FACULTY OF BUSINESS AND MANAGEMENT

MAY 2016

BBUS 2013

COMPANY LAW

MATRICULATION NO:
IDENTITY CARD NO. : 6
TELEPHONE NO. : E-MAIL :
LEARNING CENTRE : MALACCA LEARNING CENTER

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CONTENT

1.0 INTRODUCTION
-Identification of all business entities in Malaysia.

2.0 DISCUSSION ON THE FEATURES OF ALL BUSINESS ENTITIES

3.0 EXPLANATION ON CONCEPT OF SEPARATE LEGAL ENTITY

4.0 EVALUATION

5.0 VIEW AND RECOMMENDATIONS

6.0 SUMMARY

7.0 REFERENCES

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1.0 INTRODUCTION
-Identification of all business entities in Malaysia.
Business at this time has grown rapidly in line with the economic development of our country.
Therefore many business organisations have been established to facilitate business. In
accordance with the business practice, between the types of business structure in Malaysia can be
divided into:
1. Sole proprietorships,
2. Partnership
3. Company
4. Unincorporated association
Sole proprietorship is a business that is done by one person or individually. Capital for the
business acquired and released by the owner of the business itself. The business must be
registered under the Registration of Business Act 1956 and the business license issued by the
local authorities. It is most widely practiced in Malaysia.
A partnership is a business created among some people who do business together for the purpose
of making a profit. According to Walter Woon (1988), the partnership is an organisation that
consists of two or more, which combine to run a business. This partnership business carried out
by each individual capital in the partnership and will be joined for doing business.
The Company is incorporated association. The establishment of the company must be registered
under the Companies Act 1965. Definition of a company is given by Lord Justice Lindley, A
company is meant an association of many persons who contribute money or moneys worth to a
common stock and employs it in some trade or business, and who share the profit and loss (as the
case may be) arising there from. The common stock contributed is denoted in money and is the
capital of the company. The persons who contribute it, or to whom it belongs, are members. The
proportion of capital to which each member is entitled is his share. Shares are always
transferable although the right to transfer them is often more or less restricted
An 'unincorporated association' is an organisation set up through an agreement between a group
of people who come together for a reason other than to make a profit, for example corporation of
teachers and a statuary body.

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2.0 DISCUSSION ON THE FEATURES OF ALL BUSINESS ENTITIES

1. Sole proprietorships
According to Section 4 of the Registration of Business Act 1956 states that a sole proprietorship
is a business that is established, owned, funded financially and its management is controlled by a
single individual. Business owners will hire several employees to help him in his business
dealings. Then owner has full authority in administrative and decision-making in all matters
related to the business for the purpose of determining the direction of the business.
This business is conducted on a small scale and required a small capital which is privately issued
by the business owners either from savings or loans. This makes liability dependent upon the
sole owner of the business is not limited because the business is not a separate entity by itself.
This will cause if the business fail or bankruptcy, creditors can sue the owner to claim the debt
and get a court order. Business owners could not escape from handover their own property to
settle all its liabilities. Besides, a sole proprietorship also allows profit wholly owned by the
owner.
For legal status in relation to tax is based on the private ownership of property assets and profits
obtained in the business and rely on private debt obligations. This means that the tax will be
imposed in the form of singles through income tax (IRB).
However, this type of business easy to set up because it does not require complicated procedures.
They only need to be registered under the Business Registration Act 1956 and the business
license will be issued by the local authorities in areas where business is conducted. Business
operations are not subject to many regulations and laws such as business accounts need not be
audited for a report on the Inland Revenue Board.
Moreover, only one business owners name will be nominated in the business registration
license. This causes the business life span is limited. The business liquidation will occur when
the sole owner died. Apart from that liquidation can occur voluntarily leave the business or by
court order when failure to pay debt or bankruptcy business.
The advantages:
i) The right to own property.

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ii) Easy to set up or dissolved for not a lot of procedures to be followed.
iii) A small initial capital.
Disadvantages:
i) The owner shall bear unlimited liability. This makes the owner's personal assets at risk.
ii) It is difficult to get help big capital for business expansion purposes.
iii) The limited duration of the business depends on the age of the owner.

2. Partnership
According to the Partnership Act 1961, a partnership has been defined as a relationship that
existed among two or more people who do business together for the purpose of making a
profit. . Partnership can only be formed when the partners have agreed to conduct business or
share capital and profit with the rates agreed. Under Act 1961 allows a written agreement made
between the partners in order to avoid any problems or disputes that may arise in the future. This
agreement is known as the ' Partnership Agreement'. If the partnership is started without any
agreement between the partners, the Partnership Act 1961 shall apply if any problems arise in the
partnership.
Under the Companies Act 1965, they limit the number of shares to not more than 20 people. This
number excluded for partnership engaged in the practice of the profession, which can reach up to
50 people.
Business tax for the sharing does not apply to the firm, but will apply to partners because the
benefits of the partnership will be distributed among the partners so that each partner is taxed
separately. This means that each partner will pay income tax to the Inland Revenue Board. This
is explained in Section 55 (1) and (2) Act 1967.
A partnership can be dissolved. Through the provision of the Act provided, dissolution can occur
by three methods:
i) The dissolution of the self.
Section 34 (1) Act 1961 provides that if the partnership to carry out an activity or business, the
partnership is considered dissolved with the completion of the work.
Section 35 (1) Act 1961 states that the death of a partner or bankruptcy can cause a partnership is
dissolved by itself.
ii) Dissolution by notice.

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Under Section 34 (1) (c) and 34 (2) has been allocated where generally, if the partnership is not
set then any partner may give notice to the other partners to dissolve the partnership start of the
period mentioned in the notice. If the date is not known, the liquidation will be counted from the
notice.
iii) Dissolution by the court.
Under Section 37 of the Partnership Act 1961 gave six reasons that justify the court at the request
of the partners dissolve the partnership, namely:
a) When a partner is found lunatic or insane.
b) Permanent disability
c) A partner doing something intentional harm to the firm
d) Breach of the treaty in a row
e) The continuation of the partnership will bring losses
f) A condition that in the opinion of the court is fair for this partnership was dissolved.

Advantages:
Easy to set up
Could share capital
Easy to get a loan from bank institutions
Have a variety of ideas and expertise

Weaknesses:
Unlimited ability for debts
Poor decision by one partner can occur misunderstanding or threaten the business.
Death or bankruptcy of a partner may mean end of the business.
Lack of resources for expansion.

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3. Company
There are two types of company in Malaysia:
a). Private limited company (sdn bhd)

In Malaysia, the most common type of limited companies is those limited by shares. These
companies are incorporated and governed by the Companies Act, 1965. Companies limited by
shares will carry Sdn Bhd, Sendirian Berhad behind their names according to Section 22(4)
of the Act. The meaning of private limited companies is that the liabilities of its members are
limited to the amount of shares they hold in the company. A private limited company can only be
incorporated if its memorandum and articles. Its limits the numbers of its members to not more
than 50 (requires a minimum of 2 natural persons, but allow another company to wholly own
100% of its issued shares).

Advantages:

liability "protection" to its shareholders

limited their exposures to the amount of share capital that they subscribed for
simplicity to transfer existing shares or issue additional shares to new investors
Disadvantages

The company's financial affairs will be accessible by the public.

The company had to perform annual audits on its financial statements.

At least one company secretary is required to manage its statutory submissions and
returns as well as attending and preparing minutes for board and shareholders' meetings.

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b). Public Limited Company (Berhad)

Berhad (BHD) is a public limited company where its shares can be offered to the public for fixed
periods and any other forms of subscription. The minimum amount of members (shareholders)
are two and maximum of unlimited amount of members. All companies registered under Bursa
Malaysia.

There are three (3) types of limited companies:

Limited by Shares

Limited by Guarantee

Unlimited company with/without share capita

Advantages:
The shareholders have limited liability.

Shareholders can sell/transfer their shares freely.

Distribution of profit and dividend depending on company profits.

Must issue prospectus (the company's financial statements) to public through newspaper.

Disadvantages:
There is a loss of overall ownership.
There is a loss of control of the business.
Decisions take longer and there may be disagreement

4. Unincorporated association
a) Corporation
Corporation owned and controlled by its members and registered with Malaysian Koperasi
Commission (SKM).

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 Capital acquired through fees whether monthly fees, annual or shares bought members.
.Managed by a Board of Directors appointed by the members.
Profit distributed to members

Advantages:
Keeping the interests of members and not for profit-establish.
Cooperation and mutual assistance between members
Disadvantages:
Cooperative activities dominated by individual certain party members
Financial position is relatively weak because of the cooperative create by those with low
incomes.

5. Statutory body

Its established by the government to improve public under an Act of Parliament or of the state.
The federal statutory body - the Parliament Act: Fund the Employees Provident Fund (EPF),
Bank Simpanan Nasional (BSN), and the Fisheries Development Authority of Malaysia (LKIM)
Advantages:
Maintain the welfare of the community.
Disadvantages:
For large statutory body very complex management systems and complex decision-
making process because motivation for employees.

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3.0 EXPLANATION ON CONCEPT OF SEPARATE LEGAL ENTITY

First of all, we should know that separate legal entity which Section 124(1) of the Corporate Act
2001 concept is better choice because its detached from another business or individual with
respect to accountability and legal entity may be set up in the case of a corporation or a limited
liability company, and once registered it becomes a separate legal entity which incorporates it gains
the identity of a unique entity which is isolated from its shareholders. Even though there are few
consequences which flow from this as a company is liable for its own debts, but shareholders or
members of the company unable be sued by the creditors.

For example, the case of the Salomon v Salomon & Co Ltd (1897) AC 22 is one of the cases
illustrating of the separate legal entity principle. This case is jurisdiction for the legal principle
that an incorporated company is a separate legal entity from its directors and principal
shareholders. Mr. Salomon was a boot and shoe manufacturer. At first it was held that the
company had conducted the business as agent for Mr. Salomon, so he was responsible for all
debts incurred. The House of Lords rejected this approach "a company may be said to carry on a
business for and on behalf of its shareholders but this does not in point of law constitute the
relation of principal and agent between them or render the shareholders liable to indemnify the
company against the debts which it incurs." It was held that however large the quantity of shares
and debentures owned by one man even if the other shares were held in trust for him the
companys acts were not his acts, nor were its liabilities his liabilities; nor is it otherwise if he
has sole control of its affairs as governing director . There was strong evidence of good faith and
confidence in the company and the House of Lords found no evidence of fraud or deliberate
abuse of the corporate form.

It is impossible to dispute that once the company is "legally incorporated it must be treated like
any other independent person with rights and liabilities appropriate to itself." The House of
Lords approved that a company is not the agent of its shareholders, even if control is

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concentrated in only one shareholder. Once the company is legally incorporated it must be
treated like any other independent person with rights and liabilities of its own.

After the decision in Salomons case there are many legal consequences such once a company is
incorporated, some of the consequences would be flowing from the application of the separate
identity principle. The main includes distinction between private and company debts, distinction
between private and company assets; company contracting with its member as employee and
director and company liable in tort to a member.

Firstly, the obligations are attempted into the organization's name is have a place with the
organization and additionally not to the controller or chief or some other else. This is affirm by
the House of Lord's when settle on a choice for Salomon's situation. Along these lines, the
obligations or liabilities are at risk by the organization because of discrete lawful individual.
Notwithstanding, there have a few special cases in specific circumstances, that is, custom-based
law can be adjusted by statute law. For instance, Section 588G and Section 197 of the
Corporation Act 2001 applies that executives of a trustee organisation or chiefs on grounds open
approach can be by and by subject for corporate obligations brought about amid exchanging
while ruined (see: CA s588G and s197).

Besides, resources acquired by the organisation's name are having a place with the organisation.
It doesn't have a place or claimed with the chiefs, shareholders and other else despite the fact that
the shareholders who own 100% of the shares additionally don't have the privilege to possess the
benefits of the organization. This is on the grounds that organization is a different legitimate
substance and can possess property in its own particular right (see CA s124), which implies the
organization is lawful proprietor with possession right to the property. The instance of Macaura v
Northern Assurance Co Ltd (1925) AC 619 demonstrates that an organization holds its property
independently from the property of its individuals.

Thirdly, an organisation, as a different legitimate element, can go into authoritative relations with
the shareholder or executive because of they are organisation controlling individuals. This can be
outlined on account of Lee v Lee's Air Farming Ltd (1961) AC12. This case demonstrates that
the organization could go into a job contract with Mr. Lee. Master Morrison as he is a
noteworthy shareholder of an organization.

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Lastly, employer in a company, as a different legitimate element, owes a commitment to give a
sheltered arrangement of work with regardless of the harmed representatives may likewise be a
chief or controller of the organisation. For instance, the High Court was settle on a choice in the
Andar Transport Pty Ltd v Brambles Ltd (2004) 206 ALR 387; (2004) HCA 28. This case
outlines the results emerging from the crossing point between legitimate standards in corporate
law and the business' obligation of consideration to give a sheltered arrangement of work
emerging under job law.

4.0 EVALUATION ON WHO AND WHEN S181(1) COMPANIES ACT 1965 MAY
APPLIED.
Remedy in cases of an oppression 181. (1) Any member or holder of a debenture of a company
or, in the case of a declared company under Part IX, the Minister, may apply to the Court for an
order under this section on the ground
The cures can be guaranteed as per the procurements of this area against a man who had an
overwhelming power in the organisation.
Regularly, we say individual has a prevailing force in the event that he aced the larger part of its
votes. This can happen for instance when he holds a great deal. Be that as it may, a man may
have a prevailing force in the organization despite the fact that he didn't control a lion's share of
votes. This can happen for instance when the overwhelming power was acquired through the
procurement of article.
This implies the charge must be not kidding and include the event of the components of
persecution. In the event that it's fair affirmations that the prevailing party has led the voting
force of their greater part, not doable cure looked for. Conflict concerning the police or the
administration organization does not qualifies a part for apply a cure under segment 181 of the
Companies Act 1965.
Normally, we said a person has a dominant power if he mastered the majority of its votes. This
can occur for example when he holds a lot. However, a person may have a dominant power in
the company even though he did not control a majority of votes. This can occur for example

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when the dominant force was obtained through the provision of article. The acts alleged to be in
excess of the claim that the dominant party is doing the majority of the voting power.
As can see in the case of Re Kong Thai Sawmills (Miri) Sdn. Bhd, a company Kong Thai
Sawmills owned by six siblings. One of them, namely Beng Ling Sung holds a 2.5 percent stake
in the company. Meanwhile, Beng Beng Siew Siong and hold shares amounting to 63.5 percent.
Beng Siew, chairman of the board of directors and Beng Siong is a director of the company.
Beng Ling Sung, a former director of the company. In this case, Beng Ling Sung had made
allegations against the two brothers and Beng Beng Siew Siong and the company on the grounds
of oppressiveness against her. Among the allegations of bullying are:
i) Loans to Harun Ariffin, State Secretary minorities are not approved
ii) The purchase and renovation of the ship by manufacturers not members of the minority
interest
iii) Dermal issued for a particular political party not approved by the minority
iv) Withdrawal by the company and Beng Beng Siew Siong is a misuse of company funds and
v) Advances and investments in joint ventures.
Court decides only issues (iv) only demonstrating the occurrence of bullying, which is when
money is spent on own and not those of the company.
The action must be member impact charged to the member in his capacity as an expert.
If the action in dispute the members in a position other than a member, such as a director, then
section 181 (1) does not apply. For example, a director who feels the other directors has waived
the management of the company unfairly. If this happens, the directors are not eligible to apply
for a remedy under section 181 of the Companies Act 1965. However, if they was suppressed in
his capacity as a member, she may also get remedies from those actions that might affect him in
the other position as well.

Next in the case of Re Bright Pine Mills Ltd, the company running the business of the play
wood/board. Shareholder in this company was Denton, Swallow and Bolitho. Denton is the
director of this company, but he was replaced by Bolitho. Swallow is also a majority shareholder
of the company. The company then expanded its business into two types, namely its wood and
plywood. Swallow has set up a subsidiary (which is a shareholder) to handle the plywood
business. Meanwhile, the business operation of wood run by a partnership. Denton has been

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ruled out of the partnership and subsidiary. According to him both the business should be run by
the company but does not allow Swallow. The Court has ruled that action Swallow it is
intentional and planned to prevent Denton from share gains in both businesses. This is
oppression to Denton and the court ordered the other shareholders to buy shares Swallow.
The dominant manufacturers seem to manage that company was his own.
Remedies may also be obtained when the dominant party in the company has been managing the
company as if it were its own, with no regard to the rights and interests of other members.
In the case of HR Harmer Re Ltd., Harmer has opened a private company and he has the full
right to vote even though his son is also a member and director of the company. He has run a
business that seems to be his own company and set aside the resolution adopted by the other
members. He made the following points, namely:
i) Opening a new branch of the company without notifying the director and members and others.
ii) Firing indiscriminately and director
iii) Withdraw the company for its own use.
Son requested remedy from the courts on the grounds oppressiveness. The court ruled that
bullying occurs and remedies granted to the applicant and abuse of power votes for purposes that
are not good.
When a majority of shareholders or directors voted ballot by abusing power for good purposes,
remedies under section 181 of the Companies Act 1965 can also be applied.

5.0 VIEW AND RECOMMENDATIONS

In my perspective, that an organisation is separate and distinct from its individuals. An
organisation is characterised to be a simulated individual; the best meaning of partitioned lawful
element can be best depicted on account of Sunrise Sdn Bhd v First Profile (M) Sdn Bhd and
Anor (1996) whereby there was no question of who the personality controller of the organisation
was. Boundless risk is whereby an organization can't lose more than the sum contributed. The
individuals are not by and by at risk for the obligations and commitments. The idea of discrete
may bring issues like individuals not being watchful and not taking great consideration of the
organisation since they simply know they don't have anything connecting them to the company
and they don't confront any misfortune in the circumstance that is they don't bear any individual

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misfortune. The instance of Salomon V Salomon and Co likewise outlines idea of restricted
obligation in light of the fact that the courts additionally held that Salomon resembled whatever
other bank to the company shaped. The individual has completely paid for their shares; they
cannot be compelled to pay obligations brought about by the company. The instance of Macaura
V Northern Assurance Co ltd and others demonstrates the ideas of particular legitimate substance
and restricted obligation. For this situation Macaura was a sole proprietor and possessed a timber
firm, and purchased and enlisted it in his own name not the association's name; the timber was
later demolished in flame. He needed to assert with the protection however he couldn't as the
devastated products were in his name not of the firm, the courts held that.
For a better decision few improvements can be done in separate legal entity and S181(1). The
legacy of Salomon in Salomon V Salomon and Co still lives today. However, despite the fact that
the courts did an incredible by presenting it there are a few focuses by which the law ought to be
enhanced with the goal that it favors everybody furthermore is reasonable to everybody. The
progressions have been made to organization law since organizations work together diversely
and it dislike in that season of Salomon.

There have been changes in law in the previous couple of years. The law was enhanced in 2006
and the procurements came into practice in 2008, there have been major taken to enhance and
make it less demanding for individuals to run a privately owned business, as it is appeared over
that it was hard to run a privately owned business in the past as shareholders were not ensured
and the courts would dependably rule for leasers. The upgrades that are should have been made
are not making it a prerequisite for an organization to have a secretary since a few organizations
are enormous however little implying that they would not require a secretary. This is a superior
methodology and a think little first approach. Shareholders are permitted to take part in long haul
ventures this they are assume to it a society. Privately owned businesses ought to be helped
monetarily like some other organization. The extensive variety of measures to be enhanced in
conference with the shareholders and is made to modernize and rearrange organization law. The
organization ought to likewise give enhanced rights to both the financial specialists and
shareholders
Court must be watchful in screening candidates' capability to ensure they have satisfied s 181A
(4) (an) until (d) with respect to the protest preceding allowing court take off. This will require

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the complainants to guarantee they agree to s 181B (2) which offer 30 day composing notice
with respect to the application. A great deal of cash, exertion and time could be spared when it is
distinguished before that the candidate fizzled prerequisite.

Another arrangement is to be strict with the candidate to distinguish regardless of whether their
application is planned to be great and went for organization's best advantage. Candidates may
have awful expectations, for example, going for guarantee advantage in the case court leave in
affirmed. Court likewise can procure candidates to indicate physical proof with regards to
minority fake or confirmation that chiefs required in onerous way. In the occurrence no solid
confirmation is introduced, court may not concede court leave for the candidate.

6.0 SUMMARY

As a conclusion, all the business entities in Malaysia have their own rules and concept. They
must follow Companies Act1965 even Sole proprietorships, partnership, company and
unincorporated association.
Separate legal entity is a decent idea since it is not every one of the shareholders who are
dynamic in the running of the business, they work hand in with the executives they named. Since
if something turns out badly in the business it doesn't influence them by and by, the organization
is all alone. Be that as it may, the idea of constrained risk may energize wrongful act in the
organization in light of the fact that everything is done in the organization's name; nothing is
appending the shareholders to the organisation. I can say that different legal entity and restricted
risk are similarly imperative in the smooth cruising of the organization. Furthermore
organisations ought to observe the aforementioned enhancements in law.

(4565 words)

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