It is now confirmed through the gazette notice. The Companies Act 2016 will come into force on 31 January 2017.
The entire Companies Act 2016 will come into operation except for the sections on: (1) the company secretary’s registration with the Registrar of Companies; and (2) the corporate rescue mechanisms. Hence, effectively, all companies will now have to operate under the Companies Act 2016 framework.
With 31 January 2017 merely days away, I set out the 10 crucial things companies can consider preparing for under the Companies Act 2016.
(1) Filing of Annual Return – Anniversary of Incorporation Date
The new regime now requires the filing of the annual return not later than 30 days from the anniversary of the incorporation date. Previously, the annual return would be filed after the Annual General Meeting (AGM). So while companies may have just filed their annual return a short while ago, it would be prudent to track the anniversary of your incorporation date to see if you need to file the annual return again.
(2) Upcoming Annual General Meeting
Companies may already be preparing for the issuance of the notice of its AGM. For private companies, there is now no longer a need to hold your AGM.
For public companies, your AGM may now need to take into account new matters. For example, one significant new matter is where the fees to the directors and the benefits payable to the directors must be approved in a general meeting of the shareholders.
(3) Audited accounts
The new law will also bring about changes to the audited accounts. Firstly, the audited accounts can now be circulated to the members of the private company since there is no longer the requirement for an AGM. However, the audited accounts must still be placed before the AGM of a public company.
There will be changes to the contents of the company’s audited accounts. For example, the directors’ report enclosed in the audited accounts can include the new business review section. Further, there must be details of any indemnity given to, or insurance effected for, any officer or auditor of the company.
(4) Dividends – Directors be Aware of Solvency
When the directors declare dividends, they must now be aware of the new solvency requirement. The company must be able to meet its debts for 12 months after the pay-out of the dividends. If there is a breach of this new solvency requirement, the directors then face the risk of personal liability, both under criminal action and civil action.
(5) No-Par Value Comes into Effect
The no-par value comes into effect. Firstly, this means that the issuance of all shares no longer carries a par value. That also means that there is no more concept of prohibiting the issuance of shares at a discount. The directors now have the discretion and the duty to determine the appropriate value for the shares when issued.
Secondly, the company’s share premium account and capital redemption reserve account will now be merged with the company’s share capital. There is a transitional period of 24 months to utilise the amounts in the share premium account and the capital redemption reserve account. However, there will only be very limited options to utilise these amounts, especially for the share premium account.
(6) M&A Deemed to be the Constitution
Effective 31 January 2017, your Memorandum & Articles of Association (M&A) will now be deemed to be the Constitution. There may be some conflict or uncertainty in the provisions of your M&A with that of the sections under the Companies Act 2016. Companies can decide to review their M&A and to make appropriate amendments, adopt a a new Constitution, or (for companies limited by shares) choose to not have its M&A / Constitution.
(7) Shareholder Resolutions – Comply with the Written Resolutions Procedure
For private companies, there is the new written shareholder resolutions procedure. This will be different from the previous procedure of procuring the Members Circular Resolution where all the shareholders signed on the resolution. There is also an impact on wholly-owned subsidiaries which will have to comply with the new written resolution procedure.
(8) Execution of Documents: Some Uncertainty
Companies will have to be aware that there is a provision providing that the valid execution of documents will need to meet certain signatory requirements, in particular, where a director must sign on that document. It is not clear whether this provision will be interpreted as meaning this is the only way you can validly execute a document or this is merely one way you can carry out such a valid execution. This would have a significant operational impact on all companies if all documents must also require the signature of a director.
(9) New Regulations and New Forms
The new Companies Regulations 2017 have also been gazetted. The new Regulations set out some changes and also sets out the Schedule of Fees. The new Forms are not contained within the new Regulations and they should be up on the Companies Commission website very shortly. [Update: The Forms are now up on the SSM website.] Some of the forms can be lodged through the electronic filing system while the other forms will have to be printed out and then manually lodged over the counter. The Form numbers have been removed and they only refer to the specific section number in the Companies Act 2016.
(10) Winding up Notice – New RM10,000 Threshold
The notice has been gazetted confirming that the new threshold for the issuance of the winding up notice is now RM10,000. This is a significant increase compared with the existing RM500 threshold under section 218 of the Companies Act 1965.
The above is a small snapshot of some of the things to look into under the Companies Act 2016. There will still be many more things for us to get used to and to fully understand in the months and even years to come.
You may wish to read some of my related posts on the Companies Act 2016 below: