New Companies Bill passed

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The Companies Bill 2015, passed by Parliament today to replace the existing Companies Act 1965, will streamline the formation, operation and dissolution of a company, while at the same time ensure good corporate governance through simplification of laws and deregulatory measures, said Domestic Trade, Co-operatives and Consumerism Minister Datuk Seri Hamzah Zainuddin.

He said the bill will focus on corporate governance and improve the ease of doing business in the country.

“For instance, Malaysia currently ranks 18th (on World Bank’s) ease of doing business (list). By providing an Act that makes it easy to do business, it will hopefully improve our ranking,” Hamzah told reporters at Parliament today.

In his speech when tabling the second reading of the bill last Thursday (March 31), Hamzah said that the key features of the bill include the streamlining of the formation of a company, which allows a company to be formed by one person, and that person can be the director of the company.

It also abolishes the need for a private limited company to hold an annual general meeting every year, and instead, it allows the company to use written resolutions in making any decision.

The bill also introduced no-par value regimes, where new shares introduced by the company has no-par value.

“The company can decide the share price of the company, according to current situation of the company. For instance, they can use the net tangible asset (NTA) as the basis of share price, or set a higher or lower price base on the NTA ratio of the company.

“However, shareholders have to decide whether they agree or disagree with the share price offered by the board. That’s because if the share price is lower than the NTA, their interest might be diluted,” Hamzah had told the Dewan Rakyat.

The bill has five segments, comprising 620 sections and 13 schedules.

Hamzah said after the bill has been approved in the Senate and obtains the Royal Consent and becomes gazetted, the government will come up with regulations and guidelines for the Act.

“In my opinion, the opposition does not view this legislation in a hostile manner; we see it as an improvement to business process and entrepreneurship and that it will contribute towards a friendlier business environment,” Kelana Jaya Member of Parliament Wong Chen told theedgemarkets.com.

“In the current situation where the economics are not good, this bill comes at a good time, giving a small injection of hope on entrepreneurship to a sluggish economy,” he said.

Wong also pointed out that the Act allows the reduction of capital, without the need of a Court order. However, the company has to prove that it is solvent. Under the existing Companies Act, any capital reduction must be carried out by way of a Court order.

In addition, the bill gives more freedom for a listed company to buy back its share without limitation, provided the company is solvent at the time of the share purchase, and the aim of the share buy back [is] as a legitimate defence and not to benefit any shareholder, Wong added.

However, he expressed concern over the enforcement of the Bill, as the law did not spell out the criiteria of what constitutes the solvency test.

 

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