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| SECTION A - FORMS AND STRUCTURES OF AND SOURCES OF FINANCE FOR
BUSINESS ORGANISATIONS |
| A1. Forms of business (enterprise) organisation |
(a) What are the main form of business organisation for medium
and large scale enterprises in this economy?
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The main form of business organisation for medium and large scale
enterprises in Malaysia is the limited liability company. Such
companies may be either private limited (Sendirian Berhad or Sdn.
Bhd.) or public limited (Berhad or Bhd.) companies.
Public listed companies are listed either on the Main Board
or the Second Board of the Kuala Lumpur Stock Exchange ("KLSE").
The Second Board, which complements the Main Board, was established
in 11th November 1988 to enable smaller companies with strong
growth potential to seek a listing on the Exchange. Each Board
is further classified by sectors reflecting the core business
of these companies. Below is the total number of listed companies
for the last five years.
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YEAR
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MAIN BOARD |
SECOND BOARD |
TOTAL |
| 1998 |
449 |
285 |
734 |
| 1997 |
444 |
264 |
708 |
| 1996 |
413 |
208 |
621 |
| 1995 |
369 |
164 |
529 |
| 1994 |
347 |
131 |
478 |
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(b) Is there a system of registration for these business organizations?
If so, briefly describe.
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There is a system of registration for private and public limited
companies. The requirements for registration are contained in
the Companies Act 1965. The rules are the same for both private
and public limited companies. An application must first be made
to the Registrar of Companies inquiring whether the proposed name
of the company is available. If so, a three months reservation
of the name is given from the date of approval. There are prescribed
forms and fees for each application. Within the three month reservation
period, documents such as the Memorandum & Articles of Association,
Statutory Declaration of Compliance and Statutory Declaration
by a person before appointment as director or by a promoter before
incorporation of companies, together with the relevant fees should
be lodged with the Registrar of Companies. For registration of
a company in Malaysia, the fee payable to the Registrar of Companies
on its authorised share capital is as follows;
| AUTHORISED SHARE CAPITAL (RM) |
FEE PAYABLE |
| UP TO 100,000 |
1,000 |
| 100,001 - 500,000 |
3,000 |
| 500,001 - 1MILLION |
5,000 |
| 1,000,001 - 5 MILLION |
8,000 |
| 5,000,001 - 10 MILLION |
10,000 |
| 10,000,001 - 25 MILLION |
20,000 |
| 25,000,001 - 50 MILLION |
40,000 |
| 50,000,001 - 100 MILLION |
50,000 |
| 100,000,001 - AND ABOVE |
70,000 |
Upon registration, a certificate of incorporation (Form 8 or
9) of the company will be issued by the Registrar of Companies.
A company must have a registered office in Malaysia at which all
books and accounts required under the Companies Act 1965 should
be kept. The following registers have to be kept and changes thereto
have to be filed with the Registrar of Companies:
- Register of Members
- Register of Directors, Managers and Secretaries
- Register of charges (if applicable)
- Register of interest holders (if applicable)
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(c) Are there any minimal capitalisation requirements for
these enterprises?
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A public company seeking listing of and quotation for its securities
on the Main Board of the stock exchange should have an issued
and paid-up capital of not less than RM 20 million comprising
ordinary shares of RM 1.00 each, and on the Second Board should
have a minimum issued and paid-up capital of RM 5 million but
less than RM 20 million comprising ordinary shares of RM 1.00
each. As for the minimal capitalisation requirement for a private
limited company, as each company must have a minimum of 2 members,
the minimum paid up capital would be 2 Ringgit.
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(d) Briefly describe the main features of each type of these
business organisations, by reference to public/private/state ownership
and management; accounting and auditing responsibilities (particularly
the standards which apply to accounting and auditing practices);
director and management responsibility (including, if relevant,
possible liability for debts); and the role of regulatory authorities
regarding these enterprises.
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In Malaysia, a private limited company must by its Memorandum
or Articles of Association restrict the right of members to transfer
shares. It may not invite the public to subscribe for its shares
and debentures nor to deposit money with the company. A public
limited company on the other hand can offer shares and debentures
to the public for subscription and the shares are freely transferable.
A public company cannot offer shares to the public unless a prospectus
that complies with the requirements of the Companies Act 1965
has been registered with the Registrar of Companies. The proposal
for the issue or offer of shares to the public should first be
submitted to the Securities Commission for approval before a prospectus
can be accepted for registration. Where a public listed company
has issued and registered the prospectus, it is prohibited by
the Companies Act 1965 to commence business if it fails to apply
or obtain permission by the KLSE to have the its shares quoted
on the Exchange or comply with the requirements laid down by the
KLSE.
The following are the main features of private and public limited
companies by reference to ownership, accounting and auditing responsibilities,
director and management responsibility and finally the role of
regulatory authorities.
- Ownership
A private company is limited in size to 50 members whilst there
is no maximum limit for public limited company. The minimum
number of members for both types of companies is two. Employees
of a private company or its subsidiaries are not included in
the 50 member limit.
- Accounting and auditing responsibilities
The accounting and auditing responsibilities of private and
public limited companies are the same.
- Accounting
The directors of private and public limited companies are
required, at some date not later than eighteen months after
the incorporation of the company and subsequently once at
least in every calendar year, to lay before the company
at its annual general meeting, a profit and loss account,
a balance sheet as at the date to which the profit and loss
is made-up and a director's report.
The profit and loss accounts and balance sheet of the company
must show a true and fair view of the profit and loss and
state of affairs of the company for the period concerned.
The term 'true and fair view' means that the said accounts
must not be misleading. Further, the Ninth Schedule to the
Companies Act 1965 contains the information which should
be stated in the accounts. International accounting standards
apply.
Further, the company through its directors and managers
are also required to keep accounting and other records as
will sufficiently explain the transactions and financial
position of the company and enable true and fair profit
and loss accounts and balance sheets to be prepared from
time to time. The entries in such records should be made
within sixty days of the completion of the transactions
to which they relate and the records are thereafter to be
retained for a period of seven years from the latter date.
- Auditing
The auditor of a company has a duty to report to the members
on the company accounts. The report must state whether the
company accounts, ie, the balance sheet and the profit and
loss accounts are in his opinion properly prepared in accordance
to the Companies Act 1965, and whether in his opinion a
true and fair view is given in the above mentioned accounts
of the state of the company's affairs and profit and loss
respectively.
It is also the auditor's duty to form an opinion and state
in his reports, whether the company has kept proper accounting
and other records (including registers) has been kept by
the company required by the Companies Act 1965.
An auditor is obliged to exhibit a reasonable degree and
skill in the performance of his duties. This duty may arise
in contract or in tort. The standard of care required is
that of a reasonable auditor - a breach will only occur
if it can be shown that a reasonable auditor would not have
made such a mistake.
- Director's and Management Responsibilities
(i) Director's Responsibilities
In addition to the statutory duties imposed on the directors
by the Companies Act 1965, directors also owe a common law duty
of care and a fiduciary duty to the company, the extent of the
latter duties are determined by case law.
The following are some of the director's responsibilities under
the Companies Act 1965. These responsibilities apply to both
private and public limited companies unless stated otherwise.
- A director must act honestly at all times and use reasonable
diligence in the discharge of the duties of his office.
- A director must not make improper use of any information
acquired by him by virtue of his position in the company to
gain an advantage for himself or cause any detriment to the
company. In relation to this, directors must also not commit
any insider trading offences.
(ii) Management Responsibility
Generally, responsibilities of those concerned in the management
of companies depend on the constitution of each company. Responsibilities
for compliance with the Companies Act 1965 and its subsidiary
legislation may be delegated to external company secretarial
practices or handled in-house by a licensed company secretary.
The more significant duties of management are:
- to seek approval of the company in a general meeting before
they dispose of or execute any transaction for the disposal
of a substantial portion of the company's undertaking or property.
Again, the Companies Act imposes a penalty for breaches of
this section.
- Disclosure of interests in any contract or proposed contract
made by the company.
- the preparation and filing of the statutory report giving
details, inter alia, on the shares allotted, cash received
in respect of the shares, which should be forwarded to the
members of a public limited company before the holding of
a statutory meeting soon after it commences business.
- to lay before the company at its annual general meeting,
a profit and loss account, balance sheet and a director's
report and circulate the same to the members of the company
not less than fourteen days before the date of the meeting.
These documents must be accompanied by a statement issued
by the directors stating that in their opinion the profit
and loss account and the balance sheet give a true and fair
view of the profit and loss of the company and the state of
the affairs of the company respectively.
- In the case of a public limited company, the directors
of a company have the responsibility to ensure that a prospectus
is issued and circulated to the public and its contents are
in accordance with the requirements of the Companies Act.
A director of the company is open to civil or criminal liability
for untrue statements or willful non-disclosure of any material
information in the prospectus.
Statutory Regulatory Framework
- Companies Act 1965 - provides for the office of the Registrar
of Companies established under the Companies Act 1965, who generally
administers the Act.
- Securities Industry Act 1983 ("SIA") - SIA provides the regulatory
framework for the securities industry in Malaysia and is responsible
to the Ministry of Finance. It lays down provisions relating to
stock exchanges, stockbrokers and other persons dealing in securities.
Section 9 of the said Act enumerates the duties of a stock exchange
placing obligation on the Exchange to ensure that the Exchange's
rules are complied with by members, member companies and corporations.
The provisions in the SIA, amongst others, include:
- Power of Minister to approve a stock exchange and to give
recognition to a clearing house
- Power of Commission to approve amendments to the rules of
a stock exchange and clearing house
- Power to issue licences to dealers, fund managers, investment
advisers and their respective representatives.
- Securities Commission Act 1993 ("SCA") - The SCA establishes
the Securities Commission ("SC"), which is the body that regulates
the securities industry as a whole. It sets out the powers and
functions of the SC, a body corporate that is entrusted with regulating
the securities industry. The Act also contains provisions for
Take Over and Mergers. The SC has wide enforcement and investigation
powers ensuring the smooth running of a fairly and orderly market.
- Securities Industry (Central Depositories) Act 1991 ("SICDA")
- SICDA provides for the regulation of a central depository in
respect of the electronic deposit, holding, withdrawal, and dealing
in securities deposited and other matters related thereto. The
Central Depository System operated by Malaysian Central Depository
Sdn Bhd ("MCD") was given a licence by the Minister under SICDA
to establish and maintain a central depository.
Self Regulatory Organisations
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| A2. Controls and influences |
(a) Are there any relevant observations to make concerning
political, social (powerful family), financier (bank equity or
involvement) or cultural controls or influences in respect of
these types of business organisation?
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The National Economic Policy
The main source of social, political and cultural control and
influence would be the National Economic Policy ("NEP"). The NEP
was formulated in 1970 to redress certain imbalances in the spread
of ownership amongst the various races in Malaysia in the wake
of the worst racial riots in the country's history. The NEP was
designed to improve the economic well being of the Malay and aboroginal
communities (collectively known as the Bumiputera Community),
whilst preserving the ability of the other communities to continue
with new and existing businesses. This set of policies has been
the mainstay of Malaysia's economy ever since. The policy must
be understood in context of the provisions in the Federal Constitution
which acknowledge and preserve the special status of the bumiputeras.
This has led to policies that govern minimum bumiputera participation
for new businesses in key areas of the economy, particularly the
manufacturing sector, where certain percentage of the equity in
projects are reserved for the Bumiputra community. Another example
is in the raising of capital through new share issues, where a
certain portion of new shares is reserved for the Bumiputera community.
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