5. crf india 2012 nor azimah abdul aziz

REFORMING LEGISLATIVE ENVIRONMENT - A GLOBAL PERSPECTIVE

SSM’s Corporate Law Reform
Programme: Revolutionising Doing
Business In Malaysia

By:
Nor Azimah Abdul Aziz
Director
Corporate Development & Policy Division
Companies Commission of Malaysia

Companies Commission of Malaysia @ CRF 2012

OVERVIEW

Background

Highlights of New Provisions to be introduced

Conclusion

Companies Commission of Malaysia @ CRF 2012 2

BACKGROUND
Corporate Law Established in Dec.
Reform Committee 2003 to conduct a
(CLRC) comprehensive review
of the Companies Act
The 4 year review
SSM accepted 183
188 issued 12 Consultative
out of the 188
Recommendations papers
recommendations. In
June 2010 it became Final Report was
19 policy statements issued in 2008
which are be the comprising of 188
basis for the drafting 19 Policy recommendations on
of the new Statements wide-ranging aspects
Companies Bill from incorporation to
winding-up


BACKGROUND
APART FROM THE REVIEW ON CORE COMPANY LAW THAT WAS CONDUCTED BY THE CLRC,
THE REFORM EXERCISE ALSO CONSIDERED:
1. Recommendations of the 2. Other developments in related laws (Capital
Accounting Issues Market and Conventional and Islamic
Consultative Committee Financial & Banking legislation);
(AICC) that was established
in Feb 2010 to conduct a
3. Recommendations by the World Bank’s Report
focused review on corporate on the Observance of Standards and Codes
financial reporting provisions (ROSC) Audit Oversight.
and to modernise the
Companies Act 1965 based
on the development of the 4. Recommendations based on the Report issued
applicable approved by the OECD’s Peer Review Group (PRG) of the
accounting standards and Global Forum on Transparency and Exchange
global best practices; of Information for Tax purposes on Malaysia .
The recommendations are also parallel with the
Malaysian Government’s Economic
Transformation Programme (ETP)


PS 1: Modernizing the Companies Act

Introduce a new legal framework applicable to all
companies:

1. Simplify laws &
procedures for companies
based on private/public
distinction and facilitating
the growth of private 2. Remove obstacles &
companies; and facilitating the growth of
private companies.


PS 2: Facilitating & Modernizing Entrance into the
Corporate Sector

POLICY STATEMENTS
POLICY Facilitating and modernizing entrance into the corporate sector
STATEMENT 2 by:
• conferring companies with full capacity of a natural person.
This would confer unlimited capacity to companies which
would lead to the abolition of the doctrine of constructive
notice;
• introducing the concept of a single member company;
• simplifying name approval process and making the process of
name reservation optional;
• introducing a single incorporation template;
• replacing the requirement for statutory declaration with
statement of compliance for incorporation purposes;
• making the requirements for certificates of incorporation and
company seals optional; and
• leveraging on the advent of ICT for the purposes of
incorporation and lodgements.


PS 3: Migration to No Par Value Regime
PS 4: Facilitating The Management & Restructuring
Of The Company’s Share Composition

POLICY STATEMENTS
POLICY Migration to no par value regime
STATEMENT 3
POLICY Facilitating the management and restructuring of the
STATEMENT 4 company’s share composition by:
• introducing alternative procedures for the reduction of
capital;
• reforming the policies relating to share buyback and
financial assistance through the introduction of solvency
tests.


PS 5: Simplifying & Facilitating Internal Decision
Making Process

POLICY STATEMENTS
POLICY Simplifying and facilitating internal decision making process by:
STATEMENT 5 • removing the mandatory requirement for private companies
to hold Annual General Meeting;
• restructuring the policies pertaining to written resolution
procedures for private companies towards abolishing the rule
of unanimity in passing written resolutions;
• simplifying and clarifying the rules relating to meeting
procedures;
• lifting the prohibition on person(s) who can be appointed as
proxies and facilitating the affairs of proxies during general
meetings;
• liberalizing the modes of voting during general meetings
through the recognition of best practices; and
• reducing the required threshold for the purpose of
convening/requisitioning of general meetings


PS 6: Strengthening the Corporate Governance Structure
in Relation to the Affairs of the Directorship of a Company

POLICY STATEMENTS
POLICY Strengthening the corporate governance structure in relation to
STATEMENT 6 the affairs of the directorship of a company which include:
• the relationship between the board of directors and shadow directors;
• clarifying the minimum age for directorship and abolishing the
maximum age for directorship;
• revising the residency requirement for directorship;
• restructuring the rules pertaining to the appointment, resignation and
removal of directors;
• codifying the requirement for remuneration of directors of public
companies to be sanctioned;
• providing members the right to inspect directors’ contract of service
with public companies
• requiring any payment for loss of office of directors of public
companies to be approved by disinterested members
• clarifying the rules relating to exemption and indemnification of
directors’ and officers’/auditors’ liability; and
• enhancing the rules relating to disqualification of directors


PS 7 : Reinforcing The Roles of Company Secretary
PS 8: Establishment of a Registration Regime for
Practicing Company Secretaries
PS 9 & 10
POLICY STATEMENTS
POLICY Reinforcing the roles, functions and obligations of the company
STATEMENT 7 secretaries.

POLICY Establishment of a mandatory registration regime for practicing
STATEMENT 8 company secretaries

POLICY Integrating the content of the new Companies Act with the
STATEMENT 9 notions and elements of corporate responsibility

POLICY Enhancement of shareholders’ rights and protection through:
STATEMENT 10 • clarifying the application of rules relating to oppression of
members’ rights;
• refining the application of statutory derivative actions; and
• reforming the rules relating to variations of class rights and
preference shareholders


Through Refinement of Auditors’ Role & Responsibilities

POLICY STATEMENTS
POLICY Strengthening the corporate governance structure through
STATEMENT 11 refinement of auditors’ role and responsibilities by:
• retaining the mandatory requirement for the appointment of
auditor(s) for all types of companies;
• introducing a new regime for the appointment of auditors for
private companies in view of the proposal to lift the
requirement for holding annual general meetings;
• enhancing the rules relating to the resignation of auditors;
• relying on industry practice for mandatory audit rotation of
audit firms; and
• granting access to auditors on all communications relating to
any resolutions which the company proposes to pass by way of
the written resolution procedure


PS 12: Reaffirming the Importance of Audited Financial Statements
& the Timely Disclosure of such Information
PS 13: Strengthening Good Corporate Governance Practices
Through Enhancement & Refinement of Rules Pertaining to
Transactions Involving Directors & Substantial Shareholders

POLICY STATEMENTS
POLICY Reaffirming the importance of audited financial statements and
STATEMENT 12 the timely disclosure of such information.

POLICY Strengthening good corporate governance practices through
STATEMENT 13 enhancement and refinement of rules pertaining to transactions
involving directors and substantial shareholders in the following
areas:
• rules relating to substantial property transactions and persons
connected with directors or substantial shareholders; and
• disclosure principles to avoid conflict of interests.


PS 14 : Simplifying, Refining & Expediting The
Winding Up Process

POLICY STATEMENTS
POLICY Simplifying, refining and expediting the winding up process by:
STATEMENT 14 • shortening the time taken to wind up a company;
• introducing and defining the parameters for exempt
dispositions;
• refining the concept of undue preference transactions;
• preserving the assets of the company;
• increasing the threshold for statutory amount of debts to
prevent abuse by creditors;
• empowering the Court to terminate winding up proceedings to
ascertain the status of a company;
• enhancing the roles of liquidators to facilitate the smooth
process of liquidation;
• enhancing the rights of creditors;
• reaffirming the rules relating to preferential debts; and
• providing adequate protection to employees as unsecured
creditors


PS 15 : Modernising Insolvency Law By Introducing
Alternative Corporate Rescue Mechanisms to
Revive Financially Troubled Companies

 The judicial management scheme (JM);
 The corporate voluntary arrangement (CVA); and
 Clarifying the rules relating to scheme of
arrangement.

PS 16 : Restructuring The Concept Of Scheme Of
Arrangements Between A Company And Its
Creditors


PS 17, 18 & 19

POLICY STATEMENTS
POLICY Refining the role of receivers/receiver managers by:
STATEMENT 17 • clarifying the status and power of receivers; and
• introducing new provisions relating to liability, indemnity and
priority over receiver’s costs.

POLICY Refining the current system of registration of charges by
STATEMENT 18 improving the procedures and process involved.

POLICY Modernizing the enforcement regime by:
STATEMENT 19 • introducing the concept of civil and administrative proceedings
for selected types of breaches of the Companies Act alongside
criminal sanctions;
• criminal sanctions to be imposed against the officers
responsible instead of the company; and
• refining the rules pertaining to disqualification of directors.


Corporate Sector

HIGHLIGHTS

Confer companies Companies may
with full capacity of a elect/decide to have
natural person & Simplify name
their object clauses approval process
unlimited capacity to subsequent to
companies. This leads & making the
incorporation (BUT
to the abolition of the
non-profit making process of name
doctrine of reservation
constructive notice CLBGs will still be
relating to object required to specify optional
clause their objects)


Corporate Sector

Easy Access to Incorporation: HIGHLIGHTS

Single
Fixed Member/
incorporation Director
fees: Company:
Company can be
Fee to incorporated by
incorporate a only one member
company will be and that member
based on the type can also be the
of companies director.


Corporate Sector

Removal of Obstacles to HIGHLIGHTS
Incorporation Process:

Introduction of guaranteed Requirement for M & A at the point
of incorporation will NOT be
name approval concept: required:

Name reservation is Company may adopt AA
optional. If name after incorporation; and
requested is unavailable,
Registrar may assign any Some provision of
such expression current Table A will
followed by the number become substantive
assigned by the Registrar law.


Corporate Sector

HIGHLIGHTS

 No more multiple forms [Form 6,
Form 13A, Form 48A], no more
Introduce a M&A and AA at the point of
single incorporation.
interface
incorporation  M&A will be part of Super Form &
template (via Table A will become substantive
a Super Form). law.

 Promoter/shareholder /director
may incorporate a company.


Corporate Sector
HIGHLIGHTS

 Leveraging on
 No more over the counter transactions
the advent of
Mandatory electronic incorporation via
ICT - by making
MyCoID.
mandatory for
 Replace the requirement for statutory
incorporation
declaration with statement of compliance
documents to
for incorporation purposes.
be lodged
 the requirements for certificate of
electronically.
incorporation, Notice of incorporation is
 Making the
conclusive evidence.
requirements
 Company seals will become optional.
for certificates
contracts or transactions will be executed
of incorporation
by two directors. (For single director,
and company
company secretary must countersigned).
seals optional.


PS 3: Migration to No Par Value Regime

HIGHLIGHTS

The NPV regime will
bring about
simplification of
Companies will no
accounts where share longer be subjected
Companies will no to lengthy and
premium accounts
longer be required costly procedures to
and reserves will no
to state its longer be applicable (a increase share
authorised share transitional period will capital.
capital be given to utilise the
amount standing in
credit in the
company’s share
premium accounts).


PS 4: Facilitating The Management & Restructuring
Of The Company’s Share Composition

HIGHLIGHTS

Introducing an alternative procedures for the reduction of capital
through the introduction of solvency tests in the form of solvency
statement by directors (and obtaining of shareholders’ approval);

Companies will no longer be required to state its authorised
share capital policies relating to share buyback and financial
Reforming the
assistance via introduction of solvency test provided that a
special resolution is passed by its shareholders; and

Removing the limitation of share buyback transaction on stock
exchange to allow treasury shares be sold by private treaty based
on Bursa Listing Requirements


PS 5: Simplifying & Facilitating Internal Decision
Making Process

Removing the mandatory requirement for private companies to
hold Annual General Meeting:
HIGHLIGHTS



Clarifying the
HIGHLIGHTS
relationship between
the board of directors
and shadow directors;

Restructuring the rules abolishing the maximum age
pertaining to the for directorship - Appointment
appointment, resignation of directors will be based on
and removal of directors. their qualifications & merits;

Revising the residency
requirement for
directorship; and



HIGHLIGHTS

Codifying the requirement for remuneration of directors of
public companies to be sanctioned;

Stricter rules relating to directors’ remuneration:
- Members’ agreement will be required for remuneration of
directors’ of public companies.
- Members will have the right to inspect the contract of service for
directors’ of public companies.
- Only disinterested members can approve payment for loss of
office for directors’ of public companies


PS 7 : Reinforcing The Roles of Company Secretary
PS 8: Establishment of a Registration Regime for
Practicing Company Secretaries
HIGHLIGHTS

PS 7: Reinforcing The PS 8: Establishment of a
Roles of Company Registration Regime for
Secretary Practicing Company Secretaries

Retaining the appointment of qualified Introduction of a registration regime for
company secretary as well as allowing company secretaries where all named company
company directors to act as company secretaries will be required to be registered with
secretary of private companies the Registrar

But for public companies, appointment of For the purpose of monitoring mechanism, as
qualified company secretary is mandatory not all members of the prescribed bodies render
company secretarial services;

Registrar is empowered to direct a company
to appoint a qualified company secretary if To ensure the standards of professionalism and
compliance is not observed competency remain high


PS 9: Integrating the Contents of the New Companies Act
with the Notions & Elements of Corporate Responsibility

HIGHLIGHTS
Ratified UN Conventions
relating to CR:
Various laws relating to CR: UN Convention No. 8 & 11 Directors’
(Elimination of
Environmental Law Discrimination against Report will
Employment Relations Law Women & Children’s Rights)
Consumer Protection
Labour Laws
ILO Convention no. 138 cover
(Minimum Age)
additional
matters
Bursa Listing including
Requirements – PLCs: Khazanah Nasional
Berhad – GLCs: policies on
Provide statement on CR
activities in Annual Silver Book: Achieving internal
Report – Rule 9.25 read Value through
together with Item 29 of Corporate control & CR
Appendix 9C Responsibility

CURRENT FUTURE


PS 12: Reaffirming the Importance of Audited Financial
Statements & the Timely Disclosure of such Information

HIGHLIGHTS

 Expanding current provision on dividends payable from profits
only by providing clarification on rules relating to “profits”.

 New provision will require companies to ensure that the
payment of dividends will not result in negative impact on the
financial situation of the company.

 Solvency test:

 Immediately after the payment of dividend is made, the
company is still solvent.


PS 14 : Simplifying, Refining & Expediting The
Winding Up Process

HIGHLIGHTS

Shortening the Increasing the
threshold for Preserving the
time taken to
wind up a
statutory amount of assets of the
debts to prevent company;
company; abuse by creditors;

Introducing and
Refining the
defining the
concept of undue
parameters for
preference
exempt
transactions; and
dispositions.


Conclusion

The new Companies Bill will revolutionise the way
people do business in Malaysia.

The overall new process and procedures to be
introduced coupled with the modern approaches in all
aspects of corporate governance and reporting will add
competitive dimensions in the new corporate legal
framework for Malaysia.


THANK YOU


5. crf india 2012 nor azimah abdul aziz

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