Key changes from the
Companies Act 1965 vs Companies Act 2016

Incorporation of Companies

Minimum number of directors

Companies Act 1965

s14 & s122

Private & Public Companies  – A minimum of 2 directors and shareholders to be incorporated.

Companies Act 2016

S9 & 196

Private & Public Companies  – A minimum of 2 directors and shareholders to be incorporated.

Certificate of Incorporation

Companies Act 1965

The certificate of incorporation must be obtained as evidence for incorporation of a company.

Companies Act 2016

Registrar of Companies (‘ROC’) will assign a registration number to the company and issue the Notice of Registration upon compliance of the procedure and payment of the appropriate fee. This Notice of Registration serves as conclusive evidence that the company is duly registered.  A certificate of incorporation is not necessary, however can be obtained by an application by the company and payment of the prescribed fee.

Company Constitution vs Memorandum & Article of Association

Memorandum & Article of Association or Constitution of a Company

Companies Act 1965

Memorandum of Association – Mandatory for each company that defined the capacity of business and type of business activities 

Article of Association – Mandatory for each company as a statutory contract binding between the company and the members

Companies Act 2016

Not required, based on that the Company has unlimited capacity to participate in different business activities without restriction to their initial nature of business. 

 

A company may elect to have or not have a constitution. If the company elects not to have a constitutions, the company is governed by the  Companies Act 2016. If however, the company elects to have a constitution, then company must ensure that within the Company’s constitution, thee power, obligations, duties and rights must comply with the Companies Act. 

Company Administrations and Share Capital

Common seal

Companies Act 1965

A company is required to have a common seal and documents can be signed through execution of a common seal or authorised signatories of the company. 

Companies Act 2016

Not necessary, the documents can be validly executed by the signature of two authorised officers (one of the officer has to be a director of the company). However in the event of a sole director, the documents can be executed in presence of a witness who attest the signature.

Share certificate

Companies Act 1965

A share certificate must be issued within 2 months from allotment or 1 months from transfer of shares. 

Companies Act 2016

A company is not required to issue share certificate unless the shareholders applies for it. The registers of members is sufficient as the prima facie evidence of the titles to the shares. 

No par value

Companies Act 1965

The company must state its authorised share capital, minimum par value and the number of shares issued shall not exceed its authorised share capital. 

Companies Act 2016

All shares issued before or upon the commencement of the Companies Act 2016 shall have no par value. 

Share premium

Companies Act 1965

Share premium is stated separately in the statement of changes in equity 

Companies Act 2016

The share premium account is redundant due to the introduction of no par value. No share premium will be recognised. 

Pre-emptive rights

Companies Act 1965

Any pre-emptive rights provided to shareholders needs to be provided specifically the M&A. 

Companies Act 2016

Subject to the constitution, where a company issues shares that rank equally to existing shares to voting or distribution rights, these shares must first be offered to the existing shareholders in a manner that will maintain the relative voting and distribution rights of the existing shareholders. 

 

This is to protect existing shareholders voting powers. 

Annual Return

Companies Act 1965

Audited financial statements must be lodged with SSM within 6 months from the financial year end. 

Companies Act 2016

Annual return must be lodged within 30 days from the date of anniversary of the date of incorporation of the company. Annual return no longer need to be lodged together with the audited financial statements. 

General Meeting

Annual General Meeting

Companies Act 1965

Public and private company – AGM has to be held every year

Companies Act 2016

Public company – AGM has to be held every year

Private company – Not required, it can be simplified through a written resolutions, with majority of the directors signing their agreements on the resolutions. 

Venue

Companies Act 1965

Shareholders’ meeting can only be held in one venue in Malaysia

Companies Act 2016

Shareholders’ meeting may be held more than 1 venue, using any technologies that allows its shareholders a reasonable opportunity to participate. However the chairman of the meeting must be in Malaysia.

Directors

Definition

Companies Act 1965

– A person occupying the director position

– A person is regarded as director if the directors of a corporation are accustomed to act in accordance to the person’s instruction and directions. 

Companies Act 2016

– A person occupying the director position

-A person is regarded as director if “the majority of directors” of a corporation are accustomed to act in accordance to the person’s instruction and directions. The scope can include shadow directors. 

Declaring dividends

Companies Act 1965

Dividends are only payable out of profits. 

Companies Act 2016

Dividends are payable as long as the company if solvent. The Board is liable to ensure that the Company can meet the solvency test of s112 of CA 2016 (the Board must ensure that the Company can pay its debts 12 months after the dividend distribution). If not, the Board is liable for imprisonment or a significant penalty fine or both. 

Power for allotment of shares

Companies Act 1965

Directors are not allowed to issue shares without prior approval from the shareholders.

Companies Act 2016

The requirements of prior approval of the shareholders is no longer mandatory provided that the shares are issued under the following circumstances:

– allotment of shares in the proportion of the members’ shareholding

– bonus issue of shares in the proportion of the members’ shareholding

– allotment of shares to the promoter of the company that the promoter has agreed to take

 – shares issued as part of acquisition of assets by the company AND that the company has notified the intention to issue the shares 14 days before the date of issue of shares

Sanctions against directors

Companies Act 1965

(i) Maximum fine of RM30,000

(ii) Maximum imprisonment of 5 years

(iii) Both of the above.

Companies Act 2016

(i) Maximum fine of RM3 million

(ii) Maximum imprisonment of 5 years

(iii) Both of the above. 

Insolvency

Corporate rescue mechanism

Companies Act 1965

Shareholders’ meeting may be held more than 1 venue, using any technologies that allows its shareholders a reasonable opportunity to participate. However the chairman of the meeting must be in Malaysia.

Companies Act 2016

(i) Corporate Voluntary Arrangement – binding agreement between the Company with the creditors and shareholders without the need of court approval (Only for private entities)

(ii) Judicial Management – A judicial manager is appointed by the court will prepare and implement a rehabilitation plan for the company without winding up.