Phua Pao Yii and Sheba Gumis provide highlights of the amendments to the Companies Act 2016.
The Companies (Amendment) Bill 2019 (“Bill”) was passed by the Dewan Rakyat (House of Representatives
) and the Dewan Negara (Senate
) of the Malaysian Parliament on 10 and 31 July 2019 respectively. The Bill will now be presented to the Yang di-Pertuan Agong for His Majesty’s assent. After His Majesty’s assent, the law will be gazetted and come into operation on a date to be appointed by the Minister of Domestic Trade and Consumer Affairs by notification in the Gazette
The Companies Commission of Malaysia (“CCM”) has uploaded on its website, a set of Frequently Asked Questions relating to the Bill (“FAQs”). These FAQs are helpful as they explain and clarify the rationale for each of the proposed amendments.
This article highlights the main changes that will be made to the Companies Act 2016 (“Principal Act”) under the Bill and explains the rationale behind the amendments.
Section 4 (Definition of “subsidiary” and “holding company”)
Section 4(1)(a)(iii) of the Principal Act will be amended by replacing the words “issued share capital
” with “total number of issued shares
” as one of the circumstances in which a corporation is deemed to be a subsidiary of another. The “total number of issued shares
” does not include preference shares. This aligns the provision with the no par value share regime
that was introduced under the Principal Act.
Section 66 (Execution of documents)
The Bill introduces a new sub-section (6) to section 66 of the Principal Act which states that for the purposes of section 66, a “document
” means “a document which is required to be executed by any written law, resolution, agreement or constitution in accordance with subsection (1)
”. Arising from this amendment, the wider meaning assigned to the word “document
” under section 2(1) of the Principal Act will not
apply to section 66. This will limit the scope of section 66 and enable companies to carry on their daily business more effectively by adopting other methods of executing documents that do not come within the definition of a “document
” under section 66(6).
Section 72 (Preference shares)
Section 72(5) of the Principal Act will be amended to make it clear that the requirement to transfer an equivalent amount of distributable profits to the share capital account upon the redemption of preference shares only applies when preference shares are redeemed out of profits pursuant to section 72(4)(a) of the Principal Act. The existing requirement to transfer profits to the share capital account when preference shares are redeemed out of the capital of the company under section 72(4)(c) of the Principal Act will be dispensed with.
Section 84 (Power to alter share capital)
Section 84(1) of the Principal Act will be amended so that the power of a company to alter its share capital in the manner specified in section 84(1) of the Principal Act, namely by –