Companies Commission of Malaysia proposes to standardise conditions for Companies Limited by Guarantee to omit ‘Berhad’ and to hold land
30 May 2022
On 13 May 2022, the Companies Commission of Malaysia (‘CCM
’) issued the Consultative Document on the Proposed Conditions to be Imposed on Companies Limited by Guarantee under Subsection 45(5) of the Companies Act 2016
(‘the Consultative Document
The Consultative Document seeks public feedback on specific issues
relating to a proposal for the Minister of Domestic Trade and Consumer Affairs (‘Minister
’) to issue regulations to provide standard conditions in a licence to be issued by the Minister to a company limited by guarantee (‘CLBG
’) to omit the word ‘Berhad’ or its abbreviation ‘Bhd’ from its name, and to hold land.
Subsection 45(3) of the Companies Act 2016 (‘the Act’
) permits a CLBG to apply to the Minister for a licence to omit the word ‘Berhad’ or its abbreviation ‘Bhd’ from its name, whilst subsection 45(4) prohibits a CLBG from holding land unless a licence has been obtained from the Minister.
For the purposes of approving licences under subsections 45(3) and 45(4), subsection 45(5) of the Act provides that the Minister may prescribe regulations or impose any conditions as he deems fit.
The CCM observed that under the current practice, all applications for licences under subsections 45(3) and 45(4) are dealt with individually, resulting in different conditions being imposed on different CLBGs in respect of the same type of licence.
STANDARDISING THE LICENCE CONDITIONS
Recommendation 1 : Standardised licence conditions
To eliminate the inconsistencies of different conditions being imposed on the same type of licence, the CCM recommends that regulations be issued pursuant to subsection 45(5) of the Act to provide a set of standard conditions for each type of licence to be issued under subsections 45(3) and 45(4).
As stated in the Consultative Document, the proposal will eliminate the current practice where the same type of licence is subjected to different sets of conditions. A set of uniform conditions would provide clarity, improve the overall transparency, reduce the administrative burden faced by CLBGs and expedite the approval process.
In relation to Recommendation 1, the CCM seeks feedback on the following:
: Whether the respondent agrees that a set of standard conditions be introduced for each type of licence to be issued under subsections 45(3) and 45(4) of the Act.
LICENCE TO OMIT THE WORD ‘BERHAD’ OR ‘BHD’
Recommendation 2 : Specific conditions for licence to omit ‘Berhad’ or ‘Bhd’
The CCM proposes that a CLBG that has been granted a licence to omit the word ‘Berhad’ or ‘Bhd’ from its name be required to fulfil the following conditions:
- to obtain RM1.0 million in funds within six months after the licence has been granted; and
- to ensure that no member or director uses the CLBG or its financial resources to carry out any political or illegal activity.
In relation to Recommendation 2, the CCM seeks feedback on the following:
Question 2 : Whether the initial RM1.0 million funding is sufficient for a CLBG to carry out its objectives. If the respondent disagrees with the amount, what amount would he/she suggest, or what other mechanism would he/she recommend so that a CLBG will be in a financial condition to carry out its objectives and sustain its operations.
Question 3 : Whether the Minister can reduce the amount or waive the condition.
Recommendation 3 : Extension of time to fulfil the RM1.0 million condition
The CCM has proposed that a CLBG that is unable to obtain the RM1.0 million fund be allowed to apply for an extension of time for a further period of six months to fulfil this requirement.
In relation to Recommendation 3, the CCM seeks feedback on the following:
Question 4 : Whether the six months’ time frame is reasonable to obtain the full amount of the RM1.0 million contribution.
Question 5 : Whether the proposed extension of six months is sufficient.
Recommendation 4 : Cooling-off period if licence is revoked
The CCM recommends that the regulations provide for the following:
- the revocation of the licence in the event that the CLBG does not comply with the conditions; and
- that a CLBG whose licence has been revoked for non-compliance be subject to a cooling-off period of three years before it is allowed to submit a fresh application for a licence.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact firstname.lastname@example.org.
In relation to Recommendation 4, the CCM seeks feedback on the following:
: Whether the respondent agrees that the Minister can revoke the licence of the CLBG due to the non-fulfilment of the RM1.0 million contribution condition.
: Whether there should be a cooling-off period of at least three years before a CLBG can submit a fresh application for a new licence.
LICENCE TO HOLD LAND
Recommendation 5 : Specific condition for licence to hold land
The CCM proposes that a CLBG that has been granted a licence to hold land be subjected to a condition that the CLBG cannot dispose of the land without the prior approval of the Minister.
In relation to Recommendation 5, the CCM seeks feedback on the following:
: Whether the respondent agrees with the condition proposed in Recommendation 5 and whether he/she has any other issues concerning that recommendation.
Feedback on the questions posed by the CCM in the Consultative Document are to be submitted by e-mail to email@example.com
by 15 June 2022. Enquiries on the Consultative Document can be made via telephone to 03-22994734.
The proposal to issue regulations to provide a set of standard conditions for licences to be issued under subsections 45(3) and 45(4) of the Act is a commendable initiative by the CCM. As stated by the CCM, a set of standard conditions will provide clarity, improve transparency and expedite the approval process.
The proposal to grant an extension of six months for a CLBG to fulfil the RM1.0 million contribution condition will also be welcomed as it will provide greater flexibility to a CLBG that may not require the full amount of funding during the initial stages of its operations.
It is hoped that the responses received in response to Questions 3 and 5 of the Consultative Document will result in the introduction of provisions in the regulations that allow the Minister, in appropriate circumstances, to reduce or waive the RM1.0 million contribution condition and to extend the time period for raising such amount.
Article prepared by Sheba Gumis (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.