Click here to download the PDF version. The Companies (Amendment) Bill 2019 was passed by the Dewan Rakyat (the House of Representatives) on 10 July 2019 and by the Dewan Negara (the Senate) on 31 July 2019. The amendment bill makes amendments to the Companies Act 2016 (“Act”). This is the first-time amendments are made to the Act.
1. Definition of “subsidiary and holding company”
Section 4(1)(a)(iii) of the Act has been amended by replacing the words “issued share capital” with “total number of issued shares”. It provides that a corporation shall be deemed to be a subsidiary of another corporation if the corporation holds more than half of the total number of issued shares.
This amendment also seeks to affirm the application of the no par value environment for the purpose of calculating the total number of issued shares of the corporation.
2. Execution of documents
The addition of the new section 66(6) confirms that the following formalities under section 66 of the Act:
• affixing its common seal (subject to the conditions or limitations in the constitution); or
• signature of at least 2 authorised officers (one of whom is a director), or by a sole director in the presence of a witness attesting to that signature;only apply to ‘documents’ which any written law, resolution, agreement or constitution requires it to be executed in accordance with those formalities. Letters, contracts and other similar documents are therefore not subjected to these formalities.
3. Redemption of preference shares out of capital
Sections 72(4) and (5) have been amended to provide that if the shares are redeemed out of profit and is available for dividend, a sum of equal to the amount of the shares redeemed shall be transferred into the share capital accounts of the company.
4. Power of company to alter its share capital
Amendments to section 84(1) of the Act allows a company to alter its share capital by passing an ordinary resolution instead of a special resolution (unless otherwise provided in the company’s constitution).
5. Disallowance or confirmation of variation by Court
Amendments to section 93(2)(b) makes it clear that if the rights attached to shares in any class of shares in a company are varied, an application may be made on behalf of the shareholders representing at least 10% of the total voting rights in the class by any shareholder appointed by all the shareholders in that class to have the variation disallowed.
6. Accounting periods of companies within the same group
Section 247(1) of the Act requires directors of a non-foreign company to ensure that the financial year of a subsidiary company coincides with the financial year of the holding company.
Amendments to section 247(3) now allows directors of the holding company to apply in writing to the Registrar (within 30 days before the circulation of the financial statement of the holding company) for an order to authorise any subsidiary to have a financial year that does not coincide with the holding company.
7. Expenses of circulation
Amendments to section 304 makes it a requirement for a company to circulate the written resolution proposed by members once the members have deposited or tendered to the company a sum sufficient to meet the company expenses not later than 1 week before the company becomes subject to the requirement to circulate the resolution.
8. Additional matter to be transacted at the Annual General Meeting of a public company
Section 340(1)(c) of the Act has been amended to include the appointment and fixing of the remuneration of auditors as one of the matters to be transacted at the AGM.
9. Powers of receiver or receiver and manager on liquidation
Section 386 of the Act has been amended to provide that a receiver or receiver and manager that has been appointed under section 385 of the Act, may continue to exercise all its powers provided under section 386.
10. Dilution of power to appoint Judicial Manager
Presently, a company, its directors, or a creditor may apply to the Court for the company to be placed under judicial management and for a judicial manager to be appointed. Amendments to section 409(a) of the Act makes it easier now for the Court to dismiss an application for judicial management if it is satisfied that:-
• a receiver or receiver and manager has been or will be appointed; or
• a secured creditor opposes the making of the order.
It is no longer necessary to satisfy both requirements.
11. Process for grant of liquidator’s licence
Section 433(2) has been amended to allow 2 additional categories of persons to be appointed as interim liquidator or liquidator without the leave of Court in a members’ or creditors’ voluntary winding up.
New subsections 433(4A), (4B), and (4C) confers discretion to the Minister of Finance to:
(a) impose limitations and conditions as he deems fit on any person who is approved to be a liquidator and to revoke such appointment;
(b) limit the duration of the approval (and any renewal of such approval) of a person approved to 2 years;
(c) delegate all or any of his powers under this section to any person or body of persons.
12. Reinstatement of security for costs
The new section 580A is a reintroduction of the provision for the grant of a security of costs.
If it appears by a credible testimony that the plaintiff company will be unable to pay the costs of the defendant if the defendant is successful in his defence, the Court may order the plaintiff company to give sufficient security for all the costs and to stay all action or proceedings until such security is given.
This amendment also provides discretion to the Court to direct the costs of any action or proceedings to be borne by the party to the action or proceedings.
Save for the amendments made to Section 409 which can be seen as a restriction to the effectiveness of judicial management, other amendments to the Act are welcomed as it finally put to rest and clarifies certain ambiguities. The reinstatement of Court’s discretion to grant security and costs is also welcomed.