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Comparative Company Law Major Report on Mayalsia

Info: 3341 words (13 pages) Law Essay
Published: 6th Aug 2019

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Jurisdiction(s): Australian LawMalaysian law

This report will be highlighting the Malaysian Company Law rules and procedures and also comparing them to the ones enforced in Australia today. Malaysian Company Law on the surface is similar to that of Australia, however has you research deeper into the constitutions and acts you will find distinguishing differences. Malaysia also shares similarities with other former British colonies such as Singapore and Hong Kong especially in terms of structure of the legal system referring to both case and common law (Tomasic 1999). Malaysia is a country that has followed trends of the western world in many features including that of its constitutionals law.


Malaysia is located in the south eastern Asia comprising of two major areas peninsular Malaysia and Sarawak/Sabah which is separated from the Malaysia by the South China Sea. Over the years Malaysia has been empowered by numerous nationalities such as Portuguese, Dutch and also the British therefore it’s not surprising that these countries have directly influenced some of the legislation still in place today. On August 31st 1957 a federation of Malaya was formed comprising of 11 states, however later down the track Singapore was to break away and become independent(LIMTITED 1993).

There are currently 3 types of systems in place to form the legal system of Malaysia being common law system which deals with most matters of legislation including issues relating to companies and trading, the other two laws known as Islamic and Native refer mainly to matters such as religion and marriage. However these types of law systems do not impact on the business legislation, therefore not really coming into concern during this report. The Main legislation in Malaysia in regards to companies and their operations is the Companies Act 1965 and also the Business Act 1956 this in terms is very similar to that of Australia, (LIMTITED 1993; Tomasic 1999).


The types of companies that are available in Malaysia are fairly similar to that of Australia and include public and private companies, companies limited by shares or guarantees and unlimited liability companies. In the terms of a no liability company ones such seen in the mining industry of Australia there are no provisions in places to date.

For an organisation to be recognised within Malaysia as an incorporation they need to follow numerous step in order to proceed legally. The first step is to lodge a memorandum and articles of association with the Companies Commission of Malaysia (CCM)(Alsagoff 1996). Also in accordance with Form 6 and Form 48A respectively they must complete a declaration of compliance and a statutory declaration of the owners and directors(LIMTITED 1993). Under section 18 of the Act and in reference to the memorandum of articles the company must include its name, objects, and the amount of capital and share structure(LIMTITED 1993). Once the above necessary information is gathered they are lodged with the registrar of companies and the certificate posted to the appropriate place.

This a similar process as to that which takes place with Australia however the difference is within Australia the Australian Commissions and Securities (ASIC) charge a once off standard fee where as opposed to Malaysia where depending on the amount of share capital that is being lodge will determine the fee applied to that particular company. The process for registering and forming a corporation within Malaysia is fairly simple and inexpensive for a typical sized company. When all the correct documentation is filled and paid for the company will be formed and achieve the benefits of being separate legal entity, limited liability and perpetual succession.


In Malaysia it is deemed to have a similar relationship to Australia in relation to shareholders and directors, these including the powers, responsibilities, ownership and also control. The relationship is that shareholders are the owners of the entities and the directors are the managers.

The articles of association as described above are defined as “the articles of association by laws regulate the relationship between the company and its shareholders, including the appointment and powers of the directors and the conduct of the company’s affairs.”(Price Waterhouse Cooper, 1990). This statement highlights the importance of the articles in keeping order and corruption in check. The companies Act in Malaysia also provides a standard form of articles which is similar to the replaceable rules section 141 of the Australian Corporations Act which deals with my in-depth and specific issues.

As explained in incorporation the memorandum sets out the rules and regulations for share capital depending on the company’s structure. The document highlights the maximum amount of share capital if the company is limited by shares or the maximum amount of guarantee.

The memorandum and articles of association make up the constitution of the company and everything is filtered from this. In comparison to Australia it is fairly similar where the Acts dominated and force people to follow processes and procedures.


The forms of companies available in Malaysia are the same as that in Australia, Stated in section 14 of the Act these include a company limited by shares, a company limited by guarantee, a company limited by both shares and guarantee and even there is no procedures for it rarely you may find a no liability company.

For a company be a classed as a Private company it must abide certain conditions that include a restriction to transfer its shares to the public. It also is not allowed to have more than fifty members or shareholders who prohibit any invitation to the public to subscribe for shares or debentures. If any of the above conditions are breached then the company will be known as the public company and not allowed to trade as a private entity. A limited company is denounced as Berhad (Bhd) and private company is denounced as Seridan (Sdn).

Other companies that can be formed in Malaysia include sole proprietorship, partnership and joint ventures. Sole proprietorship and partnerships are unincorporated therefore meaning there not regulated by the Malaysian Companies Act. Consequently this means that these types of business forms do not take on the effects that come with incorporation such as limited liability and perpetual succession. There are positives as well including control and privacy.

“Joint ventures are structured either as partnerships or incorporated companies; the term joint venture does not denote a separate and distinct business entity” (Price Waterhouse Cooper, 1990). Therefore depending on how the company joint venture is structured well depend on how it is regulated by the Corporations Act. As Sole Proprietorships and partnerships, joint ventures do not have to be incorporated but still have to be registered with the registrar of Companies.


For an organisation to be recognised within Malaysia as an incorporation they need to follow numerous step in order to proceed legally. The first step is to lodge a memorandum and articles of association with the Companies Commission of Malaysia (CCM)(Alsagoff 1996). Also in accordance with Form 6 and Form 48A respectively they must complete a declaration of compliance and a statutory declaration of the owners and directors(LIMTITED 1993). Under section 18 of the Act and in reference to the memorandum of articles the company must include its name, objects, and the amount of capital and share structure(LIMTITED 1993).

These forms can be lodged in person at the Companies Commission of Malaysia, with the forms easily being accessed from a website set up in order to deal with this procedure.


The above site highlights all the details needed to bring an entity into incorporation. The process seems a fairly simple task compared to the surrounding jurisdictions and can be achieved quickly without high costs involved. “The time required to incorporate a company is normally not longer than two months” (Price Waterhouse Cooper, 1990)

A noticeable difference between Malaysia and Australia appears in reference to the amount of the fees payable when bringing a company into incorporation. In Australia there is a fix flat fee that is payable by all companies whether they be big or small, on the other hand Malaysia charges its fees according to the amount of share capital that is present at the time of incorporation. For example to register a company in Australia it would cost between AUD$330 to AUD$400 where in Malaysia the fee ranges from AUD$280 for a small company up to fees such as AUD$35000 for companies with large share capital (Australian Securities and Investment Commission 2010).


In terms of Business names Malaysia has a similar protocol in place with Australian. An applications must firstly be lodged, where it will be determined availability and also appropriateness then if approved the process with continue.

As stated by section sixteen of the Act,

“On and from the date of incorporation specified in the certificate of incorporation but subject to this Act the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company and suing and being sued and having perpetual succession and a common seal with the power to hold land but with such liability on the part of the members to contribute to the assets of the company in the company in the event of its being wound up as is provided by this Act” (Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010)

As per section 165 a company both public and private must submit an annual report to the commission no later than fourteen days after its annual meeting. This is compared to the Australian legislation which only requires public companies and large private companies to lodge annual returns.


The constitution which consists of the memorandum and articles of association is able to be changed in a couple of ways. A special resolution which in term is conducted at a meeting and need more then seventy five percent of the voters to agree with in order to pass, is needed to alter the constitution. Twenty one days notice is to be given in order to call the meeting as per section 28, this is similar to the Australian Corporations Act section 136.

To alter the articles it is the same process unless the company adapted the standard form offered in table A of the Act. This allows a company to change its articles without the need for a special resolution as stated in section 31 of the Act (Australian Securities and Investment Commission 2010). However still must be in the best interest of the company as a whole.

Shareholders are allowed to petition if they feel the conduct of the company affects their minority holding in any way and a court order to able to be attained. Section 105 of the Act allows the company to refuse the transfer of shares on the grounds of best interest of the company.


Section 98 informs us that all shares in Malaysia are registered shares, similarly as in Australia as per section 254F of the Australian Corporations Act, also the Malaysian Companies Act does not allow bearer shares to be issued. Bearer shares tend not to be recorded and can be used to avoid transfer taxes (Australian Securities and Investment Commission 2010).


A section that must be highlighted in the Malaysian Corporations Act is section 69 which allows in certain cases interest to be paid out of share capital. It states

“Where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any work or buildings or the provision of any plant which cannot be made profitable for a long period, the company may pay interest on so much share capital”( Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010)

There are no minimum statutory limits to the amount of initial authorised capital of a company and a company can start with one dollar this also exists within Australia (Price Waterhouse Cooper, 1990). The issues relating to lifting the “corporate veil” allow exists and related to the directors being able liable the company’s debts if their personal breach the regulations. When relating to the issuing and transfer of shares again Malaysia is fairly similar to that of Australia where private companies cannot invite public ones to invest in them by purchasing shares and also transfer of shares must be done by a certificate of title to the third party.


The by laws of a company state whether or not the company is able to issue preference shares as mentioned previously all the shares throughout Malaysia are registered shares. Section 61 of the Act states that preference shares are “to be redeemed and the redemption shall be effected only on such terms and in such manner as is provided by the articles” (Ministry of (Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010)

Under section 66 of the Act “The rights of preference shareholders are required to be specified in the company’s constitutional documents” (Sulaiman, 2003). The rights of ordinary shareholders are stated with the prospectus on issue, the variation of these rights can be altered by a resolution of the class of shareholders as well as the protection of these rights can be enforced through the courts( Section 65 of Malaysian Corporations Act). Section 218 is important as its states how dividends are to be paid out of profits unless the company is forced in winding up.


A variation in the share capital of a company incorporated by the Malaysian Companies Act, if permitted by the by laws, of the original or existing share capital may be increased by a resolution passed in a general meeting, this is covered by section 62 of the Act.

Section 64 of the Act allows the company to reduce its share capital by the way of a special resolution meaning again support from more then seventy five percent of the share holders. This is fairly similar to that of Australia however in Malaysia it must then go for further approval through the court systems.

“Every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company shall be entitled to object to the reduction” (Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010)

This therefore allows any creditor the power to refuse the reduction in share capital if it sees fits that the company may not be able to repay its liability.

Section 67A allows a company to attain shares in itself as long as it not insolvent, purchased of its stock exchange, is in good faith of the company and authorised by its articles.


As a part of the initial set up of a company the appointment of the directors must be done before the company can become incorporated. In most circumstances shareholders can be managers as longs as it is in the articles and fully disclosed to the public and rest of the shareholders.

As stated before shareholders are able to ratify the acts of directors if they believe it is not in the best interest of the company or that the directors are not acting in the best interest of the company. This must be carried out the through the appropriate process being that of a special resolution.

Sections 122 and 129 of the Act relate to who is allowed to be a director of a company. There is no mention of the minimum age limit of a director, but section 129 does state that the maximum age of a director of a public company is seventy years.

The removal of a director follows similar protocol as in Australia, which is a resolution achieved through a general meeting, once this is achieved the director is required to vacate as per instructions of the resolution.

The company is made to keep a register of all the members which includes names, addresses, the date and time at which they became members, as well as all the minutes and agendas from meetings held. Sections 159 and 160 highlight that this must be kept at the registered office and also the fees attached to the process. The follow along similar lines to the Australian Legislation except that the fee is set by the Malaysian legislation.


The general issues relating to responsibilities and duties of directors are again fairly similar to that of Australia. A noticeable difference is that there are no “one director” companies available in Malaysia, a minimum of two directors are required. This is a major concern mainly for smaller type companies wanting the benefits of companies but now will be faced with issues such as sharing of power and conflicts between directors (Alsagoff 1996).

The Corporations Act of Malaysia 1965 states “A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office”( Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010).

This is along the same lines as the Australian Corporations Act which refers to good faith, care and diligence. Also within the Australian Act and the Malaysian Act penalties for breaches can result in both criminal and civil penalties(LIMTITED 1993).

It was stated that in Australia “the modern approach to the duty of care, skill and diligence was developed through the leading case of AWA LTD V Daniels 23 (Sulaiman A.N., 2004).

There are several provisions from 122 to 121 of the Act which relates to the actions of the directors including breaches, all of which carry a penalty of imprisonment and or a fine which increases depending on the breach. Under section 369 is the only general provision which includes directors and agents of the companies and the penalties that affect the breaches.


There are numerous rules relating to how and when a company residing in Malaysia must hold meetings between its members, directors and shareholders. Section 141 of the Act means that a company must hold a general annual meeting once every year. In order to call a meeting section 145 states that “two or more members holding not less than one tenth of the issues share capital or if the company has not a share capital, not less the five percent in the number of the members of the company or such lesser number as is provided by the articles may call a meeting of the company. (Ministry of Domestic Trade, Co-Operatives and Consumerism, 2010)


In conclusion, I believe Malaysian and Australian corporation’s law is fairly similar and this is not surprising as they are based on the United Kingdom version. Although there are heaps of similarities I have found numerous distinctions including that of share procedures being able to hold shares in itself and also the fact that it is allowed to pay dividends out of share capital. Also the lack of one Director Company’s available in Malaysia which has created problems as mentioned in the report. Overall I found Malaysia to be a country that is well developed in terms of Corporations law and will be placed on par with Australia.

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