Highlights to the salient changes under the Companies Act 2016

Below are some of the important extract of the CA 2016 which will directly impact all SMEs.

(1) Lodgement of Annual Return is now based on the anniversary of incorporation

A company is now required to lodge its Annual Return not later than 30 days from the anniversary date of its incorporation date [s. 68(1)], and no longer within 1 month after its annual general meeting (“AGM”). However, the Companies Commission of Malaysia (“CCM”) has just issued its FAQ to confirm that companies having the anniversary of its incorporation from 1 to 30 January 2017 are not required to submit their Annual Returns in 2017 as the CA 2016 had yet to take effect then. Such companies’ first submission of Annual Return in compliance with the new CA 2016 will only happen in 2018. Fee for a public company has been increased from RM350 to RM500 (fee remains the same at RM150 for a private company).

Non-compliances will attract the following liabilities:-

• the Registrar may strike a company off the register if the company fails to lodge an annual return for three or more consecutive years [s.68(8)]

• the company and every officer shall, on conviction, be liable to a fine not exceeding RM50,000, and in the case of a continuing offence, to a further fine not exceeding RM1,000 for each day during which the office continues after conviction [s.68(9)].

 

(2) AGM mandatory only for public companies under the CA 2016

The CA 2016 only stipulates that a public company shall hold an AGM in every calendar year. Therefore, a private company need not convene an AGM, unless required by its constitution or validly required by the necessary member(s).

A public company shall hold its AGM in every calendar year within 6 months of its financial year end and not more than 15 months after the last preceding AGM [ss.340(1) and (2)] – the company and every officer who contravene this shall, on conviction, be liable to a fine not exceeding RM20,000 [s.340(6)].

(3) Approval for fees of directors and directors’ service contracts

Directors’ fees, and any benefits payable to directors –

1. of a public company; or
2. of a listed company and its subsidiaries,

shall be approved at a general meeting [s.230(1)]. Therefore, although private companies that are subsidiaries of listed companies may not be compelled to convene their AGMs, they are still required to have directors’ fees and benefits payable approved at a general meeting.

In the case of a private company which is not a subsidiary of a listed company, the Board may approve these fees and benefits payable (unless constitution provides otherwise) and such approval shall be notified to the shareholders within 14 days. Within 30 days after such notification, where members holding at least 10{17c0c7c8a24a6e48bfe42b0bbfddcb5c572fb0da1c5859adba1973bf3b84029b} of total voting rights consider the payment unfair, they may require the company to pass a resolution to alter the payment and any excess paid to a director shall constitute a debt due by the director to the company [ss.230(2) to (5)].

(4) Audited financial statements (“AFS”)

 

	Private company	Public company
Circulate	within 6 months of financial year end [s.258(1)(a)] although it may not need to convene AGM	at least 21 days before date of AGM [s.258(1)(b)], unless agreed by all members entitled to attend and vote
Lodge	within 30 days from the date they are circulated [s.259(1)(a)]	within 30 days from its AGM [s.259(1)(b)]
Fee	RM50	RM200
Fine	Failure to circulate, the company and every officer are liable to be fine not exceeding RM50,000, and in the case of a continuing offence, to a further fine not exceeding RM500 for each day during which the offence continues after conviction [s.258(3)]. Failure to lodge,  every officer are liable to be fine not exceeding RM50,000, and in the case of a continuing offence, to a further fine not exceeding RM1,000 for each day during which the offence continues after conviction [s.259(3)].

A new business review section may also be included in the directors’ report [Fifth Schedule Part II].

 (5)  Memorandum and Articles of Association (“M&A”) deemed to be the constitution

While under the CA 2016, there is no M&A and the adoption of a constitution is optional, the constitution of a company incorporated under the CA 1965 is its M&A [s.34] and the M&A of an existing company in force and operative, including the provisions of Table A under the Fourth Schedule of the CA 1965 (where adopted by an existing company), at the commencement of the CA 2016, shall have effect as its constitution, unless otherwise resolved by the company [s.619(3)]. However, there may be some conflicts between the M&A (deemed constitution) and the CA 2016 – please note that the constitution has no effect to the extent that it contravenes or is inconsistent with the provisions of the CA 2016 [s.32(2)] i.e., the CA 2016 always prevails.

Under Section 36 of the CA 2016, the M&A (deemed constitution) may be reviewed and amended as and when the need arises. Any amendment will have to be notified to the CCM together with a copy of the amended constitution and accompanied by a fee of RM30, within 30 days from the date of the passing of the special resolution for the amendment – fines on the company and every officer who contravenes this are up to RM10,000 upon conviction, and in the case of a continuing offence, there is a further fine of up to RM500 for each day during which the offence continues after conviction.

(6)  No par value regime and the transitional provisions

The concept of authorised capital is abolished and all shares no longer carry a par value [s.74]. Shares can no longer be issued at a premium or discount. The issued price of shares will be determined by their current value and the needs of the company.

To ensure a smooth transition from the previous regime to the no par value regime, an existing company is given 24 months (up to 31 January 2019) to utilise the credit in the share premium account for the following purposes [s.618(3)]:-

• paying premium on redemption of debenture or redeemable preference shares issued before 31 January 2017;
• writing off:

1. the preliminary expenses of the company incurred prior to 31 January 2017; or
2. expenses incurred, or commissions or brokerages paid or discounts allowed, prior to 31 January 2017, for any duty, fee or tax payable on or in connection with any issue of shares of the company;

(iii)    paying for unissued shares which are to be issued from 31 January 2017 as fully paid bonus shares pursuant to an agreement made before 31 January 2017;

(iv)    paying up in whole or in part the balance unpaid on shares issued before 31 January 2017; or

(v)     paying for shares which are to be issued in satisfaction of dividends declared before 31 January 2017.

(7) Dividends – declaration of solvency required

Prior to declaring dividends, which must be out of available profits if a company is solvent, directors must now make a declaration of solvency that the company must be able to pay its debts as and when they become due within the 12 months after the dividends are paid. If there is a breach of this new requirement, the company, every officer and any other person or individual shall, on conviction, be liable to imprisonment of up to 5 years or to a fine not exceeding RM3 million, or both [ss.131 and 132].

(8)  Only private companies can pass member’s written resolution

Only a private company can pass member’s written resolution. All public companies requiring members’ resolutions to be passed must have them passed at a meeting of members. [s.290]

Also, member’s written resolution is no longer required to be signed by all for it to be passed. For ordinary resolutions, they can be passed by a simple majority of more than half of such members who are entitled to vote on a written resolution [s.291(1)(b)]. For special resolutions, they can be passed by a majority of at least 75{17c0c7c8a24a6e48bfe42b0bbfddcb5c572fb0da1c5859adba1973bf3b84029b} of such members who are entitled to vote on a written resolution [s.292(1)(b)].

 (9)  Accounting records and director’s service contract to be kept at registered office (“RO”)

The following are some of the documents that are now to be kept at the RO:-

1. copies of all financial statements and group financial statement [s.47(1)(h)];
2. the accounting records of a company required under section 245 [s.47(1)(i)]; and
3. a copy of every director’s service contract with the company or with its subsidiaries, for all existing contracts and for at least 1 year from the date of termination or expiry of any contract, whether original or varied – applicable only to a public company [s.232].

However, they may also be kept at a place other than the RO provided notice to that effect has been given to the Registrar as follows:-

 

	Documents (i) and (ii)	Document (iii)
If not kept at the RO and if there is any change in that place, to notify the Registrar	Within 14 days [s.47(3)]	Within 30 days [ss.232(4) and 609(1)]
Fine upon the company and every officer convicted for non-compliance	RM10,000 and in the case of a continuing offence, to a further fine not exceeding RM500 for each day during which the offence continues after conviction [s.47(4)]	RM1 million [s.232(5)]

Note: Kindly refer to notifications and announcements from Suruhanjaya Syarikat Malaysia (SSM) for further information pertaining to the changes. www.ssm.com.my