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WHAT IS A COMPANY ?

A company is a legal entity that is separate and distinct from its members and shareholders. When a company is formed, it is said to have become "incorporated".

A company is capable of owning property, making contracts, employing people and being sued or of suing.

Unlike sole proprietorships or partnerships, companies have continuity of succession, as it is unaffected by the death or incapacity of one or more of its members.

There are three types of companies - A company limited by shares where the members personal liabilities are limited to the par value of their shares, a company limited by guarantee where the liabilities of the members will be restricted to the amount each agrees to contribute to the assets of the company in the event of dissolution or liquidation and an unlimited company where there is no limit to the members liabilities.

Company limited by shares is the most common type of company structure in Malaysia. Companies limited by shares falls into two categories - Public limited companies and Private limited companies.

A Private limited company cannot sell shares to the general public. The name of private limited company ends with the word "Sendirian Berhad" or abbreviation "Sdn. Bhd.".

Public limited companies raise capital by selling shares and are run by a board of directors elected by shareholders. They show their status by using the abbreviation "Bhd." or the word "Berhad" after their name.

Public limited companies can only offer shares to the public if a prospectus which complies with the requirements of the Companies Act 1965 has been registered with the Registrar of Companies. Before a prospectus can be accepted for registration, the proposal for the issue or offer of shares to the public have to be submitted to the Securities Commission for approval.

Subject to the requirements laid down by the Kuala Lumpur Stock Exchange or KLSE, public limited companies have to apply to the KLSE for permission to have its shares quoted on the Exchange. Even after a public listed company has its prospectus issued and registered, it is not allowed to commence business if it fails to obtain permission from the KLSE.

Public listed companies are listed either on the Main Board or the Second Board of the KLSE. Any subsequent issue of securities such as the issue by way of a rights or bonus requires the approval of the Securities Commission.

WHAT IS THE PRINCIPAL LEGISLATION GOVERNING THE FORMATION AND OPERATION OF COMPANIES IN MALAYSIA ?

The Companies Act 1965 is the principal legislation governing the formation and operation of companies in Malaysia. The Act enables an association of persons to form various types of corporate organization known as registered company. In addition to protecting the right and interests of shareholders in particular and investors in general, this Act also provides facilities for the incorporation of companies, its constitution, its relation with members and creditors, management and winding-up.

The Registrar of Companies Malaysia or ROC enforces and administers the Companies Act 1965. Every company intending to carry on business in Malaysia must register with Registrar of Companies before conducting any business activity.

The Trust Companies Act regulating the formation and operation of trust companies and Kootu Funds (Prohibition) Act 1971 introduced to prohibit all undertakings which promote or which are designed to promote kootu funds are also administer by the ROC.

Other regulatory framework includes the Securities Industry Act 1983 which provides the securities industry in Malaysia and is under the responsibility of the Ministry of Finance, the Securities Commission Act 1983 which provides the powers and functions of the Securities Commission and provisions for take over and mergers and finally, the Securities industry (Central Depositories) Act 1991 which provides for the regulation of a central depository in respect of the electronic deposit, withdrawal, holding and dealing in securities deposited and other related matters.