Companies Act 2016 Overview
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Questions and Answers

What legal principle prevents members and officers from being liable for the debts incurred by a company?

The separate legal entity principle.

Under what circumstances can the veil of incorporation be lifted to hold members or officers personally liable?

When fraud is involved or if statutory provisions apply, such as CA2016 section 65(1).

What is the significance of a company's constitution under the Company Act 2016?

It outlines the objects, rights, and internal governance of the company.

How does the Company Act 2016 differentiate between a company's memorandum and constitution?

<p>The memorandum is merged into the constitution, which now covers all essential details.</p> Signup and view all the answers

In the context of company types, what distinguishes private companies from public companies regarding the requirement of a constitution?

<p>A private company may be incorporated without a constitution, while public companies typically require one.</p> Signup and view all the answers

What defines a company according to the Companies Act 2016?

<p>A company is defined as a body of persons incorporated under the law, possessing a distinct legal personality separate from its members.</p> Signup and view all the answers

How does limited liability benefit the members of a company?

<p>Limited liability protects members by ensuring they are only liable for the company's debts to the extent of their investment in shares.</p> Signup and view all the answers

What are the essential requirements for a company as outlined in the Companies Act 2016?

<p>A company must have a name, one or more members with limited or unlimited liability, at least one share if limited by shares, and one or more directors.</p> Signup and view all the answers

Differentiate between private and public companies.

<p>Private companies are limited in terms of member numbers and cannot offer shares to the public, while public companies can raise capital by selling shares to the public and have fewer restrictions on membership.</p> Signup and view all the answers

Explain the incorporation process as established by the Companies Act 2016.

<p>Incorporation involves registering the company with the relevant authorities, which grants it legal status and separate personality.</p> Signup and view all the answers

What is the significance of having one or more directors in a company?

<p>Having directors ensures that the company is managed properly, as they are responsible for making decisions on behalf of the company.</p> Signup and view all the answers

What does it mean for a company to exist in perpetuity?

<p>A company exists in perpetuity means it continues to exist regardless of changes in its membership until it is legally dissolved.</p> Signup and view all the answers

How does the limitation of liability impact creditors in a company limited by shares?

<p>Creditors have limited rights to recover debts from shareholders, only up to the amount unpaid on shares, thereby protecting personal assets.</p> Signup and view all the answers

What is the primary difference in the commencement of business between a private company and a public company under CA2016?

<p>A private company can commence business immediately upon registration, while a public company must comply with additional steps and lodge a statutory declaration with the ROC.</p> Signup and view all the answers

What does it mean for a company to have a separate legal entity?

<p>It means the company has a legal personality distinct from its members and can continue to exist independently of its members' identities.</p> Signup and view all the answers

Under CA2016, when is a company considered incorporated?

<p>A company is incorporated on the date specified in the notice of registration issued by the ROC.</p> Signup and view all the answers

What capacity does a company have under section 21(1) of CA2016?

<p>A company has unlimited capacity to carry on any business or activity and can perform all functions of a body corporate.</p> Signup and view all the answers

How does the liability of members in a company work according to section 192(1)?

<p>Members are not personally liable for the company's obligations simply by virtue of being members.</p> Signup and view all the answers

What must a public company do before starting business according to CA2016?

<p>A public company must lodge a statutory declaration of compliance with the ROC after fulfilling additional requirements.</p> Signup and view all the answers

What happens to the registered office of a company upon incorporation?

<p>The registered office of the company is the address stated in its application for incorporation.</p> Signup and view all the answers

What is the effect of a company being able to sue and be sued?

<p>It allows the company to take legal action for wrongs committed against it and also to be held liable for its wrongful acts.</p> Signup and view all the answers

Flashcards

Separate Legal Entity

A company is treated as distinct from its owners (shareholders).

Company's legal action

Only the company itself can sue or be sued for a wrong done to it.

Lifting the corporate veil

Making owners or officers liable for the company's actions (exceptions to separate legal entity rule).

Pre-incorporation contract liability

Person signing a contract before company's formation may be personally liable.

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Company Constitution

The document that governs a company's internal workings and objectives.

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Public Company Incorporation

A public company can commence business only after complying with specific requirements and filing a statutory declaration of compliance with the ROC.

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Company Incorporation Date

A company becomes incorporated on the date specified in the notice of registration issued by the ROC under section 15 of the CA 2016.

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Certificate of Incorporation

A company can optionally apply for a certificate of registration from the ROC after receiving the notice of registration.

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Unlimited Capacity of a Company

A company can engage in any lawful business or activity as a body corporate with full capacity to carry out its functions.

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Liability of Members

A member of a company is not liable for any company obligations simply by being a member.

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Registered Office

A company's registered office is the address stated in its application for incorporation, which is where official communications are sent.

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What is a company?

A company is a legal entity that is distinct and separate from its owners (shareholders), allowing it to sue, be sued, own property, and exist beyond the lifetime of its members.

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CA 2016

The Companies Act 2016 in Malaysia, which replaced the older Companies Act 1965. This Act regulates companies and their operations.

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Limited Liability

A key feature of companies where shareholders' liability for the company's debts is limited to the amount of money they have invested in the company.

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What does a company need?

To be registered, a company needs a name, members (shareholders) with limited or unlimited liability, shares (for companies limited by shares), and directors.

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Company limited by shares

A company where the liability of shareholders (owners) is limited to the amount of their unpaid shares. Creditors can't go after their personal assets.

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Public vs Private Company

Public companies can raise funds from the public through stock markets, while private companies have limited shareholders and don't trade shares publicly.

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Incorporation

The process of forming a company by registering it with the relevant authority.

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What's the relationship between the company and its members?

Members can sue or be sued by the company, highlighting the separate legal entity principle. The company, in turn, can own property independently of its members.

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Study Notes

Companies Act 2016 (CA 2016)

  • The Companies Act 2016 (CA 2016) replaced the Companies Act 1965 (CA 1965)
  • CA 2016 was enacted on April 28, 2016, and enforced on January 31, 2017
  • The goal of the CA 2016 is to modernize company law in Malaysia in alignment with global best practices

Definition of a Company

  • A company is defined as an incorporated body
  • Companies are bodies of persons, combined for commercial purposes (Oxford Dictionary)
  • A company exists independent of its members
  • Companies have their own legal personality, separate from members, and can sue/be sued and own property
  • Members of a limited company enjoy limited liability (protection from company debts)
  • A company exists perpetually unless dissolved

Types of Registered Companies

  • Categories of registered companies include private and public companies

Company Limited by Shares

  • Members' liability is restricted
  • A company's constitution or Section 10(2) of CA 2016 limits shareholder liability in winding-up situations
  • Shareholders are relieved of liability when shares are fully paid

Company Limited by Guarantee

  • Members' liability is capped at a pre-agreed amount.

Unlimited Company

  • Members' liability is not limited; they are responsible for all company debts

Private Company Characteristics

  • Limited by shares
  • Maximum 50 shareholders
  • Restricted share transfer
  • Prohibited from issuing shares/debentures to the public
  • Restrictions on inviting public funding

Public Company Characteristics

  • May be limited by shares, guarantee or unlimited
  • Can exceed 50 shareholders
  • No restrictions on share transfer
  • Able to offer shares/debentures to the public
  • Can invite public funding

Incorporation Procedure

  • Companies are legally recognized as separate entities after a formal incorporation process.
  • Information required for incorporation includes company name, type (private or public), nature of business, registered office address, and details of members, directors, and secretary.

Post-Incorporation Requirements

  • Private companies can start operating upon registration
  • Public companies require additional compliance steps and a statutory declaration before commencing business

Effects of Incorporation

  • Companies gain separate legal personality, distinct from members
  • Incorporated companies have perpetual existence
  • Companies exercise unrestricted powers
  • Companies can sue and be sued, hold land, and enter into transactions
  • Members are not liable for company obligations
  • Registered office is specified

Corporate Constitution (and its components)

  • A constitution (formerly called memorandum and articles) outlines a company's rules and regulations.
  • Elements to include are company purpose, member rights, company capacities etc.
  • A private company may be incorporated without a constitution.

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Chapter 2: General Principles of Corporate Compliance PDF

Description

This quiz explores the Companies Act 2016 (CA 2016), which modernized company law in Malaysia. It covers the definition of a company, types of registered companies, and the concept of limited liability. Test your knowledge of CA 2016 and its implications for businesses.

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