Company Law in Malaysia - Separate Legal Entity

Topics: Corporation, Types of business entity, Legal entities Pages: 13 (5368 words) Published: February 10, 2013
In a modern capitalist market economy, companies are a familiar part of everyday life. Companies own supermarkets, supply water, gas, electricity and petroleum products we are depending on. They publish the newspapers and provide our Internet services. We deal with companies so often as purchasers and users of their products and services that the image ‘company’ brings to mind is usually of an organisation concerned with marketing and collecting payment for products which the company has made (or bought in) or services it has provided. It is necessary to go behind this image to get to the company which is the subject of company law. As we all know in Malaysia there are different types of business entities. Local or foreign investors are coming to Malaysia to start a business. Company has been defined as any formal business entity for profit which may be a corporation, a partnership, association or individual proprietorship. Often people think the term "company" means the business is incorporated, but that is not true. In fact, a corporation usually must use some term in its name such as "corporation," "incorporated," "corp." or "inc." to show it is a corporation. In Malaysia, a "company" is a business organisation that is registered (or "incorporated") under the Companies Act, 1965 or its predecessor legislation, Section 14(1) two or more persons, if they agree to become associated for any lawful purpose may incorporate a company. In reality, a company or a corporate person is an association of persons who have agreed to undertake their lawful undertakings through a company.

In order to incorporate a company, there are two stages that we have to go through, which are, pre-incorporation and post incorporation. In the pre incorporation stage, the promoter is responsible to bring the company into the legal existence and ensure its successful running, and in order to accomplish his obligation he may enter into some contract on behalf of prospective company. Promoters are the persons involved in formation of a company. They will undertake the initiative to prepare necessary documents and do other significant works in order to register the company. Sometimes they become the first directors of the company once the company has been registered or they might find new directors.

While in the post incorporation stage, we have to ensure that all the things that have been stated in memorandum and article of association will be exercised. A company is also required to maintain the statutory books such as, Register of Members as has been provided in Section 158, Register of Substantial Shareholders as in Section 69L, Books of Accounts Section 167 etc. The responsibilities will increase once the company is incorporated. A company is an artificial person, which is capable of owning property. Who owns the company and benefits from the wealth which the company has, and who controls what the company does with its assets? Therefore, we will discuss more regarding the duties of the promoters and the effects of incorporations in Malaysia.

Before a company can be formed, there must be some persons who have an intention to form a company and who take the necessary steps to carry that intention into operation. Such persons are called ‘promoters’. According to Cockburn CJ in Twycross v Grant (1877), a promoter is a “person who undertakes to form a company with reference to a given object and set it going and takes the necessary steps to accomplish the purpose”. While in Tengku Abdullah v Mohd Latiff bin Shah Mohd, [1996] 2 MLJ 265 Gopal Sri Ram JCA said, "A promoter is one who starts off a venture-any venture-not solely for himself,  but for others, but of whom, he may be one." The promoter lays the foundations for a Company in terms of negotiations, registration of the Company, obtaining directors and shareholders and preparing all the paperwork. However, because the promoter is such an important person in the...
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