Starting a Company under the New Corporate Regime

29
Mar
2017

On 31 January 2017, the new Companies Act 2016 (“new Act”) came into force, replacing the old Companies Act 1965 (“old Act”) in its entirety.  This has been the largest revamp of Malaysian company law over 50 years, bringing major reforms that are welcomed and ultimately, necessary to keep pace with global developments and international practices. To encourage the ease of doing business in Malaysia, part of the reforms involves simplifying and relaxing the manner in which companies operate or are set up.

Key changes to the incorporation process

1. MyCOID portal

The Companies Commission of Malaysia (“CCM”) launched the MyCOID portal in January 2017 to enable applications for incorporation of companies to be made online in accordance with the provisions of the new Act.  A “super form”, an electronic template, was introduced by CCM to replace the various physical forms previously required for the incorporation process under the old Act.

2. One member, one director, no 70-year age limit

The old Act required a company to be incorporated with a minimum of 2 members and 2 directors.

Previously, a public company or a subsidiary of a public company, a person of the age of 70 or more could not be appointed as a director unless the appointment or re-appointment was approved by not less than 75% of shareholders entitled to vote at a general meeting of the company.  If approved, such person would hold or continue to hold office until the next annual general meeting of the company.

What has changed?

The new Act now states that a company may be incorporated with 1 member and 1 director. Note that a minimum of 2 directors is still required for public companies. There is no longer a maximum age limit for a director.

3. Proving incorporation: certificate of incorporation

Under the old Act, a company’s certificate of incorporation was conclusive evidence that all registration requirements relating to its incorporation have been satisfied.

What has changed?

Under the new Act, a certificate of incorporation is optional and will only be issued by the Registrar upon application and payment of a prescribed fee.

How will I prove the incorporation of my company?

The new Act provides that a notice of registration issued by the Registrar is conclusive evidence of the incorporation of a company.

4. Share certificate

The old Act provided that a share certificate and register of members shall be the main form of evidence of a party’s legal title to any shares vested in them.

What has changed?

Under the new Act, companies are not required to issue share certificates unless an application has been made by a shareholder.

If no share certificate is issued, how will I prove my legal title to shares?

The new Act provides that the Register of Members is prima facie evidence of shareholders’ legal title in the shares so vested in them.

5. Common seal

It used to be mandatory for a company to have a common seal under the old Act.

What has changed?

Under the new Act, a common seal is optional.  If a company opts to have a common seal, it must comply with the relevant requirements under the new Act which includes having a constitution in place that lays down the conditions and limitations for the affixation of the common seal.

How will a company without a common seal execute documents that are required to be under common seal?

In the event that a company has not adopted a common seal, a document is validly executed by a company if it is signed on behalf of the company (a) by at least two authorized officers, one of whom shall be a director, or (b) in the case of a sole director, by that director in the presence of a witness who attests the signature. A document signed in this manner shall have the same effect as if the document is executed under common seal.

For our previous client alerts relating to the reforms under the new company law regime, please click on the following links:

The New Companies Act 2016 to be Implemented from 31 January 2017
The New Companies Act 2016: Raising the Bar for Directors
New Companies Act 2016 and Interest Schemes Act 2016 Gazetted
Key Changes to the Dividend Regime
Migration to No-Par Value Regime
Companies Bill 2015: Making the Transition
Major Reform as New Companies Bill 2015 Passed

If you have any questions or require any additional information, you may contact Gilbert Gan, Joan Ting or the ZICO Law partner you usually deal with.


This alert is for general information only and is not a substitute for legal advice.