CRG 660 Notes - Malaysian Corporate Secretarial Framework PDF

CRG 660 - Reports to the Ministry of Domestic Trade and Consumer Affairs CHAPTER 1 - THE LEGAL FRAMEWORK -Powers to inspect, investigate and OF CORPORATE SECRETARYSHIP. com...

CRG 660 - Reports to the Ministry of Domestic Trade and Consumer Affairs CHAPTER 1 - THE LEGAL FRAMEWORK -Powers to inspect, investigate and OF CORPORATE SECRETARYSHIP. compound offenses under the relevant Acts it administers. Acts of Parliament governing the - SSM launched e-Info Services to allow Malaysian Securities Industry: information on companies and businesses Companies Act 2016 obtainable via its website. Securities Industry Act 1983 - SSM handles monitoring and enforcement Securities Commission Act 1993 activities to ensure compliance with Securities Industry (Central business registration and corporate Depositories) Act 1991 legislation. Malaysian Code of Corporate - In 2003, the SSM began a review of the Governance (Code) Companies Act 1965, with the aim of simplifying the process of incorporation in Regulatory Authorities of the Securities Malaysia and reducing businesses' costs of Industry: compliance with Malaysian corporate law. - Companies Act 1965 was eventually 1) Companies Commision of Malaysia replaced by Companies Act 2016 Major (CCM) changes such as: Only one director is needed to - The Companies Commission of Malaysia register the company as a Company (Suruhanjaya Syarikat Malaysia or SSM) is Limited by Shares instead of two, a statutory body which regulates companies Heavier penalties on directors who and businesses. do not comply with the Act, - The main activity of CCM is to serve as an Annual General Meeting (AGM) is agency to incorporate companies and no longer mandatory to be held by register businesses as well as to provide private companies. company and business information to public. 2) Bursa Malaysia - To ensure that the provisions of the Companies Commission of Malaysia Act - Bursa Malaysia is an exchange holding and laws are administered, enforced, given company approved under section 15 of the effect to, carried out and complied with; Capital Markets and Services Act 2007. - To act as agent of the Government and - It operates a fully-integrated exchange, provide services in administering, collecting offering the complete range of and enforcing payment of prescribed fees or exchange-related services including trading, any other charges under the laws clearing, settlement and depository administered. services. - Administers and enforces the Companies - Governed by Securities Commision. Act 2016, and all its subsidiary legislations. - Objective is to maintain efficient, secure - Submission of relevant documents to get and active trading for investors. approval for incorporation of companies. 3) Bank Negara Malaysia / Central Bank of Malaysia -Statutory body wholly owned by the Government of Malaysia. - Reports to the Minister of Finance. -Objective is to safeguard monetary stability and maintain a sound financial system. -Acts as a banker and adviser to the Government. -Broad powers to develop, enhance and enforce rules relating to financial institutions. 4) Securities Commission Malaysia / Suruhanjaya Sekuriti -Central authority responsible for the regulation and development of the securities and futures industries in Malaysia. -Established under the Securities Commission Act 1993 (Incorporating latest amendment – Act A1539/2017). -Reports to the Minister of Finance and tables its account to Parliament annually. -Broad powers to make rules, interpret rules, investigate and enforce rules relating to the securities law. -Regulates conduct of brokers, dealers, investment advisors, the exchanges, public companies. -Supervises and monitors the capital and futures markets. CHAPTER 2 - FORMS OF BUSINESS 2 categories : OWNERSHIP 1) Incorporation - separate company jointly 1) Sole Proprietor undertaken by joint ventures One person. 2) Unincorporated Profit and loss, no sharing. - collaboration between joint Solely responsible for all the debts of ventures without any separate the firm, liability is unlimited. company. When the sole proprietor dies the - not separate legal entity firm will be closed. No legal entity. 5) Limited Liability Partnership Act 2012 Combine the characteristics of a 2) Partnership company and a partnership firm that Min: 2 person Max: 20 person provides the protection of limited Profesional: Unlimited liability for its partners and flexibility Profit and loss shared between of the partnership arrangement for partners. the internal management of its Collectively responsible for all the business. debts of the firms, partners' liability Provides businessmen and investors to pay the firm’s debts is unlimited. the flexibility and freedom to select Dissolved in accordance with the the best business model. partnership agreement. Steps registration of a new LLP: No legal entity. 1) Name of the proposed LLP 2) General nature of the proposed 3) Company business Min: 2 Max: Public: No limit 3) Proposed registered office of the Private: 50 LLP Profit and loss dividend payment 4) Name and details of every person Liability of members is limited to the who is to be a partner amount of capital invested in the 5) Name and details of compliance company. officer Can only be dissolved in accordance with the provisions of the Companies Organizational Structure of CCM, ROC & Act 2016. ROB Can sue and be sued in its own name to enforce its rights or liabilities owed by it. 4) Joint Venture (JV) A collaboration of 2 or more separate entities with a view to share profits. CHAPTER 3 - TYPES OF COMPANIES Distinguish between company limited by shares and company limited by 1) Limited Company guarantee i) Company Limited by Shares Members can't be asked to pay Company Limited Company Limited more than the amount unpaid on his by Shares by Guarantee shares in the event of winding up. Can offer shares to the public. Members cannot be Liability of the Easy to transfer ownership. asked to pay more members is limited 1) Private Company than the amount by the MOA to the - Max no of member : < 50 person unpaid on his amount members - Name of comp: ‘Sendirian Berhad’ shares in the event have guarantee to - Min no of director: 1 person of winding up. contribute in the - AGM: not required event of winding - Member resolution: up. Meeting / Written. Exempt Private Company(section 4) Creditors do not Enjoy the limit on have liability to the * must not more than 20 members recourse/choice amount fixed only. * shares must not be owned directly or against members to indirectly by a corporation. an unlimited extent. Exempted from:- * submit a financial statement with its Have the word Bhd, Usually formed for annual return with CCM. can offer shares to non profit making the public. purposes. * restriction on loans to directors and Examples: persons connected to the director. charitable bodies, 2) Public Company sports clubs. - Max no of members: no limit - Name of comp: ‘Berhad’ Easy to transfer Prohibit the - Min of directors: 2 person ownership. formation with share capital. - AGM: required - Member resolution: Meeting. Private Limited Company Characteristic i) Public listed company - shares (Section 15) traded in Bursa Malaysia ii) Non listed company ii) Company Limited by Guarantee Formed for non profit making purposes. Examples such as trade, associations, charitable bodies and sports clubs. Prohibit the formation with a share capital. 2) Unlimited Company Holding Company 1) Wholly owned subsidiary ( 100% owned) 2) Subsidiary company ( holding more than 50% shares in subs company) * controls the composition of BOD of subsidiary company. * control > ½ voting power in subsidiary company. * hold > ½ of issued share capital in subsidiary company. Foreign Company Section 4 A company, corporation, society, association or other body incorporated outside Malaysia. An unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia. Must register with CCM before it establishes a place of business or carries on business in Malaysia. CHAPTER 4 - COMPANY SECRETARY The Malaysian Institute of Chartered The Changing Role of Company Secretaries and Administrators Secretary (MAICSA) "note taker" at a board meeting. The Malaysian Association of Company "administrative servant" of the board. Secretaries "board advisor" responsible for The Malaysian Institute of Accountants organization's corporate (MIA) governance. The Malaysian Institute of Certified Public Accountants (MICPA) Role and function of Company Secretary The Malaysian Bar Council 1. Guiding the board members as to The Sabah Law Association their duties and responsibilities. The Advocates’ Association of Sarawak 2. Ensuring that the company complies with all relevant laws and APPOINTMENT OF SECRETARY (SEC regulations. 236) 3. Conducting an ongoing strategic The appointment of the first communication between the secretary shall be made within 30 company and its key stakeholders days from the date of incorporation so that the board and management of a company. are informed about stakeholders' The company shall submit legitimate needs, interests and "NOTIFICATION OF expectations of the company. APPOINTMENT OF THE FIRST COMPANY SECRETARY" to the Implementation of corporate Registrar (CCM) within 14 days from governance. the date of appointment. Support the board and Chairman. Compliance with filing administrative Appointed by the Board (terms and requirements. conditions) Appointment of new directors. The person appointed as secretary shall make a declaration using form REQUIREMENT FOR A SECRETARY "DECLARATION BY PERSON (SEC 235) BEFORE APPOINTMENT AS No person shall act as a secretary unless SECRETARY" to the Registrar he is: (CCM) within 14 days from the date - Natural person of appointment. - Full age (18 years above) - Qualified to act as a secretary s235 - Have his principal or only place of - Not disqualified to act as secretary residence in Malaysia s238 - a member of a professional body set - Consent to act as secretary of the out in the Forth Schedule of the Act company. or a person licensed by the CCM under section 20G of the Companies Commission of Malaysia Act 2001 RESIGNATION OF SECRETARY (SEC CODE OF ETHICS 237) The Company Secretary 's Code of Ethics is - If a secretary resigned by lodging a formulated to enhance the standard of copy of "NOTICE OF INTENTION corporate governance and to instil TO VACATE THE OFFICE OF professionalism and effectiveness among SECRETARY" to the board of the company secretaries. directors. - Notice original submit to the The principles on which this Code relies are Registrar accompanied by a those that concern transparency, integrity, "DECLARATION BY SECRETARY accountability and corporate social TO CEASE OFFICE" to the responsibility Registrar. Objectives of this Code: 1. Ceased to be secretary on expiry of 30 days after lodgement of forms. 1) To Instill professionalism among 2. Not allowed to lodge any documents company secretaries within the on behalf of the company or the tenets of morality, efficiency and directors. administrative effectiveness 3. If the resigning secretary is the only 2) To uphold the spirit of responsibilities secretary, the appointment of the and accountability In line with the new secretary must be effected legislation, regulations and within 30 days from the date of guidelines governing a company vacancy s240 DISQUALIFICATION OF SECRETARY (SEC 238) Undischarged bankrupt Convicted in or outside Malaysia of any offence referred to s.198 Ceases to be a holder of a practicing certificate issued by the Registrar. REQUIREMENT TO REGISTER WITH REGISTRAR (SEC 241) The name of secretary The residential address and business address of the secretary Details of qualifications Such other information as the Registrar may require If the requirements are satisfied, the Registrar (CCM) shall enter the particulars in the Register of Secretaries and issue a Practicing Certificate. CHAPTER 5 - STATUTORY BOOKS Section 48: Inspection of documents and records kept by the company. CA 2016 requires every company to keep All registers must be in writing to be and maintain statutory books at its available for inspection. registered office. If information is stored in the form of an electronic device, the company Statutory Books must provide proper facilities for the Any register or other records of inspections and reasonable information. precautions should be taken for Any accounts and accounting guarding against falsification. records, recorded and restored. Section 48(1): The person entitled to Any documents however complied, inspect the documents and records shall be recorded and restored. allowed to make copies or take extracts from documents and records. Section 46: It is a legal requirement for companies to keep registers and statutory Types of Statutory Books books at the registered office in Malaysia 1. Register of members and to make them available for inspection. Section 50: every company shall keep a register of its member that includes: Section 47: Documents to be kept at the Names, addresses, identification Registered Office. number, nationality, place of 1. Notice of Registration issued under residence of each member S.15 Statement of shares held by each 2. The constitution of the company (not members compulsory except for company The date the member entered in the limited by guarantee) register as member 3. All registers, books, records and The date at which the member documents as required ceased to be the member 4. Minutes of all meetings of members The date of every allotment of and members resolution shares to members and the number 5. Minutes of all meetings and of shares in each allotment. resolution of the Board and the Board committees Section 51: Duty to notify particulars and 6. Copies of all written communications changes in the register of member to all members or all holders of the same class of shares Section 52: Index of Members 7. Copies of all financial statements For companies having more than 50 and group financial statements members, it shall keep an index of 8. The accounting records of the the members’ names. company (S.245) Any necessary alteration in the index 9. Copies of all instruments creating or shall be made within 14 days after evidencing charges (S.357) the date of registration of members 10. Such other documents required to Index shall contain sufficient be kept by the Registrar indication of members Section 54: Place where register of 2. Register of Directors, Managers and members to be kept Secretaries Register of members and index shall Section 57: every company shall keep a be kept at the company’s registered register of its directors, managers and office. secretaries at its registered office The register and index may be kept containing, but not limited to the following at another office of the company but particulars: must be within Malaysia. a) Directors If any person was arranged by the Name, residential address, service company to prepare the company’s address, date of birth, business register and index then it may be occupation and identification kept at the office of that person if number. that office is within Malaysia. particulars of any other directorship Virtue of paragraph (1)(b), the agent of public companies or companies shall be liable to the same penalties which are subsidiaries of public as the company and the power of companies held by the director. the court under S.585 shall extend against the agents, servants and b) Managers and secretaries officers of the agents. Full name, residential address, The company and every officer who business address and identification contravene this section commit an number. offence and shall on conviction, liable to a fine not exceeding Company need to lodge with the registrar RM10K, in the case of continuing within 1 month of the occurrence of any offence, to a further fine not following events: exceeding RM500 for each day Incorporation of the company, during which the offence continues Person cease to be or become a after conviction. director, Person cease to be or become a Closure of register manager or secretaries, A company may close the register of Change in names or residential members for a period of not more than 30 address. days in any calendar year. - The register shall be open for inspection Purpose: without charge for any member of the To determine the registered company and payment of RM10 or lesser members as at the date. sum for any other person as the company To pay a dividend or make some requires, for each inspection. distributions to members. - If there is any change in the particulars of A notice should be given to the Registrar at director, manager or secretary the company least 14 days before the closure of the shall effect the change in the register within register. 14 days from the change. - The company and every officer who The register shall be opened for contravene this section commits an offence inspection by any member of the and shall on conviction be liable to a fine not company without charge and by any exceeding RM10K and in a continuing other person on payment of RM10 offence, to a further fine not exceeding for each inspection or such lesser RM500 for each day during which the sum as the company requires. offence continues after conviction. (S.57 (6)) 5. Register of Directors’ Shareholdings, 3. Register of Debenture Holders Debentures and Interests Section 60: Section 59: Company shall keep a register Every company which issues showing with respect to each director of the debentures shall keep a Register of company the following particulars: Debenture Holders with the Shares in the company or in a Registrar within 14 days from the related corporation being shares in date of issuance. which the director has an interest It shall be opened for inspections of and the nature and extent of that the registered holder if any interest. debentures and any holder of Debentures or participatory shares. It shall contain the name, interests by which the director has particulars and the amount of an interest and the nature and extent debentures held. of that interest. At any time it is requested, the Rights or options of the director company shall supply the copy of and other person in respect of the the register on payment of RM5 of acquisition or disposal of shares in every page required. debentures or participatory interests A copy of trust deed shall be made available by the company or a forwarded by the company on his related corporation. request on a payment of RM10 for Contracts to which the director is a every page required. party or under which he is entitled to a benefit being contracts under 4. Register of Substantial Shareholders which a person has a right to call for Section 144: or to make delivery of shares in, A company shall keep a register and shall debentures of or participatory forthwith enter; interests made available by the Names of persons in alphabetical company or a related corporation. order from whom the company A company shall enter in its register receives notice under S.137 and the in relation to the director the information given in the notice particulars referred to S.59 (1) after against each name entered in the he became a director within 3 days register. after receiving notice from a director: The information given in such notice - The price or other if the company receives a notice consideration for the under Section 138 or 139. transaction - The date of the transaction  A company shall enter in its register 7. Book of Accounts the particular of the change referred Section 259: to in notice under the section within The Act requires a company to lodge 3 days after receiving the notice its financial statements and reports from the director with the Registrar. The Register shall be open for For a private company, it must be inspection by a member of the done within 30 days from the day the company without charge and by any accounts are circulated to the other person on payment of RM20 or members, where the accounts must such lesser amount as the company be circulated to the members within requires. six months from the end of its Any person may request a company financial year. to furnish him with a copy of its In the case of a public company, the register or any part of its register on accounts must be lodged with the payment of RM20 and the company Registrar within 30 days from its shall send the copy to that person AGM. within 21 days or such longer period However, section 68 requires the as the Registrar thinks fit from the company to lodge its annual return day on which the request is received with the Registrar every calendar by the company. year within 30 days from the The Registrar may, at any time in anniversary of its incorporation date. writing, require a company to furnish him with a copy of its register or any 8. Minutes part of its register and the company Minutes are a written record of the shall furnish the copy within 7 days business transacted at a meeting. from the day on which the Minutes must be authentic, complete requirement is received by the and free from ambiguity. They will be company. signed by the Chairman of the A public company shall produce its proceedings or by the succeeding register to all persons attending the meetings. meeting at the commencement of Minutes should include: each AGM of the company and keep 1. Heading stating the name of it open and accessible during the the body holding the meeting meeting. 2. Names of person present and those attending ex-officio 6. Register of Charges or by invitation The Registrar shall keep and maintain a 3. A record of decision taken register of all charges lodged for registration and resolutions passed under this subdivision. 4. Records of item of business not requiring formal resolution 5. Names of proposers and seconders of motions CHAPTER 6 – INCORPORATION OF 4. The proposed address of the COMPANIES registered office of the proposed co Effect of Incorporation Types of Companies ❖ There shall be a company by the name Section 9 – a company shall have: and registration number as stated in the 1. A name principal register kept by Registrar. 2. One or more member, having limited ❖ Every person/body corporate whose or unlimited liability for the name is stated as a member shall be obligations of the company entered as members in the Register of 3. In the case of a company limited by Members. shares, one or more shares ❖ In the case of a company having a “share 4. One or more directors capital” every person whose name is stated, they will become a shareholder. A company may be incorporated as: ❖ The person named in the statement as 1. Limited by Shares director or secretary shall be deemed to - LBS if the liability of its members is have been appointed to that office. limited to the amount, if any, unpaid ❖ A company shall be capable: on shares held by the members. - To sued and be sued. - Either private or public company. - To acquire, own, hold, develop, or 2. Limited by Guarantee dispose of any property. - LBG if the liability of its members is To do any act which it may do or limited to such amount as the enter into transactions. members undertake to contribute if wound up. Availability of Name - Shall be a public company. Section 26(1) – the name is available if it is - Cannot be formed with a share not: capital. 1. Undesirable or unacceptable 3. Unlimited Company 2. Identical to an existing company, - There is no limit on the liability of its corporation or business members. 3. Identical to a name that is be - Either private or public company. reserved under this Act 4. A name of a kind that the Minister Application for Incorporation has directed the Register not to - Shall apply to the Registrar using form accept for registration “APPLICATION FOR REGISTRATION OF A COMPANY” General principle to decide company - Incorporation under Section 14 shall name: include statement contain following i. Correct spelling and proper grammar particulars: ii. Mixture of BM and English is allowed but 1. The name of the proposed company 2. The status whether the company is must follow proper grammar private or public iii. Do not resemble elements of religion 3. The nature of business of the iv. Name refers to the name of proposed company  director/owner Not a name can be confused: Section 27(3) i. Names of institutions of higher learning - If applicant aggrieved with Registrar (UiTM, UTM, UNIMAS, UKM) decision, he may appeal against ii. Names for Federal government agencies such decision to Minister. or State (SSM, JKR, SIRIM, KWSP) - Submit “APPEAL TO MINISTER Public company → Berhad / Bhd AGAINST DECISION OF Private company → Sendirian Berhad / Sdn REGISTRAR UNDER SECTION 27” Bhd, Unlimited company → Sendirian / Sdn to Minister within 30 days from the date of decision made by Registrar. Undesirable or Unacceptable Names: 1. Contains words of an obscene nature Change of Name 2. Contrary to public policy Section 28 3. May likely offend any particular Company may change its name by section of community or religion special resolution. 4. Names that are misleading to the Lodge “APPLICATION FOR identity nature, objects or purposes of CHANGE OF NAME” to Registrar a company or in any other manner within 30 days from the date special resolution pass. Names Prohibited Under Direction of If Registrar is satisfied, the Registrar Minister: shall enter the new name of the 1. Names suggesting connection with the company on the register in place of royal family (Royal, King, Queen, Prince) the former name and issue a notice 2. Names suggesting connection with of registration of the new name. State/Federal Government (Federal, State, National) Power of Registrar to Direct a Change of 3. Names suggesting connection with Name ASEAN, Commonwealth or United Nations Section 29 (ASEAN, UNESCO, NATO) - If the Registrar is justified to suspect that 4. Names including following words the name under which the business was (Chartered, Institute, Bumiputra) formed should not have been registered, Registrar may order the company to change Confirmation of Availability and its name. Reservation - Company is given a period of 60 days to - Shall submit “APPLICATION FOR comply with the direction. AVAILABILITY OF NAMES AND RESERVATION” to Registrar. Publication of Name - Registrar shall confirm the availability of Section 30 the proposed and reserve name within 30 ✓ Every company must display its days from the date of lodgment of the registered name & company registration application or longer period as Registrar number at its registered office, every place may allow. where its business is carried on and every place where its books are kept. b) If the shareholder is body corporate ✓ A company shall disclose its registered c) Every person who is appointed as a name and company registration director of the foreign company in Malaysia number on: d) List of shareholders or members at its i. Its business letters, notices and other place of origin official publications including in e) Foreign company with share capital electronic form. f) Foreign company without share capital ii. its websites. g) Such other information that Registrar iii. its bills of exchange, promissory may require: notes and order forms. The application shall be sent with a iv. cheques purporting to be signed by statement by the agent of the foreign or on behalf of the company. confirming his consent for appointment. Verification of Incorporation Section 563 – Shall at all times appoint an a) Notice of Registration. agent in Malaysia who shall be answerable b) Certificate of Incorporation will only for all things required to be done and be issued by CCM upon request personally liable to all penalties. together with prescribed fee. Section 564 – Shall be registered under the Post Incorporation name as registered in its place of origin. a) Appoint company secretary. b) If required, may file Constitution. Section 565 – Obligation to state its name The former name of the company shall and the place where the foreign company is appear beneath its present name for a formed or incorporated outside its registered period of not less than 12 months from the office and every place of business date of the change. established by it in Malaysia. Incorporation of Foreign Companies Section 566 – Requirement to have a Section 561 – Prohibition on carrying a registered office within 30 days from the business in Malaysia unless the company date it was established. does the following matters in Malaysia: ✓ Maintains any bank account Section 574 – Shall kept accounting & other ✓ Effect any sale through independent records in Malaysia to explain the contractor transaction and financial position of the ✓ Secures or collects any of its debt foreign company, arising out of its ✓ Invests any of its funds or hold any operations in Malaysia. property Section 575 – Within 2 months of AGM,lodge with Registrar a copy of its Section 562 – Registration of Foreign financial statements of last financial year, Companies and submit “APPLICATION together with STATUTORY DECLARATION FOR REGISTRATION OF FOREIGN VERIFYING FINANCIAL STATEMENTS OF COMPANY” FOREIGN COMPANY to ensure copies are Provide particulars statements: true. a) Every shareholder CHAPTER 7 - CONSTITUTION Form of Constitution Types of Form of Constitution Section 31 Company A company, other than a company Co limited by A document adopted as limited by guarantee, may or may not shares its Constitution under have a Constitution. section 32 If a company has a Constitution, the company, each director, and each Co limited by A document lodged for guarantee registration of the member of the company shall have the company under section rights, powers, duties, and obligations 38 set out in this Act Co registered Memorandum and Company May Adopt a Constitution under articles of association as - The adoption of the constitution shall Companies originally registered or as Act 1965 altered in accordance be by way of special resolution. with the provision of the - A company's constitution has no Companies Act 1965 effect if it contravenes or is inconsistent with the provisions of this Act. Contents of a Company's Constitution -The Constitution shall be binding on Section 35 - stipulates the contents of a the company, its directors and its company's Constitution as follows: members. ❖ The objects of the company. - Shall submit a "LODGEMENT OF ❖ The capacity, rights, powers or CONSTITUTION" to Registrar within 30 privilege of the company. days from its adoption ❖ Matters contemplated by the Act to be included in the Constitution. Effect of Constitution ❖ Any other matters as the company The Constitution will bind the company wishes to include in its Constitution. and the members once it is approved ❖ If the Constitution sets out the In the same way, as if the Constitution objects of a company, the company had been signed and sealed by each shall be restricted from carrying on member and contained an agreement any business or activity that is not on behalf of each Member to follow the within those objects. provisions of the Constitution Any amount of money that a member Company May Alter or Amend must pay the company in accordance Constitution with the Constitution represents a debt Section 36 owed by that member to the firm. A company having a Constitution shall be by way of special resolution. Alter or amend its Constitution unless the Constitution itself prohibits the alteration or amendment. Any alteration or amendment to the Constitution shall bind the company and  the members on or after the date of ❖ The number of members with which passing in the special resolution. the company proposed to be Shall lodge "NOTIFICATION OF incorporated. ALTERATION OR AMENDMENT TO ❖ Contemplated by the Act to be CONSTITUTION" to the Registrar within included in the Constitution. 6. Any 30 days of the day, the special other matters as the company resolution was passed, together with a wishes to include in its Constitution. copy of the Constitution as altered or amended. Section 38(4) Any provisions in the Constitution of a Court May Alter or Amend Constitution company limited by guarantee that On the request of a director or member purports to divide the company's of a company, the Court may issue an undertaking into shares or interest order to alter and amend the which is a provision for a share capital Constitution of a company on the terms shall be void. and conditions it deems appropriate if it Any provision in the Constitution that determines that it is not practical to do purports to give any person a right to so using the procedures stated in the participate in the divisible profits of the Act or in the Constitution itself. company shall be void. The company shall ensure that an office A Constitution lodged with the Registrar copy of the "NOTIFICATION OF shall be binding on the company and its ALTERATION OR AMENDMENT TO members. CONSTITUTION BY COURT ORDER" together with a copy of the Constitution as altered or amended is lodged with the Registrar for registration within 30 days from the date of the order. Company Limited by Guarantee Shall have a Constitution Shall have a Constitution. The Constitution shall be signed by the person intending to incorporate a company limited by guarantee and lodged by the Registrar at the time the company is incorporated. The Constitution shall state: ❖ That the company is a company limited by guarantee. ❖ The objects of the company. ❖ The capacity, rights, powers and privileges of the company. CHAPTER 8 -CONVERSION company by passing special resolution and Reason For Conversion shall lodge with the Registrar a Notice of - Convert from a private to a public co. Conversion. - To have bigger capital issues (instead of being limited to only 50 Section 41(3) Upon Lodgement of Notice s/holders) for Conversion, registrar shall: - To enable company to invite public ➔ Make alteration to registrar to record co to subscribes shares/ debentures conversion - To disable the restrictions on the ➔ Issue a notice of conversion and right to freely transfer shares in a cancel previous notice of company. registration. ➔ Conversion shall take effect on 1. Conversion Unlimited Co. to Limited Issuance. Co. Section 40 - unlimited company may Passing following at EGM: convert to a limited company by passing a A notice of conversion from a public special resolution and shall lodge “ NOTICE company to a private company. OF CONVERSION FROM AN UNLIMITED - Amend its name by adding COMPANY TO A LIMITED COMPANY” ‘Sendirian’. with the Registrar specifying an appropriate - Alter provision of the alteration to its name. Constitution to impose restriction applicable to Registrar shall: private co in accordance to -Make endorsement or alter the section. register. -issue Notice of Conversion, cancel previous notice of registration or Lodge documents with CCM: certificate of incorporation. - Printed copy of amended Constitution Registrar will notify (in writing): - Registration fee of RM500 -It is being dispensed from lodging - Original copy of Notice of any documents as an unlimited Registration or Certificate of company. Incorporation. -Conversion will takes effect on the CCM will Issue: issue of Notice of Conversion - Form 19 Certificate of. Incorporation on Conversion This Conversion shall not: to Private Company -affect the identity of the company or any rights or any obligations of the 3. Conversion Private Co. to Public Co company. Section 41(2) states that a private company may convert to a public company by special 2. Conversion Public Co to Private Co resolution and shall lodge with the registrar. Section 41(1) - Public company having a share capital may convert to private  By passing a Special Resolution & Lodge with Registrar: - A notice of conversion and Effects of Conversion specifying an appropriate Section 41(5) states that a conversion of a alteration to its name. company under this section shall not: - A statement in lieu of - Affect the identity of company or any prospectus rights or obligation of company. - A statutory declaration - Render defective any legal verifying Para 190(2)(b) has proceeding by or against the been complied with company. Upon the lodgement of the notice, Section 41(6) states that any legal the Registrar shall: proceeding that could have been continued - Make endorsement in or commenced by or against company prior ordinary resolution alteration to conversion may, notwithstanding any to registers, to record the change in the company’s name or capacity conversion. in consequence of conversion, be continued - Issue Notice of Conversion or commenced by or against company after and Cancel the previous conversion. Notice of Registration or Certificate of Incorporation of Company. The conversion will take effect para 3(b) has been fulfilled. The conversion of the status will not: - Affect identity of company or any rights or obligations of co. - Render defective legal proceedings by or against the company. - Legal proceedings prior to conversion will be continued or commenced against the company after conversion. Disadvantages of Conversion ❖ Loss of privacy ❖ Volatility ❖ Disclosure requirement ❖ Accountability to Public ❖ Tedious and expensive listing cost  CHAPTER 9 - Directors under subsection (1) unless a person is appointed in his place. Company and management ❖ For the purpose of this section, the Company - separate legal entity with no minimum number of directors; physical existence. (a) Shall ordinarily reside in Malaysia by It has a legal existence – an independent having a principal place of residence in legal person separate and distinct from its Malaysia, and individual members or directors. (b) Shall not include an alternate or The mind and will of a company lies with substitute director. the management of the company. Officer: Persons who act for and behalf of TYPE OF CHARACTERISTICS the company (eg directors, secretary, DIRECTORS employees, receiver and liquidator) perform day-to-day operation and decision. EXECUTIVE - Full time employee DIRECTOR - Draw salaries from the Definition of Director company ❖ Sec 2(1) CA 2016 : any person occupying - Performing managerial the position of director of a corporation by function whatever name called and includes a - Members of BOD with person in accordance with whose specific executive directions or instructions the majority of responsibilities directors of corporation are accustomed to act and an alternate or substitute director. NON-EXECUTIVE - Not employees of the ❖ A group of individuals who have been DIRECTOR company entrusted with the power and authority to - Receive fees make decisions for the running of the determined by the company or the management of the members at general company. meeting ❖ Sec 196 of CA 2016: - To protect & act in the a) Every private company must have at best interest of his least 1 director – Sec 196(1) employer as b) Every public company must have shareholders in the minimum of 2 directors company. c) Each must have principal / residence in - Member of BOD Malaysia - Sec 196(4) without specific d) Natural person of full age (18 years old) executive Sec 196(2) responsibilities e) Sound mind ❖ Appointed by the shareholders ALTERNATE/ -Person appointed by a ❖ A director of a company shall not resign SUBSTANTIVE member of the board or vacate his office if by his resignation or DIRECTOR - Purpose: Act & speak vacation from office, the number of during periods of directors of the company is reduced absence/incapacity of below the minimum number required the director  - A director can’t appoint terminated if cease to an alternate to act be director (from any UNLESS the cause) Constitutionauthorized - Co. can terminate - Must give his consent to even if term of service act before his not yet expired appointment - Not required to hold NOMINEE Sec 217 of CA 2016 qualification shares DIRECTORS - As a person who has - Vacated if substantive been designed to act director vacates office for another in his/her - Alternate director place. entitled to receive: - Shall act in the best a) notice of board interest of the meeting company and in the b) to attend & vote event of any conflict c) to exercise all between his duty to powers of the act in the best interest substantive of the company and director in his his duty to his place nominator, he shall not subordinate his duty to act in the best interest MANAGING Articles (in Constitution) of the company to his DIRECTOR - Board has power to duty to his nominator. appoint a managing director. INDEPENDENT - An independent Not in articles (no DIRECTORS director is a director provision in the who is independent of Constitution) management and free - Board cannot appoint from any business or Managing director other relationship unless its constitution which could interfere be altered to empower with the exercise of board to appoint MD. independent - Board decides terms judgement and conditions of - Bursa Malaysia appointment & requirements: at least managing director sign two directors or contract of service. one-third of the board - Not subject to of directors, whichever retirement by Rotation is higher, are - Appointment independent directors. - Independent directors  qualification: judgements Not an executive relating to director conflicting issues. Not an officer To carry out Not a relative of functions required any executive by the Bursa. director, officer or major shareholder Not acting as a SHADOW - persons who are not nominee or DIRECTORS named as directors of representative of the company but who any executive act behind the scenes director or major to exercise a certain shareholder degree0 of control Not engaged as a over the company. professional adviser Person connected with Directors Not engaged in Sec 197; A person shall be deemed to be any transaction connected with a director if the person is which exceed 1) a member of the director’s family. RM250,000 2) a body corporated which is associated Independent directors of with that director. public listed companies requires; Qualification of Directors To act as ✔Natural person of full age (18 years old) Chairman of ✔Lodge Statutory Declaration (Form 48A) committee within 1 month from the date of appointment meetings. together with Form 49 To evaluate and ✔1 st director named in constitution monitor the ✔1 st director will hold office until the 1st decision-making AGM where they will retire process. ✔Subsequent appointment: by the director To provide an themselves objctve & positive - he is not a bankrupt contribution. - he has not been convicted To provide an - he has not been imprisonment of assertive & any offence within the period of 5 influencing years immediately preceding the presence for the date of the declaration co’s interests. - he consent to act as a director of the To provide company independent views & Disqualification of Directors (Sec 198 of Retirement of Directors (Sec 205) Act) Apply with regards to the retirement of (a) Is an undischarged bankrupt directors unless there is specific provision in (b) Has been convicted of an offence the company’s constitution or the term of relating to the promotion, formation or appointment regarding retirement of management of a corporation. directors. (c) Has been convicted of an offence The directors shall retire as follows: involving bribery fraud or dishonesty (a) At the first annual general meeting of a (d) Has been convicted of an offence under public company, all directors shall retire sections 213,217,218,228 and 539 from office at the conclusion of the meeting. (e) Has been disqualified by the Court under (b) At the annual general meeting in every section 199. subsequent year, 1/3 of the directors for the time being, or if their number is not 3 @ a Power of Court to Disqualify Person from multiple of 3, then the number nearest to Acting as Director (Sec 199 of Act) 1/3, shall retire from office at the conclusion (a) Within the last five years, the person has of the meeting. been a director of 2/more companies which The directors to retire in every year shall be went into liquidation resulting from the the directors who have been longest in company being insolvent due to his conduct office since the directors’ last election, but as a director. as between persons who became directors (b) Contravention of duties as director. on the same day, the directors the retire (c) Habitual contravention of Act. shall be determined by lot, unless they otherwise agreed among themselves. Consent to Act as Director (Sec 201) The company may appoint any person who A person shall not be appointed as a is not disqualified under this Act to fill in the director of a company unless he has vacancy at the annual general meeting at consented in writing to be a director & make which a director so retires, and if no declaration using form DECLARATION BY appointment was made to fill the vacancy, PERSON BEFORE APPOINTMENT AS the retiring director shall, if he offers himself DIRECTOR that he is not disqualified from for re-election, be deemed to have been being appointed as a director of a company re-elected. under this Act. ↓ Removal of Director (Sec 206) A person named as director shall hold office as a director from the date of incorporation until that person ceases to hold office as director in accordance Act. Subsequent director may be appointed by ordinary resolution. ↓ Section 203 (1) states the appointment of director of public co need to be voted individually. Not applicable to private companies. Vacation of Office of Director (Sec 208) director reasonably believes to be A director shall become vacant in the appropriate under the circumstances following circumstances: ✔ death - If only have 1 director, any 2. Reliance on information Provided by shareholder can request to appoint new Others. director Section 215, a director in exercising his ✔ provisions in the AOA - Disqualified to duties as a director may rely on information, act as director (resignation, lunatic & absent professional or expert advice, opinions, from the board meeting) reports or statements including financial ✔statutory provision contained in the Act - statements & other financial data, prepared, Share qualification, undischarged bankrupt, presented or made by: age limit, disqualification by Court Order(e.g - Another director in relation to fraud) matters within the director’s authority ✔Restriction by Listing Requirements of the - Any officer of co. whom the director Bursa Malaysia - Max 5 directorship believes on reasonably grounds to be reliable and competent on Duties & Responsibilities of Directors matters concerned. Section 213, a director of a company shall - at all times exercise his powers in accordance with the Act, for a proper 3. Responsibility of a Nominee Director purpose and in good faith in the best Section 217, a director who was appointed interest of the company. A director of a by virtue of his position as an employee of a company shall exercise reasonable care, company, or who was appointed by or as a skill and diligence with the knowledge, skill representative of a member, employer or and experience which may reasonably be debenture holder, shall act in the best expected of a director having the same interest of the co. and in the event of any responsibilities. conflict between his duty to act in the best of innterst of the co. and his duty to nominator, 1. Business Judgment Rule he shall not subordinate his duty to act in Section 213(2), a director who makes a the best interest of the co than to his business judgment is deemed to meet the nominator. requirement of the duty and the equivalent duties under the common law and in equity 4. Prohibition against improper use or if the director: property position - Makes the business judgment for a Section 218, a director or officer of a co proper purpose and in good faith shall not, without the consent or ratification - Does not have a material personal of GM: interest in the subject ,matter of the - Use property of co. business judgment. - Use his position as a director or - Reasonably believes that the officer business judgment is inn the best - Engage in business which is in interest of co. competition with company. - Is informed abt the subj matter of the business judgment to the extent the 5. General duty to make disclosure or holding company or subsidiary of Section 219, a director of a company shall its holding company. give notice in writing to a company of It does not apply to loans made to a particulars relating to the shares, person connected with a director who debentures, participatory, interest, rights, is engaged in full time employment of options and contracts within 14 days from co. or its related corporation. the date on which the director becomes a director. 8. Prohibitions of Tax free payment to directors. 6. Loan to Directors Section 226 prohibits the payment of tax Section 224, a company shall not make a free remuneration to directors. loan to a director of the company or enter into any guarantee or provide any security 9. Approval for Fees of Directors in connection with a loan made to such a Section 230 The fees of the director, any director by any person. benefits payable to the directors include any Exceptions: compensation for loss of employment of a - Does not apply to exempt private co director of public co shall be approved at - Funds given to director to meet general meeting. expenditure to perform his duties - Full time employment 7. Prohibition of loans to person connected to director Section 225, a company ( other tan exempt private company) shall not make a loan to any person connected with a director of the co or of its holding company or enter into any guarantee or provide any security in connnection with a loan made to such person by any other person. - A trustee of a trust under which a director or member of his family is a beneficiary. - Spouse, parent, child (adopted&step), brother, sister, son/daughter in law, brother/sister in law. - A partner of a director or a partner of a person connected with director - A body corporate which is associated with director. Exemptions: Where the loan is made, provided in relation to a loan made to subsidiary C11 - CAPITAL FINANCING ★ Right to an equal share in dividends authorized by the Board Financing the company CLASSES OF SHARES Ordinary Shares Capital Financing ❖ Equity capital Issue shares to public ❖ Main risk bearers No limitation ❖ Entitled to residue of profit after Low cost of capital payment of dividend Dilution of the rights of the existing ❖ Entitled to any surplus in a winding shareholders up ❖ Right to vote at general meeting Debt Financing Borrowings Preference Shares Does not dilute ownership ❖ Preference to payment of dividend Interest attribute to the scheme is a or return of capital in a winding up business expenses deductible for income ❖ Do not have the rights to attend and tax purposes vote at general meetings EXCEPTIONS According to Sec 69 of the Act, subject to Dividend in arrears the constitution of the company, shares in a Resolution to vary rights of company may— preference shareholders be issued in different classes; Resolution to wind up the be redeemable in accordance with S.72; company confer preferential rights to distributions of capital or income; Non-cumulative preference shares confer special, limited or conditional If insufficient profit in a particular voting rights; or year, arrears will not be carried not confer voting rights forward to the following years No voting rights RIGHT AND POWER ATTACHED TO THE SHARES (SEC 71) Cumulative Preference shares A share in a company, other than If insufficient profit in a particular preference shares, confers on the holder– year, arrears will be carried forward ★ Right to attend, participate, and to the following years. speak at a meeting If dividend in arrears, they are ★ Right to vote on a show of hands on entitled to voting rights. any resolution of the company ★ Right to one vote for each share on a poll on any resolution of the company ★ Right to an equal share in the distribution of the surplus assets of the company Raising of share capital in private Power of directors to allot shares or companies grant rights - S.75 ISSUE OF SHARES BY DIRECTORS ★ Shareholders’ approval ○ To allot shares All issue of shares must be approved by the ○ To grant rights to subscribe general meeting for shares The allotment is done by the Board of ○ To convert any security into Directors after prior approval is obtained shares from the members ○ To allot shares under The issue of shares must be done agreement, option or offer carefully to avoid any irregular allotment A private company cannot invite the public ★ Allotment of shares to subscribe for any of its shares ○ Right issue Issue of shares in a private company is by ○ Bonus issue way of allotment, determined by the ○ Allotment of shares to a company promoter ○ Shares issued as HOW TO RAISE SHARE CAPITAL IN PVT consideration for acquisition CO of shares or assets of the company and members has Application Form + monies (alloted for been notified 14 days before cash)/ contract (allotment otherwise than for the issue cash) → [capitalisation or bonus share] → company ★ Lodgement with Registrar ○ NOTICE OF APPROVAL The company will do → FOR ALLOTMENT OF Shareholders meeting SHARES OR GRANT OF - To approve the allotment RIGHTS - To give authority to the ○ The approval expires at the directors to issue share conclusion of the AGM certificates ○ If no AGM, the approval will Board meeting expire not more than 12 - To approve the allotment months after the approval - To authorize the directors to was given issue share certificates → issued to new member within RETURN OF ALLOTMENT 2 months from date of Statement of capital lodgement of application Numbers of shares Amount paid, due and payable After meeting the company give out forms Different classes of shares (Within 1 month) → to the CCM Particulars of allottees Allotted otherwise than in cash Upon application Attach contract in writing ★ Company shall issue a share RETURN OF ALLOTMENT OF certificate within 60 days → SHARES ★ Shareholder may serve notice to the Power of co to alter its share capital company to deliver within 14 days (Sec. 84) ★ Failing which, the shareholder may Consolidated and divide apply to the Court for an order 10,000,000 ordinary shares of RM1 Failure to deliver → each divided into 5,000,000 ordinary shares of RM2 each If name is wrongly entered in the Conversion Register of Members Convert paid up shares into stock ★ May apply to Court rectification or and reconvert that stock into paid-up payment of compensation or both. shares Subdivide Raising of share capital in public 10,000,000 ordinary shares of RM1 companies each subdivided into 5,000,000 METHODS OF RAISING FINANCE VIA A ordinary shares of RM1 each and PUBLIC ISSUE 2,500,000 ordinary shares of RM2 each Issuing shares directly to the public An offer for sale (existing Variation of class rights shareholders offer share to public) Provision in the Constitution A private placement Written consent from shareholders of > 75% Public issuance (1 - new shares) Special resolution Notify shareholders within 14 days Disallowance or confirmation by court Shareholders holding >10% may apply to court within 30 days Court may disallow or confirm Lodgement of Court Order to Registrar LODGEMENT OF COURT ORDER TO CONFIRM OR DISALLOW VARIATION OF CLASS RIGHTS Offer for sale (2 - existing shares) NOTIFICATION OF VARIATION OF CLASS RIGHTS ISSUANCE OF SHARE CERTIFICATE ★ Constitution ★ Application by shareholder A company is not required to issue a share certificate → Reduction of Share Capital –S.115 Reduction of Capital by Private or Public 1. Company may reduce its share Company –S.117 (Procedures) capital 2. Unless otherwise provided in the A company may reduce its share capital by constitution, a company may reduce a special resolution if the company– its share capital by– Sends a notice to the Director A special resolution and General of the IRB referred to in confirmation by the court in S134 of the Income Tax Act 1967 accordance with section 116; [Act 53] and the Registrar within 7 or days of the date of the resolution A special resolution and the notice shall state that the supported by a solvency resolution has been passed and the statement in accordance with resolution date; and section 117. Meets the solvency requirements The resolution and the reduction of the Reduction of share capital by Court share capital shall take effect in accordance –S.116 with S119. Subject to confirmation by the Court, a The company meets the solvency company may, by special resolution, requirements if– reduce the share capital of the company All directors of the company make a in any way which includes all or any of solvency statement in relation to the the following: reduction of share capital; The statement is made– By extinguishing or reducing the ○ In the case of a private liability on any of the shares of the company, within the period of company in respect of unpaid share 21 days ending with the date capital; of resolution; and By canceling any paid-up share A copy of the solvency statement capital which is lost or requirements if the reduction of unrepresented by available assets; share capital is solely by way of By returning to the shareholders any cancellation of any paid up capital is paid-up share capital which is in solely by way of cancellation of any excess of the needs of the company. paid-up share capital which is lost or unrepresented by available assets. SHARE BUY BACK Transfer the shares, or any of the shares as purchase consideration Sec 127: ONLY A PUBLIC COMPANY can Cancel the shares or any of the exercise share buy back provided the shares following conditions are present: Sell, transfer or otherwise use the The company is solvent. shares for such other purposes as The consideration for the share buy back the Minister may by order prescribe exercise must come from distributable retained profit. Properties of Treasury Shares Shares are quoted on the Bursa Malaysia ★ No voting rights and not to be and the purchase is made through Bursa counted in determination of any Malaysia resolution Purchase is made in good faith ★ No dividend entitlement purchase is made in the interest of the ★ Not taken into account in calculating company the number of % of shares of a class of shares for any purposes A company shall lodge “NOTICE OF ★ Not entitled to any notices of general SHARES BUY BACK BY A COMPANY” meeting with the Registrar and the stock exchange ★ Not taken into account for within 14 days. substantial shareholdings for takeover Where a company has purchased its own ★ No rights for requisitioning of shares, the directors of the com may meeting resolve — ★ Not counted for quorum purposes To cancel the shares to retain the shares purchased in treasury and such shares thereafter to be known as LOSS OF SHARE CERTIFICATE “treasury shares” to retain part of the shares so purchased Loss of share certificate S.104 as treasury shares and cancel the balance. Steps to be taken: Payment of RM50 fees to issue TREASURY SHARES duplicate certificate or document to the owner Where such shares are held as treasury Advertise in a newspaper shares, the directors of the company may Bond or indemnification Distribute the shares as dividends to shareholders, such dividends to shareholders, such dividends to be known as “share dividends”; Resell the shares or any of the shares Transfer the shares, or any of the shares for the purposes of or under an employees’ share scheme REGISTRATION OF TRANSFER & Transfer & transmission of shares REFUSAL OF REGISTRATION Transfer of share S.105: Requirement for instrument of transfer Any shareholder or debenture holder may transfer all or any of his shares or debentures in the company by a duly executed and stamped instrument of transfer and shall lodge the transfer with the company. S.105: Registration of transfer or refusal of registration A company shall enter or cause to be entered the name of the transferee in the register of members as shareholder within thirty days from the receipt of the instrument of transfer. The directors may refuse or delay the registration of a transfer of shares under subsection (1) where the shareholder fails to pay the company an amount due in respect of those shares DIVIDEND Unclaimed dividends SEC 131 – Distribution out of profit SEC 132 – Distribution only if company is solvent SEC 133 – Recovery of distribution Sec 131 : a company may only make a distribution to the shareholders out of profit of the co available if the co is solvent. Dividends are usually paid out by companies who have earned net profits after deducting all accruals and taxation, and are a form of returns to shareholders for their investment. The final dividend has to be approved by shareholders at the AGM and the rates recommended by the boards of directors should be maintained or can be reduced, but not increased. Every director or officer who willfully permits the payment of dividend from any other fund other than the profits or the share premium account shall be liable to a maximum penalty of RM250,000 or 10 years imprisonment or both and shall be liable to the creditors of the company of the amount of dividends paid that have exceeded the profits. Payment of dividend in a public listed company TUTORIAL – CAPITAL FINANCING Q1 Q2 The Board of Directors of BASFID Berhad approved a share purchase scheme with a OMMA Sdn Bhd (OSB) is a private maximum amount of RM30 million on July company. The chairman of the company is 4. 2022. BASFID Berhad plans to buy its seeking your view on the following matters: shares under this scheme between January 11, 2022, and December 31, 2023. The a. One of the shareholders, Puan Zia would chairman of BASFID Berhad requested that like to give her shares worth RM25,000 to the company secretary explain several her son Encik Ahmad. However, she is issues to the shareholders concerning the confused between the transfer and company's share buy-back scheme. transmission of shares. Explain with example the differences between transfer I. Explain the exceptions that permit a and transmission of shares. company or its holding company to provide (6 marks) financial aid to purchase its shares. (6 marks) b. A prospective investor, Encik Nadzri has Il. Distinguish between reduction of capital written to the company to inform his interest and share buy-back. in purchasing 20,000 shares of the (6 marks) company. In exchange for the shares, Encik III. Explain the concept of the transmission Nadzri will provide the company two vans of shares of a corporate owner. valued at RM60,000. Describe the (4 marks) procedure for Encik Nadzri's application for Iv. Distinguish between a bonus issue and a new shares. rights issue. (8 marks) (4 marks) (Total: 20 marks) c. Based on the latest OSB board of directors' meeting, all directors have agreed unanimously to distribute a 10% final dividend to the shareholders. Advise the board on the distribution of the dividends in accordance with the requirements of the Companies Act 2016. (6 marks) (Total: 20 marks) Q3 Puan Julia is expecting a higher rate of dividend and started to question the low rate of dividend declared. Briefly explain the solutions for this situation. CHAPTER 12 : DEBT FINANCING 4. After underwriters get the application Borrowing Power forms & monies, they would submit Give security by creating mortgage Form 34 (register charges) to CCM of charge (over properties) unless 5. CCM issue Form 40 to the company Constitution prohibits 6. Company would provide trust deed Directors are given authority by (evidence of issuance) Constitution to exercise power in 7. Trust deed lodge to SC relation to borrow money, to mortgage or charge and to issue Difference between shares & debenture debenture and other securities Shares Debenture Type of Debenture Fund Public Borrow from 1. Redeemable invest public Form (debenture) Redeemability (fixed date Status Shares = Creditors = for redemption) ownership public 2. Irredeemable of co Form (bonds) Redeemability (no fixed Voting right Entitled at Not entitled date for redemption) GM 3. Convertible Liabilities Unsecured Secured Form (debenture) (byr dia Redeemability (option to dulu) convert to shares) 4. Debenture Return Dividend - Fixed rate of Form (stock) annual profit interest Security (secured by charge; evidenced by trust deed) 5. Loan Form (stock) Security (no security) Charges (pg 289) Definition Issuance of Debenture Includes mortgage and any 1. Issuance of debenture by Public Ltd agreement to give or execute charge Co. must acquire approval of SC & or mortgage upon demand or rated by approved RAM otherwise 2. Inform & prepare prospectus Company transfer property for 3. Once public interested to join the payment of debts owed company, they would submit Security given by company in favor application forms & application of creditor monies through underwriters Type of Charges 1. Fixed charge Charge attaches to specific asset & Co cannot dispose asset w/o consent of debenture holder Common assets charged - land/buildings/part of machineries Holder of fixed charge has immediate security over property in priority to subsequent claimants 2. Floating charge Does not attach to Co assets until such time it crystallizes Charge on specific class of asset (can choose) (e.g. stock in trade/group of curr. asset) Does not relate to any specific asset until something happen to cause it crystallizes, turning into fixed charge Co free to dispose asset in ordinary course of buss Registration of Charges S.352 - company that create a charge over its property or any of its undertakings shall lodge with the Registrar “Statement of Particulars to be Lodged with Charge” within 30 days from creation of charge If company contravenes with this section, charge shall be void against liquidator and any creditor of the company CHAPTER 13 Dissolution consented in writing prior to the appointment to act as liquidator. Voluntary and Compulsory Winding Up section 432: the winding up of a company CONTRIBUTORY may be effected either by way of a winding up order by the Court, or by way of a 1. section 435, when a company is wound voluntary winding up. up, every present and past members shall be liable to contribute to the assets of the A voluntary winding up may be affected by a company to an amount sufficient for resolution either: payment of its debts and liabilities and the 1. By a members' voluntary winding up costs, charges and expenses of the winding where the company is solvent and up and for the adjustment of the rights of the the liquidator is appointed by the contributories among the p