The Companies Act 2016 in force on 31 January 2017: 10 Things To Immediately Prepare For

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.

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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.

Conclusion

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:

43 thoughts on “The Companies Act 2016 in force on 31 January 2017: 10 Things To Immediately Prepare For

  1. Moiz Halderwala January 27, 2017 / 9:56 pm

    Thanks

  2. Zainu January 30, 2017 / 3:33 pm

    Dormant companies is it true no longer to do year end statutory audit?

    • Lee Shih January 31, 2017 / 8:41 pm

      This is likely to be the case but we have to wait for the official announcement by SSM. For now, the law remains the same that all companies must have the year-end statutory audit.

  3. Py February 1, 2017 / 12:07 am

    Hi Mr Lee, is the filing of securities instrument (debenture etc) still required?

  4. Edward February 3, 2017 / 4:35 pm

    Hi Mr Lee, are there any Rules made pursuant to Section 616 of the Companies Act, 2016? In particular, to winding up of companies?

    • Lee Shih February 4, 2017 / 6:20 pm

      For the winding up rules, the present winding up rules (enacted under the Companies Act 1965) continue to be in force. This is not ideal since there will be a conflict between the existing winding up rules and the Companies Act 2016. The references will be wrong. It may take a bit of time before the winding up rules are amended as these rules have to be amended by the Rules Committee under the Courts of Judicature Act. SSM cannot unilaterally amend the winding up rules.

  5. Johnson February 10, 2017 / 6:31 pm

    For shareholders or members resolution, what significant changes are there?

    • Lee Shih February 18, 2017 / 12:28 pm

      For private companies, there is a new written resolution procedure. It does away for the unanimous members resolution where all members need to sign. There is a now a procedure to allow for the necessary majority of members (to pass an ordinary or special resolution) to sign on the written resolution.

  6. Ong Whee Tiong February 10, 2017 / 6:58 pm

    Under section 232(1) Companies Act 2016, do director applies only to directors of Public Company having service contracts with the public company or its subsidiaries or applies to both, the directors of the Public Company as well as its subsidiaries must comply with this section?

  7. Terence Phillips February 16, 2017 / 5:17 pm

    Can yo give be the Gazette Notification No.for the New Threshold amount of RM10,000 for winding-up

  8. Jenny Toh February 28, 2017 / 2:26 pm

    hello Mr. Lee, can you advise if the Annual Return S68 has to be filed online or still manual submission? can I use the Form downloaded from SSM website for submission?

  9. Cara March 2, 2017 / 3:48 pm

    May i know the table of contents for your new book ‘the companies act 2016’?

  10. Wong Hwee Lee March 7, 2017 / 6:46 pm

    Under Section 306(4) of the CA 2016:
    A written resolution shall be passed when the required majority of eligible members have signified their agreement to the written resolution.

    Please clarify :
    a). the majority members means 4 out of 5 members (80%) could pass a special resolution even their shareholding maybe less than 75% in total?
    b. Only one member OR members, who holding 75% or more could pass the special resolution?

  11. STARFISHguy March 9, 2017 / 9:50 pm

    Hi. Mr. Lee. Good review of the Companies Act. Can i invite you to speak to my network on the same matters previeeed here? And maybe promote your book?

  12. CVG March 10, 2017 / 1:39 am

    My company secretary did not file agm and accounts for year 2015. He said that he can submit the accounts for 2015 & 2016 together. Not sure why he did that……is that ok?

  13. mt March 21, 2017 / 1:10 pm

    For declaration of dividend (sdn bhd) is there a standard format to declare the solvency or we have to just prepare a letter to be signed by directors to declare solvency for the next 12mths after distribution is made.

    • Lee Shih March 22, 2017 / 2:57 pm

      For declaration of dividends, there is no standard format or any form of solvency statement that must be signed. The directors must merely ensure that they have complied with the solvency requirement. If there is a risk of the directors being challenged later on whether the company was solvent or not, it may then be good to have the written evidence supporting the directors’ view of solvency at that point in time.

  14. JaY March 24, 2017 / 3:53 pm

    Under the new Act, can an auditor (sole auditor) resigns before his term is up?
    If so, what is the procedure/process that follows thereafter for the appointment of a new auditor?

  15. Fendi April 21, 2017 / 9:30 am

    Hello there, under the new act, is it possible to utilize the share premium account to pay for the dividend declared on this year?

  16. fivefai April 24, 2017 / 11:26 pm

    Hi,
    Referring to the Point 5, if a Public Listed company already had chosen to combine Share Premium into Share Capital, what are the likelihood “things” will impact/benefit to the shareholders in layman term?

    The company’s announcement stated that “There is no impact on the numbers of ordinary shares in issue or the relative entitlement of any of the members as a result of this transition”.

    Thanks.

  17. Joseph Tan May 4, 2017 / 4:04 pm

    Hi Mr Lee,

    It is stated that s 466 the amount prescribed sum by the Minister shall be RM10,000.

    Under which PU (A) or PU (B). Thanks

  18. JJL May 18, 2017 / 2:16 pm

    Lee Shih, where to buy this book, companies act 2016 and how much?

  19. yong ching ching May 31, 2017 / 12:17 pm

    Hi, Lee Shih,

    Just wonder how about the S.350 Service of Document in the old Act? Seems like it doesn’t has any replacement in the new act. So it will be stipulated based on the case law or it could be a lacuna in new act?

    • Lee Shih May 31, 2017 / 1:12 pm

      The equivalent to section 350 was not carried forward to the Companies Act 2016. It could be a lacuna. You will also see the old section 351 for security for costs was also not incorporated into the Companies Act 2016.

      • yong ching ching May 31, 2017 / 6:01 pm

        thank you for your reply. It’s really help!!

  20. Angeline June 14, 2017 / 9:45 am

    Hi I am from Sarawak. I am doing a winding up currently. Can i know do we still need to gazette the advertisement in the “Warta Kerajaan”

    • Lee Shih June 14, 2017 / 11:18 am

      Yes, the present Winding Up Rules 1972 continue to apply. So there is the requirement to still gazette in the Warta Kerajaan.

  21. Liew Huei Qin June 26, 2017 / 5:33 pm

    What are the effect from company Act 1965 to company ACT 2016 about Memorandum of Association(MA) and Articles of Association(AA) ?

  22. Farhan July 18, 2017 / 3:40 pm

    Hi Mr Lee

    I have one question for the loan to director.

    “A company shall not make a loan to a director of the company as per the malaysia company act article 224.”

    If a company prepare the resolution for the execution of loan to director, still is it prohibited?

  23. kee chaeh chuan August 16, 2017 / 7:22 pm

    hi, Mr Lee,
    may i know what are difference between EGM and company resolution in company act 2016?
    If a company secretary wrote to lawyer the agreement shareholders (one had passed away)to sale a property in EGM, it is sufficient? does lawyer still need a special company resolution?

  24. andrew August 23, 2017 / 5:57 pm

    Hi Mr Lee,
    A very good review of the Companies Act, thanks for the sharing. Need your advice for the following:
    1) For a public listed company who declare interim dividend (annual accounts not ready yet) or final dividend (annual report ready), for both interim/special or final dividend, does it require to be approved at AGM? Does Board or even the directors have authority to declare any dividend?
    2) Accounting treatment. How is the accounting entries for (a) interim/special dividend; & (b) final dividend?

    Thanks.

  25. yaya August 24, 2017 / 11:20 am

    “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.”

    Which section in Companies Act 2016 that states this statement?
    Thanks.

  26. emy binti ismail January 24, 2018 / 12:34 pm

    good morning, my name is Amy from Kota Kinabalu.

    i have question regarding for register of member (ROM) by mycoid. I have update my ROM with date 19.02.2016. But i doing mistake to fill in amount (CONSIDERATION SUM) of transfer shares.Here, i want to know the best resolution that i can do to make correction my mistake. Thank You.

  27. Tan April 16, 2018 / 9:29 am

    If the new company incorporate in Nov 2016, can the first year accounting period be 18 months ?

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