LAW485

CHAPTER 2:
Classification Of
Companies
 SOURCES OF MALAYSIAN COMPANY LAW

– Companies Act 2016 (for private and

public companies) – Enforcement
agency: SSM
– Capital Markets and Services Act 2007
(for public company and private
company that offer securities to the
public/investment/unit trust)

LAW485/AIN MARYAM
 A COMPANY
is an association of
persons, existing as a
SEPARATE LEGAL ENTITY
from the owners
(or members).
LAW485/AIN MARYAM
CORPORATION
LEGAL DEFINITION:
➢ S.3(1) Companies Act (CA) 2016– corporation is any
body corporate formed or incorporated in or outside M’sia

▪ Include–foreign company and any ltd. liability

partnership or foreign ltd liability partnership .

▪ Exclude -:
Public authorities, Instrumentalities or agencies of the Govt
of Malaysia or of any State or body corporate not
incorporated for commercial purposes and declared as such
by notice of the Minister in the Gazette;
Corporation sole;
Co-operative societies; and
Trade Unions

LAW485/AIN MARYAM
REGISTERED COMPANIES

➢ Incorporated/registered under the CA

2016.
➢ An artificial legal person – may buy or
sell properties, exercise rights of
ownership and may sign contract by using
its common seal.
➢ Common seal is the signature of the
company.

LAW485/AIN MARYAM
Types of Companies
 Companies in Malaysia are classified according to (i)
liability, or
(ii) private or public status.

(i) By LIABILITY:
 S. 10 Companies Act 2016 - a company may either
be:
 A company limited by shares;
 A company limited by guarantee;
 A company limited by shares and guarantee;
 An unlimited (liability) company.

LAW485/AIN MARYAM
 CLASSIFICATION OF COMPANY

CLASSIFICATION OF COMPANY
ACCORDING
TO LIABILITY OF MEMBERS
S.10

LIMITED UNLIMITED
LIABILITY LIABILITY

LIMITED BY
LIMITED BY LIMITED BY
SHARES AND
SHARES GUARANTEE GUARANTEE
LAW485/AIN MARYAM
COMPANY LIMITED BY SHARES

 S.10(2) -Liability of a member of company will depend on

the shares he holds… whether are fully paid or not. On
winding up, co’s creditors cannot take a member’s personal
assets to pay off corporate liabilities.
 S.25(1) –“Berhad” or “Bhd” as part of its name to indicate
Ltd. Liability
 (i) Private Co. (Sdn.Bhd) (ii) Public Co.(Bhd)
This is to inform the creditors that the liability of the
members are limited and that they can only look to
whatever assets the company has to seek payment of the
company’s debt.
 Most common form of company.
LAW485/AIN MARYAM
COMPANIES LIMITED BY GUARANTEE

➢ S.10(3) - liability of its members limited to such

amount as the members may respectively undertake
to contribute to the assets of the company as
specified in the memorandum association in the
event of its being wound up.
➢ The co. has NO Share Capital. It is supported by
subscriptions of the members.
➢ Non-profit making purposes. This type of company does not
have share capital; e.g. charitable, scientific or religious
organization.
➢ After 1 February 1986 – only in the form of Public
Company.
LAW485/AIN MARYAM
 UNLIMITED COMPANY

 A company formed on the principle of having no limit placed on the

liability of its members’. In winding up, Creditors have access to
the personal property of all members to an unlimited extent if the
company is wound up and has insufficient fund.
 It is not much different from a partnership.
 This company may or may not have a share capital and is rarely
used as a trading company.
 This type of company enjoys the advantage of being a separate legal
entity with two special features;
i. unlike other companies, they are free to return their capital to
their members;
ii. they must have their own Articles of Association (unlike other
companies that may adopt Table A - Fourth Schedule).
LAW485/AIN MARYAM
➢ S.12 – no longer possible to
form such company ( as from
1986)

LAW485/AIN MARYAM
 Classification as Private or Public Companies
COMPANIES DEFINED
AS

PRIVATE COMPANY –
PUBLIC
* Restrict the right to transfer shares. COMPANY
* Limit the number of members to not Other than
more than 50. private company
* Prohibits the invitation or offer of
shares or debentures to public.
* Prohibits the invitation or offer the
public to deposit money with the
company.

Exempt Non-Exempt
LAW485/AIN MARYAM
 PRIVATE COMPANIES - S. 2 CA 2016

Where its Memorandum or Articles:

i. Restrict the right to transfer shares. No prescribed form of
restriction. The articles can state the restrictions, e.g. - giving
right of pre-emption only to other members before shares can be
transferred to other persons, or there is to be no transfer of
shares unless the board of directors approve.
ii. Limit the number of members to not more than 50. If shares
are jointly held they are considered as held by one person.
Employees of the company or its subsidiaries who are not
members are not counted.
iii. Prohibits any invitation or offer to the public to subscribe
for shares in debentures of the company.
iv. Prohibit any invitation to the public to deposit money with
the company.
LAW485/AIN MARYAM
PRIVATE COMPANIES - S. 11(1)

May have a share capital with ltd. or unltd. liability.

May be distinguished from public co in having the word
‘Sendirian’ or the abbreviation ‘Sdn.’ as part of its
name. (If the co is a limited liability co, then this word
should come before the word ‘Bhd.’ e.g. the name
Syarikat X Sdn. Bhd. is a private limited co.)
Can be exempt or non-exempt private co.
Enjoy certain privileges that are not given to public cos.
as they do not seek funds from the public.

LAW485/AIN MARYAM
 Exempt Private Company

 Its characteristics are:

i. Its shares are held by individuals and not companies,

ii. It has a membership of not more than 20 persons,
iii. It is required to prepare a balance sheet and a profit and loss
account for their shareholders, BUT is exempted from
having to file them with the co.’s annual return with the
RoC.
iv. It can also give loans to the directors.

LAW485/AIN MARYAM
PUBLIC COMPANIES
 S.2 - a company other than a private company.
 As this company raises funds from the public, it is subjected to
more regulatory controls than a private company. Must comply
with legislation such as Securities Commission Act 1993 and
Securities Industry Act 1983 in order to protect interest of the
public.
Conversion of Private to Public Companies
 A private company may convert to a public company by
loading a special resolution with the Registrar of
Companies.
 It may also involuntarily become a public company if it
contravenes the restrictions.
 A public company with a share capital may convert to a private
company also by lodging a special resolution.
LAW485/AIN MARYAM
GROUP COMPANIES

Holding and Subsidiary Companies

Holding (H) and Subsidiary(S) are defined by S.4 as:
i. H controls the composition of the BOD of S,
ii. H hold more than half of the voting power of S, or
iii. H holds more than half of the ISK of S;
iv. S is a subsidiary of any other corporation which is in
turn a subsidiary of H.
Ultimate Holding Co. – s.5
Where another co. is a subsidiary of a company (UH), whilst
the UH is not itself a subsidiary of any corporation.
LAW485/AIN MARYAM
 FOREIGN COMPANY

• S.2 : ‘Where the company, corporation , society , association

or other body incorporated outside Malaysia, but which
carries on business in Malaysia or establishes a place
of business in Malaysia…’.
• It is wholly or majority owned (measured in % of shares
held) by non-Malaysians.
• Every foreign company desiring to carry on business in
Malaysia shall register itself as a foreign company under the
CA 2016 .
• A foreign company registered under the CA 2016 is
commonly referred to as a “branch office”.
LAW485/AIN MARYAM
DIFFERENCES BETWEEN THE BUSINESS ORGANIZATIONS
PARTNERSHIP COMPANY
P.A 1961 C.A 2016
Formation ORALLY, IN WRITING OR BY FORMAL PROCESS OF
and CONDUCT INCORPORATION -
dissolution S.14(1)
Liability JOINT LIABILITY CORP. LIABLE, NOT
MEMBERS
Enforcement PARTNERS CAN SUE OR BE CO CAN SUE OR BE SUED
of legal PERSONALLY SUED OR AS IN CO’S NAME
rights AGENT FOR OTHER PARTNERS
Transfer of MAY NOT DO SO EXCEPT PTE CO. –LIMITED
interests WITH CONSENT OF ALL PUB.CO. – FREELY
PARTNERSHIP RANSFERABLE
Management ALL MAY BE INVOLVED BOARD OF DIRECTORS.

Limits on 2 - 20 PTE CO <50

the size PUB CO. – NO LIMIT
Raising of CONTRIBUTION OF CAPITAL PTE. CO – RESTRICTED
capital BY PARTNERS PUB. CO – NO LIMIT OF
MEMBERS
Disclosure NONE PUB.CO – DISCLOSURE
LAW485/AIN MARYAM OF ACCOUNTS
ADVANTAGES OF COMPANIES OVER PARTNERSHIPS
COMPANY PARTNERSHIP

Can sue and be sued in its own Legal action on a partnership

name. generally through its members.

As one legal entity, also owns Assets are generally

the company’s assets. collectively owned by all the
partners.
Has the unique ability to create Can only borrow by charging
floating charges over their on their fixed assets.
current assets to secure a loan.

May have limited liability. Partner’s liability is unlimited.

Has a continuous life until it is Death of a partner is a ground

legally wound up, and does not for dissolving the partnership.
dissolve because of the death
of their member.
LAW485/AIN MARYAM
THANK YOU
END OF CHAPTER 2