5. crf india 2012 nor azimah abdul aziz

Companies Commission of Malaysia @ CRF 2012

REFORMING LEGISLATIVE ENVIRONMENT - A GLOBAL PERSPECTIVE

SSM’s Corporate Law Reform Programme: Revolutionising Doing

Business In Malaysia

By:Nor Azimah Abdul Aziz

DirectorCorporate Development & Policy Division

Companies Commission of Malaysia


OVERVIEW

Background

Highlights of New Provisions to be introduced

Conclusion

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Corporate Law Reform Committee

(CLRC)

188Recommendations

19 Policy Statements

Established in Dec. 2003 to conduct a

comprehensive review of the Companies Act

Final Report was issued in 2008

comprising of 188 recommendations on wide-ranging aspects from incorporation to

winding-up

SSM accepted 183 out of the 188

recommendations. In June 2010 it became 19 policy statements

which are be the basis for the drafting

of the new Companies Bill

BACKGROUND

The 4 year review issued 12 Consultative

papers

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BACKGROUNDAPART FROM THE REVIEW ON CORE COMPANY LAW THAT WAS CONDUCTED BY THE CLRC, THE REFORM EXERCISE ALSO CONSIDERED:

1. Recommendations of theAccounting IssuesConsultative Committee(AICC) that was establishedin Feb 2010 to conduct afocused review on corporatefinancial reporting provisionsand to modernise theCompanies Act 1965 basedon the development of theapplicable approvedaccounting standards andglobal best practices;

2. Other developments in related laws (CapitalMarket and Conventional and IslamicFinancial & Banking legislation);

3. Recommendations by the World Bank’s Reporton the Observance of Standards and Codes(ROSC) Audit Oversight.

4. Recommendations based on the Report issuedby the OECD’s Peer Review Group (PRG) of theGlobal Forum on Transparency and Exchangeof Information for Tax purposes on Malaysia .

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The recommendations are also parallel with theMalaysian Government’s Economic Transformation Programme (ETP)


PS 1: Modernizing the Companies Act

Introduce a new legal framework applicable to allcompanies:

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

2. Remove obstacles &facilitating the growth ofprivate companies.

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Companies Commission of Malaysia @ CRF 2012 6

POLICY STATEMENTSPOLICYSTATEMENT 2

Facilitating and modernizing entrance into the corporate sector 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 2: Facilitating & Modernizing Entrance into the Corporate Sector



Migration to no par value regime

POLICY STATEMENT 4

Facilitating the management and restructuring of the 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 3: Migration to No Par Value RegimePS 4: Facilitating The Management & Restructuring

Of The Company’s Share Composition


POLICY STATEMENTSPOLICY STATEMENT 5

Simplifying and facilitating internal decision making process by:• 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 5: Simplifying & Facilitating Internal Decision Making Process



Strengthening the corporate governance structure in relation to 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 6: Strengthening the Corporate Governance Structure in Relation to the Affairs of the Directorship of a Company



Reinforcing the roles, functions and obligations of the company secretaries.

POLICY STATEMENT 8

Establishment of a mandatory registration regime for practicing company secretaries

POLICY STATEMENT 9

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

POLICYSTATEMENT 10

Enhancement of shareholders’ rights and protection through:• 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

PS 7 : Reinforcing The Roles of Company SecretaryPS 8: Establishment of a Registration Regime for

Practicing Company SecretariesPS 9 & 10



Strengthening the corporate governance structure through 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 11: Strengthening the Corporate Governance Structure Through Refinement of Auditors’ Role & Responsibilities



Reaffirming the importance of audited financial statements and the timely disclosure of such information.

POLICY STATEMENT 13

Strengthening good corporate governance practices through 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 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



Simplifying, refining and expediting the winding up process by:• 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 14 : Simplifying, Refining & Expediting The Winding Up Process


PS 15 : Modernising Insolvency Law By Introducing Alternative Corporate Rescue Mechanisms to

Revive Financially Troubled Companies

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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



Refining the role of receivers/receiver managers by:• clarifying the status and power of receivers; and• introducing new provisions relating to liability, indemnity and

priority over receiver’s costs.

POLICY STATEMENT 18

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

POLICY STATEMENT 19

Modernizing the enforcement regime by:• 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.

PS 17, 18 & 19


Confer companies with full capacity of a

natural person & unlimited capacity to companies. This leads to the abolition of the

doctrine of constructive notice relating to object

clause

Companies may elect/decide to have their object clauses

subsequent to incorporation (BUT non-profit making CLBGs will still be

required to specify their objects)

Simplify name approval process

& making the process of name

reservation optional


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HIGHLIGHTS



Fee to incorporate a company will be based on the type of companies

Fixed incorporation

fees:Company can be incorporated by only one member and that member can also be the director.

Single Member/Director

Company:

Easy Access to Incorporation:

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HIGHLIGHTS


Removal of Obstacles toIncorporation Process:


Introduction of guaranteed name approval concept:

Name reservation isoptional. If namerequested is unavailable,Registrar may assign anysuch expressionfollowed by the numberassigned by the Registrar

Requirement for M & A at the point of incorporation will NOT be

required:

Company may adopt AAafter incorporation; andSome provision ofcurrent Table A willbecome substantivelaw.

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HIGHLIGHTS


Introduce asingleinterfaceincorporationtemplate (viaa Super Form).

No more multiple forms [Form 6,Form 13A, Form 48A], no moreM&A and AA at the point ofincorporation.

M&A will be part of Super Form &Table A will become substantivelaw.

Promoter/shareholder /directormay incorporate a company.

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HIGHLIGHTS


Leveraging onthe advent ofICT - by makingmandatory forincorporationdocuments tobe lodgedelectronically. Making the

requirementsfor certificatesof incorporationand companyseals optional.

No more over the counter transactionsMandatory electronic incorporation viaMyCoID. Replace the requirement for statutory

declaration with statement of compliancefor incorporation purposes. the requirements for certificate of

incorporation, Notice of incorporation isconclusive evidence. Company seals will become optional.

contracts or transactions will be executedby two directors. (For single director,company secretary must countersigned).

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HIGHLIGHTS


PS 3: Migration to No Par Value Regime

Companies will no longer be required

to state its authorised share

capital

The NPV regime will bring about

simplification of accounts where share

premium accounts and reserves will no

longer be applicable (a transitional period will be given to utilise the

amount standing in credit in the

company’s share premium accounts).

Companies will no longer be subjected

to lengthy and costly procedures to

increase share capital.

HIGHLIGHTS


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

Companies will no longer be required to state its authorisedshare capitalReforming the policies relating to share buyback and financialassistance via introduction of solvency test provided that aspecial 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

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

HIGHLIGHTS


PS 5: Simplifying & Facilitating Internal Decision Making Process

Removing the mandatory requirement for private companies tohold Annual General Meeting:

HIGHLIGHTS



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

abolishing the maximum age for directorship - Appointment

of directors will be based on their qualifications & merits;

Revising the residency requirement for directorship; and

Restructuring the rules pertaining to the

appointment, resignation and removal of directors.

HIGHLIGHTS



Codifying the requirement for remuneration of directors ofpublic 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

HIGHLIGHTS


PS 7 : Reinforcing The Roles of Company SecretaryPS 8: Establishment of a Registration Regime for

Practicing Company Secretaries

PS 7: Reinforcing The Roles of Company

Secretary

Retaining the appointment of qualified company secretary as well as allowing company directors to act as company

secretary of private companies

But for public companies, appointment of qualified company secretary is mandatory

Registrar is empowered to direct a company to appoint a qualified company secretary if

compliance is not observed

PS 8: Establishment of a Registration Regime for

Practicing Company Secretaries

Introduction of a registration regime for company secretaries where all named company secretaries will be required to be registered with

the Registrar

For the purpose of monitoring mechanism, as not all members of the prescribed bodies render

company secretarial services;

To ensure the standards of professionalism and competency remain high

HIGHLIGHTS


Various laws relating to CR:Environmental Law

Employment Relations LawConsumer Protection

Labour Laws

Ratified UN Conventions relating to CR:

UN Convention No. 8 & 11 (Elimination of

Discrimination against Women & Children’s Rights)

ILO Convention no. 138 (Minimum Age)

Bursa Listing Requirements – PLCs:

Provide statement on CR activities in Annual

Report – Rule 9.25 read together with Item 29 of

Appendix 9C

Khazanah NasionalBerhad – GLCs:

Silver Book: Achieving Value through

Corporate Responsibility

Directors’ Report will

cover additional

matters including

policies on internal

control & CR

CURRENT FUTURE

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

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HIGHLIGHTS


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

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

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

Solvency test:

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

HIGHLIGHTS


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

Shortening the time taken to

wind up a company;

Increasing the threshold for

statutory amount of debts to prevent

abuse by creditors;

Preserving the assets of the

company;

Refining the concept of undue

preference transactions; and

Introducing and defining the

parameters for exempt

dispositions.

HIGHLIGHTS


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

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