Companies Bill 2015: Its Impact On Property Investments

After a lengthy engagement with all stakeholders, the Companies Bill 2015 was passed by the Dewan Rakyat on 4 April 2016 to replace the existing Companies Act 1965. As at 9 Sept 2016, the Bill has not been gazetted and it is yet to come into force. Having said that, it is a matter of time for the Bill to be gazetted into law via an Act of Parliament.

As a company is a body corporate, which is a separate legal entity having legal personality separate from that of its members, it is one of the preferred vehicles for property investors in acquiring property. This article seeks to explain several key changes introduced by the Bill and its impact to property investors.

SINGLE MEMBER

AND SINGLE DIRECTOR

Under the existing regime, the Act requires a minimum of two or more persons (shareholders) for the formation of a company. The Bill allows private company to be formed by one person.

The Act requires every company to have at least two resident directors at all times. On the contrary, the Bill allows for a private company to have one resident director only.

This is in line with Commonwealth company law developments elsewhere. In short, a company can be incorporated by a single member and the same single member can be the sole director.

SIMPLIFIED INCORPORATION PROCEDURE

The Bill has, to a large extent, simplified the –  incorporation process of a private company. Under the Bill, a private company may be incorporated without the need to appoint a company secretary at the point of incorporation (this may be done later within 30 days therefrom). With the introduction of a ‘superform’, filing of multiple forms at the point of incorporation will become a thing of the past.

The application to incorporate a company would only require the applicant to submit a statement containing basic particulars of the company such as its name, nature of business, address, shareholder and shareholding details.

This would expedite the incorporation process of a company for the purpose of acquiring properties.

The certificate of incorporation will be made optional and a notice of registration issued by the Registrar is conclusive evidence the company is duly registered.

UNLIMITED CAPACITY CONCEPTS

The Bill has introduced the concept of “unlimited capacity” which gives a company more power to exercise all the functions of a body corporate and to carry on any lawful business or activity, including to enter into any transaction to acquire, own and dispose of any property. The power of a company is no longer confined to object clause in its memorandum of association.

COMMON SEALS

Under the Bill, it is no longer compulsory for a company to have a common seal. If a company decides to have a common seal, then the provisions of the law must be strictly observed.

Be that as it may, there are other practical issues to be considered as the National Land Code and the Powers of Attorney Act would still require affixation of common seals when the relevant documents are executed by the company. Unless there are amendments made to these legislations, there is no way a real property company can do away with common seals.

SHARE CERTIFICATE

Under the Bill, share certificates are optional and will only be issued upon application. Instead, the register of members becomes prima facie evidence as to the title of the shares.

The company is required to notify the Registrar of any changes of information to a shareholder within 14 days after the information is recorded in the register of members.

BENEFICIAL INTEREST

Under the Bill, all companies are empowered to request its members to disclose the beneficial interest in its voting shares. Apart from the Securities Commission and stock exchange, the Bill also allows the Registrar to invoke such powers to ensure compliance by private companies.

As such, all nominee shareholders and beneficial owners of any voting shares in a real property company, holding shares under trust or under a nominee arrangement, should be mindful of this new requirement introduced by the Bill.

SHARE

Another significant departure from the Act is that all shares issued before or after the commencement of the Bill will have no par or nominal value. Shares will be issued at a price without par value. As a consequence, authorised share capital will no longer be necessary. The abolition of par value means that certain matters linked to par value, for example, dividend and voting rights would have to be addressed either in provisions of the Bill or in a constitution.

The Bill provides a 24-month transitional period for existing companies to utilise the monies in its share premium account for purposes as stipulated in the Bill, such as paying premium on redemption of redeemable preference shares issued before the commencement date of the Bill.

The capital redemption reserve will also be merged into the share capital account together with the share premium account.

WRITTEN RESOLUTIONS

The Bill eliminates the requirement for unanimity and allows for written resolutions of private companies to be passed by the same majority as required by the type of resolution (either ordinary or special). The relaxed requirement would expedite passing of resolutions. Under the Act, a written resolution of any company can only be passed if it is signed by all shareholders.

CONCLUDING REMARKS

The Bill has provided a regulatory framework which facilitates the incorporation and maintenance of companies with relative ease, which may then be utilised for the investment in properties. All private companies are advised to look into their property investment portfolio and review their existing shareholders agreement and constitution to ensure conformance with the Bill.