Companies Act, Lawyer,Law Firm,Legal advice,peguam,solicitor,advocate,peguamcara,legal,firm,undang-undang,nasihat,peguambela,attorney,firma guaman,kuala lumpur, selangor, petaling jaya, pj,malaysia of 50

Companies

101

(b) the consent of a person is required under section 45 to

the issue of the prospectus and he either has not given

that consent or has withdrawn it before the issue of the

prospectus,

the directors of the corporation except any without whose knowledge

or consent the prospectus was issued, and any other person who

authorized or caused the issue thereof shall be liable to indemnify

the person so named or whose consent was so required against all

damages, costs and expenses to which he may be made liable by

reason of his name having been inserted in the prospectus or of

the inclusion therein of a statement purporting to be made by him

as an expert, or in defending himself against any action or legal

proceeding brought against him in respect thereof.

Criminal liability for statement in prospectus

47. (1) Where in a prospectus there is any untrue statement or

wilful non-disclosure, any person who authorized or caused the

issue of the prospectus shall be guilty of an offence against this

Act unless he proves either that the statement or non-disclosure

was immaterial or that he had reasonable ground to believe and

did, up to the time of the issue of the prospectus, believe the

statement was true or the non-disclosure immaterial.

Penalty: Imprisonment for *five years or †one hundred thousand

ringgit.

(2) A person shall not be deemed to have authorized or caused

the issue of a prospectus by reason only of his having given the

consent required by this Division to the inclusion therein of a

statement purporting to be made by him as an expert.

Power of Minister to exempt

47A. (1) Subject to subsection (2) the Minister may, on the

application in writing by any person interested and subject to the

recommendation of the Registrar, by order declare that Division

1 and Division 4 of this Part shall not apply to any person making

an offer of shares or debentures to the public, either unconditionally

or subject to such terms and conditions as the Minister thinks fit

to impose.

*NOTE--Previously "two years"see Companies (Amendment) Act 1985 [Act A616].

†

NOTE--Previously "thirty thousand ringgit"see Companies (Amendment) (No. 2) Act 1992 [Act A836].

Laws of Malaysia

102

ACT 125

(2) Recommendation shall not be made by the Registrar to the

Minister unless he is of the opinion that circumstances exist

whereby--

(a) the cost of providing a prospectus outweighs the resulting

protection to investors; or

(b) it would not be prejudicial to the public interest if a

prospectus were dispensed with.

Exempted offers

47B. (1) Nothing in Division 1 and Division 4 of this Part shall

apply to an offer of shares or debentures, whether or not they have

been previously issued, made to--

(a) a prescribed corporation;

(b) an insurance company registered under any written law

relating to insurance companies;

(c) a trustee corporation;

(d) a statutory body established by an Act of Parliament or

an Enactment of any State;

(e) a pension fund approved by the Director General of Inland

Revenue under section 150 of the Income Tax Act 1967

[Act 53];

(f) a unit trust scheme as defined under the Securities Industry

Act 1983 [Act 280];

(g) a person licensed as a dealer or investment adviser under

the Securities Industry Act 1983;

(h) a corporation incorporated outside Malaysia;

(i) a public company which is engaged primarily in the making

of investments in marketable securities for the purpose

of revenue and for profit and not for the purpose of

exercising control; and

(j) such other person as the Minister may, by order published

in the Gazette, declare to be exempt purchasers,

who or which pursuant to the offer, acquires the shares or debentures

as principal, trustee or agent for accounts fully managed by him

or it who, for the purposes of this section, shall be deemed to be

dealing as principal.

Companies

103

(2) In this section, the term "prescribed corporation" has the

same meaning as assigned to it in subsection 38(7).

(3) Any information memorandum purporting to describe the

business and affairs of the person making the offer issued by the

said person or his agent shall be deemed to be a prospectus, in so

far as regarding the liability of the person or his agent, for any

untrue statement or non-disclosure of material information and a

copy of the memorandum shall be lodged with the Registrar within

seven days after it is first issued.

DIVISION 2

RESTRICTIONS ON ALLOTMENT AND COMMENCEMENT

OF BUSINESS

Prohibition of allotment unless minimum subscription received

48. (1) No allotment shall be made of any shares of a company

offered to the public or offered for subscription or purchase or

where an invitation to subscribe for or purchase shares is made

pursuant to a prospectus that is registered under the Securities

Commission Act 1993 unless--

(a) the minimum subscription has been subscribed; and

(b) the sum payable on application for the shares so subscribed

has been received by the company,

but if a cheque for the sum payable has been received by the

company, the sum shall be deemed not to have been received by

the company until the cheque is paid by the bank on which it is

drawn.

(2) The minimum subscription shall be--

(a) calculated on the nominal value of each share, and where

the shares are issued at a premium, on the nominal value

of, and the amount of the premium payable on, each

share; and

(b) reckoned exclusively of any amount payable otherwise

than in cash.

Laws of Malaysia

104

ACT 125

(3) The amount payable on application on each share offered

to the public or offered pursuant to a prospectus that is registered

under the Securities Commission Act 1993 shall not be less than

five per centum of the nominal amount of the share.

(4) If the conditions referred to in paragraphs (1)(a) and (b)

have not been satisfied on the expiration of four months after the

first issue of the prospectus, all money received from applicants

for shares shall he forthwith repaid to them without interest, and,

if any such money is not so repaid within five months after the

issue of the prospectus, the directors of the company shall be

jointly and severally liable to repay that money with interest at the

rate of ten per centum per annum from the expiration of the period

of five months but a director shall not be so liable if he proves

that the default in the repayment of the money was not due to any

misconduct or negligence on his part.

( 5 ) A n allotment made by a company to an applicant in

contravention of this section or of subsection 50 (1) shall be

voidable at the option of the applicant which option may be exercised

by written notice served on the company within one month after

the holding of the statutory meeting of the company, and not later,

or, in any case where the company is not required to hold a

statutory meeting, or where the allotment is made after the holding

of the statutory meeting, within one month after the date of the

allotment, and not later, and the allotment shall be so voidable

notwithstanding that the company is in course of being wound up.

(6) Every director of a company who knowingly contravenes or

permits or authorizes the contravention of this section or of subsection

50(1) shall be guilty of an offence against this Act and shall be

liable in addition to the penalty or punishment for the offence to

compensate the company and the allottee respectively for any loss,

damages or costs which the company or the allottee has sustained

or incurred thereby but no proceedings for the recovery of any

such compensation shall be commenced after the expiration of two

years from the date of the allotment.

Penalty: Imprisonment for three years or one million ringgit or

both.

(7) Any condition requiring or binding any applicant for shares

to waive compliance with any requirements of this section shall

be void.

Companies

105

(8) No company shall allot, and no officer or promoter of a

company or a proposed company shall authorize or permit to be

allotted--

(a) any shares or debentures to the public on the basis of a

prospectus after the expiration of six months or such

longer period as the Registrar may allow from the date

of issue of the prospectus; or

(b) any securities as defined under the Securities Commission

Act 1993 on the basis of a prospectus that is registered

under that Act later than such period after the date of

issue of the prospectus as the Securities Commission

may specify.

Penalty: Imprisonment for *three years or one million ringgit.

(9) Where an allotment of--

(a) shares or debentures is made on the basis of a prospectus

after the expiration of six months or such longer period

as the Registrar may allow from the date of issue of the

prospectus; or

(b) securities is made on the basis of a prospectus that is

registered under the Securities Commission Act 1993

later than such period after the date of issue of the prospectus

as the Securities Commission may specify,

the allotment shall not by reason only of that fact be voidable or

void.

Application moneys to be held in trust until allotment

49. (1) All applications and other moneys paid prior to allotment

by any applicant on account of shares or debentures offered to the

public or of any securities for which a prospectus is required under

the Securities Commission Act 1993 shall until the allotment be

held by the company, or in the case of an intended company by

the persons named in the prospectus as proposed directors and by

the promoters, upon trust for the applicant, but there shall be no

obligation or duty on any bank or third person with whom any such

moneys have been deposited to inquire into or see to the proper

application of the moneys so long as the bank or person acts in

good faith.

*NOTE--Previously "three years or ten thousand ringgit"see Companies (Amendment) Act 1986

[Act A657].

Laws of Malaysia

106

ACT 125

(2) If default is made in complying with this section every

officer of the company in default or, in the case of an intended

company, every person named in the prospectus as a proposed

director and every promoter who knowingly and wilfully authorizes

or permits the default shall be guilty of an offence against this Act.

Penalty: Imprisonment for *three years or ten thousand ringgit.

Restriction on allotment in certain cases

50. (1) A public company having a share capital which does not

issue a prospectus on or with reference to its formation shall not

allot any of its shares or debentures unless at least three days

before the first allotment of either shares or debentures there has

been lodged with the Registrar a statement in lieu of prospectus

which complies with the requirements of this Act.

(2) If default is made in complying with this section the company

and every officer of the company who is in default shall be guilty

of an offence against this Act.

Penalty: Imprisonment for *three years or ten thousand ringgit.

Requirements as to statements in lieu of prospectus

51. (1) To comply with the requirements of this Act a statement

in lieu of prospectus lodged by or on behalf of a company--

(a) shall be signed by every person who is named therein as

a director or a proposed director of the company or by

his agent authorized in writing;

(b) shall subject to Part III of the Sixth Schedule, be in the

form of and state the matters specified in Part I of that

Schedule and set out the reports specified in Part II of

that Schedule; and

(c) shall, where the persons making any report specified in

Part II of that Schedule have made therein or have, without

giving the reasons, indicated therein any such adjustments

as are mentioned in paragraph 5 of Part III of that Schedule,

have endorsed thereon or attached thereto a written

s t a t e m e n t signed by those persons setting out the

adjustments and giving the reasons therefor.

*NOTE--Previously "one year or two thousand five hundred ringgit"see Companies (Amendment)

Act 1986 [Act A657].

Companies

107

(2) The Registrar shall not accept for registration any statement

in lieu of prospectus unless it appears to him to comply with this

Act.

(3) Where in any statement in lieu of prospectus, there is any

untrue statement or wilful non-disclosure any director, who signed

the statement in lieu of prospectus shall be guilty of an offence

against this Act unless he proves either that the untrue statement

or non-disclosure was immaterial or that he had reasonable ground

to believe and did, up to the time of the delivery for registration

of the statement in lieu of prospectus, believe that the untrue

statement was true or the non-disclosure immaterial.

Penalty: Imprisonment for *three years or ten thousand ringgit

or both.

Restrictions on commencement of business in certain

circumstances

52. (1) Where a company having a share capital has issued a

prospectus inviting the public to subscribe for its shares or has

issued a prospectus pursuant to the Securities Commission Act

1993 in relation to its shares the company shall not commence any

business or exercise any borrowing powers--

(a) if any money is or may become liable to be repaid to

applicants for any shares or debentures offered for public

subscription by reason of any failure to apply for or

obtain permission for listing for quotation on any Stock

Exchange; or

(b) unless--

(i) shares held subject to the payment of the whole

amount thereof in cash have been allotted to an

amount not less in the whole than the minimum

subscription;

(ii) every director has paid to the company on each

of the shares taken or contracted to be taken by

him, and for which he is liable to pay in cash, a

proportion equal to the proportion payable on

application and allotment on the shares offered

for public subscription; and

*NOTE--Previously "one year or two thousand five hundred ringgit"see Companies (Amendment)

Act 1986 [Act A657].

Laws of Malaysia

108

ACT 125

(iii) there has been lodged with the Registrar a statutory

declaration by the secretary or one of the directors

of the company in the prescribed form verifying

that the above conditions have been complied with.

(2) Where a public company having a share capital has not

issued a prospectus inviting the public to subscribe for its shares

or has not issued a prospectus pursuant to the Securities Commission

Act 1993 the company shall not commence any business or exercise

any borrowing power unless--

(a) there has been lodged with the Registrar a statement in

lieu of prospectus which complies with this Act;

(b) every director of the company has paid to the company

on each of the shares taken or contracted to be taken by

him and for which he is liable to pay in cash, a proportion

equal to the proportion payable on application and allotment

on the shares payable in cash; and

(c) there has been lodged with the Registrar a statutory

declaration by the secretary or one of the directors of the

company in the prescribed form verifying that paragraph

(b) has been complied with.

(3) The Registrar shall, on the lodging of the statutory declaration

in accordance with this section certify that the company is entitled

to commence business and to exercise its borrowing powers and

that certificate shall be conclusive evidence thereof.

(4) Any contract made by a company before the date at which

it is entitled to commence business shall be provisional only and

shall not be binding on the company until that date, and on that

date it shall become binding.

(5) Where shares and debentures are offered simultaneously by

a company for subscription nothing in this section shall prevent

the receipt by the company of any money payable on application

for the debentures.

(6) If any company commences business or exercises borrowing

powers in contravention of this section every person who is

responsible for the contravention shall be guilty of an offence

against this Act.

Companies

109

Penalty: *Ten thousand ringgit. Default penalty: Two hundred

and fifty ringgit.

Restriction on varying contracts referred to in prospectus, etc.

53. A company shall not before the statutory meeting vary the

terms of a contract referred to in the prospectus or statement in

lieu of prospectus, unless the variation is made subject to the

approval of the statutory meeting.

DIVISION 3

Return as to allotments

54. (1) Where a company makes any allotment of its shares or

a n y of its shares are deemed to have been allotted under

subsection (6) the company shall within one month thereafter

lodge with the Registrar a return of the allotments stating--

(a) the number and nominal amounts of the shares comprised

in the allotment;

(b) the amount, if any, paid, deemed to be paid, or due and

payable on the allotment of each share;

(c) where the capital of the company is divided into shares

of different classes, the class of shares to which each

share comprised in the allotment belongs; and

(d) the full name and the address of each of the allottees and

the number and class of shares allotted to him.

(2) The particulars mentioned in paragraph (1)(d) need not be

included in the return where a company to which subsection 166(1)

applies has allotted shares--

(a) for cash; or

(b) for a consideration other than cash and the number of

persons to whom the shares have been allotted exceeds

five hundred.

*NOTE--Previously "one thousand ringgit"see Companies (Amendment) Act 1986 [Act A657].

Laws of Malaysia

110

ACT 125

(3) Where shares are allotted or deemed to have been allotted

as fully or partly paid up otherwise than in cash and the allotment

is made pursuant to a contract in writing, the company shall lodge

with the return the contract evidencing the entitlement of the

allottee or a copy of any such contract certified as prescribed.

(4) If a certified copy of a contract is lodged the original contract

duly stamped shall, if the Registrar so requests, be produced at the

same time to the Registrar.

(5) Where shares are allotted or are deemed to have been allotted

as fully or partly paid up otherwise than in cash and the allotment

is made--

(a) pursuant to a contract not reduced to writing;

(b) pursuant to a provision in the memorandum or articles;

(c) in satisfaction of a dividend declared in favour of, but not

payable in cash to the shareholders, or in pursuance of

the application of moneys held by the company in an

account or reserve in paying up unissued shares to which

the shareholders have become entitled,

the company shall lodge with the return a statement containing

such particulars as are prescribed but where the shares are allotted

pursuant to a scheme of arrangement approved by the Court under

section 176 the company may lodge an office copy of the order

of the Court in lieu of the statement in the prescribed form.

(6) For the purposes of this section any shares issued without

formal allotment to subscribers to the memorandum shall be deemed

to have been allotted to the subscribers on the date of the incorporation

of the company.

(7) If default is made in complying with this section every

officer of the company who is in default shall be guilty of an

offence against this Act.

Penalty: One thousand ringgit. Default penalty: Two hundred

and fifty ringgit.

Companies

111

As to voting rights of equity shares in certain companies

55. (1) Notwithstanding any provisions in this Act or in the

memorandum or articles of a company to which this section applies,

each equity share issued by such a company after the commencement

of this Act shall confer the right at a poll at any general meeting

of the company (subject as provided in subsection 148(1)) to one

vote, and, to one vote only for each ringgit or part of a ringgit that

has been paid up on that share.

(2) Where any company to which this section applies has, prior

to the commencement of this Act, or, while it was a company to

which this section did not apply, issued any equity share which

does not comply with subsection (1), the company shall not issue

any invitation to subscribe for or to purchase any shares or debentures

of the company until the voting rights attached to each share of

t h a t company have been duly varied so as to comply with

subsection (1).

(3) For the purposes of this section any alteration of the rights

of issued preference shares so that they become equity shares shall

be deemed to be an issue of equity shares.

(4) The Yang di-Pertuan Agong may by proclamation published

in the Gazette declare that subsection (1) shall apply to all or any

equity shares or any class of equity shares which have been issued

before the commencement of this Act by a company to which this

section applies and which is specified in the declaration and thereupon

that subsection shall apply to such equity shares so issued by the

company from such date as is specified in the declaration being

a date not less than one year after the making of the proclamation.

(5) This section applies to--

(a) a public company having a share capital; and

(b) a subsidiary of such a public company.

(6) A person shall not make any invitation to the public in

breach of subsection (2).

Penalty: Imprisonment for *five years or thirty thousand ringgit.

*NOTE--Previously "two years or five thousand ringgit"see Companies (Amendment) Act 1986

[Act A657].

Laws of Malaysia

112

ACT 125

Differences in calls and payments, etc.

56. (1) A company if so authorized by its articles may--

(a) make arrangements on the issue of shares for varying the

amounts and times of payment of calls as between

shareholders;

(b) accept from any member the whole or a part of the amount

remaining unpaid on any shares although no part of that

amount has been called up; and

(c) pay dividends in proportion to the amount paid up on

each share where a larger amount is paid up on some

shares than on others.

Reserve liability

(2) A limited company may by special resolution determine

that any portion of its share capital which has not been already

called up shall not be capable of being called up except in the

event and for the purposes of the company being wound up, and

thereupon that portion of its share capital shall not be capable of

being called up except in the event and for the purposes of the

company being wound up, but no such resolution shall prejudice

the rights of any person acquired before the passing of the resolution.

Share warrants

57. (1) A company shall not issue any share warrant stating that

the bearer of the warrant is entitled to the shares therein specified

and which enables the shares to be transferred by delivery of the

warrant.

(2) The bearer of a share warrant issued before the commencement

of this Act shall be entitled, on surrendering it for cancellation to

have his name entered in the register of members.

(3) The company shall be responsible for any loss incurred by

any person by reason of the company entering in the register the

name of a bearer of a share warrant issued before the commencement

of this Act in respect of the shares therein specified without the

warrant being surrendered and cancelled.

Companies

113

Power to pay certain commissions, and prohibition of payment

of all other commissions, discounts, etc.

58. (1) A company may pay a commission to any person in

consideration of his subscribing or agreeing to subscribe whether

absolutely or conditionally for any shares, or procuring or agreeing

to procure subscriptions, whether absolute or conditional, for any

shares in the company, if --

(a) the payment is authorized by the articles;

(b) the commission does not exceed ten per centum of the

price at which the shares are issued or the amount or rate

authorized by the articles, whichever is the less;

(c) the amount or rate of the commission is--

(i) in the case of shares of an unlisted recreational

club which are offered to the public for subscription

or in the case of shares other than of an unlisted

recreational club which are offered for subscription

o r purchase pursuant to a prospectus that is

registered under the Securities Commission Act

1993, disclosed in the prospectus; and

(ii) in the case of shares not so offered, disclosed in

the statement in lieu of prospectus, or in a statement

in the prescribed form signed in like manner as a

statement in lieu of prospectus and lodged before

the payment of the commission with the Registrar,

and, where a circular or notice not being a prospectus

inviting subscription for the shares is issued, also

disclosed in that circular or notice; and

(d) the number of shares which persons have agreed for a

commission to subscribe absolutely is disclosed in the

like manner.

(2) Except as provided in subsection (1) no company shall apply

any of its shares or capital money either directly or indirectly in

payment of any commission, discount or allowance to any person

in consideration of his subscribing or agreeing to subscribe whether

absolutely or conditionally for any shares or procuring or agreeing

to procure subscriptions whether absolute or conditional for any

shares in the company, whether the shares or money are so applied

by being added to the purchase money of any property acquired

by the company or to the contract price of any work to be executed

for the company, or the money is paid out of the nominal purchase

money or contract price or otherwise.

Laws of Malaysia

114

ACT 125

(3) Nothing in this section shall affect the power of any company

to pay such brokerage (in addition to or in lieu of the commission

referred to in subsection (1)) as it has heretofore been lawful for

company to pay but the amount or rate per centum of the brokerage

paid or agreed to be paid by the company shall (in the case of

shares of an unlisted recreational club which are offered to the

public for subscription or in the case of shares other than of an

unlisted recreational club which are offered for subscription or

purchase pursuant to a prospectus that is registered under the

Securities Commission Act 1993) be disclosed in the prospectus

or in the statement in lieu of prospectus (if applicable) or in a

statement in the prescribed form signed in like manner as a statement

in lieu of prospectus and lodged before the payment of the brokerage

with the Registrar, and, where a circular or notice not being a

prospectus inviting subscription for the shares is issued, also disclosed

in that circular or notice.

(4) A vendor to, promoter of, or other person who receives

payment in money or shares from, a company shall have power

to apply any part of the money or shares so received in payment

of any commission the payment of which if made directly by the

company would have been lawful under this section.

(5) If default is made in complying with the provisions of this

section relating to the lodging with the Registrar of the statement

in the prescribed form, the company and every officer of the

company who is in default shall be guilty of an offence against

this Act.

Penalty: *One thousand ringgit. Default penalty.

Power to issue shares at a discount

59. (1) Subject to this section a company may issue shares at a

discount of a class already issued if--

(a) the issue of the shares at a discount is authorized by

resolution passed in general meeting of the company, and

is confirmed by order of the Court;

(b) the resolution specifies the maximum rate of discount at

which the shares are to be issued;

(c) at the date of the issue not less than one year has elapsed

since the date on which the company was entitled to

commence business; and

*NOTE--Previously "two hundred and fifty ringgit"see Companies (Amendment) Act 1986

[Act A657].

Companies

115

(d) the shares are issued within one month after the date on

which the issue is confirmed by order of the Court or

within such extended time as the Court allows.

(2) The Court, if having regard to all the circumstances of the

case it thinks proper to do so, may make an order confirming the

issue on such terms and conditions as it thinks fit.

(3) Every prospectus relating to the issue of the shares shall

contain particulars of the discount allowed or of so much of that

discount as has not been written off at the date of the issue of the

prospectus.

(4) Notwithstanding any provision of its articles, a company

shall not issue at a discount shares of any class unless it first offers

the shares to every holder of shares of that class in the company

proportionately to the number of those shares held by him.

(5) Every such offer shall be made by notice specifying the

number of shares to which the member is entitled and limiting a

time not being less than twenty-one days within which the offer

may be accepted.

(6) If any such offer is not accepted within the time limited by

the notice the shares may be issued on terms not more favourable

than those offered to the shareholders.

(7) If default is made in complying with this section, the company

and every officer of the company who is in default shall be guilty

of an offence against this Act.

Penalty: *One thousand ringgit. Default penalty.

Issue of shares at a premium

60. (1) In this section--

"arrangement" means any agreement, scheme or arrangement

(including an arrangement sanctioned in accordance with section

176 or 270);

"company" except in references to the issuing company, includes

any body corporate;

*NOTE--Previously "two hundred and fifty ringgit"see Companies (Amendment) Act 1986

[Act A657].

Laws of Malaysia

116

ACT 125

"equity share capital" means, in relation to a company, its issued

share capital excluding any part thereof which neither as respects

dividends nor as respects capital, carries any right to participate

beyond a specified amount in a distribution;

"equity shares" means shares comprised in a company's equity

share capital;

"issuing company" means the company issuing the shares in the

circumstances referred to in this section;

"minimum premium value" means the amount, if any, by which

the base value of the shares transferred exceeds the aggregate

nominal value of the shares allotted in consideration for the transfer;

"non-equity shares" means shares of any class not comprised in

a company's equity share capital.

Share premium account

(2) Where a company issues shares for which a premium is

received by the company whether in cash or in the form of other

valuable consideration a sum equal to the aggregate amount or

value of the premiums on those shares shall be transferred to an

account called the "share premium account" and the provisions of

this Act relating to the reduction of the share capital of a company

shall subject to this section apply as if the share premium account

were paid-up share capital of the company.

(3) The share premium account may be applied--

(a) in paying up unissued shares to be issued to members of

the company as fully paid bonus shares;

(b) in paying up in whole or in part the balance unpaid on

shares previously issued to members of the company;

(c) in the payment of dividends if such dividends are satisfied

by the issue of shares to members of the company;

(d) in the case of a company which carries on insurance

business in Malaysia, by appropriation or transfer to any

statutory fund established and maintained pursuant to

any law of Malaysia relating to insurance;

Companies

117

(e) in writing off--

(i) the preliminary expenses of the company; or

(ii) the expenses of, or the commission or brokerage

paid or discount allowed on, any duty, fee or tax

payable on or in connection with, and issue of

shares of the company; or

(f) in providing for the premium payable on redemption of

redeemable preference shares.

Merger relief

(4) (a) Subsection (2) shall not apply--

(i) where an issuing company has secured at least ninety

per centum equity holding in another company in

pursuance of any arrangement providing for the

allotment of equity shares issued at a premium in

the issuing company on terms that the consideration

for the shares allotted is to be provided by the issue

or transfer to the issuing company of equity shares

in that other company or by the cancellation of any

such shares not held by the issuing company; and

(ii) where the arrangement also provides for the allotment

of any shares in the issuing company on terms that

the consideration for those shares is to be provided

by the issue or transfer to the issuing company of

non-equity shares in the other company or by the

cancellation of any such shares in that company

not held by the issuing company.

(b) Subject to paragraph (c), the issuing company shall be

regarded for the purposes of this subsection as having

secured at least ninety per centum equity holding in another

company in pursuance of any such arrangement as is

mentioned in paragraph (a), if, in consequence of any

acquisition or cancellation of equity shares in that company

in pursuance of that arrangement it holds equity shares

in that company (whether all or any of those shares were

acquired in pursuance of that arrangement or not) of an

aggregate nominal value equal to ninety per centum or

more of the nominal value of the company's equity share

capital.

Laws of Malaysia

118

ACT 125

(c) Where the equity share capital of the other company in

question is divided into different classes of shares this

subsection shall not apply unless the requirements of

paragraph (a) above are satisfied in relation to each of

those classes taken separately.

(d) Shares held by a company which is the issuing company's

holding company or subsidiary of the issuing company's

holding company, or by its or their trustees, shall be

regarded for the purposes of this subsection as held by

the issuing company.

(5) (a) Where the issuing company--

(i) is a wholly-owned subsidiary of another company

(the holding company); and

(ii) allots shares to the holding company or to another

wholly-owned subsidiary of the holding company

in consideration for the transfer to the issuing

company of assets, other than cash, being assets of

any company (the transferor company) which is a

member of the group of companies which comprises

the holding company and all its wholly-owned

subsidiaries,

the issuing company shall not be required by subsection (2) to

transfer any amount in excess of the minimum premium value to

the share premium account where the shares in the issuing company

allotted in consideration for the transfer are issued at a premium.

(b) In paragraph (a), "the minimum premium value" means the

amount, if any, by which the base value of the consideration for

the shares allotted exceeds the aggregate nominal value of those

shares.

(c) For the purposes of paragraph (b), the base value of the

consideration for the shares allotted shall be the amount by which

the base value of assets transferred exceeds the base value of any

liabilities of the transferor company assumed by the issuing company

as part of the consideration for the assets transferred.

Companies

119

(d) For the purposes of paragraph (c)--

(i) the base value of the assets transferred shall be taken

as the cost of those assets to the transferor company

or the amount at which those assets are stated in the

transferor company's accounting records immediately

before the transfer, whichever is the less; and

(ii) the base value of the liabilities assumed shall be

taken as the amount at which they are stated in the

transferor company's accounting records immediately

before the transfer.

(e) Subsection (4) shall not apply in any case to which this

subsection applies.

Restrospective relief in certain circumstances

(6) (a) Subject to paragraph (b), where--

(i) the issuing company has issued at a premium shares

which were allotted in pursuance of any arrangement

providing for the allotment of shares in the issuing

company on terms that the consideration for the shares

allotted was to be provided by the issue or transfer

to the issuing company of shares in another company

or by the cancellation of any shares in that other

company not held by the issuing company; and

(ii) that other company must either have been, at the time

of the arrangement, a subsidiary of the issuing company

o r of any company which was then the issuing

company's holding company or have become such a

subsidiary on the acquisition or cancellation of its

shares in pursuance of the arrangement,

any part of the premiums on the shares so issued which was not

transferred to the company's share premium account in accordance

with subsection (2) shall be treated as if subsection (2) had never

applied to those premiums (and may accordingly be disregarded

in determining the sum to be included in the company's share

premium account).

Laws of Malaysia

120

ACT 125

(b) This subsection applies only where a company has issued

shares in circumstances to which the subsection applies before the

coming into operation of the subsection.

(7) (a) An amount corresponding to any amount representing

the premiums or part of the premiums on shares issued by a

company which by virtue of subsection (4), (5) or (6) is not included

in the company's share premium account may also be disregarded

in determining the amount at which any shares or other consideration

provided for the shares issued is to be included in the company's

balance-sheet.

(b) References in subsections (4) to (6) and in this subsection

(however expressed) to--

(i) the acquisition by any company of shares in another

company; and

(ii) the issue or allotment of shares to or the transfer of

shares to or by any company,

include references respectively to the acquisition of any of those

shares by and to the issue or allotment or (as the case may require)

the transfer of any of those shares to or by trustees of that company;

and the reference in subparagraph (5)(b)(i) to the company transferring

the shares there-mentioned shall be construed accordingly.

(c) References in subsections (4) to (6) and in this subsection

to the transfer of shares in a company include references to the

transfer of right to be included in the company's register of members

in respect of those shares.

(8) Regulations may be made making provision for and in relation

to--

(i) relief from the requirement of subsection (2) in relation

to premium other than cash premium; or

(ii) restrictions or modification of any relief from those

requirements provided by subsections (4) to (7).

Redeemable preference shares

61. (1) Subject to this section a company having a share capital

may, if so authorized by its articles, issue preference shares which

are, or at the option of the company are to be, liable to be redeemed

and the redemption shall be effected only on such terms and in

such manner as is provided by the articles.

Companies

121

(2) The redemption shall not be taken as reducing the amount

of authorized share capital of the company.

(3) The shares shall not be redeemed--

(a) except out of profits which would otherwise be available

for dividend, or out of the proceeds of a fresh issue of

shares made for the purposes of the redemption; and

(b) unless they are fully paid up.

(4) The premium, if any, payable on redemption shall be provided

for out of profits or the share premium account before the shares

are redeemed.

(5) Where any such shares are redeemed otherwise than out of

the proceeds of a fresh issue, there shall, out of profits which

would otherwise have been available for dividend, be transferred

to a reserve called the "capital redemption reserve" a sum equal

to the nominal amount of the shares redeemed, and the provisions

of this Act relating to the reduction of the share capital of a

company shall, except as provided in this section, apply as if the

capital redemption reserve were paid-up share capital of the company.

(6) Where in pursuance of this section a company has redeemed

or is about to redeem any preferences shares, it may issue shares

up to the nominal amount of the shares redeemed or to be redeemed

as if those shares had never been issued, and accordingly the share

capital of the company shall not for the purposes of any fee under

this Act be deemed to be increased by such issue but where new

shares are issued before the redemption of the old shares, the new

shares shall not, so far as relates to any fee under this Act, be

deemed to have been issued in pursuance of this subsection unless

the old shares have been redeemed within one month after the

issue of the new shares.

(7) The capital redemption reserve may be applied in paying up

unissued shares of the company to be issued to members of the

company as fully paid bonus shares.

(8) If a company redeems any redeemable preference shares it

shall within fourteen days after so doing give notice thereof to the

Registrar specifying the shares redeemed.

Laws of Malaysia

122

ACT 125

Power of company to alter its share capital

62. (1) A company if so authorized by its articles may in general

meeting alter the conditions of its memorandum in any one or

more of the following ways:

(a) increase its share capital by the creation of new shares

of such amount as it thinks expedient;

(b) consolidate and divide all or any of its share capital into

shares of larger amount than its existing shares;

(c) convert all or any of its paid-up shares into stock and re-

convert that stock into paid-up shares of any denomination;

(d) subdivide its shares or any of them into shares of smaller

amount than is fixed by the memorandum, so however

that in the subdivision the proportion between the amount

paid and the amount, if any, unpaid on each reduced

share shall be the same as it was in the case of the share

from which the reduced share is derived; or

(e) cancel shares which at the date of the passing of the

resolution in that behalf have not been taken or agreed

to be taken by any person and diminish the amount of

its share capital by the amount of the shares so cancelled.

Cancellations

(2) A cancellation of shares under this section shall not be

deemed to be a reduction of share capital within the meaning of

this Act.

As to share capital of unlimited company on re-registration

(3) An unlimited company having a share capital may by any

resolution passed for the purposes of subsection 25(1)--

(a) increase the nominal amount of its share capital by

increasing the nominal amount of each of its shares, but

subject to the condition that no part of the increased

capital shall be capable of being called up except in the

event and for the purposes of the company being wound

up; and

Companies

123

(b) in addition or alternatively, provide that a specified portion

of its uncalled share capital shall not be capable of being

called up except in the event and for the purposes of the

company being wound up.

Notice of increase of share capital

(4) Where a company has increased its share capital beyond the

registered capital, it shall within fourteen days after the passing

of the resolution authorizing the increase lodge with the Registrar

notice of the increase.

(5) If any company fails to comply with subsection (4) the

company and every officer of the company who is in default shall

be guilty of an offence against this Act.

Penalty: *One thousand ringgit. Default penalty.

Validation of shares improperly issued

63. Where a company has purported to issue or allot shares and

the creation, issue or allotment of those shares was invalid by

reason of any provision of this or any other written law or of the

memorandum or articles of the company or otherwise or the terms

of issue or allotment were inconsistent with or unauthorized by

any such provision the Court may, upon application made by the

company or by a holder or mortgagee of any of those shares or

by a creditor of the company and upon being satisfied that in all

the circumstances it is just and equitable so to do, make an order

validating the issue or allotment of those shares or confirming the

terms of issue or allotment thereof or both and upon an office copy

of the order being lodged with the Registrar those shares shall be

deemed to have been validly issued or allotted upon the terms of

the issue or allotment thereof.

Special resolution for reduction of share capital

64. (1) Subject to confirmation by the Court a company may, if

so authorized by its articles, by special resolution reduce its share

capital in any way and in particular, without limiting the generality

of the foregoing, may do all or any of the following:

(a) extinguish or reduce the liability on any of its shares in

respect of share capital not paid-up;

*NOTE--Previously "two hundred and fifty ringgit"see Companies (Amendment) Act 1985

[Act A657].

Laws of Malaysia

124

ACT 125

(b) cancel any paid-up share capital which is lost or

unrepresented by available assets; or

(c) pay off any paid-up share capital which is in excess of

the needs of the company,

and may so far as necessary alter its memorandum by reducing the

amount of its share capital and of its shares accordingly.

(2) Where the proposed reduction of share capital involves either

diminution of liability in respect of unpaid share capital or the

payment to any shareholder of any paid-up share capital, and in

any other case if the Court so directs--

(a) every creditor of the company who at the date fixed by

the Court is entitled to any debt or claim which, if that

date were the commencement of the winding up of the

company, would be admissible in proof against the company

shall be entitled to object to the reduction;

(b) the Court, unless satisfied on affidavit that there are no

such creditors, shall settle a list of creditors so entitled

to object and for that purpose shall ascertain as far as

possible without requiring an application from any creditor

the names of those creditors and the nature and amount

of their debts or claims, and may publish notices fixing

a final day on or before which creditors not entered on

the list may claim to be so entered; and

(c) where a creditor entered on the list whose debt or claim

is not discharged or has not determined does not consent

to the reduction, the Court may dispense with the consent

of that creditor on the company securing payment of his

debt or claim by appropriating as the Court directs--

(i) if the company admits the full amount of the debt

or claim or though not admitting it is willing to

provide for it, the full amount of the debt or claim;

(ii) if the company does not admit and is not willing

to provide for the full amount of the debt or claim

or if the amount is contingent or not ascertained,

an amount fixed by the Court after the like inquiry

and adjudication as if the company were being

wound up by the Court.

Companies

125

(3) Notwithstanding subsection (2) the Court may, having regard

to any special circumstances of any case, direct that all or any of

the provisions of that subsection shall not apply as regards any

class of creditors.

(4) The Court, if satisfied with respect to every creditor who

under subsection (2) is entitled to object, that either his consent

to the reduction has been obtained or his debt or claim has been

discharged or has determined or has been secured may make an

order confirming the reduction on such terms and conditions as it

thinks fit.

(5) An order made under subsection (4) shall show the amount

of the share capital of the company as altered by the order, the

number of shares into which it is to be divided and the amount

of each share and the amount, if any, at the date of the order

deemed to be paid up on each share.

(6) On the lodging of an office copy of the order with the

Registrar the resolution for reducting share capital as confirmed

by the order so lodged shall take effect.

(7) The certificate of the Registrar shall be conclusive evidence

that all the requirements of this Act with respect to reduction of

share capital have been complied with and that the share capital

of the company is such as is stated in the order.

(8) On the lodging of the copy of the order the particulars

shown in the order pursuant to subsection (5) shall be deemed to

be substituted for the corresponding particulars in the memorandum

and such substitution and any addition ordered by the Court to be

made to the name of the company shall (in the case of any addition

to the name, for such period as is specified in the order of the

Court) be deemed to be alterations of the memorandum for the

purposes of this Act.

(9) A member, past or present, shall not be liable in respect of

any share to any call or contribution exceeding in amount the

difference, if any, between the amount of the share as fixed by the

order and the amount paid, or the reduced amount, if any, which

is to be deemed to have been paid, on the share (as the case may

be) but where any creditor entitled to object to the reduction is,

Laws of Malaysia

126

ACT 125

by reason of his ignorance of the proceedings for reduction or of

their nature and effect with respect to his claim, not entered on

the list of creditors, and after the reduction the company is unable,

within the meaning of the provisions of this Act with respect to

winding up by the Court, to pay the amount of his debt or claim--

(a) every person who was a member of the company at the

date of the lodging of the copy of the order for reduction

shall be liable to contribute for the payment of that debt

or claim an amount not exceeding the amount which he

would have been liable to contribute if the company has

commenced to be wound up on the day before the said

date; and

(b) if the company is wound up the Court, on the application

of any such creditor and proof of his ignorance of the

proceedings for reduction or of their nature and effect

with respect to his claim may, if it thinks fit settle

accordingly a list of persons so liable to contribute, and

make and enforce calls and orders on the contributories

settled on the list as if they were ordinary contributories

in a winding up,

b u t nothing in this subsection shall affect the rights of the

contributories among themselves.

(10) Every officer of the company who--

(a) wilfully conceals the name of any creditor entitled to

object to the reduction;

(b) wilfully misrepresents the nature of amount of the debt

or claim of any creditor; or

(c) aids, abets or is privy to any such concealment or

misrepresentation,

shall be guilty of an offence against this Act.

Penalty: Imprisonment for *five years or thirty thousand ringgit.

(11) This section shall not apply to an unlimited company, but

nothing in