overs and is issued
as an SC guideline under s 337 of the CMSA 2007.
Other key laws and regulations that are relevant to take-overs,

mergers and acquisitions are CA 2016 and the Bursa Malaysia Listing
Requirements (BMLR).
Law: s 217 and 337 of CMSA 2007.
¶15-203 The 2016 Take-over Code and Rules

The 2016 Code Rules together with the 2016 Code replaces the
Malaysian Code on Take-Overs and Mergers 2010 as of 15 August
2016.
The operational and conduct requirements in relation to takeovers
which were formerly in the 2010 Code are now contained in the Code
Rules. The 2016 Code, instead of setting out specific requirements,
now prescribes a set of 12 General Principles to be adhered to by all
parties involved in any takeover or merger transaction. The 2016
Code is reproduced in Appendix 15.1 at the end of this chapter.
Some of the key changes to take-overs, mergers and compulsory
acquisitions framework under 2016 Code and Code Rules are as
follows:
• Requirement for a minimum of 50% shareholding to initiate a
take-over is removed
The Code Rules have removed the requirement of a minimum
50% shareholding for parties intending to initiate a take-over
scheme (such as scheme of arrangement, compromise,
amalgamation or selective capital reduction).
• Only unlisted public companies subject to the 2016 Code

Previously, the 2010 applied to all public companies whether
listed or unlisted. Under the 2016 Rules, only unlisted public
companies having more than 50 shareholders and net assets of
RM15 million or more will come within the 2016 take-overs
framework.
• “Persons acting in concert” (PAC) for real estate investment

trusts (REITs) and business trusts
The 2016 Code specifies persons who are presumed to be
persons or parties acting in concert in relation to a take-over offer
where the offeror is a real estate investment trust and business
trust.
In the case of an offeror being a REIT, the following are
presumed to PACs:
(a) its management company;
(b) a director of the management company (together with his

spouse, close relatives and related trusts);
(c) any person who owns or controls 20% of the voting shares
of the management company;
(d) any person who is related to its associate or management

company; and
(e) its trustee.
However, in regard to a professional trustee of the REIT, the

concert party relationship is limited to the trustee (including its
directors) acting in the capacity as trustee.
In the case of an offeror being a business trust, the following are
presumed PAC:
(a) its management company; its trustee-manager including the
agent;
(b) a director of the trustee-manager (together with his spouse,

close relatives and related trusts);
(c) any person who owns or controls 20% of the voting shares;
and
(d) any person who is related to an associate of the trustee-

manager.
• Offer price in a mandatory take-over

The Code Rules set out the out the minimum offer price in a
mandatory take-over arising from an arrangement, agreement or
understanding to control between the offeror and PACs. In such
take-over offers, the offer price shall be the higher of the highest
purchase price paid by the offeror and PACs or the volume
weighted average traded price of the offeree for the last 20
market days prior to the triggering of the mandatory offer
obligation. The SC has the discretion to disregard any unusually
high or low traded prices within the relevant period. The 2010
Code did not specify the SC’s discretion in respect of unusually
high or low traded prices.
• Offeree with dual listing

The Code Rules contains guidance on the treatment of offeree
companies which have listings in dual jurisdictions. An offeree
with primary listing on both a stock exchange in Malaysia and
outside of Malaysia may be subject to the dual jurisdiction of the
SC and the foreign take-over regulator. In such cases, the Code
Rules require early consultation with the SC as to resolving any
conflicts between the relevant regulatory framework.
Where the offeree has a primary listing on a stock exchange
outside of Malaysia and a secondary listing in Malaysia, the SC
may consider disapplying the Code Rules provided that the
applicant is able to demonstrate that the relevant take-over
regulation in the foreign jurisdiction accords an equivalent level of
protection to offeree shareholders as provided under the Code
Rules.
¶15-210 What is a take-over?
A take-over is the acquisition by one company (or person) of another

company. It may be effected in various ways.
The CMSA 2007 defines “take-over” as “an acquisition of shares in a
company which, when aggregated with shares already held by the
acquirer, would give the acquirer the right to exercise or control the
exercise of more than 33% of the voting rights of that company”.
In some jurisdictions, take-over is described as:
“a scheme involving the making of offers for the acquisition by or
on behalf of a corporation—
(a) of all the shares in another company or of all the shares of a
particular class in another company; or
(b) of any shares in another company which results in the first-

mentioned corporation acquiring effective control of that other
company.”
“Acquiring effective control” has been defined as:

“acquiring of shares in an offeree company which (together with
shares, if any, already held by the offeror corporation or by any
other corporation that is … related to that corporation) carry the
right to exercise, or control the exercise of not less than 25% of
the votes attached to the voting shares of that company.”
In broad terms then, a take-over bid is a general offer by one person
or company to the shareholders of another company to acquire all the
shares of that other company or a proportion of them sufficient to
enable the bidder to exercise voting control.
Interpretation
Section 216 of CMSA 2007 provides the interpretation of words used
in the Div 2 on “Take-overs, Mergers and Compulsory Acquisition” as
follows:
• “Acquirer” means—
(a) a person who acquires or proposes to acquire control in a
company whether the acquisition is effected by the person or
by an agent; or
(b) two or more persons who, acting in concert with one

another, acquire or propose to acquire control in a company,
whether the acquisition is effected by the persons or by an
agent.
• “Code” means the Malaysian Code on Take-Overs and Mergers

made in accordance with s 217.
• “Company”, in relation to a company being taken over, means a

public company whether or not it is listed on any stock exchange
and any other entity as may be prescribed in the Code.
• “Control”, means the acquisition or holding of, or entitlement to

exercise or control the exercise of, voting shares or voting rights
of more than 33%, or such other amount as may be prescribed in
the Code in a company, howsoever effected.
• “Dissenting shareholder” includes any shareholder who has not

accepted a take- over offer and any shareholder who has failed or
refused to transfer shares to an acquirer in accordance with a
take-over offer.
• “Expert” includes engineer, valuer, accountant and any other

person whose profession gives authority to a statement made by
him.
• “Offeree” means a company whose voting shares or voting rights

are subject to a take-over offer.
• “Offeror” means a person who makes or proposes to make a take-

over offer.
• “Officer”, in relation to a corporation, includes—

(a) a director, secretary, executive officer or employee of the
corporation;
(b) a receiver and manager, appointed under a power

contained in any instrument, of any part of the undertaking or
property of the corporation;
(c) a liquidator of the corporation appointed in a voluntary

winding up of the corporation, but does not include a receiver
who is not also a manager, a receiver and manager
appointed by a court and a liquidator appointed by a court.
• “Private company” and “public company” have the meanings

assigned to them in s 2(1) of CA 2016.
• “Related”, in relation to a corporation, means related within the

meaning of s 7 of CA 2016.
• “Share” means a share in a company or a unit in an entity that is

prescribed in the Code.
• “Shareholder” means a shareholder in a company or a unit holder

in an entity that is prescribed in the Code.
• “Take-over offer” means an offer made to acquire all or part of the

voting shares or voting rights, or any class or classes of voting
shares or voting rights, in a company and includes—
(a) a take-over or merger transaction howsoever effected which
has the effect or potential effect of obtaining or consolidating
control in the company;
(b) a partial offer as defined in the Code;
(c) a take-over offer by a parent company for the voting shares

or voting rights in its subsidiary; or
(d) an arrangement or reorganisation that involves the voting

shares or voting rights of a listed company.
• “Voting shares”, in relation to a company, has the meaning
assigned to it in s 2(1) of CA 2016.
• A reference to “persons acting in concert” shall be construed as a

reference to persons who, pursuant to an agreement,
arrangement or understanding, co-operate to—
(a) acquire jointly or severally voting shares of a company for
the purpose of obtaining control of that company; or
(b) act jointly or severally for the purpose of exercising control

over a company.
The following persons shall be presumed to be persons acting in

concert unless the contrary is established:
(a) a corporation and its related and associate corporations;
(b) a corporation and any of its directors, or the parent, child,

brother or sister of any of its directors, or the spouse of any
such director or any such relative, or any related trusts;
(c) a corporation and any pension fund established by it;
(d) a person and any investment company, unit trust or other

fund whose investments such person manages on a
discretionary basis;
(e) a financial adviser and its client which is a corporation,

where the financial adviser manages on a discretionary basis
the corporation’s funds and has 10% or more of the voting
shares in that corporation;
(f) a person who owns or controls 20% or more of the voting

shares of a corporation falling within para (a) and any parent,
child, brother or sister of such person, or the spouse of such
person or any such relative, or any related trusts together
with one or more persons falling within para (a); and
(g) such other category of persons as may be prescribed in the
Code.
• An agreement, arrangement or understanding means an

agreement, arrangement or understanding whether formal or
informal, whether written or oral, whether express or implied or
whether or not having legal or equitable force.
• An associated corporation means a corporation in respect of which

not less than 20% of the voting shares of that corporation are held
by another corporation, the first-mentioned corporation thereby
being an associate corporation of the other corporation.
Law: s 216 and 217 of CMSA 2007; Malaysian Code on Take-overs

and Mergers 2016.
¶15-214 What is a take-over offer?

A “take-over offer” means an offer made to acquire all or part of the
voting shares or voting rights, or any class or classes of voting shares
or voting rights, in a company and includes—
(a) a take-over or merger transaction howsoever effected which has
the effect or potential effect of obtaining or consolidating control in
the company;
(b) a partial offer as defined in the Code;
(c) a take-over offer by a parent company for the voting shares or

voting rights in its subsidiary; or
(d) an arrangement or reorganisation that involves the voting shares

or voting rights of a listed company.
Types of take-over offer

A take-over offer is a method of acquiring control of a company. In a
take-over of a public company, the shareholders of the target
company (offeree) are asked to accept an offer that has been made
by an acquirer (or bidder). The two main types of offer:
• Mandatory offer: This occurs when an acquirer obtains control or
meets certain take-over thresholds. Typically, the acquirer signs a
share purchase agreement to purchase a block of shares which,
in turn, triggers the general requirement for a takeover
announcement.
• Voluntary offer: This is where an offer is made voluntarily and

simultaneously to all the shareholders of the target to acquire
their shares in the target.
In addition to the above, of lesser frequency are:

• Partial offer may also be used to acquire control, but can only be
implemented with the consent of the SC. Consent will normally be
granted where a partial offer would not result in the acquirer (and
persons acting in concert with the acquirer) holding more than
33% voting shares or voting rights of the target company. A
partial offer is a type of voluntary take-over offer whereby the
acquirer offers to buy less than 100% of any class of the voting
shares or voting rights of a company.
• Hostile take-over is a type of corporate acquisition or merger

which is carried out against the wishes of the board (and usually
management) of the target company. In such a take-over, the
acquirer (or bidder) continues to pursue the acquisition despite
the company’s board rejecting the over. The bidder may initiate a
hostile take-over through a tender offer, which means he
proposes to purchase the target company’s stock at a fixed price
above the current market price. Alternatively, he may acquire a
majority interest in the stock of the target company on the open
market. If that is not possible or is too expensive, the acquirer
may initiate a proxy fight, which means that he persuades enough
shareholders to replace the management of the company with
one which will approve the acquisition.
¶15-218 Compulsory acquisition of shares

A company which seeks to acquire all the shares in another company
will make an offer for that target company (offeree)’s shares. However,
the change in ownership may not meet with the approval of all the
target company’s shareholders. To prevent a dissenting minority from
frustrating a take-over bid, CA 2016 enables a compulsory acquisition
of shares.
A power is conferred under CA 2016 for the compulsory acquisition of
the shares of a 10% minority who dissents from a scheme or contract,
for the transfer of their shares (or any class of their shares) to an
offeror company. If approval for the scheme or arrangement is given
by holders of 90% in value of the shares within four months of the
offer, the offeror company has two months to give notice to the
dissentients that it wishes to acquire their shares. Once notice is
given, the offeror company must take the dissentients’ shares on the
same terms as those offered to the other shareholders.
The minority can object to the proposals by application to the court
within one month of the notice or seven days from receipt of a
statement naming other dissenting shareholders. The court may then
make an alternative order, as it thinks fit. A “dissenting shareholder” is
one who did not originally agree to the scheme or contract or one who
failed or refused to transfer his shares according to the scheme or
contract. There is a very heavy burden on a dissenter to show why a
compulsory acquisition should not be approved (Re Sussex Brick Co
Ltd).
If there is no objection or successful application to the court to block
the compulsory acquisition, the target company must send to the
offeror company a copy of the notice sent to the dissenting
shareholders along with instruments of transfer, executed on their
behalf. The offeror company then pays to the target company the
agreed consideration and the former is registered as holder of the
shares in the latter. The consideration is then paid over to the
dissentients.
The minority must be informed of the acquisition of the 90% holding
within one month of their transfer. The shareholders who did not
support the scheme or contract then have three months to call for the
acquisition of their shares by the transferee company. The terms of
the acquisition must be the same as for those shareholders who
approved the scheme or contract, or such as may be agreed. The
court can interfere with these terms on an application by the
dissentients or the transferee company.
Compulsory acquisition of minority shareholdings
An acquirer who has obtained control in a company shall not acquire
any additional voting shares or voting rights in the offeree except in
accordance with the provisions of the Code and any ruling made
pursuant to the CMSA 2007 [s 218(3), CMSA 2007].
Under s 222 of CMSA 2007, where a take-over has been made and
that offer has been accepted by holders of not less than 90% in the
nominal value of those shares of that class (excluding shares already
held at the date of the take-over offer by the offeror and persons
acting in concert), the offeror can, within four months of making that
offer, compulsorily acquire shares from the remaining minority
shareholders.
The successful offeror is required to give notice to the remaining
minority shareholders in the forms stipulated in Sch 5 of the Code
Rules1 (depending on whether it is addressed to a dissenting
shareholder or a shareholder who has not accepted to the offer) within
two months from the date the 90% acceptance condition has been
achieved. This notice serves as an indication of the offeror’s desire to
acquire their shares and should include a copy of a statutory
declaration by the offeror that the conditions for the giving of the notice
are satisfied.
Upon receipt of such notice, the remaining minority shareholders have
the option under s 222(2) of CMSA 2007 to serve a written demand
requesting for a written statement of the names and addresses of all
other remaining minority shareholders as listed in the register of
members. The offeror cannot acquire the shares of the remaining
minority shareholders until 14 days after the posting of the written
statement.
After the expiration of one month from the notice, the offeror must
send a copy of the said notice and an instrument of transfer executed
on behalf of all such minority shareholders by the offeror and pay, allot
or transfer to such minority shareholders the amount or consideration
for the shares to which the notice relates.
In the same manner, pursuant to s 223 of CMSA 2007, where a take-
over offer has been accepted by holders of not less than 90% in the
nominal value of those shares of that class (excluding shares already
held at the date of the take-over offer by the offeror and persons
acting in concert), the remaining minority shareholders may within the
offer period require the offeror to acquire its shares on terms of the
take-over offer or such other terms as may be agreed.
Law: s 218(3), 222 and 223 of CMSA 2007; Sch 5 of Rules on Take-
overs, Mergers and Acquisitions.
Footnotes
1 See Appendix 15.2 for Sch 5 of the Code Rules.
¶15-222 Mandatory offer
A mandatory offer is a take-over offer that an acquirer is compelled to

make by law. An acquirer triggers the obligation to make a mandatory
offer to acquire all the shares of the target company (offeree) which he
or persons acting in concert with him do not already own, if the
acquirer together with persons acting in concert with him:
(a) acquires more than 33% of a company, thereby obtaining
control;
(b) triggers the “creeping threshold” (ie holds between 33% and
50% of the voting shares or voting rights, and acquires more than
2% of the voting shares or voting rights in any period of six
months); or
(c) acquires between 20% and 33% of the target company’s voting
shares and the SC exercises its discretion to trigger the
mandatory general offer requirements,
irrespective of how control or acquisition is to be effected, including by

way of a scheme of arrangement, compromise, amalgamation or
selective capital reduction.
Persons failing to make the mandatory general offer may be publicly
censured by the governing authorities. A public censure, however,
does not amount to the removal of the obligation to make the
mandatory offer. Only specific consent for release from the obligation
by the governing authority will release the party from the obligation
(Petaling Tin Berhad v Lee Kian Chan & Ors).
The term “person” includes a corporate body.
However, a mandatory offer shall not apply in the following situations:
(a) An acquisition, holding of, or entitlement to exercise voting
shares or voting rights of a company made in accordance with a
proposal, particulars of which will be set out in a prospectus or
other document for an initial listing of the voting shares or voting
rights of a company;
(b) An acquisition, holding of, or entitlement to exercise voting

shares or voting rights of a company whereby the acquirer would
be issued new shares to replace the shares transferred to an
employee to facilitate an employee share or employee share
option scheme and the acquirer would not make any financial
gain from the transaction; or
(c) The holding of voting shares or voting rights of a company by the

following persons as security for a loan—
(i) A registered person providing capital market services
specified in Pt 1 of Sch 4 of CMSA 2007;
(ii) A holder of a Capital Markets and Services Licence who

carries on a business of dealing in securities or derivatives;
and
(iii) A person who is licensed or otherwise authorised by a
competent authority from a recognised and comparable
jurisdiction to carry out the business of providing finance or
dealing in securities or derivatives.
Law: r 4 of Code Rules.
¶15-226 Offeror and offeree dealings

The offeror makes an offer to the board of the offeree or its advisers. If
the offer is not made by the ultimate offeror, the identity of the person
making the offer must be disclosed.
• The offeree obtains competent independent advice on the offer
and informs the shareholder of advice.
• When the offeree is reasonably confident that a firm offer will be

made for its shares it must make a public announcement in the
newspaper.
• The offeree sends a copy of the press notice to its shareholders.
• When a firm’s intention to make offer is announced, the offeror

must disclose:
(a) the terms of the offer;
(b) its identity;
(c) any existing holding in the offeree, which it owns or over

which it has control;
(d) any existing holding in the offeree which is owned or

controlled by any person acting in concert with it;
(e) any existing holding in the offeree in respect of which it has

received an irrevocable undertaking to accept the offer.
• The offeree must give shareholders all facts necessary for the
formation of an informed judgment as to the merits and demerits
of an offer including:
(a) the shareholdings of the offeree in the offeror;
(b) the shareholdings in the offeree and in the offeror in which

directors of the offeree are interested;
(c) the shareholdings in the offeree owned or controlled by the

independent adviser to the offeree, if these shareholdings
total 10% or more of the offeree’s equity share capital;
(d) whether the directors of the offeree intend, in respect of

their own beneficial shareholdings, to accept or reject the
offer.
¶15-229 Announcements and notices

The take-over offer must made to the board of the offeree before the
offer is announced to the public. Prior to the announcement of an offer
or possible offer, all persons privy to any confidential information
relating to a take-over offer or proposed takeover offer, particularly
price-sensitive information, must treat the information as secret.
Announcement of firm intention
An offeror who has a firm intention to make a take-over offer shall:
(a) make an immediate announcement regarding the take-over
offer, including by way of press notice; and
(b) send a written notice to: (i) the board of the offeree or the
offeree’s adviser; (ii) the SC; and (iii) the relevant stock exchange
in Malaysia, if the securities of the offeree or the offeror are listed
on the relevant stock exchange in Malaysia.
The announcement and written notice shall include the following

information:
• The identity of the ultimate offeror, offeror and all persons acting in
concert with the offeror;
• The basis of the offer price;
• The basis of consideration, if other than by way of cash;
• The type and total number of voting shares or voting rights of the
offeree.
The offer announcement should include confirmation that the offeror

has sufficient resources to satisfy full acceptance of the offer. Upon
receiving the written notice of the firm offer, the board of the offeree
shall:
• immediately announce its receipt of the written notice; and
• dispatch a copy of the written notice to all offeree shareholders

within seven days of receipt.
Where there has been an announcement of an intention to make a

take-over offer, the offeror shall not withdraw the take-over offer
without the prior written consent of the SC.
¶15-231 Standard of care and responsibility

Any document issued or statement made in relation to the take-over
offer or possible offer must satisfy the highest standards of accuracy
and the information given must be adequately and fairly presented.
Any document issued must state that the board of directors of the
company issuing the document jointly and severally accept full
responsibility for the accuracy of information contained in the
document and confirm, having made all reasonable inquiries, that to
the best of their knowledge, opinions expressed in the document have
been arrived at after due and careful consideration and there are no
other facts not contained in the document, the omission of which
would make any statement in the document misleading. There must
be equality of information given to shareholders (eg information made
available to all shareholders as nearly as possible at the same time
and in the same manner) and to any bona fide competing offeror upon
request.
¶15-234 Types of documents and issuance

The following are documents relating to a take-over (or merger
transaction):
(a) Offer document
The document is to be dispatched to the offeree’s board,
shareholders and holders of convertible securities; and shall
disclose all information that the recipients would reasonably
require and expect to find in an offer document or for the purpose
of making an informed assessment as to the merits of accepting
or rejecting the take-over offer and the extent of the risks involved
in doing so. Together with the offer document, the offeror must
provide the form of acceptance and transfer of securities of the
offeree and procedures for acceptance of the take-over offer. The
offer document must be dispatched to the abovementioned
recipients within 21 days from the date of the written notice in (1)
(b) above;
(b) Independent advice circular

The board of directors of the offeree is required under the Code
Rules to appoint an independent adviser to provide comments,
opinions, information and recommendation to the offeree’s
shareholders for their deliberation in the form of an independent
advice circular. The independent adviser shall issue the
independent advice circular to the offeree board, shareholders
and holders of convertible securities within ten days from the
dispatch of the offer document in (3)(a) above.
(c) Offeree board circular.

This circular shall include, but shall not be limited to such
comments, opinions and information on the offeror’s stated
intentions regarding:
• the continuation of the business of the offeree and any major
changes to be introduced in the business (eg plans to
liquidate, sell its assets or redeploy its fixed assets of the
offeree, etc);
• the long-term justification for the proposed take-over offer;
• the continued employment of the employees of the offeree

and of its subsidiaries; and
• the fairness and reasonableness of the take-over offer.
The offeree board circular must be issued within ten days from
the dispatch of the offer document in (a) above.
All the above documents cannot be issued unless they have been
submitted to the SC and the SC has notified that it has no further
comments.
In addition,
(a) all documents issued in respect of a listed company must be
provided to the stock exchange in accordance with the relevant
BMLR provisions.
(b) all documents published in respect of an unlisted offeree must

be made via press notice and delivered to the SC in electronic
form in PDF format.
Where a person circulating or providing any information or document

becomes aware that the information or document previously circulated
or provided contains a materially false or misleading statement or
contains a statement from which there is a material omission or does
not contain a statement relating to a material development, before an
offer closes or lapses, he shall:
(i) disclose such fact to the SC in writing; and
(ii) make an announcement—

(a) by way of a press notice; and
(b) if the securities of the offeree or offeror are listed on the

relevant stock exchange in Malaysia, to the relevant stock
exchange in Malaysia,
of such matters which are necessary to correct the false or misleading

matter or the omission. If circumstances require, such person must
also send a supplementary document to the offeree shareholders. The
disclosure and announcement shall be made before 9 a.m. on the
next market day.
¶15-238 Take-over procedure

There is a general requirement that where discussions are ongoing
between the parties concerned that may lead to an offer being made,
the directors, officers and professional advisers of both parties must
do everything possible to maintain secrecy in order to avoid
disturbance in the price level of the shares. The following are the
general steps in a take-over procedure:
(1) An offeror who makes a take-over offer or proposes a possible
take-over is required to make a public announcement of the take-
over offer or the possible take-over offer by way of a press notice.
A written notice of the same subject matter (“Written Notice”) to
the offeree’s board of directors, the SC, and Bursa Malaysia if the
securities of the offeree are listed. Note that the announcement
should be made only when an offeror has every reason to believe
that it can and will continue to implement the take-over offer.
(2) The offeree’s board of directors shall, within one hour of the
receipt of the Written Notice, make an announcement
(“Announcement”) that they have received the Written Notice to
the public via a press notice (for a non-listed offeree).
(3) The offeror is required to submit the draft offer document to the
SC for its further comments.
(4) The offeror’s board of directors is required to dispatch the
Announcement to all its shareholders.
(5) The offeror is required to dispatch to the offeree’s board of

directors and shareholders the offer document upon clearance by
the SC, within 21 days from the date of the sending of the Written
Notice.
(6) (a) The offeree’s board of directors is required to issue a circular

with comments, opinions and information (including any other
forms of consideration offered by the offeror) on the take-over
offer to its shareholders;
(b) The independent adviser appointed by the offeree’s board of

directors is required to issue an independent advice circular
with its comments, opinions, information and recommendation
on the take-over offer to the offeree’s board of directors,
shareholders and holders of convertible securities.
(7) The offeror is required to keep the take-over offer open for
acceptance for a period of at least 21 days from the Dispatch
Date (“Acceptance Period”). The take-over offer may be accepted
by the offeree at any day after the Dispatch Date, but in any case
shall not be more than 95 days from the Dispatch Date. However,
if the offeror revises its offer, the offeror shall: (a) announce such
revision in public by way of a press notice (for listed offeree), or in
writing to Bursa Malaysia (for non-listed offeree); (b) post the
written notification of the revised take-over offer to all
shareholders of the offeree; and (c) keep the offer open for an
additional 14 days from the date of the posting of the written
notification of the revised offer to the offeree’s shareholders.
(8) The board of directors of the offeree should not announce

material information relating to trading results, profit or dividend
forecasts, and asset valuations after the 39th day following the
dispatch of the offer document. Any announcement of such
materials after the 39th day shall only be made after clearance by
the SC.
(9) An offeror shall not revise a take-over offer or cause a take-over
offer to be revised after the 46th day from the Dispatch Date.
Where a competing take-over offer has been announced, the
offeror shall not revise the take-over offer after the 46th day from
the date on which the offer document relating to the competing
take-over offer was dispatched to the shareholders of the offeree.
(10) The take-over offer shall lapse on the Dispatch Date + 60 days
if, by 5.00p.m. on that day, the offeror fails to receive acceptances
which would:
(a) in the case of a mandatory offer, result in the offeror and all
persons acting in concert with the offeror holding in
aggregate, more than 50% of the voting shares or voting
rights of the offeree; or
(b) in the case of a voluntary offer, result in the offeror holding

in aggregate, more than 50% of the voting shares or voting
rights of the offeree.
Where a take-over offer has become or been declared

unconditional as to acceptance as at the Dispatch Date, the
closing date of the take-over offer shall not be later than 60th day
from the Dispatch Date.
Where a take-over offer has become or is declared unconditional
as to acceptance on or before Dispatch Date + 46 days, the
offeror shall keep the take-over offer open for at least 14 days
from the date on which the take-over offer becomes or is declared
unconditional, which in any event shall not be later than Dispatch
Date + 60 days.
(11) All conditions attached to a voluntary offer, other than the

acceptance condition which would result in the offeror holding in
aggregate more than 50% of the voting shares or voting rights of
the offeree, must be fulfilled within 21 days after the First Closing
Date of the take-over offer.
(12) Where a take-over offer has become or is declared

unconditional as to acceptance on or before Dispatch Date + 46
days, the offeror shall keep the take-over offer open for at least
14 days from the date on which the take-over offer becomes or is
declared unconditional, which in any event shall not be later than
Dispatch Date + 95 days.
¶15-242 Reverse take-overs (or back-door listing)

A reverse take-over is a type of merger where private companies
become public listed without resorting to an initial public offering (IPO).
The private company first buys enough shares to control a public
listed company. The private company’s shareholder then uses its
shares in the private company to exchange for shares in the public
company. At this point, the private company has effectively become a
public listed company. A reverse take-over is also known as a reverse
merger or a reverse IPO.
In a reverse take-over, the private company does not need to pay the
expensive fees associated with arranging an IPO. However, the
company does not acquire any additional funds through the merger,
and it must have enough funds to complete the transaction on its own.
While not a requirement of a reverse take-over, the name of the public
listed company concerned is often changed as part of the process.
Additionally, the corporate restructuring of one or both of the merging
companies are adjusted to meet the new business design.
It is not uncommon for the public listed company to have had little, if
any, recent activity, existing as more of a shell corporation. This allows
the private company to shift its operations into the shell of the public
entity with relative ease, all while avoiding the costs, regulatory
requirements and time constraints associated with an IPO. While a
traditional IPO may require months or years to complete, a reverse
take-over may be complete much more quickly.
Only companies listed on Bursa Malaysia can be used as vehicles in
reverse take-overs.
Any restructuring exercise involving an acquisition or disposal of
assets (whether or not by way of issue of securities) which results in a
very significant change in the business direction of a listed company
or which results in change of dominant shareholder of that listed
company must be subjected to the prior approval of the Commission.
For restructuring exercises which result in a reverse take-over of a
listed company or the back-door listing of new assets, the new assets
to be acquired by the listed company must meet the existing criteria of
the Commission on new listings pertaining to track record
requirements.
The Commission defines “a very significant change in the business
direction of a listed company” as where the net tangible assets value
or profit after taxation of the new assets to be injected into the listed
company constitutes more than 50% of the total relative consolidated
figures of the listed company on completion of the restructuring
exercise.
The following should be included in all announcements to be made in
relation to reverse take-overs and back-door listings:
• A summary of the key audited financial data for the past five
financial years or since the incorporation of the acquiree
companies. The financial data should include the turnover, pre-
tax profit, profit after tax, shareholders’ fund, total borrowings and
return on shareholders’ fund.
• Financial effects on net tangible assets and earnings per share

based on the latest audited accounts of the acquiree company
and the listed company at the end of the exercise.
• A brief assessment on the outlook of the core business of the new

assets to be acquired.
• Where the assets do not have any profitability track record, the
information provided must include the total cost needed to put on
stream the privatised project and the proportion to be
assumed/guaranteed by the listed company, when profit
contribution will accrue to the listed company and the expected
internal rate of return and the appropriate assumptions used.
¶15-254 Directors’ duties and liabilities in take-overs
Directors must act as directors and not in their personal interest. They
must consider the shareholders’ interest and the interests of the
employees and the company’s creditors. Directors must ensure that
shareholders are provided with all material facts. All opinions in the
document of advertisement must be fair and accurate. Directors
cannot resign from the board until the first closing date of the offer or
the date the offer becomes or is declared unconditional, whichever is
later, except with the consent of the SC.
Directors and financial advisers of a target company (offeree) in a
contested take-over bid do not owe a duty of care to the bidder
(Morgan Crucible Co plc v Hill Samuel Bank Ltd & Ors).
CORPORATE RESCUE MECHANISM

¶15-400 Purpose and objectives
In CA 2016, the “Corporate Rescue Mechanism” is provided in Div 8
of Pt III.2 This Division enables financially distressed companies via
two corporate rescue mechanisms:
(1) Corporate Voluntary Arrangement (CVA); and
(2) Judicial Management,
with a view to rehabilitate the financial and business viabilities.

Under a CVA, the company enters into a binding compromise or
arrangement with its creditors without the need for the compromise or
arrangement to be approved by the court. However, the CVA only
applies to private companies. It does not extend to companies
regulated under the purview of the Central Bank of Malaysia (Bank
Negara) or that of CMSA 2007 or a company with its property or
undertaking charged to a secured creditor.
Definitions
For the purposes of the corporate rescue mechanism, s 394 of CA
2016 states as follows:
• “Nominee” means any person who is qualified to be appointed as
an insolvency practitioner whose powers and duties shall include
the powers and duties specified in the Sch 7 of CA 2016. (Sch 7,
CA 2017 is reproduced in Appendix 15.3 at the end of this
chapter.)
Before the CVA proposal has been approved, the insolvency
practitioner is known as the “nominee”; after approval, he is
known as the “supervisor”. The nominee/supervisor is not a party
to the CVA. The agreed CVA is between the company and its
creditors.
• “Voluntary arrangement” means a composition in satisfaction of a

company’s debts or a scheme of arrangement of a company’s
affairs under Subdiv 1 (“Corporate Voluntary Arrangement”).
Law: s 394 and 395 of CA 2016.
Footnotes
2 Division 8 of Pt III came into force on 1 March 2018 by the
gazetting of P.U.(B) 106/2018. With the coming to force of
the corporate rescue mechanism, the new Companies
(Corporate Rescure Mechanism) Rules 2018 have also
came into force on 1 March 2018.
CORPORATE VOLUNTARY ARRANGEMENT

(CVA)
¶15-405 Corporate Voluntary Arrangement (CVA)
The CVA is conceptually similar to the scheme of arrangement
mechanism (see ¶5-100), where the existing management of a
financially distressed company remains in control during the
restructuring. The fundamental difference is that the implementation of
the debt restructuring proposal will be supervised by an insolvency
practitioner with minimal court supervision.
The process commences when the applicant, who may be:
(a) the directors of the company (which is not under judicial
management or being wound up);
(b) the liquidator; or
(c) a judicial manager,
lodges a proposal (see ¶15-410) for the voluntary arrangement with

the court, whereupon a moratorium (see ¶15-415) on actions by
creditors commences automatically. The proposal must also include
the appointment of a nominee (see ¶15-400) either as a trustee or
supervisor for the purpose of supervising the implementation of the
voluntary arrangement.
A meeting of creditors and members is then convened by the
insolvency practitioner who has agreed to act as the nominee. The
required majority to approve a proposal is:
• a majority of 75% of the total value of creditors present and voting;
and
• a simple majority of members.
Once the CVA is approved by the creditors and members, the

nominee shall notify the court and the company shall be able to
implement the CVA. The proposal becomes binding on all creditors
and members.
The nominee or another insolvency practitioner will take on the role as
the supervisor of the voluntary arrangement to see to its
implementation.
Although the corporate voluntary arrangement is procedurally
straightforward, its practical use is likely to be limited because it will
not apply to public companies or any company with charged property,
as well as certain institutions regulated by the Central Bank of
Malaysia and CMSA 2007.
Law: s 395 and 396 of CA 2016.
¶15-410 Proposal for voluntary arrangement (s 397)

Where the directors of a company or Official Receiver intend to make
a proposal for a voluntary arrangement, the directors or Official
Receiver shall appoint a nominee and shall submit the following
documents to the nominee:
(a) a document setting out the terms of the proposed voluntary
arrangement; and
(b) a statement of the company’s affairs containing—

(i) the particulars of the company’s creditors and of its debts
and other liabilities and of its assets; and
(ii) other information as may be required by the nominee in

order to form an opinion on the viability of the proposal.
Unless he has reason to doubt the accuracy of the information

submitted to him by the directors or Official Receiver, the nominee
shall submit a statement to the directors indicating whether or not, in
his opinion—
(a) the proposed voluntary arrangement has a reasonable prospect
of being approved and implemented;
(b) the company is likely to have sufficient funds available for the
company during the proposed moratorium to enable the company
to carry on its business; and
(c) that the meetings of the company and its creditors should be
summoned to consider the proposed voluntary arrangement.
Law: s 397 of CA 2016.
¶15-415 Moratorium
A moratorium suspends the power of creditors to take action against a

company. The moratorium in a CVA is to prevent the company from
being wound up or placed into administration, forebear legal actions or
stay any legal proceedings and prevents distress being levied on the
property of the company. This allows the financially distressed
company some breathing space.
Moratorium period
Upon filing of the application to the court for the CVA, the company is
entitled to delay performing some of its legal obligations or to effect
payment for 28 days or up to a maximum of 60 days, subject to the
consent of the nominee, members of the company and 75% in value
of the creditors.
Section 397(1) of CA 2016 provides that a moratorium in a voluntary
arrangement commences automatically from the time of filing of the
following documents to the court:
(a) a document setting out the terms of the proposed voluntary
arrangement;
(b) a statement of the company’s affairs containing—

(i) the particulars of the company’s creditors and of its debts
and other liabilities and of its assets; and
(ii) other information;
(c) a statement that the company is eligible for a moratorium;
(d) a statement from the nominee that he has given his consent to
act;
(e) a statement from the nominee; and
(f) a statement disclosing the full particulars of previous proposed

voluntary arrangements or an application for moratorium and the
results of the application, if any.
Schedule 8 of CA 2016 provides for the effect of a moratorium with

respect to—
(a) companies eligible for a moratorium;
(b) the duration and extension of the moratorium;
(c) the effects of the moratorium; and
(d) the procedure applicable in relation to the approval and

implementation of a voluntary arrangement where such a
moratorium is or has been in force.
Schedule 8 is reproduced in Appendix 15.4 at the end of this chapter.

Law: s 398 of CA 2016.
¶15-416 Summoning of meetings and decisions of

meetings
During the moratorium period (see ¶15-415 and Sch 8 of CA 2016),
the nominee must convene a meeting of the company and a meeting
of its creditors. Every creditor of the company of whose claim and
address the nominee is aware shall be summoned to the creditors’
meeting, and the meeting summoned shall be conducted in
accordance with the rules of meeting under Div 5 (“Meetings”) of Pt III
of CA 2016, which provides for the rule, procedure and passing of the
types of resolutions at company meetings.
Decisions of meetings
The meetings of the company and the meetings of creditors
summoned by the nominee should decide on the proposed voluntary
arrangement as follows:
• A meeting summoned shall decide whether to approve the
proposed voluntary arrangement or otherwise.
• For the creditors’ meeting, the required majority to approve a
proposal for voluntary arrangement shall be seventy five per
centum (75%) of the total value of creditors present and voting at
the meeting either in person or by proxy.
• In a meeting of members, a simple majority is required to pass a

resolution to approve the proposal for voluntary arrangement.
• The meetings shall not approve any proposal which affects the
right of a secured creditor of the company to enforce his security,
except with the concurrence of the secured creditor concerned.
• Once approved by the required majority under the respective

meetings, the proposed voluntary arrangement shall take effect
and be binding on all creditors of the company whether or not the
creditors have voted in favour of the proposal.
• A modification in respect of the proposal shall not be allowed to be

made in any of the meetings.
• After the conclusion of each meeting held for creditors and

members, the nominee shall report the result of the meeting to
the court and shall give notice of that result to the Registrar and to
such other persons or bodies as the court may approve.
Law: s 399 and 400 of CA 2016.
¶15-417 Implementation of proposal (s 401)

The implementation of the proposal is provided in s 401 of CA 2016 as
follows:
Subsection (1) states that the person who is for the time being
carrying out, in relation to the voluntary arrangement, the functions
conferred—
(a) on the nominee by virtue of the approval given at one or both of
the meetings summoned under s 399 (“Summoning of meetings”);
(b) on any other person other than the nominee who is an
insolvency practitioner,
shall be known as the supervisor of the voluntary arrangement.

Subsection (2) states that the court may direct that the nominee be
replaced by another person qualified to act as a nominee in relation to
the voluntary arrangement on an application—
(a) by the directors or Official Receiver in a case where the nominee
fails to comply with any duty imposed on the nominee under Sch
73 or the nominee has died; or
(b) by the directors or Official Receiver or the nominee in a case

where it is inappropriate for the nominee to continue to act.
Subsection (3) states that a person may only be appointed as a

replacement nominee under Sch 7 if the person submits a statement
indicating his consent to act as nominee to the court.
Subsection (4) states that if any of the company’s creditors or any
other person is dissatisfied by any act, omission or decision of the
supervisor, the company’s creditor may appeal to the Court and on
receipt of the application of appeal, the Court may—
(a) confirm, reverse or modify any act or decision of the supervisor;
(b) give directions to the supervisor; or
(c) make such other order as the court thinks fit.
Subsection (5) states that the supervisor may apply to the court for
directions in relation to any particular matter arising under the
voluntary arrangement and is included among the persons who may
apply to the court for the winding up of the company or for a judicial
management order to be made in relation to the winding up of the
company.
Subsection (6) states that the court may make an order appointing a
person who is qualified to act as an insolvency practitioner or
authorised to act as supervisor, in relation to the voluntary
arrangement, either in substitution for the existing supervisor or to fill a
vacancy if—
(a) it is expedient to appoint a person to carry out the functions of
the supervisor; and
(b) it is inexpedient, difficult or impracticable for an appointment to

be made without the assistance of the court.
Subsection (7) states that the power in sub-s (6) is exercisable—

(a) to increase the number of persons exercising the functions of a
supervisor; or
(b) to replace one or more of the persons if there is more than one
person exercising the functions.
Law: s 401 of CA 2016.
Footnotes
3 Sch 7, CA 2016 is reproduced in Appendix 15.3 at the end
of this chapter.
¶15-419 Arrangements coming to an end prematurely
In broad terms, a successful CVA usually results in the company

being able to trade uninterrupted throughout the CVA process and
ultimately being relieved of its entire pre-CVA debts.
However, a CVA may come to an end prematurely if, when it ceases
to have effect, it is not fully implemented in respect of all persons
bound by the arrangement. The supervisor must file a notice that the
CVA has been terminated (within 28 days of termination at court and
with the ROC) setting out the reasons for failure and summarising
receipts and payments. Case law suggests that assets within a failed
CVA are held on trust for the creditors bound by the CVA. An
unsuccessful CVA typically ends in the company’s liquidation.
Law: s 402 of CA 2016.
JUDICIAL MANAGEMENT
¶15-500 What is judicial management?
The judicial management procedure is court-based and involves a

petition and a subsequent order, in similar manner to the mechanism
for a compulsory winding up. The procedure is elaborate and formal. A
judicial manager is appointed by order of the court, which must be
satisfied by evidence that the statutory grounds for an appointment
exist. The judicial manager takes temporary charge of the company’s
business, calls for a “statement of the company’s affairs” from the
directors, and must, on the basis of this information, formulate
“proposals” for the consideration at a meeting of the company’s
creditors. If the proposals are approved at the meeting, he then
proceeds to manage the company’s affairs in accordance with
proposals until either the company is rehabilitated or he is of the
opinion that rehabilitation is impossible.
A judicial management order may be sought for purposes other than
corporate survival, eg to secure a moratorium in connection with a
scheme of arrangement. Indeed, an important aspect of the procedure
is that on presentation of the petition for a judicial order, there is an
effective “freezing” of the company’s position. No distress may be
levied or execution commenced or continued on the company’s
goods. Owners of goods supplied to the company on hire-purchase or
lease terms or on terms providing for retention of title are not
permitted to repossess. The company is thus given breathing space
by being protected from immediate action by its creditors.
¶15-510 Judicial management under CA 2016
The judicial management mechanism under CA 2016 will allow a

company, its directors or a creditor, to apply to the court to place the
management of the company in the hands of a qualified insolvency
practitioner known as a judicial manager.
The role of the judicial manager is to prepare and table a restructuring
plan for creditor approval and, upon approval by 75% in value of
creditors whose claims have been accepted by the judicial manager,
to oversee its implementation. The judicial manager is empowered
with certain powers equivalent to that of a liquidator in a winding up.
Like a liquidator, a judicial manager is also subject to a degree of
control and supervision by the court.
The application for a judicial management order will be allowed if the
company is or will be unable to pay its debts and there is a reasonable
probability of rehabilitating the company, preserving all or part of its
business as a going concern or otherwise serve the interests of
creditors better than in a winding up.
From the time the application is made and for the duration of any
judicial management order made, a moratorium will be in force to
prevent any winding up order or any other legal proceedings against
the company without leave of court, including enforcement
proceedings by secured creditors.
Except in unusual circumstances, secured creditors have the power to
veto an application for a judicial management order, and seek instead
to proceed with the appointment of a receiver or receiver and
manager.
Certain institutions regulated by the Central Bank of Malaysia and
CMSA 2007, such as financial institutions, insurance companies and
asset management companies, will be unable to access the judicial
management regime. Nor may it be used if the company is already in
liquidation.
¶15-520 Application for judicial management (s 404)

The application to court for a judicial management order is made by
way of petition which may be presented by any or all of the following:
(a) the company;
(b) the directors of the company; or
(c) a creditor or creditors of the company including contingent or

prospective creditors.
An application for a judicial management order may be made where a

company or a creditor or creditors consider that:
(a) the company is or will be unable to pay its debts; and
(b) there is a reasonable probability of rehabilitating the company or

of preserving all or part of its business as a going concern or that
otherwise the interests of creditors would be better served than by
resorting to a winding up.
On hearing the petition, the court may dismiss the petition or adjourn
the hearing conditionally or unconditionally or make an interim order or
any other order it thinks fit. The court may dismiss a petition
conditionally or unconditionally if it is satisfied that:
(a) a receiver and manager has been or will be appointed; or
(b) the making of the order is opposed by a person who has

appointed or is entitled to appoint a receiver and manager.
A court will refuse to grant a judicial management order for a company

which is hopelessly insolvent.
Court considerations
The court must:
• be satisfied that the company is, or is likely to become, unable to
pay its debts; and
• consider that the making of the order would be likely to achieve

one or more of the following purposes—
(a) the survival of the company, or the whole or any part of its
undertaking, as a going concern (note that the survival of part
of the undertaking is not required in addition to the survival of
the company itself);
(b) the approval of a compromise or voluntary arrangement

under s 366 (see ¶5-100); or
(c) a more advantageous realisation of the company’s assets

would be effected than on the winding up of the company.
The CA 2016 gives no guidance as to the nature of the evidence on

which a ruling on the second of these issues is to be made. History
suggests, however, that judges are usually very reluctant to make
decisions in matters of business and experience under the
corresponding judicial management provisions in South Africa has
shown that they are rarely willing to give a ruling without having before
them a considerable amount of evidence, including financial records,
trading forecasts, etc. Where the applicant is a creditor, he will not
himself have ready access to this information.
The standard of proof implied by the word “considers” is also uncertain
and the expression must await judicial determination. The problem for
the court is likely to be most acute when there are simultaneous
applications for a winding-up order brought by a creditor and for a
judicial management order under this section brought by the company.
In this situation, the view taken in South Africa is that an unpaid
creditor is prima facie entitled to a winding-up order as of right, unless
the applicant for a judicial management order makes out a clear case
for keeping him out of his money: Tenowicz v Tenny Investments
(1979).
Power of court to make orders
• On hearing the petition, the court may dismiss the petition or
adjourn the hearing conditionally or unconditionally or make an
interim order or any other order it thinks fit. The court may dismiss
a petition conditionally or unconditionally if it is satisfied that:
(a) a receiver and manager has been or will be appointed; or
(b) the making of the order is opposed by a person who has

appointed or is entitled to appoint a receiver and manager.
• Where a judicial management order is given, the order must state
that during the period in which the order is in force the affairs,
business and property of the company shall be managed by a
judicial manager appointed by the court.
• The costs and expenses of any unsuccessful application for a

judicial management order shall, unless the court otherwise
orders, be borne by the applicant and, if the court considers that
the application is frivolous or vexatious, it may make such orders
to redress any injustice that may have resulted as the court thinks
just and equitable.
• The court shall not be precluded from:

(a) making a judicial management order and appointing a
judicial manager if the court considers the public interest so
requires; or
(b) appointing, after the making of an application for a judicial

management order and on the application of the person
applying for the judicial management order, an interim judicial
manager, pending the making of a judicial management
order, and such interim judicial manager may be the person
nominated in the application and may exercise such
functions, powers and duties as the court may specify in the
interim order.
• A judicial management order shall not be made in relation to a

company after the company has gone into liquidation.
• “Property” in relation to a company includes money, goods, things

in action and every description of property, whether real property
or personal property, and whether in Malaysia or elsewhere, and
also obligations and every description of interest whether present
or future or vested or contingent arising out of, or incidental to,
property.
Law: s 404 and 405 of CA 2016.

¶15-530 Effect of application and order
Moratorium
The presentation of a petition for a judicial management order
imposes an automatic moratorium, which prevents certain legal acts
and processes from being performed or continued until the application
is finally disposed of. During the period between the presentation of a
petition for a judicial management order and the granting of the order
(or dismissal of the petition), and during the period for which the order
is in force, the company cannot be put into voluntary liquidation, nor
can a winding up order be made. Unless the court gives leave, the
enforcement of a security, the repossession of goods held under hire-
purchase and similar agreements, and the commencement and
prosecution of legal proceedings, etc, may not be proceeded with. The
court’s discretion in granting leave for these activities appears to be
unrestricted.
Effect of judicial management order
• On the making of a judicial management order—
(a) any receiver or receiver and manager shall vacate office;
and
(b) any application for the winding up of the company shall be

dismissed.
• Where any receiver or receiver and manager has vacated office—

(a) the remuneration and expenses properly incurred by the
receiver or receiver and manager; and
(b) any indemnity to which the receiver or receiver and

manager is entitled out of the assets of the company,
shall be charged on and be paid out of any property which was in

his custody or under his control at the time in priority to any
security held by the person by or on whose behalf he was
appointed.
• Neither a receiver nor a receiver and manager of a company who

vacates office shall be required to take steps to comply with any
duty imposed on him on lodging of accounts on or after so
vacating office.
• During the period for which a judicial management order is in

force:
(a) no resolution shall be passed or order made for the winding
up of the company;
(b) no receiver or receiver and manager of the whole (or

substantially the whole) of the company’s property under
terms of a debenture may be appointed;
(c) no other proceedings and no execution or other legal

process shall be commenced or continued and no distress
may be levied against the company or its property except
with the consent of the judicial manager or with the leave of
the court and, if the court grants leave, subject to such terms
as the court may impose;
(d) no steps shall be taken to enforce security over the

company’s property or to repossess any goods in the
company’s possession under any hire-purchase agreement,
chattels leasing agreement or retention of title agreement,
except with consent of the judicial manager or leave of the
court and subject to such terms as the court may impose;
and
(e) no steps shall be taken to transfer any share of the

company or to alter the status of any member of the
company except with the leave of the court and, if the court
grants leave, subject to such terms as the court may impose.
The following case law, based on Singapore’s Judicial Management

provisions are cited for some insights of the courts on judicial
management:
• The decision of In the Matter of Electro Magnetic (S) Ltd (Under
Judicial Management) (1994) 4 MSCLC 96,020 which held that a
right of set-off was a personal right given under contract and was
not a security within the meaning of s 227C(b) and 227D(4). The
view that the right of set-off is a personal right and is not
concerned with some real or proprietary interest, legal or
equitable, and thus was not caught by the use of the word
“security” in s 227C and 227D has been applied in Altus
Technologies Pte Ltd (under judicial management) v Oversea-
Chinese Banking Corp Ltd [2009] SGHC 159.
• In Altus Technologies Pte Ltd (under judicial management) v

Oversea-Chinese Banking Corp Ltd [2009] SGHC 159 that the
term “proceedings” in s 227C and 227D should not be construed
to include an exercise of the right of set-off. The creditor in that
case was therefore permitted to exercise its contractual right of
set-off so as to retain the moneys in the plaintiff’s bank account.
Under CA 2016, it is the duty of a receiver who is appointed to enforce

a floating charge to pay the company’s preferential debts out of the
assets coming into his hands. Section 411 makes it clear that the
assets must be surrendered to the judicial manager by the receiver
when he vacates his office, without regard to this obligation, and also
that he is thereafter discharged from that duty.
Law: s 411 of CA 2016.
¶15-540 Duration of judicial management order and its

extension
A judicial management order shall remain in force for a period of six
months from the date of the making of the order, unless the judicial
management is otherwise discharged, but the court may, on the
application of a judicial manager, extend this period for another six
months subject to such terms as the court may impose. If an
application to extend the period of another six months is made, the
judicial manager shall give notice of the application to:
(a) all directors;
(b) all members;
(c) all creditors; and
(d) any person who is entitled to appoint a receiver or receiver and

manager, of the company, and such period shall not be taken as
part of any limitation period as specified under any written law.
The applicant must also notify the Registrar of any application made
for extension in the form and manner as determined by the Registrar.
Law: s 406 of CA 2016.
¶15-550 Powers and duties of judicial manager

The judicial manager has wide powers of management. During the
duration of the judicial management, the judicial manager will exercise
the powers conferred and duties imposed on the directors since the
board becomes functus officio and its power to manage the company
is suspended. In addition, the judicial manager assumes the powers
specified in the Companies Act, which include:
• Power to take possession of, collect and obtain the property of the
company, and for this purpose, he may take such proceedings as
may seem expedient to him;
• Power to make any arrangement or compromise on behalf of the

company;
• Power to sell or dispose of the company’s property;
• Power to borrow money and grant security over the company’s

property;
• Power to bring clawback proceedings to set aside transactions at

an undervalue and unfair preferences.
The general powers and duties of judicial manager is provided in s
414 of CA 2016 as follows:
• On the making of a judicial management order, the judicial
manager shall take into his custody or under his control all the
property to which the company is or appears to be entitled.
• During the period for which a judicial management order is in

force, all powers conferred and duties imposed on the directors
by CA 2016 or by the constitution of the company shall be
exercised and performed by the judicial manager and not by the
directors, but the judicial manager is not required to call any
meetings of the company.
• The judicial manager of a company shall—

(a) do all such things as may be necessary for the management
of the affairs, business and property of the company; and
(b) do all such other things as the court may order.
• Without prejudice to the generality to do such things as may be

necessary for management of the affairs, business and property,
the powers conferred by that subsection shall include the powers
specified in Sch 9 of CA 2016. (Sch 9 is reproduced in Appendix
15.5 at the end of this chapter.)
• The judicial manager may apply to the court for directions in

relation to any particular matter arising in connection with the
carrying out of his functions.
• The judicial manager of a company is not authorised to make any

payment towards discharging any debt to which the company was
subject on the making of the judicial management order unless—
(a) the making of the payment is sanctioned by the court or the
payment is made under a compromise or arrangement so
sanctioned; or
(b) the payment is made towards discharging sums secured by

a security or payable under a hire purchase agreement,
chattels leasing agreement or retention of title agreement to
which power to deal with charged property applies.
• If a request is made by or with the concurrence of the judicial

manager for the giving of any of the supplies including water,
electricity, gas and telecommunications, after the making of the
judicial management order—
(a) the supplier may make it a condition of the giving of the
supply that the judicial manager personally guarantees the
payment of any charges in respect of the supply given after
the judicial manager’s appointment; or
(b) the supplier shall not make it a condition of the giving of the
supply, or do anything which has the effect of making it a
condition of the giving of the supply, that any outstanding
charges in respect of a supply given to the company before
the making of the judicial management order are paid.
• The judicial manager of a company may summon a meeting of the

company’s creditors, if he thinks fit, and shall summon such a
meeting if he is directed to do so by the Court.
• Any alteration in the constitution made by virtue of an order by the

court is of the same effect as if duly made by resolution of the
company, and the provisions of CA 2016 apply to the constitution
as so altered accordingly.
• The judicial manager shall deliver an office copy of an order

sanctioning the alteration of the constitution as ordered by the
court to the Registrar within 14 days from the making of the order.
• A person dealing with the judicial manager of a company in good

faith and for value shall not be concerned to inquire whether the
judicial manager is acting within his powers.
Power to deal with the charged property, etc

Subsection (1) states that the judicial manager of a company may
dispose of or otherwise exercise his powers in relation to any property
of the company which is subject to a security to which, as created,
was a floating charge.
Subsection (2) states that where, on application by the judicial
manager of a company, the court is satisfied that the disposal, with or
without other assets—
(a) of any property of the company which is subject to a security
other than a floating charge; or
(b) of any goods under a hire purchase agreement, chattels leasing

agreement or retention of title agreement,
would be likely to promote one or more of the purposes specified in

the judicial management order, the court may, by order, authorise the
judicial manager to dispose of the property as if it were not subject to
the security or to dispose of the goods as if all rights of the owner
under the hire purchase agreement were vested in the company.
Subsection (3) states that the judicial manager shall send a copy of an
order made under sub-s (2) to the Registrar within 14 days from the
making of the order.
Subsection (4) states that the judicial manager making an application
to the court to dispose of property subject to a security under sub-s (2)
shall give notice of not less than seven days before the making of the
application, to the security holder or to the owner of the goods which
are subject to any of the agreements mentioned in that subsection and
the security holder or the owner, as the case may be, may oppose the
disposal of the property.
Subsection (5) states that where any property is disposed of under
sub-s (1), the security holder shall have the same priority in respect of
any property of the company disposed of as he would have had in
respect of the property that is subject to the security.
Subsection (6) states that it shall be a condition of an order made
under sub-s (2) that the net proceeds of the disposal shall be applied
towards discharging the sums secured by the security or payable
under the hire purchase agreement, chattels leasing agreements or
retention of title agreement and where the net proceeds of the
disposal are less than the sums secured by the security or payable
under any of those agreements, the holder of the security or the owner
of the goods, as the case may be, may prove on a winding up for any
balance due to him.
Subsection (7) states that where a condition imposed under sub-s (6)
relates to two or more securities, that condition shall require the net
proceeds of the disposal to be applied towards discharging the sums
secured by those securities in the order of priorities of such securities.
Subsection (8) states that a judicial manager who, without reasonable
excuse, contravenes sub (6) or (7) commits an offence and in the
each day the offence continues after conviction.
Subsection (9) states that that nothing in this section shall be regarded
as prejudicing an application to the court under s 425 (“Protection of
interests of creditors and members”) on the protection of interests of
creditors and members.
Law: s 414 and 415 of CA 2016.
¶15-560 Agency and liability for contracts
The judicial manager is deemed to be the agent of the company in

exercising his powers. He is personally liable on any contract,
including a contract of employment entered into or adopted by him
while carrying out his functions. He may, however, choose to disclaim
personal liability when he adopts a contract entered into by the
company and another party. Under CA 2016, a judicial manager is
considered not to have adopted a contract entered into by the
company by reason of anything done or omitted to be done within 28
days after the making of the judicial management order. The judicial
manager is not personally liable for rental payment under leases
which are held by the company at the time of his appointment.
The judicial manager is entitled to be indemnified in respect of his
liability. He may seek an indemnity from any other person in respect of
contracts entered into by him that are approved by the court. The
judicial manager is also entitled to have his remuneration and
expenses defrayed out of the property of the company which is in his
custody or under his control in priority to all other debts except those
subject to a security.
Law: s 416 of CA 2016.
¶15-570 Vacancy and release of judicial manager
The judicial manager of a company may be removed from office by

the court’s order or he may resign by giving notice of his resignation to
the court with leave of the Court and subject to such conditions as the
Court may impose.
The judicial manager of a company shall vacate office if he ceases to
be an insolvency practitioner during the tenure of his appointment or
when the judicial management order is discharged.
Where at any time a person ceases to be a judicial manager of a
company whether by the reasons above or by reason of his death:
(a) any sums payable in respect of any debts or liabilities incurred
while the person was a judicial manager under contracts entered
into by him in the carrying out of his functions; and
(b) any remuneration and expenses properly incurred by him,
shall be charged on and paid out of the property of the company in his
custody or under his control in priority to all other debts, except those
subject to a security to which s 415(2)4 applies.
Where a person ceases to be a judicial manager of a company, he
shall, from such time as the court may determine, be released from
any liability in respect of any act or omission done by him in the
management of the company or otherwise in relation to his conduct as
a judicial manager.
A person who ceases to be a judicial manager of a company is not
relieved from any liability in relation to any misapplication or retention
of money or property for which he is accountable, or from any law to
which he would be subject in respect of negligence, default,
misfeasance, breach of trust or breach of duty in relation to the
company.
Law: s 417 of CA 2016.
Footnotes
4 Section 415 of CA 2016 is reproduced in ¶15-550.
¶15-580 Information to be given by and to judicial

manager
Where a judicial management order has been made, the judicial

manager shall:
(a) send a copy of the order to the Registrar and the company within
seven days of the making of the order;
(b) publish a notice of the order in one widely circulated newspaper

newspaper in Malaysia in the English language; and
(c) send such a notice to all creditors of the company, so far as the
judicial manager is aware of the addresses within thirty days from
the making of the order, unless the court otherwise directs.
The company shall submit a statement as to the affairs of the

company (see ¶15-590) within 14 days from the receipt of judicial
management order to the judicial manager. The judicial manager may
allow for a longer period but such extended period should not exceed
60 days.
Law: s 418 of CA 2016.
¶15-590 Company’s statement of affairs

• The company’s statement of affairs that is to be submitted to the
judicial manager shall show as at the date of the judicial
management order—
(a) the particulars of the company’s assets, debts and liabilities;
(b) the names and addresses of its creditors;
(c) the securities held by the creditors respectively;
(d) the dates when the securities were respectively created;

and
(e) such other information as may be determined by the

Registrar.
• The statement shall be submitted by, and be verified by affidavit

of, at least one of the directors who was, at the date of the judicial
management order, the director of the company and at least one
other person approved by the judicial manager from the following
categories:
(a) person who is or has been an officer of the company;
(b) person who has taken part in the formation of the company
at any time within one year before the date of the judicial
management order; or
(c) person who is in the employment of the company including

a person who is employed under a contract for services, or
has been in the employment of the company within that year,
and is in the opinion of the judicial manager capable of giving
the information required.
• Any person making the statement and affidavit shall be allowed

and shall be paid by the judicial manager, out of his receipts, such
costs and expenses incurred in and about the preparation and
making of the statement and affidavit as the judicial manager may
consider reasonable, subject to an appeal to the court by the
person making the statement.
• Any statement of affairs prepared may be used in evidence

against any person making or concurring in making the statement
of affairs.
• The judicial manager shall lodge a copy of the statement of affairs

with the Registrar within seven days from the receipt of such
statement from the company.
• Any person who, without reasonable excuse, contravenes this

section commits an offence and, in the case of a continuing
Law: s 419 of CA 2016.
¶15-600 Statement of proposals

It is the responsibility for the judicial manager to send and lay a copy
of the statement of his proposal before a meeting of creditors, and to
members in the following manner:
• Where a judicial management order has been made, the judicial
manager shall, within 60 days or such longer period as the court
may allow, after the making of the order—
(a) send a statement of his proposal for achieving the purposes
of the judicial management order to the Registrar and to all
creditors to their last known address; and
(b) lay a copy of the statement before a meeting of the

company’s creditors summoned for the period of not less
than 14 days’ notice.
• The judicial manager shall also, within 60 days or such longer

period as the court may allow after the making of the order either
—
(a) send a copy of the statement to all members of the
company to the last known address of all the members; or
(b) publish a notice in one widely circulated newspaper in

newspaper in Malaysia in the English language stating an
address to which members of the company should write for
copies of the statement to be sent to the members free of
charge.
Law: s 420 of CA 2016.
¶15-610 Consideration of proposals by creditors’

meeting
The meeting of creditors summoned by the judicial manager of the
company to present his statement shall decide whether to approve the
judicial manager’s proposal.
The proposal is approved if 75% of the total value of creditors whose
claims have been accepted by the judicial manager, present and
voting at the meeting either in person or by proxy vote for it. The
proposal may also be approved with modifications subject to the
consent of the judicial manager to each modification.
Once approved by the required majority above, the proposal, with or
without modifications, shall be binding on all creditors of the company
whether or not the creditors have voted in favour of the proposal.
The judicial manager shall report the result of the meeting to the court
and shall give notice of that result to the Registrar and to such other
persons or bodies as the court may approve.
If a report is given to the court that the meeting has declined to
approve the judicial manager’s proposal with or without modification,
the court may—
(a) by order discharge the judicial management order;
(b) make any consequential provision in the judicial management

order as it thinks fit;
(c) adjourn the hearing conditionally or unconditionally; or
(d) make an interim order or any other order that the court thinks fit,
and thereafter, a copy of the court order shall be published in one

widely circulated newspaper in Malaysia in the national language and
one widely circulated newspaper in Malaysia in the English language.
Where the judicial management order is discharged, the judicial
manager shall send an office copy of the order to the Registrar within
seven days from the order.
A judicial manager who, without reasonable excuse, contravenes for
not sending an office copy of the discharged judicial management
order to the Registrar commits an offence and, in the case of a
Law: s 421 of CA 2016.
¶15-620 Committee of creditors
Upon the approval of the judicial manager’s proposal (with or without

modifications) at the creditors’ meeting, the meeting may establish a
committee of creditors. The judicial manager may be required to
attend the meeting and furnish the meeting with information relating to
the carrying out by the judicial manager of his functions.
Law: s 422 of CA 2016.
¶15-630 Judicial manager to manage company’s affairs

in accordance with approved proposals
The judicial manager has a duty to manage the company’s affairs,
business and property in accordance with approved proposals.
Where the judicial manager proposes to make substantial revisions of
an approved proposal, the judicial manager shall:
(a) send a statement of the proposed revisions to all creditors of the
company to the last known address of all the creditors; and
(b) lay a copy of the statement before the creditor’s meeting

summoned of not less than 14 days’ notice.
The judicial manager shall also either:

(a) send a copy of the statement to all members of the company to
the last known address of all the members; or
(b) publish a notice stating an address to which the members of the

company should write for copies of the statement to be sent to
them free of charge in one widely circulated newspaper in
newspaper in Malaysia in the English language.
The majority of 75% in value of creditors, present and voting at the

creditor’s meeting either in person or by proxy whose claims have
been accepted by the judicial manager, may approve the proposed
revisions with modifications but shall not do so unless the judicial
manager consents each modification.
After the conclusion of a meeting summoned, the judicial manager
shall give notice of the result of the meeting to the Registrar or to such
other persons or bodies as the court may approve.
Law: s 423 of CA 2016.
¶15-640 Judicial manager’s duty to apply for discharge

of judicial management order
The judicial manager may apply to the court for the judicial
management order to be discharged if the purpose specified in the
order has been achieved, or is incapable of being achieved.
On the hearing an application, the court may make the following
orders:
(a) discharge the judicial management order;
(b) make any consequential provision as it thinks fit;
(c) adjourn the hearing conditionally or unconditionally; or
(d) make an interim order or any other order that the court thinks fit.
Where the judicial management order is discharged, the judicial

manager shall lodge a copy of the order affecting the discharge with
the Registrar within seven days of the making of the order of
discharge.
Where a judicial management order has been discharged or where a
judicial manager vacates the office, the judicial manager may apply to
the court for his discharge. Upon receipt of an application to the court,
it may, if it thinks fit—
(a) make an order discharging him from liability in respect of any act
or omission by him in the management of the company; or
(b) make an order discharging him in relation to his conduct as

judicial manager,
but any such discharge shall not relieve him from liability for any
misapplication or retention of money or property of the company or for
which the judicial manager has become accountable or from any law
to which he would be subject in respect of negligence, default,
misfeasance, breach of trust or breach of duty in relation to the
company.
Law: s 424 of CA 2016.
¶15-650 Protection of interests of creditors and members

At any time when a judicial management order is in force, a creditor or
member of the company may apply to the court for an order on the
ground that—
(a) the company’s affairs, business and property are being or have
been managed by the judicial manager in a manner which is or
was unfairly prejudicial to the interests of its creditors or members
generally or of some part of its creditors or members, including at
least the creditor or member himself, or of a single creditor that
represents 25% in value of the claims against the company; or
(b) any actual or proposed act or omission of the judicial manager is

or would be so prejudicial.
On such an application, the court may, by order:

(a) give relief in respect of the matters complained of;
(b) adjourn the hearing conditionally or unconditionally; or
(c) make an interim order or any other order that the Court thinks fit.
Further, an order of the court may:

(a) regulate the future management of the company’s affairs,
business and property by the judicial manager;
(b) require the judicial manager to refrain from doing or continuing

an act complained of by the applicant or to do an act which the
applicant had complained that the judicial manager has omitted to
do;
(c) require the summoning of a meeting of creditors or members for

the purpose of considering such matters as the court may direct;
or
(d) discharge the judicial management order and make such

consequential provision as the court thinks fit.
An order of the court shall not prejudice or prevent the implementation

of any composition or scheme approved under s 366, which
empowers the court to order compromise or arrangement with
creditors and members.
Law: s 425 of CA 2016.
¶15-660 Undue preference in judicial management

• Any transfer, mortgage, delivery of goods, payment, execution or
other act relating to property made or done by or against a
company which is unable to pay its debts as the debts become
due, from the company’s own money in favour of any creditor or
any person in trust of any creditor with the intention to give such
creditor a preference over other creditors shall be void in the
event of the company being placed under judicial management on
an application for a judicial management order presented within
six months from the date of making, taking, paying or suffering
the transfer, mortgage, delivery of goods, payment, execution and
every such act.
• Any transfer or assignment by a company of all its property to

trustees for the benefit of all its creditors shall be void.
• The above shall not affect the rights of any person making title in
good faith and for valuable consideration through or under a
creditor of the company placed under the judicial management.
Law: s 426 of CA 2016.
¶15-670 Delivery and seizure of property

The court is given specific powers to assist judicial managers in the
performance of their duties. These include the power to make orders
against any contributory or member, trustee, banker, agent, officer or
any person who has previously held office as receiver or receiver and
manager of the company’s property for the seizure and delivery of
property, books, papers or records to the judicial manager.
Where:
(a) the judicial manager seizes or disposes of any property which is
not the property of the company; and
(b) at the time of seizure or disposal the judicial manager believes,

and has reasonable grounds for believing, that the judicial
manager is entitled, whether under an order of the court or
otherwise, to seize or dispose of that property,
the judicial manager shall not be liable to any person in respect of any
loss or damage resulting from the seizure or disposal except in so far
as that loss or damage is caused by the negligence of the judicial
manager and the judicial manager shall have a lien on the property, or
the proceeds of its sale, for such expenses as were incurred in
connection with the seizure or disposal.
Any person who, without reasonable excuse, contravenes any
obligation imposed by this section commits an offence and, in the
case of a continuing offence, to a further fine not exceeding RM1000
Law: s 427 of CA 2016.
¶15-680 Duty to co-operate with judicial manager

When a company is under judicial management, the following persons
have a duty to cooperate with the judicial manager as stipulated
below:
The person who—
(a) is or has at any time been an officer of the company;
(b) has taken part in the formation of the company at any time within
one year before the date of the judicial management order;
(c) is in the employment of the company including a person who is

employed under a contract for services, or has been in the
employment of the company within that year; and
(d) is in the opinion of the judicial manager capable of giving the

information required shall—
(i) give to the judicial manager such information concerning the
company and its promotion, formation, business, dealings,
affairs or property as the judicial manager may at any time
after the date of the judicial management order reasonably
require; and
(ii) attend on the judicial manager at such times as the judicial

manager may reasonably require.
Any person who, without reasonable excuse, contravenes any

obligation imposed by this section commits an offence and, in the
case of a continuing offence, to a further fine not exceeding RM1000
Law: s 428 of CA 2016.
¶15-690 Inquiry into company’s dealings, etc

Subsection (1) states that the court may, on the application of the
judicial manager, summon to appear before it, the following persons
for inquiry into the company’s dealings—
(a) any officer of the company;
(b) any person known or suspected to have in his possession any

property of the company;
(c) any person who is supposed to be indebted to the company; or
(d) any person whom the court thinks capable of giving information
concerning the promotion, formation, business, dealings, affairs
or property of the company, and the court may require any such
person referred to in para (a) to (d) to submit an affidavit to the
court containing an account of his dealings with the company or
to produce any books, papers or other records in his possession
or under his control relating to the company or the matters
mentioned in para (d).
Subsection (2) states that in a case where a person, without

reasonable excuse, fails to appear before the court when he is
summoned to do so under this section or there are reasonable
grounds for believing that a person has absconded, or is about to
abscond, with a view to avoiding his appearance before the court
under this section, the court may, for the purpose of bringing that
person and anything in his possession before the court, cause a
warrant to be issued—
(a) for the arrest of that person; and
(b) for the seizure of any books, papers, records, money or goods in
that person’s possession,
and may authorise a person arrested under such a warrant to be kept

in custody, and anything seized under such a warrant to be held until
that person is brought before the court under the warrant or until such
other time as the court may order.
Subsection (3) states that any person who appears or is brought
before the court under this section may be examined on oath, either
orally or by interrogatories, concerning the company or the matters
mentioned in para (1)(d).
Subsection (4) states that if it appears to the court, after considering
any evidence obtained under this section that any person has in his
possession any property of the company, the court may, on the
application of the judicial manager, order that person to surrender the
property to the judicial manager at such time, in such manner and on
such terms as the court thinks fit.
Subsection (5) states that if it appears to the court, on consideration of
any evidence obtained under this section, that any person is indebted
to the company, the court may, on the application of the judicial
manager, after examining that person on the matter, order that person
to pay to the judicial manager, at such time and in such manner as the
court may direct, the whole or any part of the amount due, whether in
full discharge of the debt or otherwise, as the court thinks fit.
Law: s 429 of CA 2016.
¶15-700 Application of provisions of winding up of a

company under judicial management
At any time when a judicial management order is in force in relation to
a company under judicial management,
• s 536 (“Offences by officers of companies in liquidation”),
• s 537 (“Inducement to be appointed as liquidator, etc”),
• s 538 (“Falsification of books, etc”); and
• s 539 (“Liability where proper accounts not kept”),
shall apply as if the company under the judicial management was a

company being wound up and the judicial manager was the liquidator
Notwithstanding the above, court shall have the power—
(a) to order that any other sections in Subdivision 4 (“Offences”) of
Division 2 (“Provisions Applicable to Every Winding Up”) of Part
IV (“Cessation of Company”) shall apply to a company under
judicial management as if the sections in Subdivision 4 of Division
2 of Part IV apply in a winding up by the court; and
(b) any reference to the liquidator shall be taken as a reference to

the judicial manager and any reference to a contributory shall be
taken as a reference to a member of the company.
Law: s 430 of CA 2016.

1. What is the meaning of arrangements and reconstructions in the
context of s 366 of the Companies Act 2016?
2. Explain briefly the statutory framework of a Scheme of

Arrangement.
3. Explain the purposes of the Malaysian Code on Take-overs and

Mergers 2016 and the Rules on Take-overs, Mergers and
Compulsory Acquisitions under the Capital Market and Services
Act 2007.
4. What is the effect of a corporate voluntary arrangement on

creditors?
5. What is a Mandatory Offer and the likely events that lead towards
it?
4. State and briefly explain the two methods of corporate rescue

mechanism.
¶15-1001 Appendix 15.1

CAPITAL MARKETS AND SERVICES ACT 2007
MALAYSIAN CODE ON TAKE-OVERS AND MERGERS 2016
P.U.(B) 356/2016
IN exercise of the powers conferred by section 217 of the Capital
Markets and Services Act 2007 [Act 671], the Minister, on the
recommendation of the Commission, prescribes the following code:
Citation and commencement
1. (1) This Code may be cited as the Malaysian Code on Take-

overs and Mergers 2016.
(2) This Code comes into operation on 15 August 2016.
General
2. This Code sets out the general principles that shall be observed
and complied with by all persons engaged in any take-over or
merger transaction.
General principle 1
3. So far as practicable, all shareholders of an offeree of the same

class shall be treated equally in relation to a take-over offer and
have equal opportunities to participate in benefits accruing from
the take-over offer, including in the premium payable for control.
General principle 2
4. (1) The acquirer or offeror, as the case may be, and the board
of directors of the offeree, shall act in good faith in observing
the general principles set out in this Code and any guidelines,
directions, practice notes and rulings issued by the
Commission.
(2) All shareholders, particularly minority shareholders, shall not

be subject to oppression or disadvantage by the treatment
and conduct of the acquirer or offeror, as the case may be, or
of the board of directors of the offeree.
General principle 3
5. (1) Any person who—

(a) is an acquirer who proposes to make an acquisition
which may lead to an obligation to make a take-over
offer; or
(b) is an offeror, shall ensure that he is able to implement

the offer in full.
(2) The financial advisers of the person referred to in paragraph

(1) shall be satisfied that the person is able and will continue
to be able to implement the offer in full.
General principle 4
6. An offeree which receives an offer or is approached with a view

to a take-over offer being made shall, in the interests of its
shareholders, appoint a competent independent adviser to
provide comments, opinions, information and recommendation on
the take-over offer.
General principle 5
7. All parties involved in a take-over or merger transaction shall

make full and prompt disclosure of all relevant information.
General principle 6
8. The shareholders and the board of directors of an offeree and the

market for the shares that are the subject of a take-over offer
shall be provided with—
(a) relevant and sufficient information, including the identity of
the acquirer or offeror, to enable them to reach an informed
decision on the take-over offer; and
(b) reasonable time to consider the take-over offer.
General principle 7
9. Any document or advertisement addressed to the shareholders

containing information, opinions or recommendations from the
offeror, the board of directors of an offeror, the board of directors
of an offeree or their respective advisers shall be prepared with
the same standard of care as if the document or advertisement
was a prospectus within the meaning of the Act.
General principle 8
10. An offeror, the board of directors of an offeror, the board of

directors of an offeree and their respective advisers are prohibited
from making selective disclosure to the shareholders in the
course of a take-over or merger transaction, or when such
transaction is in contemplation, except where such information is
provided in confidence by the board of directors of the offeree to a
bona fide potential offeror or by a bona fide potential offeror to the
board of directors of the offeree.
General principle 9
11. While the boards of directors of an offeror and the board of

directors of an offeree, and their respective advisers and
associates have a primary duty to act in the best interests of their
respective shareholders, any guidelines and rulings issued by the
Commission may restrict the board and persons involved in a
take-over or merger transaction from undertaking certain actions.
General principle 10
12. (1) A take-over offer shall be made to all shareholders within the
same class in an offeree for all the voting shares or voting
rights in the offeree.
(2) The offeror shall, in the case of an approved partial offer,

accept such voting shares or voting rights in the same
proportion from each shareholder of an offeree in order to
achieve the specified percentage of holding in the offeree.
13. The board of directors of an offeree shall act in the interests of

the shareholders as a whole and shall not deny the shareholders
the opportunity to decide on the take-over offer.
14. The period in which an offeree is subject to a take-over or

merger shall not be longer than what is reasonable.
Acquisition pursuant to subsection 218(3)
15. (1) For the purpose of subsection 218(3) of the Act, an acquirer
who has obtained control of a company but does not hold
more than fifty per centum of the voting shares or voting rights
of the company, may acquire additional voting shares or
voting rights in the company without the obligation to
undertake a take-over offer if he acquires two per centum or
lower in any period of six months.
(2) Where the an acquirer acquires additional voting shares or

voting rights of more than two per centum in any period of six
months, the acquirer is required to undertake a take-over offer
in accordance with the provision of this Code or any
guidelines, directions, practice notes or rulings issued by the
Commission.
Revocation and saving
16. (1) The Malaysian Code on Take-overs and Mergers 2010 [P.U.
(B) 538/2010] is revoked.
(2) All take-over and merger transactions that have been

commenced or undertaken before the commencement of this
Code shall be dealt with under the provisions of the Malaysian
Code on Take-overs and Mergers 2010 as if the Code has not
been revoked.
Made 11 August 2016
¶15-1002 Appendix 15.2
SCHEDULE 5
RULE 22
FORM 1
NOTICE TO DISSENTING SHAREHOLDER
[Subsection 222(1) of the Capital Markets and Services Act 2007]
To [name of shareholder]
of [address of shareholder]
In this notice—
[name of offeree] is referred to as “the offeree”, and [name of
offeror] is referred to as “the offeror”.
On [date], the offeror made a take-over offer for all [description of
shares] in the offeree at [relevant terms of the offer].
Up to [date], being a date within four months after the making of the
take-over by the offeror, the take-over offer was accepted by the
holders of not less than nine-tenths in nominal value of the
[description of shares] (other than those already held at the date of
the take-over offer by the offeror, or by a nominee for or for a related
corporation of the offeror).
The offeror hereby gives you notice, in pursuance of the provisions of
section 222 of the Capital Markets and Services Act 2007, that it
desires to acquire the [description of shares] held by you in the
offeree.
You are entitled within a month from the date on which this notice is
given to require the offeror, by demand in writing served on the offeror
to supply you with a statement of the names and addresses of all
other dissenting shareholders as shown in the register of members,
and the offeror will not be entitled or bound to acquire the shares of
those dissenting shareholders until 14 days after the posting to you of
the statement of those names and addresses.
Unless upon an application made to the High Court by you on or
before [date], being one month from the date of this notice, the High
Court orders otherwise, the offeror will, in pursuance of those
provisions, be entitled and bound to acquire the [description of
shares] held by you in the offeree on the same terms of the
abovementioned take-over offer.
Dated this [date]
[signature]
………………………………………
[name and designation in offeror]
¶15-1003 Appendix 15.3

SEVENTH SCHEDULE
[Sections 394 and 401]
POWERS AND DUTIES OF NOMINEE FOR CORPORATE
VOLUNTARY ARRANGEMENTS
1. During a moratorium, a nominee shall monitor the company’s
affairs for the purpose of forming an opinion as to whether—
(a) the proposed voluntary arrangement has a reasonable
prospect of being approved and implemented; and
(b) the company is likely to have sufficient funds available for

the company during the proposed moratorium to enable the
company to carry on its business.
2. The nominee may request from the directors or Official Receiver

and the directors or Official Receiver shall submit to the nominee,
any information necessary to enable the nominee to comply with
paragraph 1.
3. The nominee is entitled to rely on information submitted to him

under paragraph 2 in forming his opinion on matters required
under paragraph 1 unless he has reason to doubt its accuracy.
4. The reference in subparagraph 1(b) to the company’s business is

to that business as the company proposes to carry on during the
moratorium.
5. The nominee shall withdraw his consent to act if, at any time
during a moratorium —
(a) he forms the opinion that—
(i) the proposed voluntary arrangement no longer has a
reasonable prospect of being approved or implemented;
or
(ii) the company will not have sufficient funds available for
the company during the remainder of the moratorium to
enable the company to carry on its business;
(b) he becomes aware that, on the date of filing of documents

under section 398, the company was not eligible for a
moratorium; or (c) the directors or Official Receiver fail to
comply with their duty under paragraph 2.
¶15-1004 Appendix 15.4

EIGHTH SCHEDULE
[Section 398]
MORATORIUM FOR CORPORATE VOLUNTARY ARRANGEMENT
Eligibility for moratorium for corporate voluntary arrangement
1. A company is eligible for a moratorium for corporate voluntary
arrangement proposed by directors if:
(a) the company is a private company;
(b) the company is not a licensed institution or operator of a

designated payment system regulated under the laws
enforced by the Central Bank of Malaysia; or
(c) the company is not a financial market institution under the

Capital Markets and Services Act 2007.
2. A company is eligible for a moratorium for corporate voluntary

arrangement proposed by judicial manager or liquidator if—
(a) the company is being wound up;
(b) the company is under a judicial management order;
(c) the company is not a licensed institution or operator of a

designated payment system regulated under the laws
enforced by the Central Bank of Malaysia; or
(d) the company is not a financial market institution under the

Capital Markets and Services Act 2007.
Duration and extension of moratorium
3. A moratorium shall remain in force for a period of twenty eight

days from the time it commences under paragraphs 1 and 2 but a
meeting summoned under paragraph 4 may, subject to consent
given by the nominee and members of the company, and
obtaining seventy-five per centum majority in value of creditors
who are present and voting either in person or by proxy at the
meeting, extend this period for not more than sixty days.
4. At any meeting where it is proposed to extend the moratorium,

before a decision is taken with respect to that proposal, the
nominee shall inform the meeting of the actions he has taken in
order to comply with his duty under the Seventh Schedule and the
costs incurred as a result of his actions for the company, and of
any plans he intends to do to continue to comply with that duty if
the moratorium is extended and the expected costs of his actions
for the company.
5. A moratorium shall end at the end of the day of the meeting

summoned under section 399, unless it is extended under
paragraph 3.
6. If a moratorium is extended under paragraph 3, it shall end at the

end of the day to which it is extended.
7. If no meeting under paragraph 4 is summoned by the nominee

within the period of twenty-eight days as required under
paragraph 3, the moratorium ends at the last day of that period.
8. A moratorium shall come to an end if a nominee withdraws his

consent to act under the Seventh Schedule.
Notification of commencement of moratorium
9. The directors of a company or Official Receiver shall, within

seven days after the commencement of a moratorium, notify the
nominee of the commencement.
10. After being notified under paragraph 9, the nominee shall, within
seven days of the commencement of the moratorium period—
(a) notify the Registrar of the fact of the commencement of the
moratorium;
(b) notify the company and any petitioning creditor of the

company of whose claim he is aware of the fact of the
commencement of the moratorium; and
(c) advertise the fact in the website of the Commission and in

one widely circulated newspaper in Malaysia in the national
language or one widely circulated Malaysian newspaper in
the English language.
11. For the purposes of this Schedule, “petitioning creditor” means a

creditor by whom a winding up petition has been presented
before the commencement of moratorium, as long as the petition
has not been dismissed or withdrawn.
Notification of end of moratorium
12. A nominee shall, within seven days after a moratorium comes to

an end—
(a) advertise the fact in the website of the Commission and in
one widely circulated newspaper in Malaysia in the national
language or one widely circulated newspaper in Malaysia in
the English language; and
(b) notify the Court, the Registrar, the company and any
creditor of the company of whose claim he is aware, of the
fact of the end of the moratorium.
Moratorium committee
13. A meeting summoned under paragraph 4 to resolve that the
period of moratorium be extended may, with the consent of the
nominee, establish a moratorium committee to exercise the
function conferred on it by the meeting.
14. The meeting under paragraph 13 shall approve an estimate of

the expenses to be incurred by the committee in the exercise of
the proposed functions.
15. Any expenses, not exceeding the amount of the approved

estimate under paragraph 14 incurred by the committee in the
exercise of its functions shall be reimbursed by the nominee.
16. The committee shall cease to exist when the moratorium comes
to an end.
Effects of moratorium
17. During the period for which a moratorium is in force—

(a) no petition may be presented for the winding up of the
company;
(b) no meeting of the company may be called or requisitioned

except with the consent of the nominee or the leave of the
court and subject to, where the court gives leave, such terms
as the court may impose;
(c) no resolution may be passed or order made for the winding

up of the company;
(d) no application for judicial management order may be made

against the company;
(e) no judicial manager of the company may be appointed

under Subdivision 2 of Division 8 of Part III;
(f) no landlord or other person to whom rent is payable may

exercise any right of forfeiture by peaceable re-entry in
relation to premises let to the company in respect of a failure
by the company to comply with any term or condition of its
tenancy of such premises, except with the leave of the Court
and subject to such terms as the Court may impose;
(g) no other steps may be taken to impose any security over

the company’s property, or to repossess goods in the
company’s possession under any hire-purchase agreement,
except with the leave of the Court and subject to such terms
as the Court may impose;
(h) no other proceedings and no execution or other legal

process may be commenced or continued, and no distress
may be levied, against the company or its property except
with the leave of the Court and subject to such terms as the
Court may impose; and
(i) no steps shall be taken to transfer any share of the company

or to alter the status of any member of the company except
with the leave of the Court and, where the Court gives leave,
subject to such terms as the Court may impose. 18.
Notwithstanding subparagraph 17(a), a secured creditor may
appoint receiver to deal with the charged property of a
company.
Company invoices, orders for goods, etc.
19. At a time when a moratorium is in force in relation to a company,

the nominee’s name and a statement that a moratorium is in force
for the company shall appear on—
(a) its business letters, notices and other official publications,
including in electronic mediums;
(b) its websites;
(c) its bills of exchange, promissory notes, endorsements and

order forms;
(d) cheques purporting to be signed by or on behalf of the
company;
(e) orders invoices and other demands for payment, receipts

and letters of credit purporting to be issued or signed by or
on behalf of the company; and
(f) all other forms of its business correspondence and

documentation.
¶15-1005 Appendix 15.5
NINTH SCHEDULE
[Subsection 414(4)]
POWERS OF JUDICIAL MANAGER
The judicial manager may exercise all or any of the following powers:
(a) to take possession of, collect and get in the property of the
company and, for that purpose, to take such proceedings as he
seems expedient;
(b) to sell or otherwise dispose of the property of the company by

public auction or private contract;
(c) to borrow money and grant security for the borrowing over the
(d) to appoint a solicitor or accountant or other professionally

qualified person to assist him in the performance of his functions;
(e) to bring or defend any action or other legal proceedings in the

name and on behalf of the company;
(f) to refer to arbitration any question affecting the company;
(g) to effect and maintain insurances in respect of the business and

(h) to use the company’s seal;
(i) to do all acts and to execute in the name and on behalf of the
company any deed, receipt or other document;
(j) to draw, accept, make and endorse any bill of exchange or

promissory note in the name and on behalf of the company;
(k) to appoint any agent to do any business which he is unable to do

himself or which can more conveniently be done by an agent and
power to employ and dismiss employees;
(l) to do all such things, including the carrying out of works, as may
be necessary for the realisation of the property of the company;
(m) to make any payment which is necessary or incidental to the

performance of his functions;
(n) to carry on the business of the company;
(o) to establish subsidiaries of the company;
(p) to transfer to subsidiaries of the company the whole or any part

of the business and property of the company;
(q) to grant or accept a surrender of a lease or tenancy of any of the

property of the company, and to take a lease or tenancy of any
property required or convenient for the business of the company;
(r) to make any arrangement or compromise on behalf of the

company;
(s) to call up any uncalled capital of the company;
(t) to rank and claim in the bankruptcy, insolvency, sequestration or

liquidation of any person indebted to the company and to receive
dividends, and to accede to trust deeds for the creditors of any
such person;
(u) to make or defend an application for the winding up of a
company;
(v) to do all other things incidental to the exercise of the foregoing

powers.
APPENDICES
Glossary ¶16-000
Appendix 1: Checklist of things to be done before
incorporation ¶16-1001
Appendix 2: Checklist of things to be done after
Appendix 3: Books or documents to be made available
for inspection ¶16-1003
Appendix 4: Directors’ good practice checklist ¶16-1004
Appendix 5: Types of company meetings ¶16-1005
Appendix 6: Changes requiring special resolutions ¶16-1006
Appendix 7: Transition from Companies Act 1965 to
Companies Act 2016 ¶16-1007
Appendix 8: Second Schedule of CA 2016 (Statement
in lieu of prospectus) ¶16-1008
Appendix 9: Fifth Schedule of CA 2016 (Directors
report) ¶16-1009
¶16-000 Glossary
Accounting records. In relation to a corporation includes such

working papers and other documents as are necessary to explain the
methods and calculations by which accounts of the corporation are
made up.
Accounts. The profit and loss accounts and balance-sheets and
includes notes (other than auditors reports or directors reports)
attached to, or intended to be read with, any of those profits and loss
accounts or balance-sheets.
Administrator (female, administratrix). The person appointed by the
court to manage the estate of the person who died without leaving a
valid will (ie intestate) or, if leaving a valid will, failed to appoint an
executor therein (in this latter case the grant by the court is by Letter
of Administration cum testamento annexo, ie with the will attached).
Affairs. In relation to a company or corporation, the term includes: (a)
the promotion, formation, membership, control, trading, dealings,
business and property of the company or corporation; (b) a recognised
company carrying on business; and (c) the ownership of shares in,
debentures of, and interest made available by, the company or
corporation; (d) matters concerned with the ascertainment of the
persons who are or have been financially interested in the success or
failure or apparent success or failure of the company or corporation or
are or have been able to control or materially to influence the policy of
the company or corporation; and (e) the circumstances under which a
person acquired or disposed of or became entitled to acquire or
dispose of shares in, debentures of, or interests made available by,
the company or corporation.
Affidavit. A written, sworn statement made before a Commissioner for
Oaths or any authorised person by law relating to sworn statements.
Agent in company law. The person named in the memorandum of
the appointment or power of attorney lodged under s 562(1)(f) of
Companies Act 2016. An agent of the foreign company may be any
person employed or authorised to act on behalf of that company. The
acts of such agent, within the scope of his authority, binds the foreign
company.
Allotment: The Oxford Reference Dictionary defines “allotment” as to
apportion a share or to distribute or allocate officially shares after
issue or offering to investors for subscription. Section 75 of
Companies Act 2016 states that the exercise of directors’ power to
allot shares or grant rights must have prior approval by way of
resolution of the company, ie by resolution of members first. In this
context, prior approval must first be obtained for directors to offer
shares before allotment by directors when payments have been made.
This resolution shall be valid in the case of a public company at the
conclusion of the next AGM, or expiry after 12 months of approval in
the case of a private company. This resolution must be lodged in the
e-form “Notice of approval for allotment of shares or grant rights” in
Schedule B of MyCoID. When the shares are allotted pursuant to s 78
of Companies Act 2016, the e-form “Return of allotment of shares” in
Schedule A of MyCoID must be lodged for filing with the Registrar.
Alternate director. An individual who is appointed by a director, in
pursuance of a power granted by the constitution and with the
approval of his fellow directors, to attend a board meeting on behalf of
the director of a company where the principal director would be
otherwise unable to attend. The law relating to alternate directors
varies from country to country, but in most jurisdictions, the alternate
director has the same powers to attend, speak and vote at meetings
as the principal director would have had, had the alternate not been
appointed.
Amalgamation. The merger of any two or more companies, or the
whole or any part of their undertakings.
Annual general meeting (AGM). A meeting of the directors and
shareholders of every public company firm, required by law to be held
each calendar year. Generally, not more than 15 months are allowed
to elapse between two AGMs, and a 21-days’ written notice of its date
is required to be given to the shareholders. The main purpose of an
AGM is to comply with legal requirements, such as the presentation
and approval of the audited accounts, election of directors, and
appointment of auditors for the new accounting term. Other items that
may also be discussed include compensation of officers, confirmation
of proposed dividend, and issues raised by the stockholders.
Annual meeting of creditors. If the winding up of a company
continues for more than one year, the liquidator shall summon a
general meeting of the company in the case of a members’ voluntary
winding up, and of the company and the creditors in the case of a
creditors’ voluntary winding up, at the end of the first year from the
commencement of the winding up and of each succeeding year or not
more than three months thereafter, and shall lay before the meeting
an account of his acts and dealings and of the conduct of the winding
up during the preceding year.
Annual return. A yearly statement which must be lodged not later
than 30 days from the anniversary of a company’s incorporation date.
It gives essential information about a company’s composition,
activities, and financial position, and which must be filed by every
active incorporated or registered firm with an appropriate authority.
Under the provisions of general corporate legislation, it must contain
details such as (1) particulars of the shareholders, debenture holders,
directors, and the firm’s secretary, (2) list of charges (judgments and
lien) against the firm’s assets, (3) address of the registered office and
location of the register of members, along with (4) a copy of the latest
Approved accounting standards. Defined in the Financial Reporting
Act 1997 as: (a) accounting standards which are issued or adopted by
the Malaysian Accounting Standards Board (MASB); and (b) in
relation to foreign companies listed on a stock exchange in Malaysia,
acceptable internationally recognised accounting standards.
Approved company auditor. A person or a firm appointed by a
company to execute an audit. To act as an auditor, a person should
be certified by the regulatory authority of accounting and auditing or
possess certain specified qualifications; A person who has been
approved under s 263, Companies Act 2016 as an auditor and whose
approval has not been revoked.
Approved liquidator. A person appointed by the shareholders or
unsecured creditors, or on a court order, to manage the winding up of
a firm by selling off its assets. On appointment, the liquidator assumes
control of the business, collects and auctions off its free (un-pledged)
assets, pays the unsecured creditors from the proceeds of the sale,
and (if any money is left) distributes it among the shareholders in
proportion to their shareholdings; A person who has been approved
under s 433, Companies Act 2016 as a liquidator and whose approval
has not been revoked.
Arrangement. An agreement between a debtor and creditor about
repayment or a debt. It includes a re-organisation of the share capital
of a company by the consolidation of shares of different classes or by
the division of shares into shares of different classes or by both of
these methods.
Audit. An official examination of accounts with verification by
reference to witnesses and vouchers of each transaction including
statutory records and books of the entity by an independently
appointed person.
Auditor. A person who carries out an audit. To fill the office of an
auditor to a company, an auditor must be an approved company
auditor, such approval being granted by the Minister of Finance by the
issuing of an audit licence.
Audit Oversight Board. The Audit Oversight Board (AOB) is
established under Pt IIIA of the Securities Commission Act Malaysia
1993 (SCMA) which came into force on 1 April 2010 to promote and
develop an effective audit oversight framework and to promote
confidence in the quality and reliability of audited financial statements
in Malaysia. Auditors for public enterprises must registered with the
AOB.
Balance sheet. A statement of the assets, liabilities, and capital of a
business or other organisation at a particular point in time, detailing
the balance of income and expenditure over the preceding period.
Bankrupt. A person who has been declared bankrupt and has not
been not granted an “order of discharge” by a court. An undischarged
bankrupt is, in general, disqualified from holding certain public and
private offices such as that of a member of legislature or of a director
in a firm.
Beneficiary. A person for whose benefit property is held by trustees,
a will, life insurance policy, etc.
Bonus shares. Shares issued by a company from the unissued
capital and credited as full or partly paid up for which no consideration
is paid to the company by the person (usually a member of the
company) to whom they are issued. Bonus shares are capitalised from
accumulated profits, profits of the year, share premium account or any
capital reserves.
Books. Includes any register or other record of information and any
accounts or accounting records, however compiled, recorded or
stored, and also includes any document.
Borrowing corporation. A corporation that is, or will be, under a
liability (whether or not such liability is present or future) to repay any
money received, or to be received, by it in response to an invitation to
the public to subscribe for or purchase debentures of the company; In
Companies Act 2016, borrowing corporation means a corporation that
is or will be under a liability, whether or not such liability is present or
future, to repay any money received or to be received by it in
response to an invitation to the public to subscribe for or purchase
debentures of the corporation in accordance with the provisions of
Subdiv 10 of Div 1 of Pt III, and in particular s 176.
Brokerage. The commission payable to a broker for his services. The
amount of brokerage paid or agreed to be paid in the case of shares
offered to the public for subscription must be disclosed in prospectus,
etc.
Calls on shares. Demands made by a company upon the holder of
partly paid-up shares for payment of the balance, or a part.
Capital. The money subscribed by the shareholders pursuant to the
company’s constitution, or what is represented by that money. It is
also said that the capital of a company is the trading stock of the
company on which profits or dividends are calculated or the
accumulated wealth of the company employed productively.
Carrying on business. A routine and continuous involvement in an
activity undertaken for the purpose of making profit. This can be
accomplished with or without a physical or visible business entity; In
relation to foreign companies (ie Pt V, Div 1 of Companies Act 2016)
includes establishing or using a share transfer or share registration
office or administering, managing or otherwise dealing with property
situated in Malaysia as an agent, legal personal representative, or
trustee, whether by servants or agents or otherwise. Schedule 13 of
Companies Act 2016 sets out a list of activities which will not cause a
foreign company to be regarded as carrying on business in Malaysia.
Certificate by the Registrar. Section 599 of Companies Act 2016
provides that a copy or extract from documents filed or lodged at office
of the Registrar certified to be a true copy or extract signed and sealed
by the Registrar shall be admissible in evidence in any proceedings as
of equal validity with original document.
Certificate of incorporation. In English and Commonwealth legal
systems, a certificate of incorporation is usually a simple certificate
issued by the relevant government registry as confirmation of the due
incorporation and valid existence of the company.Under Companies
Act 2016, a certificate of incorporation shall no longer be issued by the
Registrar upon incorporation, but a copy of it may be obtained by
application and payment of a fee. Instead, a newly incorporated
company shall be issued with a Notice of Registration by the
Registrar.
Certified. Under Companies Act 2016, in relation to a copy of a
document, means certified in the manner determined by the Registrar
to be a true copy of the document and, in relation to a translation of a
document, means certified in the manner determined by the Registrar
to be a correct translation of the document into the national language
or into the English language.
Chairman. The person who presides at a meeting.
Charge. A form of security for payment of a debt, by way of mortgage
on the company’s assets. There are two kinds of charge: Fixed
charge, and Floating charge; “Charge” under the Companies Act
2016 includes a mortgage and any agreement to give or execute a
charge or mortgage whether upon demand or otherwise.
Chattels. Any property other than real property.
Chief Executive Officer. The principal executive officer of the
applicant or listed issuer for the time being, by whatever name called,
and whether or not he is a director.
Clear days. All the days in a time frame, excluding the day of
commencement and day of completion.
Closed period. The period during which a director or principal officers
(affected persons) are not allowed to engage in dealings of securities;
The time period between the completion of a listed company’s
financial results and the announcing of these results to the public.
Committee of inspection. A committee which represents the
interests of all creditors of a company going into liquidation. (Sch 10 of
Companies Act 2016 lists down the appointment and proceedings of
the Committee of Inspection.)
Common seal. Device used for the signing of documents issued in
the name of the company and regulated by the company’s constitution
or Companies Act 2016. The name of the company must appear in
legible characters together with the company number on its common
seal. Every share certificate must be under the company’s seal. A
company may have a duplicate common seal. See Share seal.
Company. A company incorporated pursuant to Companies Act 2016
or pursuant to any corresponding previous written law. “Company”
must be contrasted with Corporation.
Company limited by guarantee. A company formed on the principle
of having the liability of its members limited by the constitution to such
amount as the members may respectively undertake to contribute to
the assets of the company in the event of its being wound up.
Company limited by shares. A company formed on the principle of
having the liability of its members limited by the constitution or the
Companies Act 2016 to the amount, if any, unpaid on the shares held
respectively by them.
Connected person with a director. A member of that director’s
family; or a body corporate which is associated with that directors; or a
trustee of a trust (other than a trustee for an employee shares scheme
or pension scheme) under which that director or a member of his
family is a beneficiary; or a partner of that director or a partner of a
person connected with that director. A body corporate is associated
with a director if the body corporate is accustomed or is under an
obligation, whether formal or informal, or its directors are accustomed
to act in accordance with the directions, instructions or wishes of that
director; or that director has a controlling interest in the body
corporate; or that director or person connected with him, or that
director and persons connected with him, are entitled to exercise, or
control the exercise of not less than 15% of the votes attached to
voting shares in the body corporate.
Constitution. A set of fundamental principles or rules by which a
company is governed. Under the Companies Act 2016, a company
can choose to have or not to have a constitution, and the form of
constitution is provided in s 34.)
Contract. A legally bind agreement between competent parties, upon
a legal consideration, to do or to abstain from doing some act. A
contract is governed by Contracts Act 1950.
Contributory. In relation to a company means a person liable to
contribute to the assets of the company in the event of its being
wound up, and includes the holder of fully paid shares in the company.
Under Companies Act 2016, contributory, in relation to a company
means a person liable to contribute to the assets of the company in
the event of its being wound up, and includes the holder of fully paid
shares in the company and, prior to the final determination of the
persons who are contributories, includes any person alleged to be a
contributory.
Corporation. In Malaysia, means any body corporate formed or
incorporated or existing within Malaysia or outside Malaysia and
includes any foreign company but does not include: (a) any body
corporate that is incorporated within Malaysia and is by notice of the
Minister published in the Gazette declared to be a public authority or
an instrumentality or agency of the Government of Malaysia or of any
State or to be a body corporate which is not incorporated for
commercial purposes, (b) any corporation sole, (c) any society
registered under any written law relating to co-operative societies, or
(d) any trade union registered under any written law as a trade union.
Covenant. An agreement by deed, but it is sometimes used in
agreements to apply to any promise or stipulation whether under seal
or not.
Creditor. A person to whom a debt is owed. It is generally used to
refer to a person who is entitled to prove their claims against the
company in a winding up (see s 500, Companies Act 2016).
Creditor’s voluntary winding up. A procedure, instigated by the
directors of an insolvent company, by which the assets of the insolvent
company are sold, and the proceeds are distributed to the company’s
creditors. At the end of the liquidation, the company is dissolved. The
process is managed by a Liquidator.
Crystallisation. See Floating charge.
Cum dividend (abbreviated “cum div”), refers to a sale of shares in
which the right to a dividend (ie declared but unpaid) accrues to the
purchaser.
Cumulative preference shares. Shares on which the right to a
dividend, if not paid in one year through lack of profits, accumulates
until profits are sufficient. These accumulated dividends are to be paid
in priority.
Current liability. In relation to accounts or consolidated accounts
means a liability that would in the ordinary course of events be
payable within 12 months after the end of the financial year to which
the accounts or consolidated accounts relate.
Dealer. A person who carries on a business of dealing in securities
whether or not he carries on any other business, but does not include
an exempt dealer.
Dealing in securities. Whether as principal or agent, making or
offering to make with any person, or inducing or attempting to induce
any person to enter into or to offer to enter into: (a) any agreement for
or with a view to acquiring, disposing of, subscribing for, or
underwriting securities, or (b) any agreement the purpose of which is
to secure a profit to any of the parties from the yield of securities or by
reference to fluctuations in the value of securities. In short, anyone
who buys and sells Securities (stocks) for their own behalf is “dealing
in securities”.
Debenture. A written acknowledgment given by a company to secure
a sum of money. Under Companies Act 2016, the term includes
debenture stock, bonds, sukuk, notes and any other securities of a
corporation whether constituting a charge on the assets of the
corporation or not.
Debt securities. Debentures, bonds, notes, loan stocks or other
similar instruments representing or evidencing indebtedness, whether
secured or unsecured, and whether convertible or not.
Deed. An instrument written on paper or parchment signed, sealed
and delivered, by which an interest, right or property passes or an
obligation binding on some person is created or which is an affirmation
of some act by which an interest, right or property has passed.
Default penalty. Indicates that any person who is convicted of an
offence against that section (ie in which the term is so used) is guilty
of a further offence if the offence continues after he is so convicted
and is liable to additional penalty.
Defunct company. A company which is not carrying on business or is
not in operation. If the Registrar has reasonable cause to believe that
such is the case in regard to a company, he may move to strike the
company off the register.
Director. As used in Companies Act 2016, includes any person
occupying the position of director of a corporation by whatever named
called and includes a person in accordance with whose directions or
instructions the majority of directors of a corporation are accustomed
to act as an alternate or substitute director.
Dividend. A payment made out of profits to the shareholders if a
company with share capital has profits available for distribution, and
the directors have determined the company is solvent, under s 131(1)
and subject to s 132, Companies Act 2016.
Document. Under Companies Act 2016, document has the meaning
assigned to it in the Evidence Act 1950.
Emolument. In relation to a director or auditor of a company includes
any fees, percentages and other payments made (including the
money value of any allowances or perquisites) or consideration given,
directly or indirectly to the director or auditor by that company or by a
holding company or a subsidiary of that company, whether made or
given to him in his capacity as a director or auditor or otherwise in
connection with the affairs of that company or of the holding company
or the subsidiary.
Equity share. Any share which is not a preference share.
Exempt private company. A private company in the shares of which
no beneficial interest is held directly or indirectly by any corporation
and which has not more than 20 members none of whom is a
corporation.
Expert. Under Companies Act 2016, “expert” includes engineer,
valuer, accountant and any other person whose profession or
reputation gives authority to a statement made by him.
Financial year. The period in respect of which any financial
statements of a corporation is made up under Companies Act 2016,
whether that period is a year or not; In relation to a scheme under the
Interest Schemes Act 2016 means the period of 12 months ending on
31 December or on such other date as specified in the trust deed or
contractual agreement.
Firm. An unincorporated body of two or more individuals, or one or
more individuals and one or more corporations, or two or more
corporations, who have entered into partnership with one another with
a view to carrying on business for profit.
Fixed charge. A charge (ie security interest) on the real asset of the
company that is identifiable and ascertained when the charge is
created.
Floating charge. A charge over a fund of changing assets (eg stocks)
of a company or other artificial person, which “floats” or “hovers” until
the point at which it is converted into a Fixed charge, at which point
the charge attaches to specific assets of the business. This
conversion of the floating charge into a fixed charge is called
“Crystallisation”.
Foreign company. Under Companies Act 2016: (a) a foreign
company means: (a) a company, corporation, society, association or
other body incorporated outside Malaysia; or (b) an unincorporated
society, association or other body which under the law of its place of
origin may sue or be sued or hold property in the name of the
secretary or other officer of the society, body or association duly
appointed for that purpose and which does not have its head office or
principal place of business in Malaysia.
Foreign scheme. A scheme under the Interest Schemes Act 2016,
relating to an interest of which the right to participate or a right to the
interest in the scheme is offered by a management company which is
a public company limited by shares on behalf of a foreign company.
Fraud. The use of unfair and wrongful means (involving moral
obliquity, eg deceit, false representation, etc) to obtain material
advantage.
Group accounts. In relation to a holding company means: (a) a set of
consolidated accounts for the group of companies of that holding
company, (b) two or more sets of consolidated accounts together
covering that group, (c) separate accounts for each corporation in that
group, or (d) a combination of one or more sets of consolidated
accounts and one or more separate accounts together covering that
group.
Group of companies. In relation to a holding company means the
holding company and the corporations which are subsidiaries of the
holding company.
Guarantor corporation. In relation to a borrowing corporation, means
a corporation that has guaranteed, or has agreed to guarantee, the
repayment of any money received or to be received by the borrowing
corporation in response to an invitation to the public to subscribe for or
purchase debentures of the borrowing company.
Holding company. A company that has enough shares in one or
more other companies to be able to control the other companies
(called Subsidiaries). The term is to be read as a reference to a
corporation of which the last mentioned company or corporation is a
subsidiary. See also Subsidiary.
Incorporation. Upon the issue of a Notice of registration by the
Registrar of Companies, the body corporate is created (on and from
the date of the notice) and is capable of exercising all the functions of
an incorporated company and of suing and being sued and having
perpetual succession and a common seal with power to hold land but
with such liability on the part of the members to contribute to the
assets of the company in the event of its being wound up.
Inspector. A person appointed under s 590 of Companies Act 2016 to
investigate the affairs of a company on the direction of the Minister
charged with the responsibility for companies.
Insolvency practitioner. A person who is an approved liquidator,
other than the Official Receiver.
Interest. The interest of the company is a concept that the board of
directors in corporations are in most legal systems required to use
their powers for the commercial benefit of the company and its
members. For the definition of “interest” under the Interest Scheme
Act 2016, see s 2 of the Act.
Interest holder. A person who participates in a scheme; In respect of
an interest or a share, the person indicated in the register.
Investment adviser. A person who carries on a business of advising
others concerning securities or who as part of a regular business
issues or promulgates analyses or reports concerning securities.
Investment company. A corporation (not being a private company)
for the time being declared by proclamation of the Yang di-Pertuan
Agong to be an investment company.
Issued capital. The value of the shares of the company actually paid
and subscribed by members of a share capital company.
Lien. A right to hold the property of another person as security for the
performance of an obligation.
Limited company. A company limited by shares or by guarantee.
Liquidator. An officer that is specially appointed to wind up the affairs
of a company. He is legally empowered to act on behalf of the
company in various capacities. Includes the Official Receiver when
acting as the liquidator of a corporation.
Major shareholder. A person who has an interest or interests in one
or more voting shares in a company and the nominal amount of that
share, or the aggregate of the nominal amounts of those shares, is not
less than 5% of the aggregate of the nominal amounts of all the voting
shares in the company.
Management company. In relation to any interests issued or
proposed to be issued or any deed that relates to any interests issued
or proposed to be issued means a company incorporated under the
Companies Act 2016 or corresponding previous written law by or on
behalf of which the interests have been or are proposed to be issued.
Manager. In relation to a company means the principal executive
officer of the company for the time being by whatever name called and
whether or not he is a director.
Meeting. A gathering of two or more persons under common law. The
Companies Act 2016 provides the statutory meaning of a one person
meeting under s 328(1) as a quorum for a one person company.
Members. The members of a company are those persons whose
names appear in its register of members of a company. In listed
companies, a member includes a depositor who shall be treated as if
he were a member pursuant to s 35 of the Securities Industry (Central
Depositories) Act 1991 but excludes the Depository in its capacity as a
bare trustee.
Members’ voluntary winding up. A winding up where a declaration
has been made and lodged in pursuance of s 257, Companies Act
2016.
Memorandum of Association. A legal document that contains the
basic conditions on which the company is incorporated; it provides the
rules for the company’s external dealings. The Memorandum of
Association and the Articles of Association serve as the constitution of
the company. Under Companies Act 2016, a company is no longer
required to have the Memorandum of Association and the Articles of
Association for registration purposes, and a company can also
operate without a constitution.
Minimum subscription. In relation to any shares offered to the public
for subscription means the amount stated in the prospectus relating to
the offer as the minimum amount which in the opinion of the directors
must be raised by the issue of the shares offered.
Net tangible assets. Tangible assets at book values less total
liabilities at a book values and less any aggregate amount by which
the book value of the marketable securities held by the corporation
exceeds their market value.
Non-current liability. Liability that is not a current liability.
Notice of registration. Under Companies Act 2016, this refers to the
notice issued by the Registrar of Companies as evidence that a
company has been incorporated and has all attributes of a person to
carry out businesses.
Offer (or offering). Refers to: (a) issuing of, (b) offering for
subscription or purchase of, or (c) issuing an invitation to subscribe for
or purchase, the securities of a corporation.
Offeree company. In relation to a take-over scheme or a take-over
offer means a public company to which the scheme or offer relates;
The target company of a take-over.
Office. See Registered office.
Officer. Under Companies Act 2016 generally, in relation to a
corporation includes: (a) any director, secretary or employee of the
corporation or a person employed in an executive capacity by the
corporation, (b) a receiver and manager of any part of the undertaking
of the corporation appointed under a power contained in any
instrument, and (c) any liquidator of a company appointed in a
voluntary winding up. Excludes: (a) any receiver who is not also a
manager, (b) any receiver and manager appointed by the court, or (c)
any liquidator appointed by the court or by the creditors.
Official Receiver. The Director General of Insolvency, Deputy
Director General of Insolvency, Directors of Insolvency, Deputy
Directors of Insolvency, Senior Assistant Directors of Insolvency,
Assistant Directors of Insolvency, Insolvency officers and any other
officer appointed under the Bankruptcy Act 1967.
Oppressive conduct. Conduct which is burdensome, harsh and
wrongful, with, possibly, some lack of probity.
Paid up capital. The amount of money that has been paid (or
deemed paid) on shares actually allotted. Shares can be paid up
either in cash or otherwise than in cash (eg landed properties, assets
including intellectual property).
Pari passu. Latin phrase meaning “with equal step” and means
without preference.
Participating preference shares. Usually carries the right to a
dividend at a specified rate (say 5%) together with a right to participate
in a further distribution.
Per annum. Used in financial context to mean “by the year” or “for
each year”.
Premium scheme. A scheme under Interest Schemes Act 2016,
relating to an interest of which the right to participate or a right to the
interest in the scheme is offered by a management company which is
a public company limited by shares.
Per se. by or in itself or themselves; Intrinsically.
Personal representative. The general term used in Companies Act
1965 to embrace the legal representative of a deceased’s estate, ie
executors, administrators.
Preference shares. A term not defined in company law but generally
denotes shares which confer a preferential right on the holders of
them. See Cumulative preference shares, Redeemable preference
shares, Participating preference shares.
Prescribed corporation. For the purposes of the prospectus
provisions of Companies Act 2016 means: (a) a banking corporation,
or (b) a corporation or a corporation of a class which (on the
recommendation of Bank Negara Malaysia) has been declared by the
Minister in-charge by notification in the Gazette to be a prescribed
corporation.
Prescribed security. A security which has been prescribed by the
Exchange to be deposited with the Depository in accordance with s 14
of the Securities Industry (Central Depositories) Act 1991.
Private company. A company whose shares may not be offered to
the public for sale and which operates under legal requirements less
strict than those for a public company. Under Companies Act 2016, a
company is any company incorporated as a private company by virtue
of s 42, Companies Act 2016, or any company converted into a private
company.
Product disclosure statement. Any product disclosure statement or
invitation inviting applications or offers to subscribe for or purchase or
offering for subscription or purchase any interest in a small scheme
under Interest Schemes Act 2016.
Pro rata. “In proportion”.
Profit and loss account. A financial statement that summarises the
revenues, costs and expenses incurred during a specific period of
time, usually a fiscal quarter or year.
Promoter. In company law means those persons who first associate
themselves together for the purpose of organising the company,
issuing its prospectus, procuring subscriptions to the stock, securing a
charter, etc. Does not include any person by reason only of his acting
in a professional capacity.
Proof of debts. In every winding up, subject in the case of insolvent
companies to the application in accordance with the provisions of the
Act relating to bankruptcy, all debts payable on a contingency and all
claims against the company present or future, are admissible to proof
against the company.
Prospectus. A formal legal document (including a registered abridged
prospectus), notice, circular, advertisement or invitation inviting
applications or offers from the public to subscribe for or purchase or
offering to the public for subscription or purchase any shares in or
debentures of a corporation or proposed corporation.
Proxy. Authority given to a person to act for someone else, such as
by voting for them in an election, or the person who this authority is
given to.
Public company. A company other than a private company.
Quantum meriut. Latin phrase meaning “the amount he deserves” or
“as much as he has earned”. The reasonable sum of money to be paid
for services rendered or work done when the amount due is not
stipulated in a legally enforceable contract.
Receiver. In the company law context, is an impartial person
appointed by the court or out of court for the purpose of safeguarding
or getting in, holding or securing funds or other property of the
corporation or for the benefit of those entitled to it. A receiver may also
be a manager in which case his powers and duties are more
extensive.
Redeemable preference shares. Shares which give the holders of
them the right to be repaid their capital at a specified date or which
give the company itself the right to repay the capital after a specified
time or within a specified period.
Registered office. The place to which all communications and notices
may be addressed and which is open and accessible to the public
during ordinary business hours, specified in s 46 of Companies Act
2016.
Registered scheme. A small scheme, premium scheme or foreign
scheme registered and authorised by the Registrar in accordance with
s 10 of Interest Schemes Act 2016.
Related corporation. Where a corporation is: (a) the holding
company of another corporation, (b) a subsidiary of another
corporation, or (c) a subsidiary of the holding company of another
corporation, the first mentioned corporation and those other
corporations are, for the purposes of Companies Act 2016, deemed to
be related to each other.
Related party. A director, major shareholder or persons connected
with such director or major shareholders.
Related party transaction. A transaction entered into by the listed
issuer or its subsidiaries which involves the interest, direct or indirect,
of a related party.
Relative. For the purpose of regulating loans to directors means
spouse, son, adopted son, stepson, daughter, adopted daughter and
stepdaughter.
Scheme. In relation to an interest, includes any contract,
arrangement, undertaking, enterprise, programmes or plans of actions
relating to an investment scheme, a time-sharing scheme or a
recreational membership scheme, under Interest Schemes Act 2016.
Securities. Debentures, stocks and shares in a public company or
corporation, or bonds of any government or of any body, corporate or
unincorporate, and includes any right or option in respect thereof and
any interest as defined in s 2 of the Securities Commission Act 1993.
Share. A unit of ownership that represents an equal proportion of a
company’s capital. It entitles its holder (the shareholder) to an equal
claim on the company’s profits and an equal obligation for the
company’s debts and losses. A share in the share capital of a
corporation and includes stock except where a distinction between
stock and shares is expressed or implied.
Share capital. The part of the capital of a company that comes from
the issue of shares.
Share option. A right granted to shareholders of a public company
that enables them to take up unissued shares of the company within a
period of ten years from the date of issue of the option, after which the
option granted shall be void.
Shariah compliant scheme. A scheme in which the trust deed and
prospectus or contractual agreement and product disclosure
statement, whichever is applicable, are in compliance with the Shariah
framework under s 43 of Interest Schemes Act 2016.
Share seal. A duplicate common seal being a facsimile of the
company’s common seal with the addition of the words “Share Seal”
on the face. A share certificate under such share seal is deemed to be
sealed with the company’s common seal.
Small scheme. A scheme relating to an interest of which the right to
participate or right to the interest in the scheme is offered by a
management company which is a company incorporated under the
Companies Act 2016.
Special resolution. A resolution passed by a majority of not less than
three-fourths (or 75%) of such members as being entitled to vote in
person, or where proxies are allowed, by proxy, at a general meeting
of which not less than 21 days’ notice specifying the intention to
propose the resolution as a special resolution has been duly given.
Specific performance. When damages would be an inadequate
compensation for breach of contract, in certain cases, the aggrieved
party may apply to the court for an order to compel the defaulter to
complete his side of the bargain; that is, he may ask for an order for
specific performance.
Statement of affairs. A statement of assets and liabilities prepared in
a prescribed form to the receiver or manager, the Official Receiver or
liquidator appointed by the court as the case may be.
Stock market. A market, or other place at which offers to sell,
purchase or exchange securities are regularly made or accepted.
Subsidiary. A company with voting stock that is more than 50%
controlled by another company, usually referred to as the parent
company or the holding company. A subsidiary is partly or completely
owned by the parent company, which holds a controlling interest in the
subsidiary company. In cases where a parent company owns a foreign
subsidiary, the subsidiary must follow the laws of the country where it
is incorporated and operates, and the parent company carries the
foreign subsidiary’s financials on its consolidated financial statements.
Substantial shareholder. A person has a substantial shareholding in
a company if he has an interest or interests in one or more voting
shares in the company and the nominal amount of that share, or the
aggregate of the nominal amounts of those shares, is not less than
5% of the aggregate of the nominal amount of all the voting shares in
the company.
Table A. Part of the Fourth Schedule to Companies Act 1965. It
contains a model set of Articles of Association which a company may
adopt with or without modification. The Companies Act 2016 has
abolished Table A.
Take-over scheme. In Malaysia it refers to a scheme involving the
making of offers for the acquisition by or on behalf of a corporation or
on behalf of a proposed corporation: (a) of all the shares in another
corporation or of all the shares of a particular class in another
corporation; or (b) of any shares in another corporation which
(together with shares, if any, already held beneficially by the first-
mentioned corporation or by any other corporation that is deemed by
virtue of s 7, Companies Act 2016 to be related to that corporation)
carry the right to exercise, or control the exercise of, not less than
one-third of the voting power at any general meeting of the other
corporation.
Time-sharing scheme. A scheme is a time-sharing scheme if: (a) an
interest holder is or may become, entitled to use, occupy or possess,
for two or more periods during the period for which the scheme,
whether in Malaysia or elsewhere is to operate, property to which the
scheme relates; and (b) the scheme is to operate for a period of not
less than three years.
Tort. A civil wrong (not being a breach of contract) for which the
common law provides a remedy by action for unliquidated damages.
Transmission. The term used to describe the transfer of legal title to
the executor, administrator or beneficiary of a deceased estate, upon
the request of the executor or the administrator appointed under the
probate or letter of administration respectively.
Treasury shares. The portion of shares that a company keeps in its
own treasury. Treasury stock may have come from a repurchase or
buyback from shareholders, or it may have never been issued to the
public in the first place. These shares do not pay dividends, have no
voting rights and should not be included in shares outstanding
calculations. The number of shares of treasury shares is the difference
between the number of shares issued and the number of shares
outstanding. Since the treasury shares result in fewer shares
outstanding, there may be a slight increase in the corporation’s
earnings per share.
Uberrimae fidei. Latin for “utmost good faith”, which translates to “of
the fullest confidence”. This term is used to describe contracts in
which a party is bound to advise the other of every fact and
circumstance. Insurance contracts are contracts uberrimae fidei.
Undischarged bankrupt. A person who, under a law relating to
bankruptcy or insolvency, is a bankrupt in respect of a bankruptcy
from which he has not been discharged.
Unlimited company. A company formed on the principle of having no
limit placed on the liability of its members.
Unit trust scheme. Under Capital Markets and Services Act 2007
means any arrangement made for the purpose, or having the effect, of
providing facilities for the participation of persons as beneficiaries
under a trust in profits or income arising from the acquisition, holding,
management or disposal of: (a) securities, (b) derivatives, or (c) any
other property or asset.
Unregistered company. A company that is not registered or covered
under the Companies Act. Includes a foreign company and any
partnership, association or company consisting of more than five
members but does not include a company incorporated under
Companies Act 2016 or any corresponding previous written law. An
unregistered company cannot be wound up voluntarily or be subject to
supervision of the court.
Voting share. Shares that give the shareholder the right to vote on
matters of corporate policy making as well as who will compose the
members of the board of directors.
¶16-1001 Appendix 1: Checklist of things to be done

before incorporation
□ Is there a proposed name for name search to be done?
□ Where the company is taking over a business which has a

registered name, notice of cessation must be lodged.
□ Is it necessary to obtain an existing company’s consent?
□ Is the name chosen for the company to be incorporated

desirable?
□ Is a Company Constitution required (optional for private company,

but compulsory for company limited by guarantee) to be
submitted in the form required?
□ Are documents requiring stamp duty properly stamped?
□ Are the words “Berhad”, “Bhd”, or “Sendirian”, “Sdn” used

consistently throughout the Constitution (if included) and the
completion of application for incorporation (s 14)?
□ Are the clauses in the Constitution, if included for submission,

numbered?
□ Does the Constitution, if included for submission, include the

name of the company, the object clauses, the company’s
limitation of liability, the authorised capital of the company?
□ Does any clause of the Constitution, if included for submission, in

compliance with Companies Act 2016?
□ Does the Constitution, if included for submission, limit the liability

of members (as compared with limiting the liability of the
company)?
□ Is the capital divided into shares of no par value?
□ Is the capital stated in the Constitution, if included for submission,

consistent?
□ Are the subscribers correctly described?
□ Have the subscribers signed and have their signatures been

properly attested by a witness who is a company secretary?
□ Is the Constitution dated?
□ For private companies, have the provisions of s 42 of Companies

Act 2016 been complied with in the Constitution?
□ Are the names of the first directors and secretary stated in the
Constitution, if included for submission?
□ For a company limited by guarantee, are restrictions and
requirements relating to guarantee companies complied with
pursuant to s 45 Companies Act 2016?
□ Does the application accompanied by statement from each

promoter or director confirm:
– his consent to act as a promoter or to his appointment as a
director, as the case may be; and
– that he is not disqualified under the Act to act as a promoter

or a director, as the case may be.
□ Is the relevant incorporation fees attached with application?
¶16-1002 Appendix 2: Checklist of things to be done

after incorporation
□ The first meeting of directors must be held, preferably within a
month of incorporation.
□ Unless further allotment of shares is made, no further notification

of share increase is required.
□ The statutory registers and common seal have to be ordered and

produced at the first meeting of directors.
□ A bank should be appointed and signatories to cheques

designated.
□ Pre-incorporation contracts should be ratified and adopted, if any.
□ Stationery bearing the company’s full and correct name and

company number must be printed where the stationery is to be for
outside use.
□ The registered office should be confirmed and the proper sign

affixed.
□ Where necessary, application for listing on the Stock Exchange
should be arranged, if the company is a public company going for
listing.
□ Statutory procedures relating to eligibility for the commencement

of business, especially for public companies with share capital,
must be observed.
□ Books of accounts must be purchased. (Note that this is not within

the scope of a company secretary’s duties unless specified by the
company.)
□ The design for share certificates must be prepared, adopted and

printed, if the private company desires to have share certificates.
□ Minute books for the various meetings — annual general

meetings (AGMs) for a public company, general meetings and
directors’ meetings should be purchased.
□ Insurance cover for the company should be considered. Insurance

cover with respect to the Workmen’s Compensation Act 1952
should be arranged. (Note that this is not within the scope of a
company secretary’s duties unless specified by the company.)
□ Ensure that the necessary contracts for services are drawn up.
(Note that this is not within the scope of company secretary
unless specified by the company.)
□ The first auditor must be appointed. (Note that per s 267 and 271
of Companies Act 2016, the appointment of auditor can be at any
time before the first AGM of a public company, or before
circulation of first financial statements and reports, in the case of
a private company, or if the directors do not make an
appointment, the company at a general meeting may appoint an
auditor.)
□ A tax agent or GST agent should also be appointed to take care of

taxation and GST matters.
¶16-1003 Appendix 3: Books or documents to be made
available for inspection
Book or Who may Who may Time limit for

document inspect request a copy service of
or extract copy or
extract
(Articles of – Any member –
Association) or (at a fee)
Constitution
Any resolution – Any member –
or agreement (at a fee)
which binds any
class of
shareholders
(where Articles
not registered)
Material Members and – (Available for
contracts creditors inspection for a
specified in 6-month period
prospectuses after
registration of
prospectus)
(Memorandum
Any member
of Association) – –
(at a fee)
or Constitution
Minute books of Any member Within 14 days
Any member
general meeting (at a fee) of request
Profit and loss – All persons Not less than
account and entitled to 14 days before
balance sheet receive notice date of
of AGM Any meeting, or this
other member period may be
and debenture reduced if all
holders members agree
Register of Creditors and Any person Within 3 days
charges members or of request
any other
person (at a
fee)
Register of Registered Registered Within 30 days
debenture debenture debenture after request
holders holders and holder and any
any shareholder
shareholder (at a fee)
Register of Members or
directors, any other
– –
managers and person (at a
secretaries fee)
Register of Any member Any member or
members and or any other any other Within 21 days
index of person (at a person of request
members fee) (at a fee)
Register of
Member; any
substantial
person who Registrar of Within 14 days
Shareholders
request (at a Companies of request
(applicable for a
fee)
public company)
¶16-1004 Appendix 4: Directors’ good practice checklist
□ A director must always act honestly and in good faith in the

discharge of his duties.
□ A director should use reasonable diligence in carrying out the

business of the company.
□ A director must be familiar with the disclosure requirements set
out under the Companies Act, Securities laws and the Stock
Exchange listing requirements (if the company is listed).
□ Interests of employees as well as shareholders must be taken into

consideration when directors exercise their power.
□ Where the company is listed, directors should not ignore the

rulings of the Securities Commission or any other relevant
authorities.
□ Directors must be aware of the accounting procedures required by

the Companies Act and ensure that proper and timely accounts
are kept, including legal requirements of the MASB.
□ Directors must circulate to the shareholders a profit and loss

account and a balance sheet, together with a directors’ report
according to s 258 of Companies Act 2016. Failure to produce
these may amount to mismanagement.
□ Listed companies directors must be knowledgeable of disclosure

of interest, share dealings, related party transactions and other
requirements of the Securities Commission, Capital Markets and
Securities Act 2007 and the Bursa Malaysia Listing Requirements
on quarterly reporting, mid-year returns and end of year annual
reports requirements.
□ Directors may recommend dividends but they must ensure that

dividends are paid out of profits available for distribution and
confirm the solvency of the company.
□ Directors of private companies have the discretion to refuse the

transfer of shares but the exercise of this power must be in the
interest of the company.
□ The approval for directors to issue shares must first be approved

by the company in general meeting, ie by the shareholders.
□ Directors who are also shareholders must distinguish between
their two roles. The duties and liabilities of both roles differ.
□ Directors must observe the prohibition against fraudulent trading,

ie the carrying on of business with the intent to defraud creditors.
□ Directors must not forget to appoint auditors and tax and/or GST
agents after the company is incorporated.
□ Directors must be aware of the various documents, forms and the

deadlines for submission in order to avoid penalties which must
be lodged with the Registrar of Companies, and the various
notices to be served, under the Companies Act 2016 and the
¶16-1005 Appendix 5: Types of company meetings

The following is a table of company meetings. Board of directors
meetings are not included because they are largely regulated by
Companies Act 2016 or subject to the company’s Constitution, if any.
However, s 212 of Companies Act 2016 regulates proceedings of the
boards in the Third Schedule. For more on directors meetings see
Chapter 7.
Type of When to hold Notice

meeting requirements
General When matters requiring The normal 14 days’
Meeting (GM) shareholders’ approval need notice is required.
to be transacted urgently However, if the
and cannot wait for the next business transacted
AGM to be held. Matters requires special
transacted at GMs are resolutions (see
usually special businesses. Appendix X), then
Members holding not less notice should be at
than one-tenth of the paid- least 21 days.
up capital or one-tenth of the
voting rights may requisition
a GM.
Directors must then convene
a meeting not more than 2
months after receiving the
requisition. If the directors
do not convene the meeting
21 days after receiving the
requisition, the members
themselves may convene
the meeting.
Annual General • Every public company Where the AGM of a
Meeting (AGM) must hold one AGM at public company
of a public least once in every deals only in
company calendar year. An AGM ordinary business
must not be held more and no special
than 15 months after the resolution is
previous one. required: 21 days’
notice.
• Immediately after Shorter notice may
incorporation, the first be given if all
AGM must be held not members agree.
more than 18 months after Where the AGM
the date of incorporation. also deals in special
business, the
(The company may make an relevant resolution
application to the ROC for for special business
an extension for lodgment of must be stated in
financial statements and the notice, and if
reports after the AGM.) such special
business require
special resolutions
(see Appendix 6),
then 21 days’ notice
is required. For
public companies or
public listed
companies, a notice
of 21 days is
required irrespective
of whether the
businesses are
ordinary or special.
¶16-1006 Appendix 6: Changes requiring special

resolutions
(a) Altering the restriction on share transfers of a private company.
(b) Changing the name of the company.
(c) Altering the existing Memorandum or Articles of Association (of

companies incorporated under Companies Act 1965) or
constitution (of newly incorporated companies).
(d) Adoption of a constitution for a company registered without a

constitution, or adopting a constitution for old companies that
have revoked their Memorandum and Articles of Association.
(e) Converting an unlimited company to a limited one.
(f) Changing a public company to a private one.
(g) Changing a private company to a public one.
(h) Altering the objects clause.
(i) Reducing the share capital.
(j) Paying interest out of capital.
(k) Appointing an inspector to investigate the affairs of the company.
(l) Approving the commencement of winding up, in a members’

voluntary winding up.
(m) Approving the exercise of certain powers by the liquidators in a

members’ voluntary winding up.
(n) Allowing the liquidator to transfer or sell assets in return for

shares in another company in a members’ voluntary winding up.
¶16-1007 Appendix 7: Transition from Companies Act

1965 to Companies Act 2016
(A) Transitional provisions relating to abolition of nominal value;
(B) General transitional provisions;
(C) Repeal and savings.
(A) Transitional provisions relating to abolition of nominal value

(1) Where a share is issued before the commencement of section
74—
(a) the amount paid on the share shall be the sum of all
amounts paid to the company at any time for the share, but
not including any premium; and
(b) the amount unpaid on the share shall be the difference

between the price of issue of the share, but not including any
premium, and the amount paid on the share.
(2) Upon the commencement of section 74, any amount standing to

the credit of a company’s share premium account and capital
redemption reserve shall become part of the company’s share
capital.
(3) Notwithstanding subsection (2), a company may, within twenty

four months upon the commencement of section 74, use the
amount standing to the credit of its share premium account to—
(a) provide for the premium payable on redemption of
debentures or redeemable preference shares issued before
the commencement of section 74;
(b) write off—

(i) the preliminary expenses of the company incurred
before the commencement of section 74; or
(ii) expenses incurred, or commissions or brokerages paid

or discounts allowed, before or upon the commencement
of section 74, for any duty, fee or tax payable on or in
connection with any issue of shares of the company;
(c) pay up, under an agreement made before the

commencement of section 74, shares which were unissued
before that date and which are to be issued upon that date to
members of the company as fully paid bonus shares;
(d) pay up in whole or in part the balance unpaid on shares

issued before the commencement of section 74 to members
of the company; or
(e) pay dividends declared before the commencement of

section 74, if such dividends are satisfied by the issue of
shares to members of the company.
(4) Notwithstanding subsection (2), a company may, within twenty

four months upon the commencement of section 74, use the
amount standing to the credit of its capital redemption reserve
account to pay up shares which were unissued before that date
and which are to be issued to members of the company as fully
paid bonus shares.
(5) Notwithstanding subsection (2), any company carrying out the

business of insurance or takaful in Malaysia immediately before
the commencement of section 74, may apply the amount standing
to the credit of its share premium account immediately before
such date by appropriation or transfer to any fund established and
maintained under the Financial Services Act 2013 or Islamic
Financial Services Act 2013.
(6) Notwithstanding subsection (1), the liability of a shareholder for

calls in respect of money unpaid on shares issued before the
commencement of section 74, whether on account of the par
value of the shares or by way of premium, shall not be affected by
the shares ceasing to have a par value.
(7) For the purpose of interpreting and applying, upon the

commencement of section 74, a contract, including the
constitution of the company, entered into before such date or a
trust deed or other document executed before such date—
(a) a reference to the par or nominal value of a share shall be a
reference to—
(i) if the share is issued before such date, the par or
nominal value of the share immediately before such
date;
(ii) if the share is issued upon such date but shares of the
same class were on issue immediately before such date,
the par or nominal value that the share would have had if
it had been issued then; or
(iii) if the share is issued upon such date and shares of the
same class were not on issue immediately before such
date, the par or nominal value determined by the
directors,
and a reference to share premium shall be construed as a

reference to any residual share capital in relation to the
share;
(b) a reference to a right to a return of capital on a share shall

be construed as a reference to a right to a return of capital of
a value equal to the amount paid in respect of the share’s par
or nominal value; and
(c) a reference to the aggregate par or nominal value of the

company’s issued share capital shall be construed as a
reference to that aggregate as it existed immediately before
that date as—
(i) increased to take account of the par or nominal value as
defined in paragraph (a) of any shares issued upon that
date; and
(ii) reduced to take account of the par or nominal value as

defined in paragraph (a) of any shares cancelled upon
that date.
(8) A company may file with the Registrar a notice of its share
capital—
(a) at any time before—
(i) the date it is required to lodge its annual return after the
end of the period referred to under subsection (3);
(ii) the expiry of 180 days after the end of the period
referred to under subsection (3),
whichever is the earlier; or
(b) within such longer period as the Registrar may, if he thinks

fit in the circumstances of the case, allow.
(9) Notwithstanding subsection (8), a company may file with the

Registrar a notice of its share capital earlier than the periods
referred to in paragraph (8)(a) if the company—
(a) has no amount standing to the credit of its share premium
account; or
(b) it has utilised the amount standing to the credit of its share
premium accounts under subsection (3).
(10) Unless a company has filed a notice of its share capital under
subsection (8) or (9), the Registrar may for the purposes of the
records maintained by the Registrar adopt, as the share capital of
the company, the aggregate value of the shares issued by the
company as that value appears in the Registrar’s records
immediately after the end of the period referred to in paragraph
(8)(a).
(B) General transitional provisions

(1) Any person appointed under the corresponding previous written
law and holding office at the commencement of this Act, shall
remain in office as if he had been appointed under this Act.
(2) Any act made, executed, issued or passed under the

corresponding previous written law and in force and operative at
the commencement of this Act, shall so far as it could have been
made, executed, issued or passed, under this Act have effect as if
made executed, issued or passed under this Act.
(3) The memorandum of association and articles of association of

an existing company in force and operative at the commencement
of this Act, and the provisions of Table A under the Fourth
Schedule of the Companies Act 1965 if adopted as all or part of
the articles of association of a company at the commencement of
this Act, shall have effect as if made or adopted under this Act,
unless otherwise resolved by the company.
(4) All proceedings, judicial or otherwise commenced before and

pending immediately before the commencement of this Act under
the Companies Act 1965 shall be deemed to have commenced
and may be continued under that Act.
(5) A company or foreign company registered under any

corresponding previous written law shall be deemed to have been
registered under this Act and the Act shall extend and apply to the
company accordingly and any reference to this Act, express or
implied, to the date of registration of the company shall be
construed as a reference to the date upon which the company
was registered under the corresponding previous written law.
(6) A company which is in the course of winding up immediately

before the commencement of this Act shall continue to be wound
up under the relevant provisions in the Companies Act 1965.
(7) Section 308 of the Companies Act 1965 shall continue to apply
to a company which is in the course of being struck off the
register by the Registrar immediately before the commencement
of this Act.
(8) The Minister may direct the Commission to issue guidelines,

circulars or practice notes to provide for any matters in force
before the commencement of this Act to be dealt with in such
manner to bring them in conformity with this Act.
(C) Repeal and savings

(1) The Companies Act 1965 is repealed.
(2) Notwithstanding subsection (1)—

(a) any fee, charge or any sum paid or unpaid under the
repealed Companies Act 1965 on the date immediately
before the coming into operation of the relevant provision of
this Act shall, in respect of the corresponding period, be
deemed to have been paid or unpaid under the provisions of
this Act;
(b) any pending application to the Minister or the Registrar

under the Companies Act 1965 immediately before the
commencement of this Act shall be treated as though this Act
has not been enacted;
(c) any approval, direction, decision, notification, exemption and

other executive acts, howsoever called, made, given or done
under or in accordance with, or by virtue of the corresponding
provisions of this Act by the Minister, the Commission or the
Registrar, and shall continue to remain in full force and effect
in relation to the persons to whom the approval, direction,
decision, notification, exemption and other executive acts
applied until amended, repealed, rescinded, revoked or
replaced under, in accordance with or by virtue of, the
corresponding provisions of this Act.
(3) Nothing in the Companies Act 1965 or this Act shall affect any
person’s liability to be prosecuted or punished for offences or
breaches committed before the commencement of this Act or any
proceeding brought, sentence imposed or action taken before that
day in respect of such offence or breach.
(4) Any right, privilege, obligation or liability acquired, accrued or

incurred before the effective date or any legal proceedings,
remedy or investigation in respect of such right, privilege,
obligation or liability shall not be affected by this Act and shall
continue to remain in force as if this Act has not been enacted.
¶16-1008 Appendix 8: Second Schedule, Companies Act

2016
SECOND SCHEDULE
[Section 189]
STATEMENT IN LIEU OF PROSPECTUS
PART I
Statement in lieu of prospectus lodged for registration by [insert name
of company]
The share capital of the company RM
Divided into each:
Shares of RM RM
each:
Shares of RM RM
each:
Shares of RM RM
Amount, if any, of the above capital
which consists of redeemable each:
preference shares Shares of RM RM
The date on or before which these
shares are, or are liable, to be
redeemed
Names, descriptions and addresses of
directors or proposed directors
If the share capital of the company is
divided into different classes of shares,
the right of voting at meetings of the
company conferred by, and the rights
in respect of capital and dividends
attached to, the several classes of
shares respectively
Number and amount of shares and 1. shares of RM fully

debentures issued within the two years paid
preceding the date of this statement or
2. shares upon which RM
proposed or agreed to be issued as
per share credited as
fully or partly paid up otherwise than in
paid
cash
3. Debentures
RM
The consideration for the issue or 4. Consideration:
intended issue of those shares and
debentures
Number, description and amount of 1. Shares of RM and

any shares or debentures which any debentures
person has or is entitled to be given an
option to subscribe for, or to acquire
from a person to whom they have been
allotted or agreed to be allotted with a
view to his offering them for sale
Period during which option is 2. Until
exercisable
Price to be paid for shares or 3. RM
debentures subscribed for or acquired
under option
Consideration for option or right to 4. Consideration:
option
Persons to whom option or right to 5. Names and addresses
option was given or, if given to existing
shareholders or debenture holders as
such, the relevant shares or
debentures
Names and addresses of vendors of
property purchased or acquired, or
proposed to be purchased or acquired
by the company except where the
contract for its purchase or acquisition
was entered into in the ordinary course
of the business intended to be carried
on by the company or the amount of
the purchase money is not material
Amount, in cash, shares, or
debentures, payable to each separate
vendor
Amount, if any, paid or, in cash, shares Total purchase RM
or debentures, for any such property, price
specifying amount, if any, paid or
payable for goodwill Cash RM
Shares RM
Debentures RM
Goodwill RM
Short particulars of any transaction
relating to any such property which
was completed within the two
preceding years and in which any
vendor to the company or any person
who is, or was at the time thereof, a
promoter, director, or proposed
director of the company had any
interest direct or indirect
Amount, if any, paid or payable as Amount paid: RM
commission for subscribing or Amount payable:
agreeing to subscribe or procuring or RM
agreeing to procure subscriptions for
any shares or debentures in the
company; or
Rate of the commission per cent
Amount or rate of brokerage RM
The number of shares, if any, which
persons have agreed for a commission
to subscribe absolutely
Amount or estimated amount of RM
preliminary expenses
By whom those expenses have been
paid or are payable
Amount paid or intended to be paid to Name of
any promoter promoter:
Amount: RM
Consideration for the payment Consideration:
Any other benefit given or intended to
be given to any promoter
Consideration for giving of benefit
Dates of, parties to, and general nature
of every material contract, other than
contracts entered into in the ordinary
course of the business intended to be
carried on by the company or entered
into more than two years before the
delivery of this statement
Time and place at which the contracts
or copies of the contract or—
(1) in the case of a contract not
reduced into writing, a
memorandum giving full
particulars of the contract; and
(2) in the case of a contract wholly
or partly in a language other
than the national language or
English, a copy of a certified
translation of the contract in the
national language or English or
embodying a translation in the
national language or English of
the parts in a language other
than the national language or
English, as the case may be,
may be inspected.
Names and addresses of the auditors
of the company
Full particulars of the nature and extent
of the interest, direct or indirect, of
every director and of every expert, in
the promotion of or in the property
proposed to be acquired by the
company, or, where the interest of
such a director or expert consists in
being a partner in a firm or a holder of
shares or debentures in a corporation,
the nature and extent of the interest of
the firm or corporation and where the
interest of such a director or such an
expert consists in a holding of shares
or debentures in a corporation, a
statement of the nature and extent of
the interest of the director or expert in
the corporation, with a statement of all
sums paid or agreed to be paid to him
or to the firm or corporation in cash or
shares, or otherwise, by any person, in
the case of a director, either to induce
him to become, or to qualify him as, a
director, or otherwise for service
rendered by him or by the firm or
corporation in connection with the
promotion or formation of the
company, in the case of an expert, for
services rendered by him or the firm or
corporation in connection with the
promotion or formation of the
company. For the purposes of this
paragraph, a director or expert shall be
deemed to have an indirect interest in
a corporation if he has any beneficial
interest in shares or debentures in a
corporation which is by virtue of
section 7 deemed to be related to that
first mentioned corporation
And also, in the case of a statement to
be lodged by a private company on
becoming a public company, the
following items:
Rates of the dividends, if any, paid by
the company in respect of each class
of shares in the company in each of
the five financial years immediately
preceding the date of this statement or
since the incorporation of the
company, whichever period is the
shorter
Particulars of the cases in which no
dividends have been paid in respect of
any class of shares in any of these
years.
Part II
Reports to be set out
1. Where it is proposed to acquire a business, a report by an
approved company auditor, who shall be named in the statement,
with respect to—
(a) the profits or losses of the business in respect of each of the
five financial years immediately preceding the lodging of the
statement with the Registrar; and
(b) the assets and liabilities of the business at the last date to
which the accounts of the business were made.
2. (1) Where it is proposed to acquire shares in a corporation which

by reason of the acquisition or anything to be done in
consequence of the acquisition or in connection with it will
become a subsidiary of the company, a report by an approved
company auditor, who shall be named in the statement, with
respect to the profits and losses and assets and liabilities of the
other corporation in accordance with subparagraph (2) or (3), as
the case may be, indicating how the profits or losses of the other
corporation dealt with by the report would, in respect of the
shares to be acquired, have concerned members of the company,
and what allowance would have fallen to be made, in relation to
the assets and liabilities so dealt with, for holders of other shares,
if the company had at all material times held the shares to be
acquired.
(2) If the other corporation has no subsidiaries, the report
referred to in subparagraph (1) shall—
(a) so far as regards profits and losses, deal with the
profits or losses of the other corporation in respect of
each of the five financial years immediately preceding
the delivery of the statement to the Registrar; and
(b) so far as regards assets and liabilities, deal with the

assets and liabilities of the other corporation at the last
date to which the accounts of the corporation were
made.
(3) If the other corporation has subsidiaries, the report referred

to in subparagraph (1) shall—
(a) so far as regards profits and losses, deal separately
with the other corporation’s profits or losses as provided
by subparagraph (2), and in addition the deal referred to
in either—
(i) as a whole with the combined profits or losses of its
subsidiaries; or
(ii) individually with the profits or losses of each

subsidiary, or, instead of dealing separately with the
other corporation’s profits or losses, deal as
aforesaid as a whole with the profits or losses of the
other corporation and with the combined profits or
losses of its subsidiaries; and
(b) with regards to assets and liabilities, deal separately
with the other corporation’s assets and liabilities as
provided by subparagraph (2), and, in addition, the deal
either—
(i) as a whole with the combined assets and liabilities
of its subsidiaries, with or without the other
corporation’s assets and liabilities; or
(ii) individually with the assets and liabilities of each

subsidiary,
and shall indicate, in respect of the profits or losses and the assets
and liabilities of the subsidiaries, the allowance to be made for
persons other than members of the company.
NOTE — Where a company is not required to furnish any of the
reports referred to in this Part, a statement to that effect giving the
reasons of the non-requirement shall be furnished.
(Signatures of the persons above-named as directors or proposed
directors or of their agents authorized in writing)
Date:
Part III
Provisions applying to Parts I and II of this Schedule
1. In this Schedule, the expression “vendor” includes any person
who is a vendor for the purposes of the First Schedule.
2. If in the case of a business which has been carried on, or of a

corporation, which has been carrying on business, for less than
five years, the accounts of the business or corporation have only
been made up in respect of four years, three years, two years, or
one year, Part II of this Schedule shall have effect as if references
to four years, three years, two years, or one year, as the case
may be, were substituted for references to five years.
3. Any report required by Part II of this Schedule shall either indicate

by way of note any adjustments as respects the figures of any
profits or losses or assets and liabilities dealt with by the report
which appear to the persons making the report necessary or shall
make those in respect of and indicate that adjustments have been
made.
¶16-1009 Appendix 9: Fifth Schedule Companies Act

2016
FIFTH SCHEDULE
[Section 253]
DIRECTOR’S REPORT
Part I —
Contents of Directors’ Report
1. Each report to which section 252 relates, shall state the following
details:
(a) the net amount of the profit or loss of the company for the
financial year after provision for income tax;
(b) the amounts and particulars of any material transfers to or

from reserves or provisions;
(c) where, during the financial year, the company has issued
any shares or debentures —
(i) the purposes of the issue, the classes of shares or
debentures issued;
(ii) the number of shares of each class and the amount of

debentures of each class; and
(iii) the terms of issue of the shares and debentures of

each class;
(d) whether at the end of that financial year—

(i) there is a subsist arrangements to which the company is
a party, being arrangements with the objects of enabling
directors of the company to acquire benefits by means of
the acquisition of shares in, or debentures of, the
company or any other body corporate; or
(ii) there have, at any time in that year, subsisted such

arrangements as aforesaid to which the company was a
party,
and if so, the report shall contain a statement explaining the

effect of the arrangements and giving the names of the
persons who at any time in that year were directors of the
company and held, or whose nominees held, shares or
debentures acquired under the arrangements;
(e) in respect of each person who, at the end of the financial

year, was a director of the company—
(i) whether or not, according to the register kept by the
company for the purposes of section 59 relating to the
obligation of a director of a company to notify such
company of his interests in shares in, or debentures of,
the company and of every other body corporate, being
the company’s subsidiary or holding company or a
subsidiary of the company’s holding company, he was at
the end of that year, interested in shares in, or
debentures of the company or any other body corporate
and, if he was so interested, the number and amount of
shares in, and debentures of, each body in which,
according to that register, he was then interested;
(ii) whether or not, according to that register, he was, at the

beginning of that year or, if he was not then a director,
when he became a director, interested in shares in, or
debentures of, the company or any other such body
corporate and, if he was so interested, the number and
amount of shares in, and debentures of, each body in
which according to that register, he was interested at the
beginning of that year or, as the case may be, when he
became a director; and
(iii) the total number of shares in or debentures of the

company or any other such body corporate bought and
sold by him during that financial year;
(f) the amount, if any, which the directors recommended should

be paid by way of dividend, and any amount which have
been paid or declared by way of dividend since the end of the
previous financial year, indicating which of those amounts, if
any, have been shown in a previous report under section 252
or under any corresponding previous written law;
(g) whether the directors, before the financial statements were

prepared, took reasonable steps to ascertain what action had
been taken in relation to the writing off of bad debts and the
making of provision for doubtful debts, and satisfied
themselves that all known bad debts had been written off and
that adequate provision had been made for doubtful debts;
(h) whether at the date of the report the directors are aware of
any circumstances which would render the amount written off
for bad debts or the amount of the provision for doubtful
debts inadequate to any substantial extent and, if so, giving
(i) whether the directors, before the financial statements were

prepared, have taken reasonable steps to ensure that any
current assets which were unlikely to be realized in the
ordinary course of business including the value of current
assets as shown in the accounting records of the company
have been written down to an amount which the current
assets might be expected so to realize;
(j) whether at the date of the report the directors are aware of
any circumstances—
(i) which would render the values attributed to current
assets in the accounts misleading; and
(ii) which have arisen which would render adherence to the

existing method of valuation of assets or liabilities of the
company misleading or inappropriate, and, if so, giving
(k) whether there exists at the date of the report—

(i) any charge on the assets of the company which has
arisen since the end of the financial year which secures
the liabilities of any other person and, if so, giving
particulars of any such charge and, so far as practicable,
of the amount secured; and
(ii) any contingent liability which has arisen since the end
of the financial year and, if so, stating the general nature
of the liability and, so far as practicable, the maximum
amount, or an estimate of the maximum amount, for
which the company could become liable in respect of the
liability;
(l) whether any contingent or other liability has become

enforceable, or is likely to become enforceable, within the
period of twelve months after the end of the financial year
which, in the opinion of the directors, will or may affect the
ability of the company to meet its obligations when they fall
due and, if so, giving particulars of any such liability;
(m) whether at the date of the report the directors are aware of
any circumstances not otherwise dealt with in the report or
accounts which would render any amount stated in the
accounts misleading and, if so, giving particulars of the
circumstances;
(n) whether the results of the company’s operations during the

financial year were, in the opinion of the directors,
substantially affected by any item, transaction or event of a
material and unusual nature and, if so, giving particulars of
that item, transaction or event and the amount or the effect of
the item, transaction or event, if known or reasonably
ascertainable; and
(o) whether there has arisen in the interval between the end of
the financial year and the date of the report any item,
transaction or event of a material and unusual nature likely,
in the opinion of the directors, to affect substantially the
results of the company’s operations for the financial year in
which the report is made and, if so, giving particulars of the
item, transaction or event; and
(p) any other details as determined by the Registrar.
2. The report shall state, in respect of the directors or past directors

of the company, the amounts of—
(a) fees and other benefits distinguished separately, paid to or
receivable by them from the company or its subsidiary
companies as remuneration for their services to the company
or its subsidiary companies, inclusive of all fees,
percentages, bonuses, commissions, compensation for loss
of office, any contribution in respect of them under any
pension or retirement benefit scheme and inclusive of
commission paid or payable for subscribing or agreeing to
subscribe or procuring or agreeing to procure subscriptions
for any shares in or debentures of the company or of its
holding company or any subsidiary of the company:
Provided that where a director or any firm of which the
director is a member, acts for the company in a professional
capacity, the amount paid to the director or to his firm for
services rendered to the company in that capacity shall not
be included in all fees, percentages, bonuses, commissions,
compensation for loss of office, any contribution in respect of
them under any pension or retirement benefit scheme and
inclusive of commission paid or payable for subscribing or
agreeing to subscribe or procuring or agreeing to procure
subscriptions for any shares in or debentures of the company
or of its holding company or any subsidiary of the company
but shall be shown separately whether by way of note or
otherwise;
(b) by way of a note or otherwise, the estimated money value of

any other benefits received or receivable by them otherwise
than in cash from the company or from any of its subsidiary
companies;
(c) the total of the amount paid to or receivable by any third

party in respect of the services provided to the company or
any of its subsidiary companies by any director or past
director of the company;
(d) the total amount, if any, of any indemnity given to or

insurance effected for, any director, officer or auditor of the
company.
3. The directors of a company shall state in the report whether he

has, since the end of the previous financial year, received or
become entitled to receive a benefit, other than a benefit included
in the aggregate amount of remuneration received or due and
receivable by the directors shown in the accounts or the fixed
salary of a full-time employee of the company, by reason of a
contract made by the company or a related corporation with the
director or with a firm of which he is a member, or with a company
in which he has a substantial financial interest, and, if so, the
general nature of the benefit.
4. Where at the end of a financial year a company is the subsidiary

of another corporation, the directors of the company shall state in,
or by way of note as a statement annexed to, the company’s
accounts the name of the corporation regarded by the directors
as being the company’s ultimate holding company and if known to
them, the country in which it is incorporated.
5. Where any option has been granted during the period covered by
the profit and loss account to take up unissued shares of a
company, the directors’ report shall state—
(a) the number and class of shares in respect of which the
option has been granted;
(b) the date of expiration of the option;
(c) the basis upon which the option may be exercised; and
(d) whether the person to whom the option has been granted
has any right to participate by virtue of the option in any
share issue of any other company.
6. The directors’ report shall specify—

(a) particulars of shares issued during the period to which the
report relates by virtue of the exercise of options to take up
unissued shares of the company, whether granted before or
during that period; and
(b) the number and class of unissued shares of the company

under option as at the end of that period, the price, or method
of fixing the price, of issue of those shares, the date of
expiration of the option and the rights, if any, of the persons
to whom the options have been granted to participate by
virtue of the options in any share issue of any other
company.
7. The director’s report shall specify clearly either in the profit and
loss account of the holding company or consolidated profit and
loss account of the holding company and of its subsidiary
companies the name, place of incorporation, principal activities,
and percentage of issued share capital held by the holding
company in each subsidiary to which that profit and loss account
or other document relates.
8. If the auditor’s report on the accounts of a subsidiary company is

qualified in any way, the consolidated balance sheet of the
holding company, as the case may be, shall contain particulars of
the manner in which the report is qualified in so far as the matter
which is the subject of the qualification is not covered by the
holding company’s own accounts and is material from the point of
view of its members.
9. The auditor’s report shall be shown under separate headings in

the balance sheet of every subsidiary company the extent of its
holding of shares in the holding company and in other related
corporations.
10. The total amount paid to or receivable by the auditors as

remuneration for their services as auditors, inclusive of all fees,
percentages or other payments or consideration given by or from
the company or by or from any subsidiary of the company.
Part II
Contents of business review
1. Each report prepared under section 252 may include a business
review.
2. The business review may, to the extent necessary for an

understanding of the development, performance or position of the
company’s business, contain—
(a) a fair review of the company’s business;
(b) a description of the principal risks and uncertainties facing

the company;
(c) a balanced and comprehensive analysis of—

(i) the development and performance of the company’s
business during the financial year;
(ii) the position of the company’s business at the end of

that year, consistent with the size and complexity of the
business; and
(iii) the key performance indicators of the company;
(d) information about—

(i) environmental matters, including the impact of the
company’s business on the environment;
(ii) the company’s employees; and
(iii) social and community issues,
including information about any policies of the company in

relation to those matters and the effectiveness of those
policies; and
(e) subject to paragraph 7 of this Part, information about

persons with whom the company has contractual or other
arrangements which are essential to the business of the
company.
3. If the review does not contain any of the information mentioned in

subparagraphs 2(a), (b), (c) and (d), it shall state which of the
information it does not contain.
4. The review may, where appropriate, include references to, and

additional explanations of, amounts included in the company’s
5. In relation to a group directors’ report this Part has effect as if the

references to the company include references to its subsidiary
included in the consolidation.
6. Nothing in this Part requires the disclosure of information about

impending developments or matters in the course of negotiation if
the disclosure would, in the opinion of the directors, be prejudicial
to the interests of the company.
7. Nothing in subparagraph 2(e) requires the disclosure of
information about a person if the disclosure would, in the opinion
of the directors, be prejudicial to that person and contrary to the
public interest.
8. For the purposes of this Part, “key performance indicators”

means factors by reference to which the development,
performance or position of the company’s business can be
measured effectively.
FINDING AIDS
CASE TABLE
A
Paragraph
AI Levy (Holdings) Ltd, Re (1964) Ch 19 ¶13-515
AM Spicer & Son Pty Ltd (in liq) v Spicer (1931) 47 ¶7-130
CLR 151
AWA Ltd v Daniels (1992) 7 ACSR 759 ¶6-020
A & BC Chewing Gum Ltd, Re; Topps Chewing Gum ¶13-280
Inc v Coakley & Ors (1975) 1 All ER 1017
A Company, Re (1894) 2 Ch 349 ¶10-310;
¶13-276
A Company, Re (1983) Ch 178; 2 AER 854 ¶10-310
A Company, Re [1985] BCLC 333 ¶1-220
A Company, Re (No 002567 of 1982) ¶10-340
A Company, Re (No 002612 of 1984) ¶10-340
A Taxpayer, Re (1991) 1 MSCLC 95,520 ¶3-410
A-G v Times Newspapers Ltd (1974) AC 273; (1973) 3 ¶9-350
All ER 54
A-G for Gambia v N’Jie (1961) AC 617 ¶13-820
Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq ¶6-040
461; (1854) 23 LT 315
Adam Eyton Ltd, Re (1887) 36 Ch D 299 ¶13-340
Agriculturist Cattle Insurance Co, Re (Baird’s case) ¶13-055
(1870) 5 Ch App 725
Ah Yee Contractors (Pte) Ltd, Re (1988) 1 MSCLC ¶10-400;
95,054 ¶13-280
Alco Homes Pty Ltd, Re (1977–1978) CLC ¶40-401 ¶13-278
Alexander v Simpson (1889) 43 Ch D 139 ¶9-600
Alexander Ward & Co Ltd v Samyang Navigation Co ¶7-000; ¶13-
Ltd (1975) 1 WLR 673 435
Alford & Anor, Re (1984) 2 ACLC 815 ¶5-410
Allen v Gold Reefs of West Africa Ltd (1900) 1 Ch 656 ¶3-580; ¶4-
370
Allen v Hyatt (1914) 30 TLR 444 ¶6-035
Allied Cocoa Industries Pte Ltd, In re (1994) 4 MSCLC ¶12-560
96,052
Allied Glass Manufacturers Ltd, Re (1936) 53 WN ¶13-455
(NSW) 137
Allied Properties Sdn Bhd v Semua Holdings Sdn Bhd ¶4-750
& Ors (1988) 1 MSCLC 90,124
Alma Spinning Co, Re 50 LJ Ch 171 ¶9-500
Altus Technologies Pte Ltd (under Judicial ¶15-530
Management) v Oversea-Chinese Banking Corp Ltd
[2009] SGHC 159
Ambergate, Nottingham & Boston & Eastern Junction ¶7-010
Railway Co v Mitchell (1851) 17 QB 127; 117 ER 1229
Ambrose Lake Tin and Copper Co Ltd, Re (Clarke’s ¶4-210
case) (1878) 8 Ch D 635
American Pioneer Leather Co Ltd, Re (1918) 1 Ch 556 ¶13-280
Ames v Birkenhead Docks (Trustees) (1855) 20 Beav ¶12-700
332
Amour, Re; Ex parte Official Receiver v ¶13-276
Commonwealth Trading AM Spicer & Son Pty Ltd (in
liq) v Spicer (1931) 47 CLR 151
Ampol v Miller (1972) 2 NSWLR 850 ¶7-160
An Application by Queensland Co-operative Credit ¶12-430
Union League Ltd, Re (1982) 1 ACLC 606
Anaray Pty Ltd v Sydney Futures Exchange Ltd & Ors ¶7-130
(1988) 6 ACLC 271
Anglo-Continental Corporation of Western Australia, ¶13-276;
Re (1898) 1 Ch 327 ¶13-730
A1 Saudi Banque & Ors v Clark Pixley (1989) 5 BCC ¶11-840
822
Armvent Ltd, Re (1975) 1 WLR 1679 ¶13-278
Ashbury Railway Carriage & Iron Co v Riche (1875) ¶3-700
LR 7 HC 653
Asian Organisation Ltd, Re [1961] MLJ 295 ¶8-240
Asiatic Banking Corporation, Re (Symon's case) ¶4-720; ¶9-
(1870) 5 Ch App 298 030
Asparta Sdn Bhd & Ors v Bank Bumiputra Bhd & Anor ¶1-220
(1988) 1 MLJ 97
Associated Portland Cement Manufacturers Ltd v ¶11-185
Price Commission (1975) ICR 27
August Investment Pty Ltd v Poseidon Ltd (1971) 2 ¶9-400
SASR 60
Australian Group & General Assurance Co Ltd, Re ¶13-605;
(1932) 32 SR (NSW) 435 ¶13-720
Australian Guarantee Corp Ltd v Sydney Guarantee ¶2-410
Corp Ltd (1951) 51 SR (NSW) 166
Australian Mont de Piete Loan and Deposit Co Ltd, ¶4-720
Re; Ex parte Alexander (1907) VLR 660
Australian Pacific Technology Ltd, Re (1994) 12 ACLC ¶4-030
524
Automatic Self-Cleansing Filter Syndicate Co v ¶7-000
Cunninghame (1906) 2 Ch 34
Automobiles Peugeot SA v Asia Automobile Industries ¶10-323;
Sdn Bhd & Ors (1988) 1 MSCLC 90,129 ¶10-330
Avel Consultants Sdn Bhd & Anor v Mohamed Zain ¶6-040
Yusof & Ors (1950–1985) MSCLC 150
Paragraph
B Johnson & Co (Builders) Ltd, Re [1955] 1 Ch 634 ¶12-530
B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 ¶3-810
KB 48
Bahia & San Francisco Railway Co, Re (1868) LR 3 ¶4-540
Q13 584
Baillie v Oriental Telegraph & Electric Co (1915) 1 Ch ¶10-110
503
Balhannah Mining Co Ltd, Re; Re Petition of Dalwood ¶4-700
(1877) 11 SALR 52
Balkis Consolidated Co v Tomkinson [1893] AC 396 ¶4-540
Baltic Orient Shipping Pte Ltd v Sunseekers Pte Ltd ¶3-800
(1988) 1 MSCLC 90,078
Bamford v Bamford (1970) Ch 212 ¶6-220; ¶10-
120
Bank of South Australia, Re (1895) 1 Ch 578 ¶13-230
Barclays Bank Plc & Anor v Inland Revenue ¶4-210
Commissioners (1994) 12 ACLC 3,215
Barnett Hoares & Co v South London Tramways Co ¶7-350
(1887) 18 QBD 815
Barnton Hotel Co v Cook (1899) 36 SCLR 928 ¶7-440
Barron v Potter (1914) 1 Ch 895 ¶7-000; ¶7-
030; ¶7-110
Batty v Metropolitan Property Realisations Ltd (1978) ¶11-830
2 AER 445
Bede Steam Shipping Co, Re (1917) 86 LJ Ch 65 ¶4-720
Bell v Lever Bros Ltd (1932) AC 161 ¶6-035
Bell Bros Ltd, Re 65 LT (NS) 240 ¶4-720; ¶7-
010
Bell Houses Ltd v City Wall Properties Ltd (1966) 2 QB ¶3-410
656
Bellador Silk Ltd, Re (1965) 1 AER 667 ¶10-310
Belmont Finance Corp v Williams Furniture Ltd (No 1) ¶6-150
(1979) 1 AER 118
Beni-Felkai Mining Co Ltd, Re (1934) 1 Ch 406 ¶13-350
Bensa Sdn Bhd (in liq) v Malayan Banking Berhad & ¶12-310
Anor [1993] 1 MLJ 119
Biggerstaff v Rowatt’s Wharf Ltd (1896) 2 Ch 93 ¶12-780
Birch v Cropper (1889) 14 App Cas 525 ¶13-710;
¶13-770
Bird Precision Bellows Ltd, Re (1985) 1 BCC 99,467 ¶10-340
Birmingham Banking Co, Re; Ex parte Brinsley (1867) ¶13-535
36 LJ Ch 150
Bissill v Bradford Tramways Co (1891) WN 51 ¶12-520
Blair Open Hearth Furnance Co v Reigart (1913) 108 ¶7-010
LT 666
Bleriot Manufacturing Air Craft Co Ltd, Re (1916) 32 ¶13-280

TLR 253
Bloomenthal v Ford (1897) AC 156 ¶4-530
Bolton Partners v Lambert (1889) 41 Ch D 295 ¶7-020
Borland’s Trustee v Steel Bros & Co Ltd (1901) [1901] ¶4-030
1 Ch 279
Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 ¶6-040
ChD 339
Boulting v ACTAT (1963) 2 QB 606 ¶6-040
Bowes v The Hope Life Insurance and Guarantee Co ¶13-276
(1865) 11 HLC 389
Bowkett v Fuller’s United Electric Works Ltd [1923] 1 ¶13-525
KB 160
Brazilian Rubber Plantations and Estates Ltd, Re ¶6-020; ¶7-
(1911) 1 Ch 425 020
Brightlife Ltd, Re (1986) 2 BCC 99,359 ¶12-370
Britannia Brands (Singapore) Pte Ltd v Sushil ¶5-300
Premchand (1995) 4 MSCLC 96,198
British and American Trustee and Finance Corporation ¶4-950
v Couper (1894) AC 399
British Equitable Assurance Co Ltd v Baily (1906) AC ¶3-350
35
Broadcasting Station 2GB Pty Ltd, Re [1964–1965] ¶5-020
NSWR 1648
Browne v La Trinidad (1887) 37 Ch D 1 (CA) ¶7-120
Brownfields Guild Pottery Society, Re (1898) WN 80 ¶15-120
Burland v Earle (1902) AC 83 ¶4-810; ¶6-
220
Burt, Boulton and Hayward v Bull [1895] 1 QB 276 ¶12-830

Bushell v Faith (1969) Ch 438 ¶3-580; ¶5-
250
Paragraph
Caementium (Parent) Co Ltd, Re (1908) WN 257 ¶13-273
Calgary and Edmonton Land Co Ltd (in liq), Re (1975) ¶13-750
1 WLR 355
Calvary Charismatic Center Ltd, In re (1991) 1 MSCLC ¶7-100
95,465
Cambrian Peat Co, Re (1875) 23 WR 405 ¶9-500
Canadian Aero Service v O’Malley (1973) 40 DLR (3d) ¶6-040
371
Canopee Investment Pte Ltd & Ors v Landmarks ¶9-120
Holding Bhd & Ors (1989) 1 MSCLC 90,289
Caparo Industries Plc v Dickman & Ors (1990) 6 BCC ¶11-830;
164 ¶11-840
Capital Fire Insurance Association, Re (1882) 21 Ch D ¶13-273
209
Cardiff Preserved Coal & Coke Co v Norton (1867) 2 ¶13-276
Ch App 405
Carrington Viyella plc, Re (1983) 1 BCC 98,951 ¶10-310
Carruth v Imperial Chemical Industries Ltd (1937) AC ¶9-350
707
Caruso Australia Pty Ltd v Protec (Australia) Pty Ltd ¶10-240
(1984) 2 ACLC 286
Cast Iron Products, In re (1993) 3 MSCLC 91,039 ¶11-400
Cawley & Co, Re (1889) 42 ChD 209 ¶9-410
Cempro Pty Ltd & Anor v Dennis M Brown Pty Ltd & ¶13-276
Anor (1994) 12 ACLC 501
Central Piggery Co Ltd v McNicoll (1949) 78 CLR 594 ¶4-210
Cetico Sdn Bhd v The Tropical Veneer Co Bhd (1989) ¶13-240
1 MSCLC 90,157
Channel Collieries Trust Ltd v Dover, St Margaret’s ¶5-100
and Martin Mill Light Rail Co (1914) 2 Ch 506
Chapman’s Case, Re (1866) LR 1 Eq 346 ¶13-520
Chatterly v Omnico Inc Utah Supreme Court 17 May ¶1-200
1971
Cheah Theam Swee & Anor v Overseas Union Bank & ¶9-010
Ors (1989) 1 MSCLC 90,222
Cheltenham Hotel Co (The), Re (1850) 16 LT 259 ¶13-280
China Mines Ltd v Anderson (1905) 22 TLR 27 ¶7-350
Chong Lee Leong Seng Co (Pte) Ltd, In re [1989] 3 ¶10-310
MLJ 343
Chua Boon Chin v JM McCormack & Ors (1950–1985) ¶6-040
MSCLC 446
Chung Khiaw Bank Ltd v Hotel Rasa Sayang Sdn Bhd ¶4-920
& Anor; Chung Khiaw Bank Ltd v Ow Chor Seng &
Ors; Chung Khaw Bank Ltd v Hotel Rasa Sayang Sdn
Bhd (1990) 1 MSTC 90,382
City Equitable Fire Insurance Co Ltd, Re (1925) Ch ¶6-020
407
Claremont Petroleum NL v Indosuez Nominees Pty ¶5-270
Ltd & Anor (1986) 4 ACLC 315
Clarke, Re; Ex parte East and West India Dock Co ¶13-630
(1881) 17 Ch D 759
Clarkson v Davies (1923) AC 100 ¶6-220
Cleadon Trust Ltd, Re (1938) 4 AER 518 ¶7-350
Cleve v Financial Corporation (1873) LR 16 Eq 363 ¶13-530
Club Superstores Australia Pty Ltd (in liq) (1993) 11 ¶13-032
ACLC 751
Coleman v Myers (1977) 2 NZLR 298 ¶6-035
Coliseum Stand Car Services Ltd, Re (1950–1985) ¶10-310
MSCLC 245; (1972) 1 MLJ 45
Colonial Trusts Corporation, Re; Ex parte Bradshaw ¶12-370
(1879) 15 Ch D 645
Colorado Constructions Pty Ltd v Platus (1966) 2 ¶9-350
NSWR 598
Combined Weighing and Advertising Machine Co, Re ¶13-230
(1890) 43 ChD 99
Commercial Banking Co of Sydney Ltd v George ¶12-430
Hudson Pty Ltd (in liq) (1973) 131 CLR 605
Commr of Corporate Affairs v Peter William Harvey ¶13-366
(Peter Harvey case) (1980) VR 669
Contract Corporation, Re (Gooch’s case) (1872) 7 Ch ¶13-362
App 207
Convere Pty Ltd, Re (1976) VR 345 ¶13-276
Conway v Petronius Clothing Co Ltd (1978) 1 WLR 72 ¶11-030
Cook v Deeks (1916) 1 AC 554 ¶6-220; ¶10-
110; ¶10-
120
Copal Varnish Co Ltd, In re (1917) 2 Ch 349 ¶4-720; ¶7-
130
Cork & Brandon Railway Co v Cazenove (1874) 10 ¶9-030
QBD 935
Corney v Brien (1951) 84 CLR 343 ¶13-276
County of Gloucester Bank v Rudry Merthyr Steam ¶9-510
and House Coal Colliery Co (1895) 1 Ch 629
Court and Evans v Hewett (1982) WAR 151 ¶13-620
Craven-Ellis v Canons Ltd (1936) 2 AER 1066 ¶6-520; ¶7-
440
Crichton’s Oil Co, Re [1902] 2 Ch 86 ¶13-770
Cully v Parsons (1923) 2 Ch 512 ¶12-750
Cumberland Holdings Ltd v Washington H Soul ¶13-210;
Pattinson & Co Ltd (1977–1978) CLC ¶40,322; (1977) ¶13-277
13 ALR 561 (PC)
Paragraph
Daimler Co Ltd v Continental Tyre & Rubber Co (Great ¶1-200; ¶7-
Britain) Ltd (1916) 2 AC 307 350
Daniels v Daniels (1978) Ch 406 ¶6-220; ¶10-
110; ¶10-
120
Dartmouth College v Woodward (1819) 4 Wheat 518; ¶1-120
4 L Ed 629
David Lau Tai Bek v Lau Ek Ching Sdn Bhd (1950– ¶9-600
1985) MSCLC 249
Davis & Co Ltd v Brunswick (Australia) Ltd (1936) 1 All ¶13-280
ER 299
De Courcy v Clement (1971) Ch 693 ¶13-120
Dempster v National Companies & Securities ¶4-920
Commission (1993) 11 ACLC 576
Denistone Real Estate Pty Ltd, Re (1970) 3 NSWR ¶15-120
327
Derrygarrif Investments Pty Ltd, Re (1982) 1 ACLC ¶13-276
558
Destone Fabrics Ltd, Re (1941) Ch 319 ¶13-610
Deverges v Sandeman, Clark & Co (1902) 1 Ch 579 ¶4-030
Devonshire Silkstone Coal Co, Re (1878) WN 71 ¶13-340
Diamond Fuel Co, Re (1879) 13 Ch D 400 ¶10-410
Dictating Machine Centre Pty Ltd v Combe (1981) ¶10-240
CLC ¶40-702
Dimbula Valley (Ceylon) Tea Co Ltd v Laurie (1961) ¶4-840
Ch 353
Discoveries Finance Corporation, Re (Lindlar’s case) ¶4-710
(1910) 1 Ch 312
Dr Leela Ratos dan Rakan-Rakan (Chow Kit) Sdn ¶7-120
Bhd, In re (1994) 4 MSCLC ¶91-234
Dominion Freeholders Ltd v Aird (1966) 2 NSWR 293 ¶11-830
Dorchester Finance v Stebbing [1989] BCLC 498 ¶6-020
Dover Coalfields Extension Ltd, Re (1907) 2 Ch 76; ¶6-510
(1908) 1 Ch 65
Dovey v Corey (1901) AC 477 ¶11-830
Dresdner Bank Aktiengeselischaft & Ors v Ho Mun- ¶12-370
Tuke Don & Anor (1993) 3 MSCLC 95,876
Driffield Gas Light Co, Re (1898) 1 Ch 451 ¶13-760
Duckett v Gover (1877) 6 Ch D 82 ¶10-000
Duffy v Super Centre Development Corp Ltd (1967) 1 ¶12-520;
NSWR 382 ¶12-530;
¶12-700;
¶13-300
Dundas, Re; Moss v Dundas (1933) 6 ABC 265 ¶13-625
Dunstan v Imperial Gas Light Co (1831) 3B & Ald 125 ¶6-500
Duomatic Ltd, Re (1969) 2 Ch 365 ¶6-220
Paragraph
EC Smith, Re; Ex parte Official Receiver [1929] 1 ABC ¶13-620
186
EH Dey Pty Ltd v Dey [1966] VR 464 ¶4-920
Ealing Corporation v Jones (1959) 1 QB 384 ¶13-820
East Pant Du United Lead Mining Co Ltd v ¶9-350
Merryweather (1864) 2 Hem R M 254
East Rand Deep Ltd v Joel (1903) TS 616 ¶13-273
Eastern Copper Mines NL, Re (1975–1976) CLC ¶40- ¶13-277
205
Eastern Telegraph Co Ltd, Re (1947) 2 All ER 104 ¶13-280
Ebrahimi v Westbourne Galleries Ltd (1973) AC 300 ¶5-270; ¶10-
400; ¶10-
410; ¶13-
280
Edman v Rose (1922) SR (NSW) 351 ¶11-030
Edwards v Halliwell (1950) 2 AER 1064 ¶10-100;
¶10-110
Efstathis v The Greek Orthodox Community & Ors ¶9-630
(1988) 6 ACLC 706
Electro Magnetic (S) Ltd (under Judicial Management), ¶15-530
In re (1994) 4 MSCLC 96,020
Employers Corporate Investments Pty Ltd v Cameron ¶11-830
(1977–1978) CLC ¶40-365
English and Scottish Mercantile Investment Co v ¶12-370
Brunton (1892) 2 QB 700
Esberger & Son Ltd v Capital and Counties Bank ¶12-430;
(1913) 2 Ch 366 ¶13-610
Estmanco (Kilner House) Ltd v Greater London ¶10-120
Council [1982] 1 All ER 437
Evans v Brunner, Mond & Co (1921) Ch 359 ¶6-040
Ewing v Buttercup Margarine Co Ltd [1917] 34 RPC ¶2-410
232
Exchange Drapery Co, Re (1888) 38 Ch D 171 ¶13-760
Expanded Plugs Ltd, Re (1966) 1 WLR 514 ¶10-400
Expo International Pty Ltd (in liq) v Chant (1979) 2 ¶13-610;
NSWLR 820 ¶13-620
Paragraph
FJ Reddacliffe & Associates Pty Ltd v ARC ¶13-240
Engineering Pty Ltd (1978) CLC 140
Farrow’s Bank Ltd, Re (1921) 2 Ch 164 ¶13-400
Fireproof Doors Ltd, Re (1916) 2 Ch 142 ¶7-020; ¶7-
130
First Nominee (Pte) Ltd v New Kok Ann Realty Sdn ¶4-380; ¶9-
Bhd & Anor (1950–1985) MSCLC 306 610
Five Minute Car Wash Service Ltd, Re (1966) 1 WLR ¶10-310;
745 ¶10-320
Flagstaff Silver Mining of Utah, Re (1875) LR 20 Eq ¶13-276
269
Florence Land and Public Works Co, Re (Nicol's case) ¶4-210
29 ChD 421
Flynn v The University of Sydney (1971) NSWR 857 ¶9-350; ¶9-
600
Fomento (Sterling Area) Ltd v Seldson Fountain Pen ¶11-800
Co Ltd (1958) 1 WLR 45
Foo Tong Eng v Po Gun Suan (1950–1985) MSCLC ¶7-030; ¶9-
304 510
Foo Yin Shung & Ors v Foo Nyit Tse & Brothers Sdn ¶13-277
Bhd [1989] 2 MLJ 369
Forster v Borax Co (1889) 2 Ch 130 ¶12-520
Foss v Harbottle (1843) 2 Hare 461, 67 ER 189 ¶6-020; ¶10-
000; ¶10-
100; ¶10-
110; ¶10-
120; ¶10-
200; ¶10-
300
Foster v Foster [2003] EWCA Civ 565 ¶7-000
Foster Clark Ltd’s Indenture Trusts, Re; Loveland v ¶12-760
Horscroft [1966] 1 All ER 43
Fowler v Commercial Timber Co (1930) 2 KB 1 ¶13-520
Freehold Land and Brickmaking Co, Re (1870) LR 9 ¶13-350
Eq 367
Furs Ltd v Tornkies (1936) 54 CLR 583 ¶6-040; ¶6-
220
G
Paragraph
Galbraith v Merito Shipping Co Ltd (1947) SC 446 ¶13-280
Gan Tuck Meng & Ors v Ngan Yin Groundnut Factory ¶8-240
Sdn Bhd & Anor [1990] 1 MLJ 227
Ganda Holdings Bhd v Pamaron Holdings Sdn Bhd ¶13-230
(1988) 1 MSCLC 90,286
General Auction Estate and Monetary Co v Smith ¶12-020
(1891) 2 Ch 432
General Mutual Insurance Co Ltd, Re; Re Motorists ¶13-278
Mutual Insurance Co Ltd (1979) VR 484
George Barker (Transport) Ltd v Eynon [1974] 1 WLR ¶12-530;
462 ¶12-730;
¶12-780
German Date Coffee Co, Re (1882) 20 Ch D 169 ¶10-410;
¶13-280
Globe New Patent Iron & Steel Co, Re (1875) LR 20 ¶13-276
Eq 337
Governments Stock & Other Securities Investment Co ¶12-370
Ltd v Manila Railway Co Ltd (1897) AC 81
Grant v United Kingdom Switchback Railways Co ¶6-220
(1888) 40 Ch D 135
Great Eastern Electric Co Ltd, Re (1941) Ch 241 ¶13-410
Greymouth-Point Elizabeth Railway & Coal Co Ltd, Re ¶7-130
(1904) 1 Ch 32
Griffith v Paget (1877) 6 Ch D 511 ¶3-200
Griffiths v Secretary of State for Social Services (1973) ¶12-760
3 AER 1184
Gula Perak Berhad (In Receivership) v Agri-Projects ¶10-240;
(M) Sdn Bhd (1989) 1 MSCLC 90,242 ¶15-150
Paragraph
HA Stephenson & Sons Ltd v Gilanders, Arbuthnot & ¶13-280
Co (1931) 45 CLR 476
HL Bolton (Engineering) Co Ltd v TJ Graham & Sons ¶7-100; ¶13-
Ltd [1951] 1 QB 159 055; ¶13-
200
Harben v Phillips (1883) 23 Ch D 14 ¶5-100
Harlowe’s Nominees Pty Ltd v Woodside (Lakes ¶6-020
Entrance) Oil Co NL (1968) 121 CLR 483
Harold Meggitt Ltd v Discount & Finance Ltd (1939) 56 ¶12-560
WN (NSW) 23
Hartley Baird Ltd, Re (1955) Ch 143 ¶9-510
Haven Gold Mining Co, Re (1882) 20 ChD 151 ¶13-280
Haw Par Bros (Pte) Ltd v Dato Aw Kow (1950–1985) ¶11-030
MSCLC 350
Haycraft Gold Reduction & Mining Co, Re (1900) 2 Ch ¶7-350
D 230
Hayes v Bristol Plant Hire Ltd (1957) 1 All ER 685 ¶7-100; ¶10-
110
Hayman, Christy & Lilly Ltd, Re (1917) 1 Ch 283 ¶13-610
Heap Huat Rubber Company Sdn Bhd v United ¶12-350
Overseas Bank Ltd [1992] 3 CLJ 1589 (HC)
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) ¶11-840
AC 465
Hely-Hutchinson v Brayhead Ltd (1968) 1 QB 549 ¶6-350
Heron International v Lord Grade (1983) BCLC 244 ¶6-020; ¶6-
035
Hickman v Kent or Romney Marsh Sheep Breeders’ ¶3-310; ¶3-
Association (1915) 1 Ch 881 340
Hillman v Crystal Bowl Amusements Ltd (1973) 1 WLR ¶13-400
162
Hills Waterfall Estate and Gold Mining Co, Re (1895) ¶13-300
20 QB 946
Hire Purchase Furnishing Co Ltd v Richens (1888) 6 ¶13-405
Ch App 51
Hodges’ Distillery Co, Re; Ex parte Maude (1870) 6 ¶13-710
Ch App 51
Hodson v Tea Co (1880) 14 Ch D 859 ¶12-520
Hogg v Cramphorn Ltd (1967) Ch 254; (1966) 3 AER ¶6-040; ¶10-
420 120
Holmes v Keyes [1959] Ch 199 ¶3-200
Holmes v Life Funds of Australia Ltd (1971–1973) ¶5-240
CLC ¶40-013; (1971) 1 NSWLR 860
Hong Huat Realty (M) Sdn Bhd, Re (1988) 1 MSCLC ¶13-276
90,037
Hooper v Western Counties & South Wales Telephone ¶15-010
Co Ltd (1892) 68 LT 78
Hopkins v Worcester and Birmingham Canal ¶12-520
Proprietors (1868) LR 6 Eq 437
Horn v Henry Faulder & Co Ltd (1908) 99 LT 524 ¶7-020
Hotel Jaya Puri Bhd v National Union of Hotel, Bar & ¶1-220
Restaurant Workers & Anor (1950–1985) MSCLC 282
Household Fire Insurance Co Ltd v Grant (1879) 4 Ex ¶4-220
D 216
Howard v Patent Ivory Manufacturing Co (1888) 38 Ch ¶3-810

D 156
Howard Smith Ltd v Ampol Petroleum Ltd (1974) CLC ¶6-040; ¶6-
¶40-101; 48 ALJR 5; (1984) AC 821 120
Hume Industries (Far East) Ltd, Re (1950–1985) ¶4-350; ¶4-
MSCLC 419; (1974) 1 MLJ 167 840
Humes Ltd v Unity APA Ltd & Anor (1987) 5 ACLC 15 ¶9-120
Hup Seng Co Ltd v Chin Ying & Ors (1950–1985) ¶9-630
MSCLC 186
Huth v Clarke (1890) 25 QBD 391 ¶7-020
Hutton v West Cork Railway Co Ltd (1883) 23 Ch D ¶6-500; ¶6-
654 520
Hyams, Re; Official Receiver v Hyams (1970) 19 FLR ¶13-625
232
Hymix Concrete Pty Ltd v Garrity (1977) 13 ALR 321 ¶13-620
Paragraph
Illingworth v Houldsworth [1904] 355 HL ¶12-370
Imperial Hydropathic Hotel Co; Blackpool v Hampson ¶5-270
(1882) 23 Ch D 1
Indo-China Steam Navigation Co, Re (1917) 2 Ch 100 ¶7-350
Industrial Equity Ltd v Blackburn (1977) 3 ACLR 89 ¶4-840
International Harvester Export Co v International ¶12-710
Harvester Australia Ltd (1983) VR 539
Intraco Ltd v Multi-Pak Singapore Pte Ltd (1995) 4 ¶6-040
MSCLC 96,204
Irish Woollen Co Ltd v Tyson (1900) 26 Acct LR 13 ¶11-830
Irvine v Union Bank of Australia (1877) 2 App Cas 366 ¶3-810; ¶6-
220
Isle of Thanet Electricity Supply Co Ltd, Re (1950) Ch ¶13-770
161
Paragraph
JN2 Ltd, Re (1978) 1 WLR 183 ¶13-210
J Franklin & Son Ltd, Re [1937] 4 All ER 43 ¶6-500
J Leslie Engineers Co Ltd, Re (1976) 1 WLR 292 ¶13-515
Jax Marine Pty Ltd Re (1967) 1 NSWR 145 ¶15-120
Jermyn Street Turkish Baths Ltd, Re (1970) 1 WLR ¶10-310
1194
John v Rees (1969) 2 LR 1294; 2 All ER 274 ¶9-350
John Shaw & Sons (Salford) Ltd v Shaw (1935) 2 KB ¶10-000
113
Johnson Corporation Ltd, Re (1980) 2 NSWLR 681 ¶13-280
Jupiter House Investments (Cambridge) Ltd, Re ¶4-950
(1985) 1 WLR 975
Jurupakat Sdn Bhd v Kumpulan Good Earth (1973) ¶13-036;
Sdn Bhd (1988) 1 MSCLC 90,148 ¶13-240
Paragraph
KL Sdn Bhd & Anor v LGH & Ors; ALLS v LGH & Ors ¶4-920
(1990) 1 MSCLC 90,402
K Rees Emporiums Ltd, Re (1969) R 981 ¶15-120
K/9 Meat Supplies (Guildford) Ltd (1966) 1 WLR 1112 ¶10-410
Kal Assay Southern Cross Pty Ltd (in Liq), Re (1992) ¶13-350
10 ACLC 1,627
Katherine et Cie, Re (1932) 1 Ch 70 ¶13-640
Kent Coalfields Syndicate Ltd, Re (1898) 1 QB 754 ¶13-535
Keystone Knitting Mills Trade Mark, Re [1929] 1 Ch 92 ¶13-525
Kinatan (Borneo) Rubber Ltd, Re (1923) 1 Ch 124 ¶13-720
King v Tait (1936) 57 CLR 715 ¶13-710
Kingston Cotton Mill Co (No 2), Re (1896) 2 Ch 279 ¶11-800
Kitson & Co Ltd, Re (1946) 1 AER 435 ¶10-410
Kleinwort v Associated Automatic Machine Corp Ltd ¶4-770
(1934) 151 LT 1
Knowles v Scott (1891) 1 Ch 717 ¶13-300
Kong Thai Sawmill (Miri) Sdn Bhd, Re (1950–1985) ¶10-300;
MSCLC 14; (1978) 2 MLJ 227 ¶10-310;
¶10-410
Kris Cruisers Ltd, Re (1949) Ch 138 ¶12-430
Kyshe v Alturas Gold Co (1888) 4 TLR 331 ¶7-020
Paragraph
La Compagnie de Mayville v Whitley (1896) 1 Ch 788 ¶7-120; ¶7-
140
Lagunas Nitrate Co v Lagunas Syndicate (1899) 2 Ch ¶4-830
392
Lar Mar Diamant (Oversea) Pte Ltd, In re (1993) 3 ¶10-410;
MSCLC 95,973 ¶13-280
Lawson v Mitchell (1979) VR 529 ¶6-210
Laxon & Co, Re (1892) 3 Ch 555 ¶9-030
Leas Hotel Co, Re; Salter v Leas Hotel Co (1902) 1 ¶13-605
Ch 332
Lee v Neuchatel Asphalte Co (1889) 41 Ch D 1 ¶4-840
Lee Mah Realty Sdn Bhd, Re [1980] 1 MLJ 115 ¶10-310
Leeds Estate Building and Investment Co v Shephard ¶11-830
(1887) Ch D 787
Leon v York-o-Matic Ltd (1966) 1 WLR 1450 ¶13-405
Leong Ah Hong v Hup Seng Co Ltd [1996] 1 MLJ 661 ¶9-150
Levin v Clark [1962] NSWR 686 ¶5-020
Lian Keow Sdn Bhd & Anor v Overseas Credit Finance ¶13-620
(M) Bhd & Ors (1988) 1 MSCLC 90,105
Liew Yin Yin Construction Sdn Bhd v Yata Enterprise ¶13-240
Sdn Bhd (1990) 1 MSCLC 90,419
Lim Foo Yong v Public Prosecutor (1950–1985) ¶6-320
MSCLC 268
Lim Tok Chiow & Anor v Diam Tong Credit & ¶13-276
Development Sdn Bhd (1994) 4 MSCLC 91,178
Lim Tow Leong v Che Wan Development Sdn Bhd ¶3-800
(1989) 1 MSCLC 90,318
Lin Securities (Pte) v Noone & Co Sdn Bhd (1989) 1 ¶10-240
MSCLC 90,217
Lin Securities (Pte) (in liq) & Ors v Royal Trust Bank ¶13-620
(Asia) Ltd (1995) 4 MSCLC 96,188
Littlewoods Mail Order Stores Ltd v McGregor (1965) ¶1-200
3 All ER 855
Liverpool and District Hospital for Diseases of the ¶13-750
Heart v A-G (1981) 1 All ER 994
Llewellin’s Will Trusts, Re; Griffiths v Wilcox (1949) 1 ¶6-510
AER 487
Loch v John Blackwood Ltd (1924) AC 783 ¶13-280
London and County Coal Co, Re (1866) 3 Eq 355 ¶13-280
London and General Bank (No 2), Re (1895) 2 Ch 673 ¶11-800
London & Paris Banking Corporation (1874) 19 Eq 444 ¶13-276
Look Chun Heng & Anor v Asia Insurance Co Ltd ¶9-050; ¶9-
(1952) MLJ 33 060
Lord Advocate v The Huron and Erie Savings ¶1-430
Company (1911) SC 612
Low Nai Brothers & Co, Re (1969) 1 MLJ 171 ¶1-020
Lucas v Fitzgerald (1903) 20 TLR 16 ¶4-830
Lundie Brothers Ltd, Re (1965) 1 WLR 1051 ¶13-280
Lympne Investments Ltd, Re (1972) All ER 385 ¶13-276
Paragraph
MA Productions Pty Ltd v Austarama Television Pty ¶10-240
Ltd (1982) 1 ACLC 404
McAusland v DFC of T; Antlers Pty Ltd v The Official ¶5-210
Trustee in Bankruptcy (1994) 12 ACLC 78
MacDougall v Gardiner (1875) 1 Ch D 13 ¶10-000
MacDowall’s Case (1886) 32 Ch D 366 ¶13-520
McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835 ¶9-420
Mack Trucks (Britain) Ltd, Re (1967) 1 AER 977 ¶12-760
Madison Avenue Carpets Pty Ltd, Re (1974) CLC ¶40- ¶13-276
125
Mageleine Investments Pte Ltd v Swiss Levingston ¶13-240
(Property Consultants) Pte Ltd (1989) 1 MSCLC
95,272
Magna Alloys & Research Pty Ltd, Re (1975) CLC ¶5-430; ¶5-
¶40-227 450
Mahesan v Malaysian Government Officers Co- ¶6-040
operative Housing Society Ltd [1974] 1 LNS 83
Maidstone Buildings Provisions Ltd, Re (1971) 3 AER ¶7-310
363
Makin Nominees Pte Ltd, In re (1994) 4 MSCLC ¶13-276
96,099
Manchestor & Milford Railway Co, Re (1881) 14 Ch D ¶12-560
64
Mannum Haulage Pty Ltd, Re (1974) 8 SASR 451 ¶13-276
Manurewa Transport Ltd, Re (1971) NZLR 909 ¶12-370
Marka Industrial Sdn Bhd v Elgi Marka Sdn Bhd ¶12-530
(1989) 1 MSCLC 90,247
Marra Developments Ltd v BW Rofe Pty Ltd (1977) 3 ¶4-840
ACLR 185
Mascot Home Furnishers Pty Ltd (in Liq), Re (1970) ¶15-120
VR 593
Masonic & General Life Assurance Co, Re (1885) 32 ¶13-230
Ch D 373
Massey, Re (1870) LR 9 Eq 367 ¶13-350
Matthew Ellis Ltd, Re (1933) Ch 458 ¶13-610
Mawcon Ltd, Re (1969) 1 WLR 78 ¶13-510
Maxwell v Department of Trade and Industry; Same ¶13-278
and Stable (1974) QB 523
Maynard v Consolidated Kent Collieries Corporation ¶4-700
(1903) 2 KB 121
Mechanised Construction Pte Ltd, Re (1988) 1 ¶13-240
MSCLC 95,229
Mendip Press Ltd, Re (1901) 18 TLR 38 ¶12-430
Menier v Hooper’s Telegraph Works Ltd (1874) LR 9 ¶10-110
Ch App 350
Merchant Nurseries Pty Ltd (receivers and managers ¶12-520
appointed), Re; Corporate Affairs Commission v
Rowley & Ors (1985) 3 ACLC 840
Metropolitan Coal Consumers’ Assoc v Scrimgeour ¶7-010
(1895) 2 QB 604
Metropolitan Railway Warehousing Co Ltd, Re (1867) ¶13-273
36 LJ Ch 827
Middle Harbour Investments Ltd (in liq), Re (1977) 2 ¶13-635
NSWLR 652
Middlesborough Assembly Rooms Co, Re (1880) 14 ¶13-273
Ch D 104
Midland Counties District Bank Ltd v Attwood (1905) 1 ¶13-520
Ch 357
Mills v Mills (1938) 60 CLR 150 ¶6-035
Mineral Securities Australia Ltd (in liq), Re (1973) 2 ¶13-440
NSWLR 207
Mohan a/l Paramsivam v Sepang Omnibus Company ¶4-740
Sdn Bhd [1989] 1 MLJ 247
Molineaux v London, Birmingham & Manchester ¶7-350
Insurance Co Ltd (1902) 2 KB 589
Mooney & Ors v Peat, Marwick, Mitchell & Co & Anor ¶10-100
(1950–1985) MSCLC 205
Morgan v Flavel (1983) 1 ACLC 831 ¶6-120
Morgan v 45 Fleurs Avenue Pty Ltd & Anor (1987) 5 ¶10-410
ACLC 222
Morgan Crucible Co plc v Hill Samuel Bank Ltd & Ors ¶15-254
[1991] Ch 295
Morris v Kanssen (1946) 1 AER 586 ¶5-100
Motorists Mutual Insurance Co Ltd, Re; Re General ¶13-278
Mutual Insurance Co Ltd (1979) VR 484
Movitex Ltd v Bulfield & Ors (1986) 2 BCC 99,403 ¶6-040; ¶6-
310
Multinational Gas and Petrochemical Co v ¶6-020; ¶6-
Multinational Gas and Petrochemical Services Ltd 035
(1983) Ch 258
Paragraph
NFU Development Trust Ltd, Re (1973) 1 All ER 135 ¶15-100;
¶15-140
NM Superannuation Pty Ltd v Hughes & Ors (1992) 10 ¶3-800
ACLC 477
NW Robbie & Co Ltd v Whitney Warehouse Co Ltd ¶12-780
[1963] 1 WLR 1324
N Sinnasamy v Hup Aik Omnibus Co [1952] 1 LNS 63 ¶4-930
National Bank Ltd, Re (1966) 1 WLR 819 ¶15-150
National Discounts Ltd, Re (1951) 52 SR (NSW) 244 ¶13-277
National Funds Assurance, Re (1878) 10 Ch D 118 ¶4-930
National Portland Cement Co Ltd (The), Re (1930) ¶13-280
NZLR 564
National Savings Bank Association, Re (Hebb’s case) ¶4-220
(1867) LR 4 Eq 9
National Westminster Bank Plc & Anor v Inland ¶4-210
Revenue Commissioners [1994] 3 All ER 1; [1995] 1
AC 119
Nestor Pty Ltd, Re (1981) 6 ACLR 114 ¶13-280
New Gas Generator Co, Re (1877) 5 Ch D 703 ¶13-273;
¶13-275
New Timbiqui Gold Mines Ltd, Re (1961) Ch 319 ¶13-820
New Transvaal Co, Re (1896) 2 Ch 750 ¶13-730
New Travellers’ Chambers Ltd v Cheese & Green ¶13-276
(1894) 70 LT 271
New Zealand Hardware Co Ltd, Re (1926) NZLR 76 ¶13-760
New Zealand Netherlands Society v Kuys (1973) 1 ¶6-040
WLR 1126
Newdigate Colliery Ltd, Re (1912) 1 Ch 468 ¶12-730;
¶12-770
Ng Chee Keong v Ng Teong Kiat Highlands ¶10-320
Plantations Ltd (1950–1985) MSCLC 279; (1980) 1
MLJ 45
Ng Eng Hiam v Ng Kee Wei & Ors (1950–1985) ¶7-030; ¶10-
MSCLC 7 410
Nokes v Doncaster Amalgamated Collieries Ltd (1940) ¶13-605
AC 1014
Normandy v Ind Coope & Co Ltd [1908] 1 Ch 84 ¶10-000
North Brazilian Sugar Factories, Re (1887) 37 Ch D 83 ¶13-535
North End Motels (Huntly) Ltd, Re (1976) 1 NZLR 446 ¶13-280
North-West Transportation Co Ltd v Beatty 1887) 12 ¶9-190
App Cas 589
North Western Railway Co v McMichael (1850) 5 Ex ¶9-030
114
Northern Counties Securities Ltd v Jackson & Steeple ¶9-350
Ltd (1974) 1 WLR 1133; (1974) 2 All ER 625
Norwegian Titanic Iron Co Ltd, Re (1865) 35 Beav 223 ¶13-273
Nottingham General Cemetery Co, Re (1955) Ch 683 ¶13-640
Paragraph
OC Transport Services Ltd, Re (1984) 1 BCC 99,068 ¶10-340
Oakbank Oil Co v Crum (1882) 8 AC 65 ¶3-200
Odeon Associated Theatres Ltd v Jones (Inspector of ¶11-185
Taxes) (1971) 1 WLR 442
Odessa Waterworks Co Ltd, Re (1901) 2 Ch 190 ¶13-770
Olathe Silver Mining Co, Re (1884) 27 Ch D 278 ¶13-230
Old Silkstone Collieries Ltd, Re [1954] Ch 169 ¶4-960
Onward Building Society, Re (1891) 2 QB 463 ¶13-530
Oriel Ltd, Re [1986] 1 WLR 180 ¶1-430
Oriental Bank Berhad (The) v CSJ Pengangkutan Sdn ¶13-276
Bhd (1989) 1 MSCLC 90,314
Othery Construction Ltd, Re (1966) 1 AER 45 ¶10-400
Ottos Kopje Diamond Mines Ltd, Re (1893) 1 Ch 618 ¶4-540
Oxford Building and Investment Co, Re (1883) 49 LT ¶13-340
495
Paragraph
Pacific Acceptance Corporation Ltd v Forsyth (1970) ¶11-800
92 WN (NSW) 29
Page v International Agency and Industrial Trust Ltd ¶12-400
(1893) 62 LJ Ch 610
Panama, New Zealand and Australian Royal Mail Co, ¶12-370;
Re (1870) 5 Ch App 318 ¶12-520
Pang Ten Fatt v Tawau Transport Co Sdn Bhd (1986) ¶3-630
1 MLJ 179
Panorama Developments (Guildford) Ltd v Fidelis ¶7-310; ¶7-
Furnishing Fabrics Ltd (1971) 2 QBD 815 330
Paragon Holdings Ltd, Re [1961] 2 All ER 41 ¶13-700
Paris Skating Rink Co, Re (1877) 5 Ch D 373 ¶13-230
Park Ward & Co Ltd, Re (1926) Ch 828 ¶13-515
Parke v Daily News Ltd (1962) Ch 927; 2 AER 929 ¶6-040
Parker Davies & Hughes, Re (1953) 1 WLR 1349. ¶13-276
Parsons v Sovereign Bank of Canada (1913) AC 160 ¶12-700
Partridge, Re; Ex parte McDonald [1961] SR (NSW) ¶13-370
622
Patent Bread New Machinery Co, Re (1866) 14 LT ¶13-273
582
Patent Steam Engine Co, Re (1878) 8 Ch D 464 ¶13-210
Patrick and Lyon Ltd, Re (1933) Ch 786 ¶13-610
Paul A Davies (Australia) Pty Ltd (in liq) v PA Davies & ¶6-140; ¶6-
Anor (1983) 1 ACLC 1091 620
Pavlides v Jensen (1956) Ch 565 ¶6-220; ¶10-
120
Pedley v Inland Waterways Association Ltd (1971) 1 ¶5-232
AER 209
Peer Mohamed bin Abdul Aleez v Pahang Investments ¶13-000
Public Ltd Co (Companies (Winding-up) Petition No
42-67-86) (unreported)
Pender v Lushington (1877) 6 CLD 70 ¶10-110;
¶10-210
Percival v Wright (1902) 2 Ch 421 ¶6-035; ¶6-
040
Perusahaan Jenwatt Sdn Bhd, Re (1990) 1 MSCLC ¶13-276
90,527
Peruvian Railways Co v Thames & Mersey Maritime ¶7-010
Insurance Co (1867) 2 Ch App 617
Petaling Tin Berhad v Lee Kian Chan & Ors [1994] 2 ¶15-222
CLJ 346 (SC)
Peter’s American Delicacy Co Ltd v Heath (1939) 61 ¶3-580; ¶9-
CLR 457 350
Peters, Re; Ex parte Lloyd (1882) 47 LT 64 ¶13-405
Petersburg and Viborg Gas Co, Re (1874) WN 196 ¶13-273
Petsch v Kennedy (1971–1973) CLC ¶40-015 ¶7-110; ¶7-
120
Phoenix Bessemer Steel Co, Re (1875) 44 LJ Ch 683 ¶12-400
Phoenix Oil and Transport Co Ltd (No 2), Re (1958) ¶13-020;
Ch 565 ¶13-475;
¶13-700
Piercy v S Mills & Co (1920) 1 Ch 77 ¶6-040
Planeto Tullio v Andrea G Maoro (1994) 4 MSCLC ¶10-340
96,093
Playcorp Pty Ltd v Shaw & Ors (1993) 11 ACLC 641 ¶5-120
Poon Huat Seng & Anor v Goh Cheng Chua (1994) 4 ¶6-040
MSCLC 96,081
Portmen Building Society v Gallway (1955) 1 AER 227 ¶12-600
Poyser v CCA (1985) 3 ACLC 584 ¶5-410
Press Caps, Re (1949) Ch 434 ¶11-185
Price, Re; Ex parte Foreman (1884) 13 QBD 466 ¶13-635
Princess Reuss v Bos (1871) LR 5 HL 176 ¶13-273
Processed Sand Pty Ltd v Thiess Contractors Pty Ltd ¶13-276
(1983) 1 ACLC 1,069
Progress Advertising (NX) Ltd v Auckland Licensed ¶3-810
Victuallers Industrial Union of Employers (1957) NZLR
1207
Project Aqua Culture & Trading Co Pte Ltd, Re (1988) ¶6-210
1 MSCLC 95,116
Prudential Assurance Co Ltd v Newman Industries Ltd ¶10-120;
(No 2) (1982) 2 Ch 204 ¶10-230
Punt v Symonds & Co Ltd (1903) 2 Ch 506 ¶6-040
Paragraph
Queensland Mines Ltd v Hudson (1978) 52 ALJR 399 ¶6-220
Quek Leng Chye & Anor v A-G (1950–1985) MSCLC ¶5-430; ¶5-
341; (1985) 2 MLJ 270 450
Paragraph
RA bin TU & Anor v DG of IR (1989) 1 MSCLC 90,193 ¶13-600
RA Cripps & Son Ltd v Wickendon [1973] 1 WLR 944; ¶12-755
[1973] 2 All ER 606
RA Noble & Sons (Clothing) Ltd, Re [1983] BCLC 273 ¶10-310
R v Registrar of Companies (1912) 3 KB 23 ¶2-400
R v Registrar of Companies; Ex parte Esal ¶12-470
(Commodities) Ltd (1985) 1 BCC 99,501
Raffles Hotel v Malayan Banking Berhad (No 2) (1965) ¶3-310; ¶3-
1 MLJ 262 (HC); (1966) 1 MLJ 206 (FC) 340
Raja Khairulzaman Shah bin Raja Aziddin & Ors v ¶8-200
Zaman Indah Sdn Bhd [1979] 2 MLJ 181
Rayfield v Hands (1960) Ch 1 ¶3-330
Red Rock Gold Mining Co Ltd, Re (1889) 61 LT 785 ¶13-280
Rees v Bank of New South Wales (1964) 111 CLR ¶13-625
210
Regal (Hastings) Ltd v Gulliver (1967) AC 134 ¶6-040
Reid v The Explosives Co Ltd (1887) 19 QBD 264 ¶12-710
Reigate v Union Manufacturing Co (1918) 1 KB 592 ¶13-520
Reinvestment (Australia) Ltd v Murray Securities Ltd ¶8-240
(1974) CLC 40
Rendall v Conroy (1897) 8 QLJ 89 ¶13-366;
¶13-430
Richardson v Commercial Banking Co of Sydney Ltd ¶13-620
(1952) 85 CLR 110
Richmond Gate Property Co Ltd, Re (1965) 1 WLR ¶6-520
335
Rio Grande Do Sul Steamship Co, Re (1877) LR 5 ¶13-525
ChD 282 (CA)
Robert Tan v Tommy Tan (1950–1985) MSCLC 454; ¶4-740
(1984) 1 MLJ 230
Rother Iron Works Ltd v Canterbury Precision ¶12-780
Engineers Ltd (1973) 1 AER 394
Royal British Bank v Turquand (1856) 6 E & B 327 ¶3-800; ¶12-
020
Royal Trust Nominees Ltd v Sri Hartamas ¶4-740
Development Sdn Bhd (1989) 1 MSCLC 90,304
Rubber Produce Investment Trust, Re (1915) 1 Ch D ¶13-340
382
Ruben v Great Fingall Consolidated (1906) AC 439 ¶4-540
Russell Kinsela Pty Ltd (in liq) v Kinsela & Anor (1983) ¶6-220
1 ACLC 1215
Russian Spratts Patent Ltd, Re (1898) 2 Ch 149 ¶12-400
Paragraph
SBA Properties Ltd, Re (1967) 1 WLR 799 ¶13-250
Safety Explosives Ltd, Re (1904) 1 Ch 226 ¶13-600
St Piran Ltd, Re (1981) 3 All ER 270 ¶13-278
Salmon v Quin & Axtens Ltd [1909] AC 442 ¶3-310; ¶6-
220
Salomon v Salomon & Co Ltd (1897) AC 22 ¶1-110
Sanford v Sanford Courier Service Pty Ltd & Ors ¶6-500
(1987) 5 ACLC 394
Sanitary Burial Association, Re (1900) 2 Ch 289 ¶13-350
Sankey Brook Coal Co (No 2), Re (1870) LR 10 Eq ¶12-400
381
Sartoris’ Estate, Re (1892) 1 Ch 11 ¶12-500
Saunderson v Griffiths (1826) 5 B & C 909 (Court of ¶2-210
King’s Bench, England)
Savage v Bentley (1904) 90 LT 641 ¶12-730
Scottish Co-operative Wholesale Society Ltd v Meyer ¶10-310
(1959) AC 324
Scottish Insurance Corporation Ltd v Wilsons and ¶13-770
Clyde Coal Co Ltd (1949) AC 462
Seah Eng Lim v P&O Banking Corp Ltd (1933) SSLR ¶4-740
236
Second Consolidated Trust Ltd (The) v Ceylon ¶9-350
Amalgamated Tea and Rubber Estates Ltd (1943) 2
All ER 567
Senson Auto Supplies Sdn Bhd, Re (1988) 1 MSCLC ¶10-410;
90,067 ¶13-277
Sharikat Import Dan Export Timbering Sdn Bhd v ¶1-020
Othman bin Taib (unreported) High Court of Malaya
(Muar) Civil Suit No 32 of 1972
Shaw & Sons Ltd v Shaw (1935) 2 KB 113 ¶7-010
Shelbourne Cheese Manufacturing & Produce Co, Re ¶13-273
(1888) 14 VCR 294
Sheppard’s Corn Malting Co, Re; Ex parte Lowenfield ¶13-730
(1893) 70 LT 3
Siebe Gorman & Co Ltd v Barclays Bank Ltd (1979) 2 ¶12-370
Lloyd’s Rep 142
Siemens Bros & Co v Burns (1918) 2 Ch 324 ¶9-350
Silver Valley Mines, Re (1882) 21 Ch D 381 ¶13-364
Simonius Vischer and Co v Holt and Thompson (1979) ¶11-830
CLC ¶40-575
Sin Lee Sang Sawmill Sdn Bhd, In re (1989) 1 MSCLC ¶10-330
90,309
Sir John Moore Gold Mining Co, Re (1879) 12 ChD ¶13-340
325 (CA)
Slogger Automatic Feeder Co Ltd, Re (1915) 1 Ch 478 ¶12-520
Sly, Spink & Co, Re (1911) 2 Ch 430 ¶7-140
Smith v Bush [1990] 1 AC 831 ¶11-840
Smith and Fawcett Ltd, Re (1942) Ch 304; 1 All ER ¶4-720; ¶6-
542 040
Solaiappan & Ors v Lim Yoke Fan & Ors (1950–1985) ¶5-232
MSCLC 51
South African Supply & Cold Storage Co, Re [1904] 2 ¶15-000
Ch 268
South Luipaards VIei Gold Mines Ltd (The), Re (1897) ¶13-273
13 TLR 504
Southland Woollen Mills Ltd, Re (1929) NZLR 564 ¶13-280
Southern Foundries Ltd v Shirlaw [1940] AC 701 ¶5-250
Sovereign Life Assurance Co v Dodd (1892) 2 QB 573 ¶4-100; ¶15-
110
Spackman v Evans (1868) LR 3 HL 171 ¶9-210
Sri Hartamas Development Sdn Bhd v MBF Finance ¶13-425
Berhad (1990) 1 MSCLC 90,368
Stanfield v Gibbon (1925) WN 11 ¶12-520
State Government Insurance Corporation & Ors v ¶13-620
Pollock (1993) 11 ACLC 839
State of Wyoming Syndicate, Re (1901) 2 Ch 431 ¶7-350
Steane’s (Bournemouth) Ltd, Re (1950) 1 All ER 21 ¶13-515
Steel Wing Co Ltd, Re (1921) 1 Ch 349 ¶13-276
Stonegate Securities Ltd v Gregory (1980) 3 WLR 168 ¶13-250
Strata Welding Alloys Pte Ltd v Heinrich Pty Ltd (1980) ¶13-240
5 ACLR 442
Streatham & General Estates Co, Re (1897) 1 Ch 15 ¶12-400
Suntoso Jacob v Kong Miao Ming (1989) 1 MSCLC ¶4-700
95,210
Sussex Brick Co Ltd, Re (1961) Ch 289 ¶15-218
Swabey v Port Darwin Gold Mining Co (1889) 1 Meg ¶3-350
385
Swiss Screen (Australia) Pty Ltd & Anor v Burgess & ¶7-110
Ors (1987) 5 ACLC 1,076
Syd Mannix Pty Ltd v Leserv Constructions Pty Ltd ¶13-276
(1971) 1 NSWLR 788
Paragraph
TE Brinsmead & Sons, Re [1897] 1 Ch 406 ¶10-410
TH Knitwear (Wholesale) Ltd, Re (1988) 4 BCC 102 ¶13-032
TN Farrer Ltd, Re [1937] Ch 352 ¶13-520
Tan Mooi Liang v Lim Soon Eng (1974) 2 MLJ 60 ¶1-020
Tan Tien Kok v Medical Specialist Centre (JB) Sdn ¶9-210
Bhd (1995) 4 MSCLC 91,263
Tang Choon Keng Realty (Pte) Ltd & Ors v Tang Wee ¶13-210
Cheng (1993) 3 MSCLC 95,820
Tavistock Ironworks Co, Re (1871) 24 LT 605 ¶13-366;
¶13-370
Tay Bok Choon v Tahansan Sdn Bhd (1988) 1 ¶3-630; ¶13-
MSCLC 90,063; (1987) 1 MLJ 433 277
Tay Koh Yat Bus Co Pte Ltd, Re (1988) 1 MSCLC ¶13-750
95,226
Tay Say Geok v Tay Ek Seng Co Sdn Bhd 1974] MLJ ¶9-150
70
Teck Yow Brothers Hand-Bag Trading Company v ¶13-276
Maharani Supermarket Sdn Bhd (1988) 1 MSCLC
90,177
Tenowitz v Tenny Investments (1979) 2 SA 680 ¶15-520
Thai Chee Ken & Ors v Banque Paribas (1993) 3 ¶12-400
MSCLC 95,947
Thames Ironworks, Shipbuilding & Engineering Co ¶12-770
Ltd, Re (1912) 106 LT 674
Thomas Gerrard & Sons Ltd, Re (1968) Ch 455 ¶11-800
Thomas Marshall (Exporters) Ltd v Guinle (1978) 3 All ¶6-040
ER 193
Thorby v Goldberg (1964) 112 CLR 597 ¶6-040
Tilt Cove Co, Re (1913) 82 LJ Ch 545 ¶12-520
Timbatec Pty Ltd, Re [1974] 1 NSWLR 613 ¶13-620
Timberland Ltd and Equitable Forestry Services Pty ¶13-525
Ltd, Re (1976) 2 ACLR 346
Ting Chong Maa v Chor Sek Choon (1989) 1 MSCLC ¶10-120
90,255
Tiu Shi Kian & Anor v Red Rose Restaurant Sdn Bhd ¶1-220
(1950–1985) MSCLC 309
Tivoli Freeholds Ltd, Re (1971–1973) CLC ¶40-027; ¶10-310;
(1972) VR 445 ¶13-280
Tomlin Patent Horse Shoe Co Ltd, Re (1886) 55 LT ¶13-273
314
Tong Eng Sdn Bhd, In re (1994) 4 MSCLC 91,094 ¶10-310
Totex-Adon Pty Ltd v Marco (1982) 1 ACLC 228 ¶6-040
Toverishestvo Manufactur Liudwig Rabanek, Re ¶1-430
(1944) 1 Ch 404
Towers v African Tug Co (1904) 1 Ch 558 ¶4-830
Trade Auxiliary Co v Vickers (1873) LR 16 Eq 303 ¶12-520
Transport & General Credit Corporation Ltd v Morgan ¶13-610
(1939) Ch 531
Trevor v Whitworth (1887) 12 App Cas 409 ¶4-900; ¶9-
010
Triden Corporation, Re (1994) 12 ACLC 351 ¶13-505
Trocko v Renlita Products Pty Ltd (1971–1973) CLC ¶15-100
¶40-073
Tullet v Armstrong 1 Keen 428 ¶12-520
Tweeds Garages Ltd, Re (1962) 1 All ER 121 ¶13-276
Tyman’s Ltd v Craven (1952) 2 QB 100 ¶13-800
Paragraph
Ultramares Corp v Touche 255 NY Rep 179 (1931) ¶11-840
Union Accident Insurance Co Ltd, Re (1972) 1 All ER ¶13-034;
1105 ¶13-510
United Investment and Finance Ltd v Tee Chin Yong & ¶9-510
Ors (1950–1985) MSCLC 412
United Malayan Banking Corporation Bhd v Aluminex ¶12-370
(M) Sdn Bhd & Anor (1994) 4 MSCLC 91,051
United Ports Insurance Co, Re (1877) 36 LT 457 ¶13-605
United Stock Exchange Co Ltd, Re (1884) WN 251 ¶13-230;
¶13-276
Paragraph
Vasudevan s/o Narayan Nair v ICAB Private Ltd ¶13-364
(1988) 1 MSCLC 95,028
Verghese Mathai v Telok Plantations Sdn Bhd (1988) ¶10-310
1 MSCLC 90,122
Viola v Anglo-American Cold Storage Co (1912) 2 Ch ¶12-700
305
Paragraph
W Foster & Son Ltd, Re (1942) 1 All ER 314 ¶13-770
W&M Roith Ltd, Re (1967) 1 WLR 432; 1 AER 427 ¶6-040
Wakefield Rolling Stock Co, Re (1892) 3 Ch 165 ¶13-760
Wallersteiner v Moir (1974) 3 All ER 217 ¶9-350
Wallersteiner v Moir (No 2) [1975] QB 373 ¶10-230
Weiss, Re; Ex parte White v John Vicars & Co Ltd ¶13-625
(1970) ALR 654
Welsh Brick Industries Ltd, Re (1946) 2 All ER 197 ¶13-276
Weng Wah Construction Co Sdn Bhd v Yik Foong Sdn ¶13-276
Bhd (1994) 4 MSCLC 91,172
West Devon Great Consols Mine, Re (1884) 27 Ch D ¶13-535
106
West of England Bank, Re; Ex parte Budden and ¶13-055
Roberts (1879) 12 Ch D 288
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR ¶5-020
285
Whyte, Petitioner 1984 SLT 336; (1984) 1 BCC 99,044 ¶10-310
Wigan v English Scottish Law and Life Assurance ¶13-625
Association (1909) 1 Ch 291
Willes Trading Pty Ltd, Re (1978) 1 NSWLR 463 ¶13-276
William Hockley Ltd, Re (1962) 1 WLR 555 ¶13-220;
¶13-250
Williams v Lister & Co (1913) 109 LT 699 (CA) ¶12-830
Willingale v International Commercial Bank Ltd (1978) ¶11-185
AC 834
Wilson v Kelland (1910) Ch 306 ¶12-470
Windle, Re; Ex parte The Trustee of the Bankrupt v ¶13-625
Windle [1975] 3 All ER 987
Windsor Refrigerator Co Ltd v Branch Nominees Ltd ¶12-755
(1961) Ch 375
Windsor Steam Coal Co (1901) Ltd, Re (1929) 1 Ch ¶13-300
151
Wong Kim Fatt v Leong & Co Sdn Bhd & Anor (1950– ¶3-330
1985) MSCLC 264; (1976) 1 MLJ 140
Wood v Odessa Waterworks Co (1889) 42 Ch D 636 ¶3-320; ¶4-
820
Woodland Development Sdn Bhd v Chartered Bank ¶3-810
(1986) 1 MLJ 84
Woodroffes Musical Instruments Ltd, Re (1985) Ch ¶12-370
543
Wreck Recovery & Salvage Co, Re (1880) 15 Ch D ¶13-410
353
Paragraph
Xing Ji Food Products (M) Sdn Bhd, Re (1988) 1 ¶10-410
MSCLC 90,100
Paragraph
Yap Kim Kee & Sons Holdings Sdn Bhd v Goh Joon ¶13-375
Hai & Ors (1994) 4 MSCLC 91,098
Yate Collieries and Limeworks Co, Re (1883) WN 171 ¶13-276
Yeng Hing Enterprise Sdn Bhd v Datuk Dr Ong Poh ¶6-210
Kah (1988) 1 MSCLC 90,092
Yenidje Tobacco Co Ltd, Re (1916) 2 Ch 426 ¶10-410
Yip Hock Chye & Ors v Santan Engineering Pte Ltd (In ¶13-600
Receivership) & Anor (1988) 1 MSCLC 95,041
Young v Naval, Military and Civil Service Co-operative ¶6-500
Society Ltd (1905) 1 KB 687
SECTION FINDING LIST
Age of Majority Act 1971
Section Paragraph
Generally ¶9-030
Arbitration Act 2005
Section Paragraph
Generally ¶13-530
Bankruptcy Act 1967
Section Paragraph
47(1) ¶13-615; ¶13-
620
53 ¶13-615; ¶13-
620
54 ¶13-615; ¶13-
620
Generally ¶13-034
Bills of Sale Act 1950

Section Paragraph
Generally ¶8-386; ¶12-400
Bursa Malaysia Listing Requirements (BMLR)
Paragraph Paragraph
3.04 ¶14-230
3.05 ¶14-230
3.07 ¶14-240
Ch 7 ¶14-650
8.15 ¶14-230
9.02 ¶14-300
9.03 ¶14-310
9.04 ¶14-310
9.08 ¶14-320
9.09 ¶14-330
9.10 ¶14-330
9.11(1) ¶14-340
9.12 ¶14-350
9.13 ¶14-350
9.19 ¶14-400
9.20 ¶14-410
9.21 ¶14-420
9.22 ¶14-650
9.23 ¶14-660
Ch 12 ¶14-420
14.04 ¶14-420
14.08 ¶14-430
Generally ¶14-000; ¶14-610; ¶15-
200
Capital Markets and Services Act 2007
Section Paragraph
2 ¶5-010
171(2) ¶12-120
188 ¶6-045; ¶14-360
188(1) ¶6-045; ¶14-360
188(2) ¶6-045; ¶14-360
188(3) ¶6-045; ¶14-360
188(4) ¶6-045; ¶14-360
188(5) ¶6-045; ¶14-360
212(2) ¶14-270
212(3) ¶14-270
212(4) ¶14-270
212(5)(a) ¶14-270
212(6) ¶14-270
212(8) ¶14-270
Pt VI Div 2 ¶15-210
216 ¶15-210
217 ¶14-750; ¶15-200; ¶15-210
218(3) ¶15-218
222 ¶15-218
222(2) ¶15-218
223 ¶15-218
226 ¶14-250
229 ¶14-280
232 ¶14-240
232(1) ¶14-240
233 ¶14-240
258 ¶12-150
261 ¶12-160
262 ¶12-160
276 ¶11-820
283 ¶12-130
317 ¶6-340
320 ¶11-825
320(1) ¶11-825
320(2) ¶11-825
320(3) ¶11-825
320(4) ¶11-825
320(5) ¶11-825
320(6) ¶11-825
320(7) ¶11-825
337 ¶15-200
Sch 4 Pt 1 ¶15-222
Sch 5 ¶14-270
Sch 6 ¶14-200; ¶14-230; ¶14-280
Sch 7 ¶14-200; ¶14-230
Generally ¶1-000; ¶1-350; ¶2-100; ¶2-130; ¶4-250;
¶6-300; ¶8-400; ¶9-645; ¶12-100; ¶14-
260; ¶14-610; ¶15-405; ¶15-510
Civil Law Act 1956
Section Paragraph
5 ¶1-020
5(1) ¶1-020
5(2) ¶1-020
Civil Law Ordinance 1956
Ordinance Paragraph
5(1) ¶1-020
Co-operative Societies Act

Section Paragraph
Generally ¶1-140
Companies Act 1947
Section Paragraph
13(1) ¶11-185
Companies Act 1948
Section Paragraph
149(1) ¶11-185
149(2) ¶11-185
149A(1) ¶11-185
Sch 8 para 90 ¶11-185
Sch 8A ¶11-185
Generally ¶1-000; ¶1-020; ¶10-300; ¶11-
030
Companies Act 1965
Section Paragraph
176 ¶15-150
293 ¶13-615
Generally ¶1-000; ¶2-210; ¶3-300; ¶4-350; ¶4-840;
¶5-232; ¶7-000; ¶7-130; ¶9-500; ¶11-
030
Companies Act 1981
Section Paragraph
Generally ¶11-185
Companies Act 1989
Section Paragraph
Generally ¶11-180
Companies Act 2016
Section Paragraph
2 ¶1-350; ¶4-250; ¶5-010; ¶5-040; ¶6-000;
¶9-000; ¶12-100
2(1) ¶1-400; ¶1-440; ¶5-010; ¶5-120; ¶9-000;
¶9-320; ¶11-000; ¶12-750; ¶13-300;
¶15-210
4 ¶1-360
4(1) ¶1-360
4(1)(a)(i) ¶1-360
4(1)(c) ¶1-360
4(1)(d) ¶1-360
4(2) ¶1-360
4(3) ¶1-360
4(4) ¶1-360
5 ¶1-360; ¶11-220
6 ¶1-360
7 ¶1-360; ¶1-400; ¶5-060; ¶5-061; ¶6-330;
¶6-400; ¶6-530; ¶6-600; ¶6-621; ¶11-
520; ¶13-032; ¶15-210
8(1) ¶6-410
8(3) ¶6-410
8(3)(a) ¶8-400
8(3)(c) ¶8-400
9 ¶1-100; ¶6-400; ¶9-020
10 ¶1-300
10(1) ¶1-300
10(2) ¶1-300; ¶1-305
10(3) ¶1-300
10(4) ¶1-300; ¶1-320
12 ¶1-310
13 ¶9-025
14 ¶2-000; ¶2-010; ¶2-020
14(1) ¶2-020
14(2) ¶2-020
14(3) ¶2-020
14(4) ¶2-020
15 ¶2-010; ¶2-080
17 ¶2-010
19 ¶2-000; ¶2-080
20 ¶1-110; ¶1-210
21 ¶1-110; ¶3-400; ¶3-410; ¶3-700; ¶3-710
21(1) ¶3-400; ¶3-710
21(2) ¶3-400; ¶3-710
25 ¶1-305
25(2) ¶2-400
26 ¶1-420; ¶2-030; ¶8-740
26(1) ¶2-030
26(1)(a) ¶2-030
26(1)(b) ¶2-030
26(1)(c) ¶2-030
26(1)(d) ¶2-030
26(2) ¶2-030; ¶2-400
26(3) ¶2-030
27 ¶2-030
27(1) ¶2-030; ¶9-750
27(2) ¶2-030
27(3) ¶2-030
27(4) ¶2-030; ¶9-750
27(5) ¶2-030
27(6) ¶2-030
27(7) ¶2-030
28 ¶2-030; ¶2-420; ¶2-450
28(2) ¶9-750
29 ¶2-400; ¶2-450
29(1) ¶2-400
29(2) ¶2-400
29(3) ¶2-400
30 ¶2-450
30(1) ¶2-450
30(2) ¶2-450
30(3) ¶2-450
30(4) ¶2-450
30(5) ¶2-450
Pt II Div 5 ¶3-000
31 ¶2-050; ¶3-000; ¶3-210; ¶3-230
31(1) ¶3-000; ¶4-010; ¶7-000
31(2) ¶3-000
31(3) ¶3-000
32 ¶3-000; ¶3-210; ¶3-230; ¶3-320; ¶7-030;
¶9-105
32(1) ¶3-000
32(2) ¶3-000
32(3) ¶3-000
32(4) ¶3-000
32(5) ¶3-000
33 ¶3-000; ¶3-210; ¶3-300; ¶3-310; ¶3-320
33(1) ¶3-000; ¶3-300
33(2) ¶3-000; ¶3-300
34 ¶3-230; ¶3-300
35 ¶2-050; ¶3-100; ¶3-210; ¶3-220; ¶3-520
35(1) ¶3-100; ¶3-220
35(1)(a) ¶3-100; ¶3-220; ¶3-520
35(2) ¶3-100; ¶3-220; ¶3-520
36 ¶3-220; ¶3-510; ¶3-620; ¶7-030
36(1) ¶3-510; ¶3-620
36(2) ¶3-510
36(3) ¶3-510; ¶9-750
36(4) ¶3-510
37 ¶3-520; ¶3-620
37(1) ¶3-520; ¶3-620
37(2) ¶3-520
37(3) ¶3-520; ¶9-040
38 ¶1-310
38(1) ¶1-310; ¶1-315
38(2) ¶1-310
38(3) ¶1-310
38(4) ¶1-310; ¶1-315
38(5) ¶1-310
38(6) ¶1-310
39 ¶3-820
Pt II Div 6 ¶13-805
40 ¶3-550
40(1) ¶3-550; ¶9-750
40(2) ¶3-550
40(3) ¶3-550
40(4) ¶3-550
40(5) ¶3-550
40(6) ¶3-550
41 ¶2-310; ¶2-330; ¶2-420; ¶9-750
41(1) ¶2-310; ¶2-330; ¶9-750
41(2) ¶2-310
41(3) ¶2-310
41(3)(b) ¶2-310
41(4) ¶2-310
41(5) ¶2-310; ¶2-320
41(6) ¶2-310; ¶2-320
42 ¶1-330; ¶3-630
42(1) ¶1-330; ¶2-320; ¶3-630
42(2) ¶2-320; ¶3-630
42(3) ¶3-630
42(3)(a) ¶2-320
42(3)(b) ¶2-320
42(4) ¶3-630
42(5) ¶3-630
42(6) ¶3-630
42(7) ¶3-630
43 ¶3-630; ¶12-310
43(1) ¶3-630; ¶12-310
43(1)(a) ¶2-320
43(1)(c) ¶2-320
43(2) ¶3-630
43(3) ¶3-630
43(3)(b) ¶3-630
43(4) ¶3-630
43(5) ¶3-630
45 ¶3-400
45(1) ¶3-400
45(2) ¶3-400
45(3) ¶3-400
45(4) ¶3-400
45(5) ¶3-400
46(3) ¶9-750
47 ¶6-010
47(3) ¶8-200
48 ¶8-010
50–55 ¶4-300
50 ¶6-010; ¶8-200; ¶8-360
51 ¶6-010; ¶8-200; ¶8-360
52 ¶8-210; ¶8-360
53 ¶8-360
54 ¶8-210; ¶8-360
55 ¶8-220; ¶8-360
55(1) ¶8-230
55(2) ¶8-230
55(3) ¶4-300
55(4) ¶4-300
56 ¶6-410
57 ¶5-060; ¶8-200; ¶8-300
57(1) ¶5-060
57(1)(a) ¶5-060
57(2) ¶5-060
57(3) ¶5-060
57(4) ¶5-060
57(5) ¶5-060
57(6) ¶5-060
57(7) ¶5-060
58 ¶5-060; ¶6-010; ¶7-420
58(1) ¶5-060
58(2) ¶5-060
58(3) ¶5-060
58(4) ¶5-060
59 ¶5-061; ¶6-010; ¶6-400; ¶6-410; ¶8-320
59(1) ¶5-061; ¶6-400
59(2) ¶5-061; ¶6-400
59(3) ¶5-061; ¶6-400
59(4) ¶5-061; ¶6-400
59(5) ¶5-061; ¶6-400
59(6) ¶5-061; ¶6-400
59(7) ¶5-061; ¶6-400
59(8) ¶5-061; ¶6-400
59(9) ¶5-061; ¶6-400
59(10) ¶5-061; ¶6-400
59(11) ¶5-061; ¶6-400
59(12) ¶5-061; ¶6-400
59(13) ¶5-061; ¶6-400
60 ¶8-360; ¶12-130
60(1) ¶8-360
60(2) ¶8-360
60(3) ¶8-360
60(4) ¶8-360
60(5) ¶8-360
60(6) ¶8-360
60(7) ¶8-360
60(8) ¶8-360
60(9) ¶8-360
61 ¶2-500; ¶2-510
61(1) ¶2-510
61(2) ¶2-510
61(3) ¶2-510
61(4) ¶2-510
62 ¶2-510
62(1) ¶2-510
62(2) ¶2-510
62(3) ¶2-510
62(4) ¶2-510
62(5) ¶2-510
63 ¶2-510
63(1) ¶2-510
63(2) ¶2-510
65 ¶2-200; ¶2-210
65(1) ¶2-200
65(2) ¶2-200
66 ¶2-210
68 ¶1-100; ¶1-330; ¶9-320; ¶11-410
68(1) ¶11-410
68(2) ¶11-410
68(3) ¶11-410
68(3)(i) ¶11-410
68(4) ¶11-410
68(5) ¶11-410
68(6) ¶11-410
68(7) ¶11-410
68(8) ¶11-410
68(9) ¶11-410
Pt III ¶12-000; ¶15-400
Pt III Div 1 ¶4-010
69 ¶4-010
70 ¶4-000; ¶4-010; ¶4-030
72 ¶4-130; ¶4-136
73 ¶4-545
73(1) ¶4-545
73(2) ¶4-545
73(3) ¶4-545
73(4) ¶4-545
74 ¶4-010; ¶4-340; ¶4-350; ¶4-940
75 ¶4-200; ¶7-010; ¶7-030
75(1) ¶4-200
75(2) ¶4-200
75(2)(d) ¶4-200
75(3) ¶4-200
75(4) ¶4-200
75(5) ¶4-200
75(6) ¶4-200
76 ¶4-200; ¶4-210
76(1) ¶4-200
76(2) ¶4-200
76(3) ¶4-200
76(4) ¶4-200
76(5) ¶4-200
76(6) ¶4-200
77 ¶4-200; ¶4-320
78 ¶4-200; ¶4-210; ¶4-320
78(1) ¶4-200
78(8) ¶4-230
79 ¶4-335
79(1) ¶4-335
79(2) ¶4-335
79(3) ¶4-335
80(5) ¶7-010
82 ¶4-360; ¶7-010; ¶9-210
82(1) ¶4-360; ¶9-210
82(2) ¶4-360; ¶9-210
82(3) ¶4-360; ¶9-210
82(4) ¶4-360; ¶9-210
82(5) ¶4-360; ¶9-210
82(6) ¶4-360; ¶9-210
82(7) ¶4-360; ¶9-210
82(8) ¶4-360; ¶9-210
82(9) ¶4-360; ¶9-210
83 ¶4-380; ¶7-010
83(1) ¶4-380
83(2) ¶4-380
83(3) ¶4-380
83(4) ¶4-380
83(5) ¶4-380
83(6) ¶4-380
83(7) ¶4-380
83(8) ¶4-380
83(9) ¶4-380
83(10) ¶4-380
83(11) ¶4-380
84 ¶3-560; ¶4-020
84(1) ¶3-560
84(2) ¶3-560; ¶9-750
84(3) ¶3-560
85 ¶1-330; ¶7-010
86 ¶4-040
86(1) ¶4-040
86(2) ¶4-040
86(3) ¶4-040
86(4) ¶4-040
87 ¶4-045
87(1) ¶4-045
87(2) ¶4-045
88 ¶4-050; ¶4-100
90 ¶4-100; ¶4-110
90(2) ¶4-150
90(3) ¶4-150
90(4) ¶4-138
91 ¶4-160; ¶4-610
91(1) ¶4-160
91(1)(b) ¶4-160
91(2) ¶4-160
91(2)(b) ¶9-750
91(3) ¶4-160
91(4) ¶4-160
91(5) ¶4-160
92 ¶4-160
93 ¶4-160; ¶4-610
93(1) ¶4-610
93(2) ¶4-160; ¶4-610
93(3) ¶4-610
94 ¶4-610
94(1) ¶4-610
94(2) ¶4-610
95 ¶4-610
95(1) ¶4-610
95(1)(a) ¶4-610
95(2) ¶4-610
95(3) ¶4-610
96 ¶4-610
96(1) ¶4-610
96(2) ¶4-610
97 ¶4-510
97(1) ¶4-510
97(2) ¶4-510
98 ¶4-510; ¶4-530
98(1) ¶4-510
99 ¶4-510
99(1) ¶4-510
99(2) ¶4-510
99(3) ¶4-510
100 ¶4-520
100(1) ¶4-520
100(2) ¶4-520
100(3) ¶4-520
101 ¶4-540
101(1) ¶4-540
101(2) ¶4-540
102 ¶7-320; ¶7-340
103 ¶8-240
104 ¶4-780
104(1) ¶4-780
104(2) ¶4-780
105 ¶4-000; ¶4-030; ¶4-730
105(1) ¶4-700; ¶4-730
105(2) ¶4-730
105(3) ¶4-730
105(4) ¶4-730
105(5) ¶4-730
106 ¶4-700; ¶4-750; ¶7-010
106(1) ¶4-700
106(2) ¶4-700; ¶7-010
106(3) ¶4-700
107 ¶4-760; ¶4-780
107(1) ¶4-760
107(2) ¶4-760
109 ¶9-050; ¶9-060; ¶9-070
109(1) ¶9-060
109(2) ¶9-060
109(3) ¶9-060
109(4) ¶9-060
109(5) ¶9-060
109(6) ¶9-060
109(7) ¶9-060
109(7)(b) ¶9-070
109(8) ¶9-060
110 ¶9-050; ¶9-065
110(1) ¶9-065
110(2) ¶9-065
110(3) ¶9-065
110(4) ¶9-065
111 ¶4-370
111(1) ¶4-370
111(2) ¶4-370
111(3) ¶4-370
111(4) ¶4-370
111(5) ¶4-370
111(6) ¶4-370
111(7) ¶4-370
113(5) ¶4-420
115 ¶3-570; ¶4-930
116 ¶3-570; ¶4-930; ¶4-950
116(1) ¶3-570
116(2) ¶3-570
116(3) ¶3-570; ¶4-950
116(4) ¶3-570
116(5) ¶3-570
116(6) ¶3-570
116(7) ¶3-570
116(8) ¶3-570
116(9) ¶3-570
116(10) ¶3-570
116(11) ¶3-570
116(12) ¶3-570
117 ¶3-570; ¶4-930; ¶4-960; ¶9-750
117(1) ¶3-570; ¶4-930; ¶4-960
117(1)(a) ¶3-570; ¶4-930
117(2) ¶3-570; ¶4-930
117(3) ¶3-570; ¶4-930; ¶4-960
117(3)(c) ¶3-570; ¶4-930
117(4) ¶3-570; ¶4-930
117(5) ¶3-570; ¶4-930; ¶4-960

117(5)(c) ¶3-570; ¶4-930
117(6) ¶3-570; ¶4-930; ¶4-960
117(6)(b) ¶3-570; ¶4-930
117(7) ¶3-570; ¶4-930
117(8) ¶3-570; ¶4-930
117(9) ¶3-570; ¶4-930
117(10) ¶3-570; ¶4-930; ¶4-960
117(11) ¶3-570; ¶4-930
118 ¶3-570; ¶4-960
118(1) ¶3-570; ¶4-960
118(2) ¶3-570; ¶4-960
118(3) ¶3-570; ¶4-960
118(4) ¶3-570; ¶4-960
119 ¶3-570; ¶4-930; ¶4-960
119(1) ¶3-570; ¶4-960; ¶9-750
119(2) ¶3-570; ¶4-960; ¶9-750
119(2)(a) ¶3-570
119(3) ¶3-570; ¶4-960
119(4) ¶3-570; ¶4-960
120 ¶3-570
120(1) ¶3-570
120(2) ¶3-570
120(3) ¶3-570
120(4) ¶3-570
120(5) ¶3-570
120(6) ¶3-570
121 ¶3-570
122 ¶3-570; ¶4-970
123 ¶4-400; ¶4-410; ¶4-920
123(1) ¶4-400; ¶4-920
123(2) ¶4-400; ¶4-920
123(3) ¶4-400; ¶4-920
123(4) ¶4-400; ¶4-920
123(5) ¶4-400; ¶4-920
124 ¶4-400; ¶4-410
125 ¶4-920
126 ¶4-390; ¶4-920
126(1) ¶4-920
126(2) ¶4-920
126(2)(a) ¶4-920
126(2)(b) ¶4-920
126(2)(c) ¶4-920
126(3) ¶4-920
126(4) ¶4-920
126(5) ¶4-920
126(6) ¶4-920
127 ¶4-410
127(1) ¶4-410
127(2) ¶4-410
127(2)(b) ¶4-410
127(3) ¶4-410
127(4) ¶4-410
127(4)(a) ¶4-410; ¶4-420
127(4)(b) ¶9-010
127(5) ¶4-410
127(6) ¶4-410
127(7) ¶4-410
127(7)(b) ¶4-420
127(7)(e) ¶4-410; ¶4-420
127(8) ¶4-410; ¶9-010
127(9) ¶4-410; ¶9-010
127(10) ¶4-410
127(11) ¶4-410
127(12) ¶4-410
127(13) ¶4-410
127(14) ¶4-410; ¶4-420
127(15) ¶4-410; ¶4-420
127(16) ¶4-410; ¶4-420
127(17) ¶4-410
127(18) ¶4-410
128 ¶4-240; ¶4-300
128(1) ¶4-240; ¶4-300
128(2) ¶4-240; ¶4-300
129 ¶4-300
129(4) ¶4-300
129(5) ¶4-300
131 ¶4-800; ¶4-830
131(1) ¶4-800
131(2) ¶4-800
132 ¶4-800; ¶4-830
132(1) ¶4-800
132(2) ¶4-800
132(3) ¶4-800
132(4) ¶4-800
132(5) ¶4-800
133 ¶4-800
133(1) ¶4-800
133(2) ¶4-800
133(3) ¶4-800
133(4) ¶4-800
Pt III Div 1 Subdiv 7 ¶6-410
134 ¶8-340
135 ¶8-340; ¶9-040
136 ¶8-347; ¶9-040
137 ¶8-343; ¶8-345; ¶8-349; ¶9-040; ¶14-
600
138 ¶8-343; ¶8-345; ¶8-349; ¶9-040; ¶14-
600
138(1) ¶9-040
139 ¶8-343; ¶8-345; ¶8-349; ¶9-040; ¶14-
600
139(1) ¶9-040
140 ¶8-343
141 ¶8-343; ¶14-600
142 ¶14-600
143 ¶8-343
144 ¶8-349
145 ¶8-345
146 ¶4-410; ¶4-730
147 ¶4-540
147(1) ¶4-730
152 ¶8-400
158 ¶8-400; ¶14-260
Pt III Div 1 Subdiv 10 ¶12-000; ¶12-100; ¶14-260
171 ¶12-100; ¶14-260
171(2) ¶14-260
173 ¶12-110
174 ¶12-020
176 ¶12-150; ¶12-160
177 ¶12-200
177(1) ¶12-200
177(2) ¶12-200
177(3) ¶12-200
177(4) ¶12-200
177(5) ¶12-200
177(6) ¶12-200
177(7) ¶12-200
177(8) ¶12-200
178(5) ¶12-160
179 ¶12-170; ¶12-310
179(1) ¶12-170
179(2) ¶12-170
179(3) ¶12-170
179(4) ¶12-170
182 ¶12-255; ¶12-260
182(1) ¶12-255
182(2) ¶12-255
182(3) ¶12-255
182(3)(f) ¶12-255
182(4) ¶12-255
182(5) ¶12-255
182(6) ¶12-255
182(7) ¶12-255
182(8) ¶12-255
182(9) ¶12-255
182(10) ¶12-255
183 ¶12-260
184(3) ¶12-200
184(4) ¶12-200
185 ¶12-210
186 ¶4-250
186(1) ¶4-250
186(1)(a) ¶4-250
186(1)(b) ¶4-250
186(2) ¶4-250
186(3) ¶4-250
186(4) ¶4-250
186(5) ¶4-250
186(6) ¶4-250
186(7) ¶4-250
186(8) ¶4-250
186(9) ¶4-250
186(10) ¶4-250
187 ¶4-250
188(1) ¶4-250
190 ¶1-350; ¶4-020
190(1) ¶2-130; ¶4-250
190(1)(a) ¶2-130
190(1)(b) ¶2-130; ¶3-630
190(2) ¶2-100; ¶2-110; ¶2-120; ¶2-130; ¶2-140
190(2)(a) ¶2-130
190(2)(b) ¶2-130
190(3)–(8) ¶2-130
190(3) ¶2-100; ¶10-410; ¶13-200; ¶13-210
194 ¶3-500
195 ¶9-175
195(1) ¶9-175
195(2) ¶9-175
195(3) ¶9-175
Pt III Div 2 Subdiv 2 ¶5-000; ¶7-000
196–209 ¶5-000
196 ¶7-010
196(3) ¶5-220; ¶5-221
196(4) ¶5-030
197 ¶6-700
197(1) ¶5-140
197(2) ¶5-140
198 ¶5-050; ¶5-220; ¶5-400; ¶5-450; ¶7-320;
¶7-380
198(1) ¶5-141
198(1)(a) ¶5-141; ¶5-410
198(1)(b) ¶5-141
198(1)(c) ¶5-141; ¶5-430
198(1)(d) ¶5-141; ¶5-440
198(1)(e) ¶5-141
198(2) ¶5-141
198(3) ¶5-141
198(3)(b) ¶5-141
198(4) ¶5-141
198(5) ¶5-141
198(6) ¶5-141
198(7) ¶5-141
199 ¶5-141; ¶5-220; ¶5-420; ¶5-450; ¶7-320
199(1) ¶5-420; ¶5-450
199(1)(a) ¶5-420; ¶5-450
199(2) ¶5-420; ¶5-450
199(3) ¶5-420; ¶5-450
199(4) ¶5-420; ¶5-450
199(5) ¶5-420; ¶5-450
200 ¶5-450
201 ¶5-100; ¶5-142
202 ¶5-100
202(1) ¶5-110
203 ¶5-100; ¶5-130
204 ¶5-100
205 ¶5-200; ¶5-210
205(1) ¶5-200
205(2) ¶5-110; ¶5-200
205(3) ¶5-110; ¶5-200
205(4) ¶5-200
205(5) ¶5-200
205(6) ¶5-200
206 ¶5-232; ¶5-270
206(1) ¶5-232
206(1)(b) ¶5-232
206(2) ¶5-232
206(3) ¶5-232; ¶5-240; ¶7-340
206(4) ¶5-232
206(5) ¶5-232
207 ¶5-240; ¶5-270
207(1) ¶5-240
207(2) ¶5-240
207(3) ¶5-240
207(4) ¶5-240
207(5) ¶5-240
207(6) ¶5-240
207(7) ¶5-240
208 ¶5-220
208(1) ¶5-220
208(1)(d) ¶5-221; ¶7-130
208(1)(e) ¶5-221; ¶7-130
208(1)(f) ¶5-221; ¶7-130
208(1)(g) ¶5-221; ¶7-130
208(2) ¶5-220
208(3) ¶5-220
208(4) ¶5-220; ¶5-260
209 ¶5-220; ¶5-221
209(1) ¶5-221; ¶7-130
209(2) ¶5-221
209(3) ¶5-221; ¶7-130; ¶7-324
209(4) ¶5-221
209(5) ¶1-100; ¶5-221
209(6) ¶5-221
Pt III Div 2 Subdiv 3 ¶5-000; ¶5-010; ¶7-000
210–234 ¶5-000
210 ¶5-010; ¶6-000
212 ¶7-100; ¶7-110
213 ¶5-010; ¶5-141; ¶5-440; ¶6-000; ¶6-035
213(1) ¶6-000; ¶6-040
213(2) ¶6-000; ¶6-020
213(3) ¶6-000
214 ¶5-010; ¶6-000; ¶6-020; ¶6-035; ¶6-210
214(1) ¶6-020
214(2) ¶6-020
215 ¶5-010; ¶6-000; ¶6-020
215(1) ¶6-020
215(2) ¶6-020
216 ¶5-010; ¶6-000; ¶6-040; ¶7-010; ¶7-020
216(1) ¶6-040; ¶7-010
216(2) ¶6-040; ¶7-010
216(3) ¶6-040
217 ¶5-010; ¶5-020; ¶5-141; ¶5-440; ¶6-000
217(1) ¶5-020
217(2) ¶5-020
218 ¶5-010; ¶5-141; ¶5-440; ¶6-000
218(2)(a) ¶13-276
219 ¶6-410
219(1) ¶6-410
219(1)(a) ¶5-061; ¶6-400; ¶6-410
219(1)(b) ¶5-061; ¶6-400; ¶6-410
219(1)(c) ¶6-410
219(2) ¶6-410
219(2)(a) ¶6-410
219(2)(b) ¶6-410
219(3) ¶6-410
219(4) ¶6-410
219(5) ¶6-410
219(6) ¶6-410
219(7) ¶6-410
221 ¶6-310; ¶6-330; ¶7-160
221(1) ¶6-310
221(2) ¶6-310
221(4) ¶6-310
221(5) ¶6-310
221(6) ¶6-310
221(7) ¶6-310
221(8) ¶6-310; ¶6-320
221(9) ¶6-310
221(11) ¶6-350
222 ¶6-010; ¶7-160
223 ¶5-010; ¶6-000; ¶6-010; ¶7-010; ¶7-030
224 ¶6-010; ¶6-600; ¶6-621; ¶6-650; ¶7-010
224(1) ¶6-600
224(1)(a) ¶6-600
224(1)(b) ¶6-600
224(2) ¶6-600; ¶6-610
224(3) ¶6-600; ¶6-610
224(4) ¶6-600; ¶6-610
224(4)(a) ¶6-600; ¶6-610
224(5) ¶6-600; ¶6-610
224(6) ¶6-600; ¶6-610; ¶6-620
224(7) ¶6-600; ¶6-621
224(8) ¶6-600; ¶6-621
224(9) ¶6-600
224(10) ¶6-600
225 ¶6-010; ¶6-650; ¶7-010; ¶7-030
225(1) ¶6-630
225(2) ¶6-640
225(3) ¶6-650
226 ¶6-530; ¶7-010
226(1) ¶6-530
226(2) ¶6-530
226(3) ¶6-530
227 ¶5-300; ¶6-530
227(1) ¶5-300; ¶6-530
227(1)(a) ¶6-530
227(1)(b) ¶6-530
227(2) ¶6-530
227(3) ¶6-530
227(4) ¶6-530
227(5) ¶5-310; ¶6-530
227(6) ¶6-530
227(7) ¶6-530
227(8) ¶6-530
228 ¶5-010; ¶5-141; ¶5-440; ¶6-000; ¶6-700;
¶6-710; ¶7-010
228(1) ¶6-700; ¶6-720
228(1)(a) ¶6-700
228(1)(b) ¶6-700
228(2) ¶6-700; ¶6-720
228(3) ¶6-700
228(4) ¶6-700
228(5) ¶6-700; ¶6-720
228(6) ¶6-700; ¶6-720
228(7) ¶6-700; ¶6-720
229 ¶6-700; ¶6-710
230 ¶6-500
230(1) ¶6-500
230(2) ¶6-500
230(3) ¶6-500
230(4) ¶6-500
230(5) ¶6-500
230(6) ¶6-500
230(7) ¶6-500
231(1) ¶6-800
231(2) ¶6-800
232 ¶6-810
232(1) ¶6-810
232(2) ¶6-810
232(3) ¶6-810
232(4) ¶6-810
232(5) ¶6-810
232(6) ¶6-810
233 ¶6-810; ¶6-820
233(1) ¶6-820
233(2) ¶6-820
233(3) ¶6-820
233(4) ¶6-820
233(5) ¶6-820
234 ¶6-900
234(1) ¶6-900
234(2) ¶6-900
234(3) ¶6-900
234(4) ¶6-900
235–242 ¶5-050
235 ¶7-370
235(1) ¶5-050
235(2) ¶5-050; ¶7-390; ¶7-400
235(2)(a) ¶5-050
235(3) ¶5-050
235(4) ¶5-050
236 ¶7-400
236(1) ¶5-050
236(2) ¶5-050
236(3) ¶5-050
236(4) ¶5-050
237 ¶7-420
237(1) ¶5-050
237(2) ¶5-050
237(3) ¶5-050
237(4) ¶5-050
238 ¶5-050; ¶7-370; ¶7-380; ¶7-400
238(1) ¶5-050
238(2) ¶5-050
238(3) ¶5-050
239 ¶5-050; ¶7-370; ¶7-380; ¶7-430
240 ¶5-050; ¶7-370; ¶7-380; ¶7-420
241 ¶7-370; ¶7-390; ¶7-400
241(1) ¶5-050; ¶7-390
241(2) ¶5-050; ¶7-390
241(3) ¶5-050; ¶7-390
241(4) ¶5-050; ¶7-390
241(5) ¶5-050; ¶7-390
241(6) ¶5-050; ¶7-390
241(7) ¶5-050; ¶7-390
241(8) ¶5-050; ¶7-390
244 ¶11-000; ¶11-140; ¶11-150; ¶11-160;
¶11-600
244(1) ¶11-140
244(2) ¶11-140
244(3) ¶11-140; ¶11-170
244(4) ¶11-140; ¶11-170
244(5) ¶11-140
244(6) ¶11-140
244(7) ¶11-140
245 ¶6-700; ¶11-000; ¶11-010; ¶11-040;
¶11-050
245(3) ¶8-770
245(4) ¶8-770; ¶11-020
245(5) ¶11-020
245(6) ¶11-020
245(7) ¶8-770; ¶11-020
245(8) ¶8-770
247 ¶11-150; ¶11-160; ¶11-210
247(1) ¶11-210
247(2) ¶11-210
247(3) ¶11-210
247(4) ¶11-210
247(5) ¶11-210
247(6) ¶11-210
247(7) ¶11-210
247(8) ¶11-210
247(9) ¶11-210
247(10) ¶11-210
247(11) ¶11-210
247(12) ¶11-210
247(13) ¶11-210
247(14) ¶11-210
248 ¶9-320; ¶11-600
249 ¶11-120
250 ¶11-200
251 ¶11-330
251(1) ¶11-330
251(1)(b) ¶11-340
251(2) ¶11-330
251(3) ¶11-330
251(4) ¶11-330
252 ¶11-300; ¶11-320
252(1) ¶11-300; ¶11-310; ¶11-320
252(2) ¶11-300; ¶11-320
252(3) ¶11-300; ¶11-320
252(4) ¶11-300
252(5) ¶11-300
253 ¶11-320
253(1) ¶11-320
253(2) ¶11-320
254 ¶11-120
255 ¶11-450
255(1) ¶11-450
255(2) ¶11-450
255(3) ¶11-450
255(4) ¶11-450
255(5) ¶11-450
255(6) ¶11-450
257 ¶11-300; ¶11-330; ¶11-400
257(1) ¶11-400
257(2) ¶11-400
257(3) ¶11-400
257(4) ¶11-400
258 ¶1-330; ¶1-340; ¶9-320; ¶11-100; ¶11-
350; ¶11-400
258(1) ¶11-400
258(1)(a) ¶9-300; ¶11-100
258(2) ¶11-400
258(3) ¶11-400
259 ¶1-330; ¶9-320; ¶11-100; ¶11-350
259(1) ¶1-340
259(1)(b) ¶1-340; ¶1-360
259(2) ¶11-100
260 ¶9-320; ¶11-350
260(1) ¶11-350
260(2) ¶11-350
260(3) ¶11-350
261 ¶11-350
261(1) ¶11-350
261(2) ¶11-350
263 ¶8-770; ¶11-510
264(1)–(3) ¶11-520
264(4) ¶11-522
264(5) ¶11-530
264(6) ¶11-522
264(7) ¶11-522
265 ¶11-532
266 ¶8-770; ¶11-600; ¶11-810; ¶11-820
266(1) ¶11-600
266(2) ¶11-600
266(3) ¶11-350; ¶11-600
266(4) ¶11-600
266(5) ¶11-600; ¶11-610
266(6) ¶11-600
266(7) ¶11-600
266(8) ¶11-600
266(9) ¶11-600
266(10) ¶11-600
266(11) ¶11-600
266(12) ¶11-600
266(13) ¶11-600
267 ¶11-553
267(1) ¶11-553
267(2) ¶11-112; ¶11-553
267(3) ¶11-553
267(4) ¶11-553
267(5) ¶11-553
267(6) ¶11-553
267(7) ¶11-553
268 ¶11-553
269 ¶11-553
269(1) ¶11-553
269(1)(b) ¶11-553
269(2) ¶11-553
269(3) ¶11-553
270 ¶11-553; ¶11-555
270(1) ¶11-553
270(2) ¶11-553
271 ¶11-555
272 ¶11-555
273 ¶11-555
274 ¶11-630
275 ¶11-630
277 ¶11-570
277(3) ¶11-580
278 ¶11-570
279 ¶11-560
280 ¶11-560
281 ¶11-580
282 ¶11-580
283 ¶11-580
283(1) ¶11-580
283(2) ¶11-580
283(3) ¶11-580
283(3)(a) ¶11-580
283(3)(b) ¶11-580
283(4) ¶11-580
283(5) ¶11-580
283(6) ¶11-580
283(7) ¶11-580
283(8) ¶11-580
283(9) ¶11-580
283(10) ¶11-580
283(11) ¶11-580
284 ¶11-580
285 ¶11-620
286 ¶11-750
287 ¶11-820
289 ¶7-450
Pt III Div 5 ¶9-000; ¶9-645; ¶15-416
291 ¶9-710
291(1) ¶9-710
291(1)(a) ¶9-710
291(2) ¶9-710
291(3) ¶9-710
291(4) ¶9-710
292 ¶9-720; ¶13-110
292(1) ¶9-720
292(2) ¶9-720
292(3) ¶9-720
292(4) ¶9-720
292(5) ¶9-720
293 ¶9-190
293(2) ¶9-170
294 ¶9-180
295(1) ¶9-620
297 ¶5-110; ¶5-200; ¶5-210; ¶9-740
297(1) ¶3-560; ¶3-570; ¶7-197
299 ¶9-740
300 ¶8-020; ¶9-740
301 ¶9-740
302 ¶9-125; ¶9-740
302(1) ¶9-740
302(2) ¶9-740
302(3) ¶9-740
302(4) ¶9-740
302(5) ¶9-740
303 ¶9-125; ¶9-740

306 ¶9-740
306(4) ¶13-110
307 ¶9-740
307(1) ¶9-740
308 ¶9-740
310 ¶9-150; ¶9-330
310(b) ¶9-150
311 ¶5-232; ¶9-120; ¶9-125; ¶9-330
311(1) ¶9-330
311(2) ¶9-330
311(3) ¶9-330
311(4) ¶9-330
311(5) ¶9-330
311(6) ¶9-330
312 ¶5-232; ¶9-120; ¶9-330
312(1) ¶9-330
312(2) ¶9-330
312(3) ¶9-330
312(4) ¶9-330
313 ¶9-120; ¶9-330
313(1) ¶9-330
313(2) ¶9-330
313(3) ¶9-330
313(4) ¶9-330
313(5) ¶9-330
313(6) ¶9-330
313(7) ¶9-330
314 ¶9-120; ¶9-150
314(2) ¶9-150
316 ¶9-610
317 ¶9-630
319 ¶9-610
320 ¶9-610
321 ¶9-620
322 ¶9-730
322(4) ¶9-730
328 ¶7-130; ¶9-025; ¶9-340; ¶9-500
330 ¶9-310; ¶9-340
330(1) ¶9-310
331 ¶9-190
332 ¶9-190
334 ¶2-430; ¶9-180
334(3) ¶9-180
335 ¶2-430; ¶9-180
336 ¶9-180
337 ¶9-180
337(1) ¶9-180
338 ¶9-180
339 ¶9-340
339(1) ¶9-340
339(2) ¶9-340
339(3) ¶9-340
339(4) ¶9-340
339(5) ¶9-340
339(6) ¶9-340
339(7) ¶9-340
340 ¶9-105; ¶9-320; ¶11-100; ¶11-300
341 ¶7-170; ¶7-195; ¶8-020; ¶9-410; ¶9-430
342 ¶8-010; ¶8-020; ¶9-430
343 ¶7-197; ¶8-020; ¶9-420
343(1) ¶9-420
343(2) ¶9-420
343(3) ¶9-420
343(4) ¶9-420
344 ¶7-199; ¶9-420; ¶9-400; ¶9-410; ¶9-420
344(1) ¶9-420
344(2) ¶9-420
344(3) ¶9-420
345 ¶10-010
346 ¶3-590; ¶3-610; ¶10-010; ¶10-410

346(1) ¶10-010
346(1)(a) ¶10-300
346(2) ¶10-010; ¶10-330
346(3) ¶10-010
346(4) ¶10-010; ¶10-330
346(5) ¶10-010
346(6) ¶10-010
347 ¶3-590; ¶10-230; ¶10-250
348 ¶3-590; ¶10-230; ¶10-250
350 ¶3-590; ¶10-240; ¶10-250
Pt III Div 7 Subdiv 1 ¶12-000; ¶12-200; ¶12-350
352 ¶8-383; ¶12-400; ¶12-430
352(2) ¶12-470
352(3) ¶12-470
352(6) ¶12-405
353 ¶12-400
354 ¶6-210; ¶8-383; ¶12-400; ¶12-430
355 ¶8-383; ¶12-400; ¶12-430
355(1) ¶12-400
355(2) ¶12-400
355(3) ¶12-400
355(4) ¶12-400
356 ¶8-383; ¶12-410; ¶12-430; ¶12-440
356(1) ¶8-383; ¶12-410
356(2) ¶8-383; ¶12-410
357 ¶12-420
358 ¶8-389; ¶12-130
359 ¶8-391; ¶12-460
359(1) ¶12-460
359(2) ¶12-460
359(3) ¶12-460
359(4) ¶12-460
359(5) ¶12-460
360 ¶8-394; ¶12-450
362 ¶8-380; ¶12-480
363 ¶8-383
364 ¶8-380; ¶12-480
365–371 ¶15-000
365 ¶15-000; ¶15-100
366 ¶6-710; ¶13-425; ¶14-780; ¶15-000;
¶15-100; ¶15-113; ¶15-150; ¶15-155;
¶15-520; ¶15-650
366(3) ¶9-340
367 ¶15-113
368 ¶14-780; ¶15-155
368(1) ¶15-155
368(2) ¶15-155
368(2)(d) ¶15-155
368(3) ¶15-155
368(4) ¶15-155
368(5) ¶15-155
368(6) ¶15-155
368(7) ¶15-155
369 ¶13-425; ¶15-100; ¶15-116
370 ¶15-010; ¶15-100
370(1) ¶15-010
370(2) ¶15-010
370(3) ¶15-010
370(4) ¶15-010
370(5) ¶15-010
370(6) ¶15-010
370(7) ¶15-010
371 ¶15-015; ¶15-100
371(1) ¶14-760; ¶15-015
371(2) ¶14-760; ¶15-015
371(3) ¶15-015
371(4) ¶15-015
371(5) ¶15-015
371(6) ¶15-015
371(7) ¶15-015
371(8) ¶15-015
371(9) ¶15-015
371(10) ¶15-015
371(11) ¶15-015
371(12) ¶15-015
372 ¶12-600
373 ¶12-600
374 ¶12-510
375 ¶12-530
376 ¶12-520
376(1) ¶12-520
376(2) ¶12-520
376(3) ¶12-520
376(4) ¶12-520
377 ¶12-610
378 ¶12-900
378(1) ¶12-900
378(2) ¶12-900
378(3) ¶12-900
378(4) ¶12-900
378(5) ¶12-900
379 ¶12-815; ¶12-900
380 ¶12-620
381 ¶12-830
381(1) ¶12-830
381(2) ¶12-830
381(3) ¶12-830
382 ¶12-830
382(1) ¶12-830
382(2) ¶12-830
383 ¶12-830
383(1) ¶12-830
383(2) ¶12-830
384 ¶12-830
384(1) ¶12-830
384(2) ¶12-830
386 ¶12-840
387 ¶12-570
388 ¶12-800
388(1) ¶12-800
388(2) ¶12-800
388(3) ¶12-800
388(4) ¶12-800
388(5) ¶12-800
389 ¶12-800
390 ¶12-800
390(1) ¶12-800
390(2) ¶12-800
390(3) ¶12-800
390(4) ¶12-800
391 ¶12-800; ¶12-810
392 ¶12-800; ¶12-820

394 ¶9-645; ¶15-400
395 ¶9-645; ¶15-400; ¶15-405
396 ¶15-405
397 ¶15-410
397(1) ¶15-415
398 ¶15-415
399 ¶9-645; ¶15-416; ¶15-417
400 ¶9-645; ¶15-416
401 ¶15-417
401(1) ¶15-417
401(2) ¶15-417
401(3) ¶15-417
401(4) ¶15-417
401(5) ¶15-417
401(6) ¶15-417
401(7) ¶15-417
402 ¶15-419
404 ¶15-520
405 ¶15-520
406 ¶15-540
411 ¶15-530
414 ¶15-550
415 ¶15-550; ¶15-570
415(1) ¶15-550
415(2) ¶15-550; ¶15-570
415(3) ¶15-550
415(4) ¶15-550
415(5) ¶15-550
415(6) ¶15-550
415(7) ¶15-550
415(8) ¶15-550
415(9) ¶15-550
416 ¶15-560
417 ¶15-570
418 ¶15-580
419 ¶15-590
420 ¶15-600
421 ¶15-610
422 ¶15-620
423 ¶15-630
424 ¶15-640
425 ¶15-550; ¶15-650
426 ¶15-660
427 ¶15-670
428 ¶15-680
429 ¶15-690
429(1) ¶15-690
429(1)(d) ¶15-690
429(2) ¶15-690
429(3) ¶15-690
429(4) ¶15-690
429(5) ¶15-690
430 ¶15-700
Pt IV ¶13-000
431 ¶13-000
432 ¶13-020
433 ¶13-032
433(1) ¶13-032
433(1)(a) ¶13-032
433(1)(c) ¶13-032
433(2) ¶13-032
433(3) ¶13-032
433(4) ¶13-032
433(5) ¶13-032
433(6) ¶13-032
433(7) ¶13-032; ¶13-320
433(8) ¶13-032
435(1) ¶13-038
435(2) ¶13-038
435(3) ¶13-038; ¶13-050
435(4) ¶13-050
436 ¶13-038
437 ¶13-055
438 ¶13-055
439 ¶13-100
439(2)(a) ¶9-750
440 ¶13-034
440(1) ¶13-034
442 ¶13-410; ¶13-500; ¶13-505
442(1) ¶13-410
443 ¶13-100; ¶13-120; ¶13-123; ¶13-345
443(4)(a) ¶7-180
444 ¶13-100
445 ¶13-120; ¶13-340; ¶13-510
446 ¶13-342
447 ¶13-345
447(1) ¶13-345
447(2) ¶13-345
447(3) ¶13-345
447(4) ¶13-345
447(5) ¶13-345
447(6) ¶13-345
448 ¶13-123
449 ¶9-640
449(1) ¶9-640
449(2) ¶9-640
449(3) ¶9-640
449(4) ¶9-640
449(5) ¶9-640
449(5)(b) ¶9-640
449(6) ¶9-640
449(7) ¶9-640
449(8) ¶9-640
449(9) ¶9-640
449(10) ¶9-640
449(11) ¶9-640
450 ¶13-130
450(4) ¶13-060
451 ¶13-130
452 ¶13-750
453 ¶13-340
454 ¶13-350
456 ¶13-310; ¶13-400; ¶13-415; ¶13-430
457 ¶13-530
457(1) ¶13-530
457(2) ¶13-530
457(3) ¶13-530
457(4) ¶13-530
457(5) ¶13-530
457(6) ¶13-530
457(7) ¶13-530
458 ¶13-375
459 ¶13-375
459(3) ¶9-750
460 ¶13-036
460(1) ¶13-036
460(2) ¶13-036
460(3) ¶13-036
460(4) ¶13-036
461 ¶13-366
462 ¶13-350; ¶13-375
464 ¶13-210; ¶13-265
464(1) ¶13-000
464(1)(a) ¶13-271
464(1)(d) ¶13-260
465 ¶10-410; ¶13-200
465(1) ¶10-410
465(1)(b) ¶13-272
465(1)(c) ¶13-273
465(1)(d) ¶13-275
465(1)(e) ¶13-036; ¶13-276
465(1)(f) ¶13-277
465(1)(h) ¶13-280; ¶10-400
465(1)(k) ¶10-410
465(1)(l) ¶13-278; ¶13-280
465(2) ¶10-410
466 ¶13-276
466(1) ¶13-276
466(1)(a) ¶13-276
466(2) ¶13-276
467 ¶13-200
468 ¶13-265; ¶13-375
468(1) ¶13-265
468(2) ¶13-265
468(3) ¶13-265
468(4) ¶13-265
469 ¶13-290
469(4) ¶13-272
470 ¶13-290
472 ¶13-335; ¶13-375; ¶13-400; ¶13-435
472(1) ¶13-400
472(2) ¶13-310; ¶13-400; ¶13-430
472(3) ¶13-400
473 ¶13-525
475 ¶13-500
476 ¶13-034; ¶13-330
477 ¶13-330
477(1) ¶13-330
478 ¶13-330
478(1) ¶13-330
478(2) ¶13-330
478(3) ¶13-330
479 ¶13-350; ¶13-375

479(1) ¶13-034
479(5) ¶13-034
482 ¶13-340
483(1) ¶13-375
484(3) ¶13-375
484(4) ¶13-375
486 ¶13-335; ¶13-375; ¶13-400; ¶13-410;
¶13-430
488 ¶13-370
488(1) ¶13-370
488(2) ¶13-370
488(3) ¶13-370
489(2) ¶13-700
489(2)(b) ¶13-710
496 ¶13-415; ¶13-720
497(1) ¶13-720
499 ¶13-375; ¶13-505
501 ¶13-535
504 ¶13-040
509 ¶13-470; ¶13-535
511 ¶13-465
514 ¶13-375
514(1) ¶13-375
514(2) ¶13-375
514(3) ¶13-375
518 ¶11-050; ¶13-470; ¶13-535
518(1) ¶13-535
518(2) ¶13-535
518(3) ¶13-535
518(4) ¶13-535
518(5) ¶13-535
519 ¶13-350; ¶13-375
521 ¶13-460
524 ¶13-600
524(1) ¶13-600
524(1)(a) ¶13-600
524(1)(b) ¶13-600
524(1)(c) ¶13-600
524(2) ¶13-600
524(3) ¶13-600
524(4) ¶13-600
524(4)(c) ¶13-600
524(5) ¶13-600
524(6) ¶13-600
524(6)(a) ¶13-600
524(6)(b)(i) ¶13-600
524(6)(b)(ii) ¶13-600
524(7) ¶13-600
524(8) ¶13-600
524(9) ¶13-600
524(10) ¶13-600
524(11) ¶13-600
525 ¶13-600
527 ¶13-420
527(1) ¶13-375
527(2) ¶13-375
527(5) ¶13-375
527(9) ¶13-375
528 ¶13-620
528(1) ¶13-620
528(2) ¶13-620
528(3) ¶13-620
528(4) ¶13-620
528(5) ¶13-620
528(6) ¶13-620
529 ¶13-610
530 ¶13-475
530(1) ¶13-475
530(2) ¶13-475
530(3) ¶13-475
530(4) ¶13-475
530(5) ¶13-475
531 ¶13-630
531(1) ¶13-630
531(2) ¶13-630; ¶13-635
531(3) ¶13-630
531(4) ¶13-630
531(5) ¶13-630; ¶13-645
531(6) ¶13-630; ¶13-647
531(7) ¶13-630; ¶13-640
531(8) ¶13-630; ¶13-640
531(9) ¶13-630
531(10) ¶13-630; ¶13-650
Pt IV Div 2 Subdiv 4 ¶15-700
536 ¶15-700
536(1)(c)(vii) ¶1-210
536(1)(c)(viii) ¶1-210
537 ¶15-700
538 ¶15-700
539 ¶5-141; ¶5-440; ¶15-700
540(1) ¶1-210
540(2) ¶1-210
Pt IV Div 4 Subdiv 1 ¶5-221
549 ¶11-410; ¶13-800; ¶13-805; ¶13-807
550 ¶13-800; ¶13-807
551 ¶13-805
552 ¶13-805
553 ¶13-805
554 ¶13-807
554(1) ¶13-807
555 ¶13-820
556 ¶13-830
557 ¶13-830
558 ¶13-830
559 ¶13-830
560 ¶13-830
Pt V ¶1-420
Pt V Div 1 ¶1-420; ¶8-700
561 ¶1-430; ¶8-710
561(1) ¶1-430
561(2) ¶1-430
561(3) ¶1-430
561(4) ¶1-430
562 ¶8-720
562(1) ¶1-410
562(1)(c) ¶1-410
562(2) ¶1-410
562(3) ¶1-410
562(4) ¶1-410
563 ¶8-730
563(1) ¶1-420
563(2) ¶1-420
563(3) ¶1-420
563(4) ¶1-420
563(5) ¶1-420
564 ¶1-420; ¶8-740
565 ¶8-740
566 ¶8-750
566(1) ¶8-750
566(2) ¶8-750
567 ¶8-760
568 ¶8-500
574 ¶8-770
575 ¶8-770
575(1) ¶8-770
575(2) ¶8-770
575(3) ¶8-770
575(4) ¶8-770
575(5) ¶8-770
575(6) ¶8-770
575(7) ¶8-770
575(8) ¶8-770
576 ¶8-780
577 ¶8-790
578 ¶8-810
578(1) ¶8-810
578(2) ¶8-810
578(3) ¶8-810
578(4) ¶8-810
578(5) ¶8-810
578(6) ¶8-810
578(7) ¶8-810
578(8) ¶8-810
579 ¶8-800
586(3) ¶11-040
590 ¶10-010; ¶13-200; ¶13-278
592 ¶11-600
593 ¶11-112; ¶11-600
594 ¶11-600
595 ¶11-600
596 ¶11-600
601 ¶8-360
618 ¶4-350
618(2) ¶4-340; ¶4-350
618(3) ¶4-350
618(4) ¶4-350
618(5) ¶4-350
619(3) ¶3-300; ¶9-105
Sch 1 ¶4-250; ¶14-290
Sch 2 ¶2-110; ¶2-140
Sch 2 Pt I ¶2-110
Sch 2 Pt II ¶2-110
Sch 2 Pt II para 1(c) ¶13-425
Sch 3 ¶5-000; ¶7-010; ¶7-100; ¶7-110; ¶7-140;
¶7-150; ¶7-160; ¶7-180; ¶7-197; ¶9-350
Sch 3 para 6(b) ¶7-190
Sch 4 ¶5-050
Sch 5 ¶11-320
Sch 5 Pt II ¶11-320
Sch 7 ¶9-645; ¶15-400; ¶15-417
Sch 8 ¶9-645; ¶15-415; ¶15-416
Sch 9 ¶15-550
Sch 10 ¶13-060
Sch 11 ¶13-300; ¶13-400
Sch 11 para 4 ¶13-415
Sch 12 ¶13-300; ¶13-335; ¶13-400; ¶13-435;
¶13-515
Sch 12 Pt I ¶13-335; ¶13-375; ¶13-400
Sch 12 Pt I para (a) ¶13-435
Sch 12 Pt I para (b) ¶13-430
Sch 12 Pt I para (c) ¶13-440
Sch 12 Pt I para (d) ¶13-445
Sch 12 Pt I para (f) ¶13-450
Sch 12 Pt I para (g) ¶13-455
Sch 12 Pt II ¶13-335; ¶13-375; ¶13-400; ¶13-410
Sch 12 Pt II para 1(b) ¶13-420
Sch 12 Pt II para 1(c) ¶13-430
Sch 12 Pt II para 1(d) ¶13-430
Sch 12 Pt II para 1(e) ¶13-430
Sch 13 ¶1-430; ¶8-710
Sch 14 ¶8-720
Generally ¶1-000; ¶2-440; ¶2-520; ¶3-200; ¶4-330;
¶4-710; ¶4-720; ¶4-740; ¶4-840; ¶6-100;
¶6-200; ¶6-300; ¶7-300; ¶7-310; ¶9-510;
¶10-110; ¶11-030; ¶11-500; ¶11-830;
¶12-010; ¶12-370; ¶12-765; ¶13-010;
¶13-250; ¶13-730; ¶14-200; ¶15-110;
¶15-218; ¶15-510
Companies Commission of Malaysia Act 2001
Section Paragraph
Generally ¶1-000
Companies Regulations 1966
Regulation Paragraph
Generally ¶1-000
Companies Regulations 2017
8 ¶2-020; ¶4-020; ¶9-750; ¶11-410; ¶12-
430
8(3) ¶2-030
8(9) ¶9-320
8(21) ¶11-532
8(22) ¶11-532
8(28) ¶13-805
28(29) ¶13-805
Generally ¶1-000; ¶2-000; ¶13-120
Companies (Winding-up) Rules 1972
Rule Paragraph
65 ¶13-010
Contracts (Malay States) Ordinance 1950
Ordinance Paragraph
Generally ¶1-020
Development Financial Institutions Act 2002
Section Paragraph
Generally ¶6-600; ¶6-
621
Financial Reporting Act 1997
Section Paragraph
26D ¶11-120; ¶11-140; ¶11-
600
Generally ¶11-000; ¶11-150; ¶11-
170
Financial Reporting (Publication of Approved Accounting Standards)
Regulations 1999
Generally ¶11-170
Financial Services Act 2013
Section Paragraph
Generally ¶4-350; ¶10-410; ¶12-405; ¶13-200
Income Tax Act 1967
Section Paragraph
75A ¶1-210
91(1) ¶11-050
134 ¶3-570; ¶4-
930
Interest Schemes Act 2016
Section Paragraph
4(1) ¶8-400
76 ¶8-400
Generally ¶5-061; ¶6-400; ¶6-
410
Islamic Financial Services Act 2013

Section Paragraph
Generally ¶4-350; ¶10-410; ¶12-405; ¶13-200
Limited Liability Partnership Act 2012
Section Paragraph
Generally ¶1-150
Malaysian Code on Take-overs and Mergers 2010
Code Paragraph
Generally ¶15-203; ¶15-
210
Malaysian Code on Take-overs and Mergers 2016
Code Paragraph
5 ¶15-160
Generally ¶15-200; ¶15-
203
Mental Health Act 2001
Section Paragraph
Generally ¶5-220; ¶5-221; ¶7-320; ¶7-324
National Registration Act 1959
Section Paragraph
Generally ¶4-300
Partnership Act 1890
Section Paragraph
1 ¶1-120
Partnership Act 1961
Section Paragraph
3(1) ¶1-120
Probate and Administration Act 1959
Section Paragraph
14(1) ¶9-080
Generally ¶9-000
Rules of the High Court 1980
Order Paragraph
50 rule 2 ¶4-760
50 rule 10 ¶4-760
50 rule 11 ¶4-760
Rules on Take-Overs, Mergers and Compulsory Acquisitions 2016
Rule Paragraph
4 ¶15-222
Sch 5 ¶15-218
Generally ¶15-200; ¶15-
203
Securities Commission Act 1993
Section Paragraph
31A ¶11-825
Generally ¶1-000; ¶1-350; ¶4-020; ¶4-250; ¶6-
300
Securities Industry (Central Depositories) Act 1991
Section Paragraph
Generally ¶1-000
Singapore Companies Act
Section Paragraph
168 ¶5-300
227C ¶15-530
227C(b) ¶15-530
227D ¶15-530
227D(4) ¶15-530
Stamp Act 1949
Section Paragraph
Generally ¶4-730
Trading with the Enemy Act

Section Paragraph
Generally ¶1-200
Trust Companies Act 1949
Section Paragraph
Generally ¶14-200
Trustee Act 1949
Section Paragraph
43 ¶12-160
Uniform Companies Act 1961

Section Paragraph
Generally ¶1-000
INDEX
A
Absconding contributory ¶13-040
Accounting records ¶11-020
form and language ¶11-040
inspection ¶11-030
retention ¶11-050
Accounts and audit

administrative matters
— despatch of accounts to members ¶11-400
— filing of annual returns ¶11-410
audit committees ¶11-130
audit exemption requirements for private companies ¶11-112
auditors — see Auditors
balance sheet ¶11-160
compliance with approved accounting standards ¶11-140
directors’ report and auditor's statement
— certificate and auditors statement ¶11-350
— contents ¶11-320
— directors’ statement ¶11-330
— separate document ¶11-310
— statutory declaration ¶11-340
— statutory requirements ¶11-300
financial institution’s accounting obligations ¶11-110
general requirements for financial statements ¶11-120
group and consolidated accounts ¶11-210
— financial year ¶11-200
— ultimate holding company ¶11-220
profit and loss account ¶11-150
relief
— Registrar's power ¶11-450
scope of directors’ duties in financial reporting ¶11-100
to be kept
— accounting records ¶11-020
— accounts, definition ¶11-000
— form and language ¶11-040
— inspection by directors ¶11-030
— requirements ¶11-010
— retention ¶11-050
true and fair view
— applicable Malaysian legislation ¶11-170
— legal opinion ¶11-185
— nature ¶11-180
ACE Market ¶14-200
Alteration of constitution ¶3-350; ¶3-500

altering or amending constitution ¶3-510
altering or change of constitution ¶3-520
conversion of unlimited company to limited ¶3-550
company
court orders ¶3-600
intervention by the court ¶3-530
provisions applying to private companies ¶3-630
reduction of share capital ¶3-570
remedies under Companies Act ¶3-590
requirements ¶3-580
restrictions ¶3-620
role of case law ¶3-610
share capital, alteration ¶3-560
Alternate or substitute directors ¶5-030

appointment ¶5-120
Amalgamation ¶15-010
definition ¶15-000
Annual general meeting (AGM) ¶9-300

public companies ¶9-320
— notice of member's meeting ¶9-610
Annual returns
filing ¶11-410
Appointment of receivers by the court — see Receivers
Appointment of receivers out of court — see Receivers
Approved accounting standards

compliance ¶11-140
Approved company auditor ¶11-510

Articles of association
constitution
— change of number of members ¶3-240
— registration and adoption ¶3-210
— required contents for certain companies ¶3-230
— status ¶3-200
Associate director ¶5-000
Audit committees ¶11-130
Auditors
acceptance of appointment ¶11-522
appointment and change
— private company ¶11-553
— public company ¶11-555
— where auditor removed ¶11-560
approved company auditors ¶11-510
attendance at general meeting ¶11-620
auditor of holding company, rights ¶11-610
consent ¶11-530
duties and liabilities ¶11-830
— common law duties ¶11-800
— duties of listed corporations ¶11-825
— duty to inform upon cessation of office ¶11-580
— duty to trustees for debenture holders ¶11-820
— liability to third parties ¶11-840
— report breaches of Companies Act ¶11-810
eligibility ¶11-520
fees and remuneration ¶11-630
functions and independence ¶11-500
liquidator ¶13-032
powers and duties of auditors ¶11-600
protection from defamation actions ¶11-750
registration of firms ¶11-532
statements ¶11-350
vacation of office
— removal from office ¶11-570
— resignation from office ¶11-580
Auditor's statements ¶11-350
B
Back-door listing ¶15-242
Balance sheet ¶11-100; ¶11-160
Bearer debentures ¶12-110
Board meetings
chairman ¶7-150
conduct ¶7-140
constitution ¶7-110
electronic forms ¶7-190
general principles ¶7-100
minutes ¶7-170
notice ¶7-120
quorum ¶7-130
voting ¶7-160
written resolutions ¶7-180
Borrowing
needs of a company ¶12-000
obligations of a company ¶12-255
— accounts to be made out and lodged ¶12-260
— obligation of guarantor corporation to furnish information ¶12-260
— quarterly reporting ¶12-250
power ¶12-020
regulation ¶12-010
Branch registers ¶8-500
Bursa Malaysia ¶14-010

ACE Market ¶14-200
disciplinary actions ¶14-700
LEAP Market ¶14-200
listing
— applicability and lodgement of prospectus ¶14-260
— application procedure and admission process ¶14-240
— disadvantages ¶14-220
— excluded offers or invitations ¶14-280
— exempted categories ¶14-270
— form and content of prospectus ¶14-290
— going public ¶14-200
— pre-requisites ¶14-230
— prospectus ¶14-250
— reasons ¶14-210
Main Market ¶14-200
regulatory functions ¶14-020
responsibilities ¶14-030
Bursa Malaysia Listing Requirements (BMLR) ¶14-000
C
Carrying on business, definition ¶1-430
Chairman ¶7-150
call the meeting to order ¶9-310
duties ¶9-350
Charges
fixed charges ¶12-360
— general nature ¶12-350
floating charges ¶12-370
— general nature ¶12-350
registration ¶8-383; ¶12-010; ¶12-
400
— acquisition of charged property ¶12-440
— assignment and variation ¶8-391; ¶12-460
— charges that need not be registered ¶12-405
— company obliged to keep register ¶12-480
— created outside Malaysia ¶8-383
— duty to register charges ¶8-383; ¶12-410
— effect of non-registration ¶12-470
— endorsement of certificate of registration ¶8-389
— lodgement of documents made out of ¶8-383
Malaysia
— procedure ¶12-430
— Registrar to keep register of charges ¶12-420
— satisfaction and release of property ¶8-394; ¶12-450
— series of debentures ¶8-383
— types of charges ¶8-386
Class meetings ¶9-340
Class rights ¶4-110

alteration ¶4-600
— minority protection ¶4-610
variation ¶4-160
Classification of companies ¶1-300

company limited by guarantee ¶1-310
company limited by guarantee without share capital ¶1-315
company limited by shares ¶1-305
exempt private companies ¶1-340
private companies ¶1-330
subsidiary and holding companies ¶1-360
unlimited company ¶1-320
Co-operative societies ¶1-140
Code of ethics — see Secretary
Commencement of business
prospectus
— already been issued ¶2-130
— not been issued ¶2-140
starting business ¶2-100
statement in lieu of prospectus ¶2-110
statutory declaration by secretary or director ¶2-120
Committee of inspection ¶13-060
Companies
characteristics ¶1-100
— co-operative societies ¶1-140
— Limited Liability Partnership (LLP) ¶1-150
— partnership ¶1-120
— separate legal entity ¶1-110
— sole proprietorship ¶1-130
classification ¶1-300
— company limited by guarantee ¶1-310
— company limited by guarantee without share ¶1-315
capital
— company limited by shares ¶1-305
— exempt private companies ¶1-340
— private companies ¶1-330
— public companies ¶1-350
— subsidiary and holding companies ¶1-360
— unlimited company ¶1-320
Companies Act ¶1-000
constitution
— alteration ¶3-350; ¶3-500–3-
630
— change of number of members ¶3-240
— companies having full capacity ¶3-710
— constitutional documents ¶3-000
— contents ¶3-100; ¶3-220
— contract between company and each ¶3-310
member
— contract between members ¶3-320
— effect on third party ¶3-340
— enforcing members’ rights ¶3-330
— formation of contractual relationships ¶3-300
— indoor management rule ¶3-800–3-820
— objects and powers ¶3-400; ¶3-410
— registration and adoption ¶3-210
— required contents for certain companies ¶3-230
— status ¶3-200
— ultra vires doctrine ¶3-700
corporate veil, lifting
— power of the court ¶1-220
— reasons ¶1-200
— statutory ¶1-210
English law in commercial matters, application ¶1-020
foreign companies — see Foreign companies
meetings — see Company meetings
precedents from the UK and Australia, ¶1-010
application
Company limited by guarantee ¶1-310
Company limited by guarantee without share capital ¶1-315
Company limited by shares ¶1-305
Company meetings
class meetings ¶9-340
conduct of meetings ¶9-350
freedom to discuss company's affairs ¶9-350
general meetings ¶9-300; ¶9-330
— proceedings ¶9-310
meeting of members ¶9-330
public companies’ AGM ¶9-320
Company names
common law remedy in name clashes ¶2-410
difference between change of name and change of status ¶2-420
disclosure ¶2-450
effect on identity ¶2-440
notice and resolution ¶2-430
refusal of Registrar to register name ¶2-400
Company officers
alternate or substitute directors ¶5-030
directors ¶5-010
duties and powers ¶5-070
identification in Companies Act ¶5-000
liability ¶5-080
managers ¶5-040
nominee directors ¶5-020
register of director's shareholdings ¶5-061
registration ¶5-060
secretary ¶5-050
Company registers
branch registers ¶8-
500
index of members ¶8-
210
— right of member to inspect ¶8-
230
method of keeping registers, circulating notices and written ¶8-
resolutions 020
need to keep registers and statutory books ¶8-
000
register of chargers ¶8-
380
register of debenture holders ¶8-
360
register of directors, managers and secretaries ¶8-
300
register of directors’ shareholdings ¶8-
320
register of interest holders ¶8-
400
register of members ¶8-
200
— closing ¶8-
220
— rectification by court ¶8-
240
— right of member to inspect ¶8-
230
register of substantial shareholders ¶8-
340
— company to keep and maintain ¶8-
349
— failure to notify ¶8-
345
— required notifications ¶8-
343
— substantial holder, definition ¶8-
347
registers to be kept ¶8-
010
Company seal ¶2-500

documents requiring seal ¶2-510
share sealing register ¶2-520
types ¶2-510
Company secretary — see Secretary
Company's shares
allotment and issue of shares ¶4-
200
— allotment, definition ¶4-
210
— contract arising from application for shares ¶4-
220
— effect of allotment ¶4-
230
— option to take up shares ¶4-
240
— restrictions ¶4-
250
alteration of class rights ¶4-
600
— minority protection ¶4-
610
classes ¶4-
100
— class rights ¶4-
110
— convertible preference shares ¶4-
138
— cumulative and non-cumulative preference shares ¶4-
134
— employees’ shares ¶4-
155
— non-voting shares ¶4-
150
— ordinary shares ¶4-
120
— participating preference shares ¶4-
132
— preference shares ¶4-
130
— redeemable preference shares ¶4-
136
— variation of class rights ¶4-
160
dividends ¶4-
800
— constitution and dividends ¶4-
830
— entitlement ¶4-
810
— forms of payment ¶4-
820
— interim and final dividends ¶4-
830
— payment of dividend from profits available ¶4-
840
maintenance of capital
— confirmation by court ¶4-
950
— creditors entitled to object to reduction ¶4-
960
— financial assistance ¶4-
920
— general principles ¶4-
910
— liability of members on reduced shares ¶4-
970
— reduction of capital ¶4-
930
— reductions of capital without court order ¶4-
940
— return of assets ¶4-
930
— unlisted company dealing in its own shares ¶4-
900
nature of shares ¶4-
000
— definition of a share ¶4-
030
— nominal and issued capital under no par value ¶4-

020
— rights and privileges of stockholders ¶4-
045
— rights conferred on shareholders ¶4-
050
— share capital structure ¶4-
010
— stock ¶4-
040
payment ¶4-
300
— alternative treatment of share premium accounts ¶4-
350
— calls on shares ¶4-
360
— consideration as payment for subscription shares ¶4-
320
— effect of cancellation of share “buy back” ¶4-
420
— existing share premium account ¶4-
340
— financial assistance in dealing with its own shares ¶4-
400
— financial assistance not exceeding 10% of shareholders’ ¶4-
funds 390
— forfeiture of shares ¶4-
380
— general prohibition of commissions, discounts and ¶4-
allowances 335
— lien on shares ¶4-

370
— purchase of its own shares by listed company ¶4-
410
— register of options ¶4-
300
— shares at market or current price ¶4-
330
— underwriting an initial public offer ¶4-
430
share certificates ¶4-
500
— contents ¶4-
530
— estoppel effect ¶4-
540
— issuance ¶4-
510
— numbering of shares ¶4-
520
— prohibition to issue bearer's share warrants ¶4-
545
transfer of shares
— effect of certification ¶4-
770
— instruments ¶4-
730
— loss or destruction of share certificates ¶4-
780
— notice of refusal ¶4-
750
— registration and certification ¶4-
740
710
— restrictions imposed by constitution ¶4-
720
— right ¶4-
700
— stop-notice and charging order ¶4-
760
Compromises or arrangements ¶14-780

court's power
— to appoint an approved liquidator ¶15-113
— to make orders ¶15-100; ¶15-150
— to restrain proceedings ¶15-155
explanatory statement ¶15-130
first hearing ¶15-120
information ¶15-116
majority approval ¶15-140
scheme of arrangement ¶15-100
steps ¶15-110
triggering of mandatory offer provisions ¶15-160
Compulsory acquisition ¶14-760
shares ¶15-218
Compulsory winding up ¶13-000; ¶13-010

commencement ¶13-200
company business ¶13-505
company's own resolution ¶13-271
contracts of employment ¶13-520
creditor
— contingent or prospective ¶13-250
— judgment ¶13-230
— secured ¶13-240
directors’ powers ¶13-510
directors unjust and unfair ¶13-277
distribution
— adjusting rights of contributories ¶13-710
— among members ¶13-700
— when constitution exclude principle of equity ¶13-730
— whether amount raised by call part of assets ¶13-720
failure to commence business ¶13-273
failure to file statutory report (declaration) ¶13-272
grounds ¶13-200
inability to pay debts ¶13-276
investigation at Minister's direction ¶13-278
just and equitable ¶13-280
legal process ¶13-525
liquidator ¶13-300
— appointment by court ¶13-330
— removal ¶13-340
— remuneration ¶13-350
payment of preliminary costs by the petitioner ¶13-265
petition ¶13-200
— contributory ¶13-210
— creditor ¶13-220
— liquidator ¶13-260
powers of the court on hearing petition ¶13-290
reduction of members ¶13-275
right to inspect ¶13-535
share transfers ¶13-530
Consolidated accounts ¶11-210
Constitution ¶2-050
alteration — see Alteration of constitution
change of number of members ¶3-240
companies having full capacity ¶3-710
constitutional documents ¶3-000
contents ¶3-100; ¶3-220
contract between company and each member ¶3-310
contract between members ¶3-320
effect on third party ¶3-340
enforcing members’ rights ¶3-330
formation of contractual relationships ¶3-300
indoor management rule
— doctrine of constructive notice ¶3-820
— effect ¶3-800
— limitations ¶3-810
objects clauses in practice ¶3-410
objects clauses in the constitution ¶3-400
registration and adoption ¶3-200
required contents for certain companies ¶3-230
status ¶3-200
ultra vires doctrine ¶3-700
Constitutional documents ¶3-000
Contingent creditor ¶13-250
Contracts
express and implied ratification ¶2-220
pre-incorporation ¶2-200
— status ¶2-210
Contributory ¶13-038
absconding ¶13-040
death or bankruptcy ¶13-055
petition ¶13-210
Conversion of status ¶2-300

from public to private ¶2-330
from public to private or private to public ¶2-310
notice of conversion to public company ¶2-320
Corporate disclosures
clarification, confirmation or denial of rumours or reports ¶14-330
immediate disclosure of material information ¶14-310
insider trading ¶14-360
policy ¶14-300
response to unusual market activity ¶14-340
thorough public dissemination ¶14-320
unwarranted promotional disclosure activity ¶14-350
Corporate rescue mechanism

Corporate Voluntary Arrangement ¶15-405
— arrangements coming to an end prematurely ¶15-419
— implementation of proposal ¶15-417
— moratorium ¶15-415
— proposal ¶15-410
— summoning and decisions of meetings ¶15-416
judicial management — see Judicial management
purpose and objectives ¶15-400
Corporate restructuring
reconstruction and amalgamation ¶15-010
right of offeror to buy out ¶15-015
schemes ¶15-000
Corporate veil
lifting
— power of the court ¶1-220
— reasons ¶1-200
— statutory ¶1-210
Corporate Voluntary Arrangement (CVA) ¶15-405

arrangements coming to an end prematurely ¶15-419
meeting of company and creditors ¶9-645
moratorium ¶15-415
proposal ¶15-410
— implementation ¶15-417
summoning and decisions of meetings ¶15-416
Creditors
contingent or prospective ¶13-250
judgment creditor ¶13-230
notice of meeting ¶9-640
petition ¶13-220
secured ¶13-240
Creditors’ voluntary winding up ¶13-020; ¶13-130

conversion ¶13-123
distinction to members’ voluntary winding up ¶13-100
liquidators ¶13-130
meeting of creditors ¶13-130
meeting of the company ¶13-130
property and proceedings ¶13-130
D
Damages
director's breach of duty ¶6-150
Debenture stock ¶12-110
Debentures
bearer ¶12-110
debenture stock ¶12-110
general nature ¶12-100
perpetual ¶12-110
power to issue or re-issue ¶12-020
private
— nature ¶12-300
register of holders ¶12-130
registered debentures ¶12-110
statutory requirements ¶12-120
trustee for debenture holders
— appointment requirements of trustee corporation ¶12-150
— compulsory covenants in trust deed ¶12-170
— duties ¶12-200
— retirement requirements ¶12-160
Debts and liabilities

antecedent transactions ¶13-615
charged property ¶13-610
disclaimer by liquidator ¶13-630
effect of disclaimer ¶13-640
exceptions to fraudulent disposition ¶13-625
person injured by disclaimer ¶13-650
priority of payment ¶13-600
property available for distribution ¶13-605
rescission of contract ¶13-647
time limit for disclaiming ¶13-635
undue preferences ¶13-620
when disclaimer not permitted ¶13-645
Deceased joint-holder ¶9-070
Deceased legal personal representative ¶9-080
Deceased shareholders ¶9-050

transmission of shares ¶9-060
Definitions
a member of the director's family ¶5-140
a serious offence involving fraud or ¶11-600
dishonesty
accounts ¶11-000
acquirer ¶15-210
acquiring effective control ¶15-210
agreement, arrangement or understanding ¶15-210
allotment ¶4-200; ¶4-210
amalgamation ¶15-000
arrangement ¶15-000; ¶15-100
associated corporation ¶15-210
business judgment ¶6-020
carrying on business ¶1-430
code ¶15-210
company ¶1-100; ¶15-100; ¶15-
210
company having a share capital ¶1-100
company number ¶8-740
company officer ¶5-000
complainant ¶10-010
compromise ¶15-000
consolidated accounts ¶11-210
control ¶15-210
debentures ¶12-100
director ¶5-010; ¶6-000
dissenting shareholder ¶15-210
exempt disposition ¶13-335; ¶13-400
exempt private company ¶1-300
expert ¶15-210
financial year ¶11-000
foreign company ¶1-400
group of companies ¶11-210
identification ¶5-060
inability to pay debts ¶13-276
infant ¶9-030
insider ¶14-360
the interests of the members as a whole ¶13-277
issue ¶4-200
list of shareholders or members ¶1-410; ¶8-720
listing ¶14-000
manager ¶5-040; ¶9-410
managing director ¶5-000
member ¶9-000
minutes ¶9-400
necessary ¶13-410
nominee ¶9-645; ¶15-400
non-cash asset ¶6-700
offeree ¶15-210
offeror ¶15-210
officer ¶15-210
participatory interests ¶8-400
partnership ¶1-120
persons acting in concert ¶15-210
private company ¶15-210
prospectus ¶14-250
public company ¶1-350; ¶15-210
quorum ¶9-500
reconstruction ¶15-000
related ¶15-210
share ¶4-030; ¶15-210
shareholder ¶15-210
substantial holder ¶8-347
take-over ¶15-210
take-over offer ¶15-210; ¶15-214
transferee company ¶15-100
transferor company ¶15-100
ultimate holding company ¶1-360
voluntary arrangement ¶9-645; ¶15-400
voting shares ¶15-210
wholly-owned subsidiary ¶1-360
Deregistration of a company — see Strike off
Derivative actions
minority shareholders ¶10-230
Directors
alternate or substitute ¶5-030
— appointment ¶5-120
appointment ¶5-100
associate ¶5-000
company officers ¶5-000
definition ¶5-010
directors’ report
directors’ statement ¶11-330
disclosures — see Directors’ disclosures
disqualification ¶5-141
— conviction for certain offences ¶5-430
— relief ¶5-450
— statutory framework ¶5-400
— types of offences ¶5-440
— undischarged bankrupts ¶5-410
— unfit directors of insolvent companies ¶5-420
duties and liabilities ¶5-070;
¶5-080
— contract of a one director company ¶6-900
— disclosure requirements ¶6-300–
6-350
— duties in financial reporting ¶11-100
— duties owed by directors ¶6-000
— duty of care ¶6-020
— duty to make disclosure ¶6-410
— fiduciary duty ¶6-030;
¶6-035
— insider trading ¶6-045
— loans to directors and connected persons ¶6-600–
6-650
— nature of fiduciary duty ¶6-040
— property arrangements ¶6-700–
6-720
— register of directors’ shareholdings ¶6-400
— relief from liability for breach of duty ¶6-200–
6-220
— remedies for director's breach of duty ¶6-100–
6-150
— remuneration and fees ¶6-500–
6-530
— service contract ¶6-800–
6-820
— statutory duty ¶6-010
— take-overs ¶15-254
financial statements, preparation ¶9-320
first directors ¶5-110
general meetings
— attendance ¶9-310
— duty to call meetings ¶9-330
management of company affairs
— board meetings ¶7-100–
7-190
— division of powers ¶7-000–
7-030
— duties of the company secretary ¶7-300–
7-360
— importance of record of minutes and resolutions ¶7-195–
7-199
managing ¶5-000
nominee ¶5-020
payments for loss of office
— disclosure and approval of members ¶5-300
— payments not requiring approval ¶5-310
persons connected ¶5-140
powers ¶5-070;
¶13-510
register of shareholdings ¶5-061;
¶8-320
retirement, re-election and vacation of office — see
Retirement, re-election and vacation of office of director
shareholding qualification ¶5-150
statement by director ¶5-142
statutory declaration ¶2-120
unjust and unfair ¶13-277
winding up
— unlimited liability ¶13-050
Directors’ appointment ¶5-100
alternate or substitute directors ¶5-120
disqualification ¶5-141
first directors ¶5-110
persons connected ¶5-140
shareholding qualification ¶5-150
statement by director ¶5-142
Directors’ disclosures
disclosure of shares interest to the SC ¶14-610
substantial shareholdings ¶14-600
Directors’ report
contents ¶11-320
Directors’ statement ¶11-330
Disclosure
company's name ¶2-450
conflict of interest, proposed contracts and property ¶6-330
contracts with the company ¶6-310
corporate
— clarification, confirmation or denial of rumours or reports ¶14-
330
— immediate disclosure of material information ¶14-
310
— insider trading ¶14-
360
— policy ¶14-
300
— response to unusual market activity ¶14-
340
— thorough public dissemination ¶14-
320
— unwarranted promotional disclosure activity ¶14-
350
dealing in shares ¶6-340
directors
— disclosure of shares interest to the SC ¶14-
610
— substantial shareholdings disclosure ¶14-
600
effect of non-disclosure of conflict of interest ¶6-350
periodic disclosure obligations
— quarterly report ¶14-
650
— submission of annual audited accounts and annual ¶14-
reports 660
— announcement on corporate proposals ¶14-
410
— dealings in quoted securities ¶14-
420
— immediate announcements to the exchange ¶14-
400
— procedures for securities dealings during closed period ¶14-
430
statutory obligations ¶6-320
Disqualification
directors ¶5-141
— conviction for certain offences ¶5-430
— relief ¶5-450
— statutory framework ¶5-400
— types of offences ¶5-440
— undischarged bankrupts ¶5-410
— unfit directors of insolvent companies ¶5-420
Distribution
compulsory winding up
— adjusting rights of contributories ¶13-710
— when constitution exclude principle of equity ¶13-730
— whether amount raised by call part of assets ¶13-720
voluntary winding up
— arrears in preferential dividends ¶13-770
— presumption of equality ¶13-760
— property of company ¶13-750
Dividends
constitution and dividends ¶4-830
entitlement ¶4-810
form of payment ¶4-820
generally ¶4-800
interim and final dividends ¶4-830
payment of dividend from profits available ¶4-840
Division of powers
between directors and general meeting ¶7-000
directors’ power ¶7-010
power to delegate ¶7-020
shareholders have restricted powers of administration ¶7-030
Doctrine of constructive notice ¶3-820
Dormant companies
audit exemption requirements ¶11-112
Duties
company secretary — see Secretary
directors
— duty of care ¶6-020
— duty of directors to make disclosure ¶6-410
— fiduciary duty ¶6-030
— fiduciary duty is owed ¶6-035
— insider trading ¶6-045
— nature of fiduciary duty ¶6-040
— owed by directors ¶6-000
— statutory duty ¶6-010
liquidators — see Liquidators
receiver or receiver and manager
— duty to inform Registrar of cessation of office ¶12-815
— duty to lodge accounts ¶12-810
relief from liability for breach of duty ¶6-200
— ratification ¶6-220
— statutory relief ¶6-210
remedies for breach of duty ¶6-100
— account of profits ¶6-140
— damages ¶6-150
— injunction ¶6-110
— rescission of contracts ¶6-130
— restoration of company property ¶6-120
trustee for debenture holders ¶12-200
Effect of constitution
alteration ¶3-350
contract between members ¶3-320
contract between the company each member ¶3-310
effect on third party ¶3-340
enforcing members’ rights ¶3-330
formation of contractual relationships ¶3-300
Effects of winding up
disposal of property ¶13-515
implications ¶13-500
Employees’ shares ¶4-155
Exempt private companies ¶1-340

certificate ¶11-350
definition ¶1-300
lodgement of certificate in lieu of financial statements ¶9-320
Extraordinary general meeting (EGM) ¶9-300
F
Fiduciary duty
directors ¶6-030; ¶6-035
— bribes and other undisclosed benefits ¶6-040
— duty of good faith ¶6-040
— duty to avoid conflict of interest ¶6-040
— duty to retain discretion ¶6-040
— exercise of powers for proper purposes ¶6-040
— misuse of company's funds ¶6-040
— nature ¶6-040
— profiting from the position ¶6-040
— responsibility for actions of delegatee ¶6-040
— taking up corporate opportunity ¶6-040
— using confidential information ¶6-040
senior officers ¶6-040
Financial assistance ¶4-920
Financial institutions
accounting obligations ¶11-110
Financial statements
approved by the board ¶11-330
compliance with approved accounting standards ¶11-140
general requirements ¶11-120
Financial year ¶11-200
Fixed charges ¶12-360

Floating charges ¶12-370

charged property ¶13-610
Foreign companies
accounting requirements ¶8-770
carrying on business in Malaysia, definition ¶1-430
cessation of business ¶8-810
changes or alterations of documents ¶8-760
definition ¶1-400
law governing ¶1-440
liability of agents ¶1-420
lodgement of annual return ¶8-780
name and publication ¶1-420; ¶8-740
power to hold immovable property ¶8-800
prohibition on carrying on a business ¶8-710
provisions ¶8-700
registration ¶1-410; ¶8-720
requirement to have agent ¶8-730
requirement to have registered office ¶8-750
service of notice ¶8-790
Formation of a new company

company name
— application ¶2-030
— approval ¶2-040
constitution ¶2-050
— application ¶2-010
notice of registration (NOR) ¶2-080
procedure and secretarial practice ¶2-020
G
General meetings (GMs) ¶9-300; ¶9-330
appointment of scrutineers ¶9-310
attendance
— auditors ¶11-620
— directors ¶9-310
Chairman to call the meeting to order ¶9-310
closure ¶9-310
notification of members’ meeting ¶9-610
notification to stock exchange ¶9-310
proposing and seconding ¶9-310
proxies ¶9-310
registration of attendance ¶9-310
voting
— by show of hands ¶9-310
— on a poll ¶9-310
Guarantor corporation
obligation to furnish information ¶12-260
H
Holding company ¶1-360
auditor ¶11-610
ultimate ¶1-360
Hostile take-over ¶15-214
I
Incorporation
commencement of business
— prospectus has already been issued ¶2-130
— prospectus has not been issued ¶2-140
— starting business ¶2-100
— statement in lieu of prospectus ¶2-110
— statutory declaration by secretary or director ¶2-120
company names
— common law remedy in name clashes ¶2-410
— difference between change of name and change of status ¶2-420
— disclosure ¶2-450
— effect on identity ¶2-440
— notice and resolution ¶2-430
— refusal of Registrar to register name ¶2-400
company seal ¶2-500
— documents requiring seal ¶2-510
— share sealing register ¶2-520
— types ¶2-510
conversion of status ¶2-300
— from public to private ¶2-330
— from public to private or private to public ¶2-310
— notice of conversion to public company ¶2-320
formation of a new company ¶2-000
— application for company name ¶2-030
— application for incorporation ¶2-010
— approval of company name ¶2-040
— constitution ¶2-050
— notice of registration (NOR) ¶2-080
— procedure and secretarial practice ¶2-020
— registration ¶2-090
pre-incorporation contracts ¶2-200
— express and implied ratification ¶2-220
— status ¶2-210
Independent advice circular ¶15-234
Index of members ¶8-210

right of member to inspect ¶8-230
Indoor management rule

doctrine of constructive notice ¶3-820
effect ¶3-800
limitations ¶3-810
Infant shareholders ¶9-030

Injunction ¶6-110
Insider trading ¶14-360

listed company director ¶6-045
Interim liquidator ¶13-034
Investment scheme ¶8-400
J
Judgment creditor ¶13-230
Judicial management ¶15-500

application ¶15-520
— effect ¶15-530
application of provisions of winding up of a company ¶15-700
committee of creditors ¶15-620
company's statement of affairs ¶15-590
delivery and seizure of property ¶15-670
duty to co-operate with judicial manager ¶15-680
inquiry into company's dealings ¶15-690
judicial manager
— agency and liability for contracts ¶15-560
— duty to apply for discharge of order ¶15-640
— duty to manage company's affairs ¶15-630
— information to be given ¶15-580
— powers and duties ¶15-550
— vacancy and release ¶15-570
order
— duration and extension ¶15-540
— effect ¶15-530
proposals
— consideration by creditors’ meeting ¶15-610
— statement ¶15-600
protection of interests of creditors and members ¶15-650
undue preference ¶15-660
Judicial manager ¶15-510

information to be given ¶15-580
powers and duties ¶15-550
— agency and liability for contracts ¶15-560
— duty to apply for discharge of order ¶15-640
— duty to manage company's affairs ¶15-630
— power to deal with charged property ¶15-550
vacancy and release ¶15-570
L
LEAP Market ¶14-200
Liabilities
relief for breach of duty ¶6-200
— ratification ¶6-220
— statutory relief ¶6-210
trustees for debenture holders ¶12-210
Limited company, characteristics

company may contract with shareholders ¶1-120
control by shareholders ¶1-120
financing the business ¶1-120
limited liability of shareholders ¶1-120
no liability for acts shareholders ¶1-120
perpetual succession ¶1-120
transferability of shares ¶1-120
Limited Liability Partnership (LLP) ¶1-150
Liquidators — see also Powers of liquidators

appointment by court ¶13-330
consent to act as liquidator ¶13-320
creditors’ voluntary winding up ¶13-130
disclaimer ¶13-630
duty to call for creditors’ meeting in an insolvency ¶13-345
duty to maintain impartially ¶13-362
exercise of skill ¶13-364
fiduciary duty ¶13-360
general functions ¶13-370
interim ¶13-034
legislative framework ¶13-310
may seek court's assistance ¶13-366
members’ voluntary winding up
— power to fill vacancy in office ¶13-342
pay moneys received into bank account ¶13-370
petition ¶13-260
powers — see Powers of liquidators
removal ¶13-340
remuneration ¶13-350
status ¶13-300
statutory functions ¶13-375
winding up
— qualification ¶13-032
Loans
connected persons ¶6-630
— permitted ¶6-640
directors ¶6-600
— non-application ¶6-621
permitted directors ¶6-610
unapproved loans ¶6-620
unlawful loan made ¶6-650
M
Main Market ¶14-200
pre-requisites for listing ¶14-230
Maintenance of capital
confirmation by court ¶4-950
creditors entitled to object to reduction ¶4-960
financial assistance ¶4-920
general principles ¶4-910
liability of members on reduced shares ¶4-970
reduction of capital ¶4-930
reductions of capital without court order ¶4-940
return of assets ¶4-930
unlisted company dealing in its own shares ¶4-900
Malaysian Financial Reporting Standards (MFRS) ¶11-140
Malaysian Private Entities Reporting Standard ¶11-140

(MPERS)
Malaysian stock exchange ¶14-000

Bursa Malaysia Berhad ¶14-010
regulatory functions of Bursa Malaysia ¶14-020
responsibilities of Bursa Malaysia ¶14-030
securities commission ¶14-030
Managers ¶5-040
duties and powers ¶5-070
liability ¶5-080
Managing director ¶5-000

Mandatory offer ¶15-214; ¶15-222
Members’ voluntary winding up ¶13-020; ¶13-

120
conversion to creditors’ voluntary winding up ¶13-123
distinction to creditors’ voluntary winding up ¶13-100
liquidators
— appointment ¶13-120
— duty to call for creditors’ meeting in an ¶13-345
insolvency
Memorandum of association
contents of the constitution ¶3-100
Mergers ¶14-750
Minority protection
common law
— exceptions to the rule in Foss v Harbottle ¶10-110
— fraud on the minority ¶10-120
— rule in Foss v Harbottle ¶10-100
— wrongdoers in control ¶10-120
concept of locus standi ¶10-000
just and equitable winding up
— application of remedy ¶10-400
— grounds ¶10-410
modes of action against company
— derivative ¶10-230
— different forms ¶10-200
— personal ¶10-210
— power of the court to make order ¶10-250
— representative ¶10-220
— security for costs ¶10-240
principle of majority rule ¶10-000
remedies available to individual and minority shareholders ¶10-010
statutory protection against oppression
— construction of statutory remedy ¶10-310
— director may be added as a party to oppression ¶10-323
— forms of relief ¶10-330
— oppression and negligence of directors ¶10-320
— scope ¶10-300
— valuation of shares ¶10-340
Minutes
details of decisions provided by a sole member ¶7-199
director's meeting ¶7-170
generally ¶9-400
inspection of minute books ¶7-195; ¶9-430
minutes as evidence ¶7-197; ¶9-420
N
Nature of companies
characteristics ¶1-100
co-operative societies ¶1-140
Limited Liability Partnership (LLP) ¶1-150
partnership ¶1-120
separate legal entity ¶1-110
sole proprietorship ¶1-130
Nominee directors ¶5-020

fees ¶6-510
Non-voting shares ¶4-150
Notice of registration (NOR) ¶2-080
Notices of meeting ¶9-610

contents ¶9-630
fair and reasonable ¶9-600
meeting of company and creditors in voluntary arrangement ¶9-645
notice of creditors’ meeting ¶9-640
notification of publication on website ¶9-610
persons entitled to receive notice ¶9-620
O
Objects and powers
clauses in practice ¶3-410
clauses in the constitution ¶3-400
Offences
conviction ¶5-430
types ¶5-440
Offer document ¶15-234
Offeree board circular ¶15-234
Official Receiver ¶13-034
Ordinary resolution ¶9-710
Ordinary shares ¶4-120
P
Partial offer ¶15-214
Partnership ¶1-120
Payments for loss of office

directors
— disclosure to and approval of members ¶5-300
— payments not requiring approval ¶5-310
Periodic disclosure obligations

quarterly report ¶14-650
submission of annual audited accounts and annual report ¶14-660
Perpetual debentures ¶12-110

Personal action
Powers of liquidators
access to company books and books kept by ¶13-470
liquidator
borrowing on security ¶13-455
bringing and defending legal proceedings ¶13-435
carrying on business ¶13-410
common law ¶13-400
compromising and making creditor arrangements ¶13-425
compromising and recovering debts ¶13-430
convening meetings ¶13-460
drawing and accepting cheques ¶13-450
executing documents ¶13-445
exempt disposition ¶13-335; ¶13-
400
incidental powers ¶13-475
making calls on contributories ¶13-415
obtaining delivery of property ¶13-465
priority payments in full ¶13-420
restraint of exercise of power ¶13-405
selling company property ¶13-440
source ¶13-400
statutory ¶13-400
Pre-incorporation contracts — see Contracts

Preference shares ¶4-130
convertible ¶4-138
cumulative and non-cumulative ¶4-134
participating ¶4-132
redeemable ¶4-136
Preferential creditors
priority of payment of debts ¶13-600
Private companies ¶1-330

appointment of auditors ¶11-553
conversion to public ¶2-310
general meeting ¶9-300
notice of members’ meetings ¶9-610
provisions ¶3-630
removal of directors ¶5-270
written resolutions ¶9-740
Private debentures — see Debentures
Profit and loss account ¶11-100; ¶11-150
Property arrangement
between directors and their companies
— contract of a one director company ¶6-900
— effect of prohibited arrangements ¶6-720
— exempted substantial property transaction ¶6-710
— service contract ¶6-800–6-820
Prospective creditor ¶13-250
Prospectus ¶8-400; ¶14-250

applicability and lodgement ¶14-260
form and content ¶14-290
Proxies
voting
— on a show of hands ¶9-180; ¶9-310
— on poll ¶9-180; ¶9-310
Public companies ¶1-350

annual general meeting ¶9-320
appointment of auditors ¶11-555
appointment of directors ¶5-130
conversion to private ¶2-310; ¶2-330
director's service contract ¶6-800
— copy to be available for inspection ¶6-810
— right of member to inspect and request copy ¶6-820
general meeting ¶9-300
notice of conversion ¶2-320
notice of members’ meetings ¶9-610
removal of directors ¶5-230
— by ordinary resolution or special notice ¶5-232
restrictions as to allotment of shares ¶4-250
rights of resigning auditor ¶11-580
Public debenture ¶12-010
Q
Quorum
definition ¶9-500
R
Ratification
Receiver and manager ¶12-540

appointment by the court ¶12-510; ¶12-520
appointment under an instrument ¶12-510; ¶12-530
duties
— inform Registrar of cessation of office ¶12-815
— lodge accounts ¶12-810
powers in winding up ¶12-840
priority payment ¶12-820
role ¶12-560
scope of liability ¶12-830
vacancy of office ¶12-900
Receivers ¶12-540; ¶12-550

appointment by the court ¶12-510; ¶12-520
— determination of board's powers ¶12-720
— discharge of staff ¶12-710
— general position ¶12-700
— prior contracts are not terminated ¶12-730
appointment out of court
— date of appointment ¶12-755
— diminution of directors’ powers ¶12-765
— employment with company is not terminated ¶12-760
— general position ¶12-750
— prior contracts are not terminated ¶12-770
— set-off of mutual debts ¶12-780
appointment under an instrument ¶12-510; ¶12-530
duties
— inform Registrar of cessation of office ¶12-815
— lodge accounts ¶12-810
functions ¶12-500
powers in winding up ¶12-840
priority payment ¶12-820
process of appointment
— eligibility for appointment ¶12-600
— general notice ¶12-620
— notification of appointment ¶12-610
receive statement of affairs and information ¶12-800
role ¶12-550
scope of liability ¶12-830
vacancy of office ¶12-900
Receivership — see Receivers; Receiver and manager
Reconstruction ¶15-010
definition ¶15-000
Recreational membership scheme ¶8-400
Register of charges ¶8-380
Register of debenture holders ¶8-360; ¶12-130
Register of directors, managers and secretaries ¶8-300
Register of directors’ shareholding ¶8-320
Register of interest holders ¶8-400
Register of members ¶8-200

closing ¶8-220
rectification by court ¶8-240
right of member to inspect ¶8-230
Register of substantial shareholders ¶8-340

company to keep and maintain ¶8-349
failure to notify ¶8-345
required notifications ¶8-343
substantial holder, definition ¶8-347
Registered debentures ¶12-110
Registration
attendance at general meeting ¶9-310
charges — see Charges
directors, managers and secretaries, register of ¶5-060
firms of auditors ¶11-532
foreign companies ¶1-410; ¶8-720
resolutions ¶9-750
transmission of shares or debentures ¶9-060
Registration of charges — see Charges
Remedies
available to individual and minority shareholders ¶10-010
— account of profits ¶6-140
— damages ¶6-150
— injunction ¶6-110
— rescission of contracts ¶6-130
— restoration of company property ¶6-120
Remuneration
auditors ¶11-630
company secretary ¶7-440
fees of nominee or trustee directors ¶6-510
quantum meruit basis ¶6-520
regulation of directors’ remuneration and fees ¶6-500
tax-free payments to directors ¶6-530
Representative actions
Rescission of contracts ¶6-130
Resolutions
ordinary ¶9-710
registration and lodgement of notice ¶9-750
special ¶9-720
special notice ¶9-730
types ¶9-700
written resolutions of private companies ¶9-740
Retirement, re-election and vacation of office of director ¶5-200

filing of vacancy ¶5-260
removal by ordinary resolution or by special notice ¶5-232
removal of directors
— obstacles ¶5-250
— private companies ¶5-270
right of director to be heard ¶5-240
rules for retirement and re-election ¶5-210
sole director of a company ¶5-221
vacation of office ¶5-220
Reverse take-overs ¶15-242
S
Scrutineers
appointment ¶9-310
Secretary
appointment ¶5-050; ¶7-400
code of ethics ¶7-500
disqualification ¶5-050; ¶7-380
duties ¶5-070; ¶7-300
— commonly accepted ¶7-310
— governance advisory role to the board ¶7-340
— limitations on administrative authority ¶7-350
— owed to the board of directors ¶7-330
— owed to third parties ¶7-330
— secretarial service being outsourced ¶7-360
— specifically prescribed ¶7-320
exclusion from liability ¶7-450
legal liabilities ¶7-300
liability ¶5-080
prohibition to act in dual capacity ¶5-050
registration ¶5-060; ¶7-390
— attendance at general meeting ¶9-310
removal and dismissal ¶5-050; ¶7-430
resignation and vacation of position ¶5-050; ¶7-420
statutory declaration ¶2-120
Secured creditors ¶13-240

rights and duties ¶13-600
Securities Commission (SC)

disclosure of shares interest ¶14-610
exempted categories of transactions or securities ¶14-270
responsibilities ¶14-030
Separate legal entity ¶1-110
Service contract
public company director's ¶6-800
— copy to be available for inspection ¶6-810
— right of member to inspect and request copy ¶6-820
Share capital
alteration ¶3-560
reduction ¶3-570
— by court ¶3-570
— by private or public company ¶3-570
structure ¶4-010
Share certificates ¶4-500

contents ¶4-530
estoppel effect ¶4-540
issuance ¶4-510
numbering of shares ¶4-520
prohibition to issue bearer's share warrants ¶4-545
Share premium accounts ¶4-340

alternative treatment ¶4-350
Share sealing register ¶2-520
Shareholders
deceased ¶9-050
duties and rights
— attend and participate in general meetings ¶9-105
— obligation to pay calls on shares ¶9-210
— power to require circulation of written resolution ¶9-125
— right to appoint proxies ¶9-180
— right to call a meeting ¶9-150
— right to requisite ¶9-120
— right to vote ¶9-190
— rights at meetings ¶9-170
— rights for management review ¶9-175
— role ¶9-100
infant ¶9-030
substantial ¶9-040
Shareholders and meetings

company meetings — see Company meetings
decisions of meeting ¶9-
645
duties and rights
— attend and participate in general meetings ¶9-
105
— obligation to pay calls on shares ¶9-
210
— power to require circulation of written resolution ¶9-
125
— right to appoint proxies ¶9-
180
— right to call a meeting ¶9-
150
— right to requisite ¶9-
120
— right to vote ¶9-
190
— rights at meetings ¶9-
170
— rights for management review ¶9-
175
— role ¶9-
100
minutes — see Minutes
notices of meeting ¶9-
610
— contents ¶9-
630
— fair and reasonable ¶9-
600
— meeting of company and creditors in voluntary ¶9-
arrangement 645
— notice of creditors’ meeting ¶9-
640
— persons entitled to receive notice ¶9-
620
quorum
— definition ¶9-
500
— requirements ¶9-
510
resolutions
— ordinary ¶9-
710
— registration and lodgement of notice ¶9-
750
— special ¶9-
720
— special notice ¶9-
730
— types ¶9-
700
— written resolutions of private companies ¶9-
740
shareholders and members — see Shareholders and
members
summoning of meetings ¶9-
645
Shareholders and members

company is not a member of itself ¶9-010
deceased joint-holder ¶9-070
deceased legal personal representative ¶9-080
deceased shareholders ¶9-050
essential requirements of a company ¶9-020
infant shareholders ¶9-030
limitation of trustee, executor or administrator of estate ¶9-065
member, definition ¶9-000
restrictions on membership ¶9-025
substantial shareholders ¶9-040
transmission of shares ¶9-060
Shares
allotment and issue ¶4-
200
— allotment, definition ¶4-
210
— contract arising from application for shares ¶4-
220
— effect of allotment ¶4-
230
— option to take up shares ¶4-
240
250
alteration of class rights ¶4-
600
— minority protection ¶4-
610
certificates ¶4-
500
— contents ¶4-
530
— estoppel effect ¶4-
540
— issuance ¶4-
510
— numbering of shares ¶4-
520
— prohibition to issue bearer's share warrants ¶4-
545
classes ¶4-
100
— class rights ¶4-
110
— convertible preference shares ¶4-

138
— cumulative and non-cumulative preference shares ¶4-
134
— employees’ shares ¶4-
155
— non-voting shares ¶4-
150
— ordinary shares ¶4-
120
— participating preference shares ¶4-
132
— preference shares ¶4-
130
— redeemable preference shares ¶4-
136
— variation of class rights ¶4-
160
nature ¶4-
000
— definition of a share ¶4-
030
— nominal and issued capital under no par value ¶4-
020
— rights and privileges of stockholders ¶4-
045
— rights conferred on shareholders ¶4-
050
— share capital structure ¶4-
010
— stock ¶4-
040
payment ¶4-
300
— alternative treatment of share premium accounts ¶4-
350
— calls on shares ¶4-
360
— consideration as payment for subscription shares ¶4-
320
— effect of cancellation of share “buy back” ¶4-
420
— existing share premium account ¶4-
340
— financial assistance in dealing with its own shares ¶4-
400
— financial assistance not exceeding 10% of shareholders’ ¶4-
funds 390
— forfeiture of shares ¶4-
380
— general prohibition of commissions, discounts and ¶4-
allowances 335
— lien on shares ¶4-
370
— purchase of its own shares by listed company ¶4-
410
— register of options ¶4-
300
— shares at market or current price ¶4-
330
— underwriting an initial public offer ¶4-

430
register of directors’ shareholdings ¶6-
400
transfer
— effect of certification ¶4-
770
— instruments ¶4-
730
— loss or destruction of share certificates ¶4-
780
— notice of refusal ¶4-
750
— registration and certification ¶4-
740
710
— restrictions imposed by constitution ¶4-
720
— right to transfer ¶4-
700
— stop-notice and charging order ¶4-
760
Sole proprietorship ¶1-130

Special resolution ¶9-720
lodgement of notice ¶9-750
voluntary winding up ¶13-110
Statement in lieu of prospectus ¶2-110
Statutory declaration ¶2-120; ¶11-340

failure to file ¶13-272
Statutory duty
directors ¶6-010
Statutory protection
construction of statutory remedy ¶10-310
director may be added as a party to oppression ¶10-323
forms of relief ¶10-330
oppression and negligence of directors ¶10-320
scope ¶10-300
valuation of shares ¶10-340
Statutory relief
Stock ¶4-040
Stockholders
rights and privileges ¶4-045
Strike off
deregistration of company
— defunct company ¶13-800
— effect of striking off ¶13-807
— management of assets of dissolved companies ¶13-830
— notice of intention ¶13-805
— objection ¶13-805
— power of Registrar ¶13-800
— reinstatement of a deregistered company ¶13-820
— withdrawal ¶13-805
Subsidiary company ¶1-360
Substantial shareholders ¶9-040

T
Take-over offer
definition ¶15-210; ¶15-214
hostile ¶15-214
mandatory ¶15-214; ¶15-222
partial ¶15-214
voluntary ¶15-214
Take-overs ¶14-750
announcements and notices ¶15-229
compulsory acquisition of shares ¶15-218
definition ¶15-210
directors’ duties and liabilities ¶15-254
legislative framework ¶15-200
offeror and offeree dealings ¶15-226
procedure ¶15-238
reverse take-overs ¶15-242
standard of care and responsibility ¶15-231
take-over offer ¶15-214
2016 Take-over Code and Rules ¶15-203
types of documents and issuance ¶15-234
Threshold-qualified companies
Time-sharing scheme ¶8-400
Trust deed
compulsory covenants ¶12-170
Trustee directors
fees ¶6-510
Trustees
debenture holders
— appointment requirements of trustee corporation ¶12-150
— compulsory covenants in trust deed ¶12-170
— duties ¶12-200
— liabilities ¶12-210
— retirement requirements ¶12-160
liabilities
— limitation ¶9-065
U
Ultimate holding company ¶11-220
definition ¶1-360
Ultra vires
companies having full capacity ¶3-710
doctrine ¶3-700
minority protection ¶10-110
Undischarged bankrupts ¶5-410
Unlimited company ¶1-320

conversion to limited company ¶3-550
Unsecured creditors
rights and duties ¶13-600
V
Vacancy of office
auditors
— removal from office ¶11-570
— resignation from office ¶11-580
directors ¶5-220
liquidator
receiver ¶12-900
single director ¶7-324
Voluntary offer ¶15-214
Voluntary winding up ¶13-000; ¶13-010

creditors ¶13-020; ¶13-130
— conversion ¶13-123
— distinction to members’ voluntary winding up ¶13-100
— right to inspect ¶13-535
differences ¶13-020
distribution
— arrears in preferential dividends ¶13-770
— presumption of equality ¶13-760
— property of company ¶13-750
effect ¶13-500
grounds ¶13-100
liquidator ¶13-300
— removal ¶13-340
— remuneration ¶13-350
members ¶13-020; ¶13-120
— appointment of liquidators ¶13-120
— distinction to creditors’ voluntary winding up ¶13-100
particulars relating to resolution ¶13-110
Voting ¶9-350
board meeting ¶7-160
by show of hands ¶9-310
on a poll ¶9-190; ¶9-310
vote by proxy ¶9-180; ¶9-310
W
Wholly-owned subsidiary
definition ¶1-360
Winding up
compulsory — see Compulsory winding up
directors
— unlimited liability ¶13-050
duties and functions of liquidators — see
Liquidators
effects — see Effects of winding up
mechanics ¶13-000
modes ¶13-000; ¶13-
010
parties ¶13-030
— committee of inspection ¶13-060
— contributory ¶13-038
— creditors ¶13-036
— liquidator ¶13-032
— official receiver ¶13-034
voluntary ¶13-000; ¶13-
010
— creditors ¶13-020; ¶13-
130
— differences ¶13-020
— grounds ¶13-100
— members ¶13-020; ¶13-
120
— particulars relating to resolution ¶13-110
Written resolutions
circulation
— date ¶9-740
— hard copy or electronic form ¶9-740
— members’ power to require ¶9-740
— proposed by directors ¶9-740
— proposed by members ¶9-740
eligibility of members to receive ¶9-740
period of agreeing ¶9-740
procedure for signifying agreement ¶9-740
procedure to appoint auditor ¶11-560
sending of documents by electronic means ¶9-740
Zero-revenue companies

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© 2018 by Commerce Clearing House (Malaysia)

ABOUT WOLTERS KLUWER

ABOUT THE AUTHOR

He has also contributed numerous articles in Perspectives on

FOREWORD FROM THE ACADEMIA

DEVELOPMENT OF MALAYSIAN COMPANY

¶1-010 Application of precedents from the UK and

¶1-020 Application of English law in commercial matters

According to the Oxford English Dictionary, a “company” is a “body of

• a common purpose among the members of the group which would

• Arising from the concept of separate personality mentioned above,

The CA 2016 defines “company” to mean a company incorporated

¶1-110 Separate legal entity

(b) To acquire, own, hold, develop or dispose of any property; and

(c) To do any act which it may do or, to enter into transactions.

• the partners cannot enjoy limited liability; and

• a partnership, like a sole proprietorship, does not constitute a

Note, however, that a partnership may not necessarily be limited to 20

¶1-130 Sole proprietorship

¶1-140 Co-operative societies

¶1-150 Limited liability partnership

• entrepreneurs and businessmen a more structured business

• An LLP has perpetual succession, ie its existence continues

• An LLP has unlimited capability and is capable of suing and being

• The partners in an LLP have a limited liability. Unlike in

• keeping and maintaining registers and records of the LLP; and

• ensuring publication of names of the LLP in accordance with the

A compliance officer is personally liable to all penalties including

• certified copy of its charter or instrument defining its constitution, if

• voluntary winding up; and

• striking off by Registrar.

Registration of LLP can only be done by using MyLLP found in CCM’s

LIFTING OF THE CORPORATE VEIL

Under certain circumstances, the corporate form will not always

¶1-210 Statutory lifting of the corporate veil

• If in the course of a winding up, it appears that an officer of a

• Every person who, is or was an officer or a contributory of a

(b) has pawned, pledged or disposed of any property of the

• The corporate veil is consistently lifted in the area of taxation. For

¶1-220 Power of the court in lifting the corporate veil

Companies may be classified in various ways. Section 10(1) of CA

(b) a company limited by guarantee;

(c) an unlimited company.

Cutting across this classification is the equally important distinction

¶1-305 Company limited by shares

¶1-310 Company limited by guarantee

(b) the objects of the company;

(c) the capacity, rights, powers and privileges of the company;

(d) the number of members with which the company proposed to be

(e) matters contemplated by this Act to be included in the

(f) any other matters as the company wishes to include in its

Subsection (4) states that any provision in the constitution of a

¶1-315 Company limited by guarantee without share

¶1-320 Unlimited company

¶1-330 Private companies

(c) prohibits offer to the public of any shares or debentures of the

By virtue of the abovementioned conditions, a private company shall

¶1-340 Exempt private companies