Asimplified procedure of incorporation of companiesIncorporation means a company when comes intoformation to become a legal entity. An incorporated company can have afundamental impact on many aspects of business operation, from owner liabilityto taxes to raising capital.
A company can raise its capital by selling theshares to investors. The company who incorporated also can enjoy tax advantagessuch as the entitlement for certain tax deduction of business expenses.Besides, an incorporated company served as a separate legal entity which canhave protection from liabilities. To incorporate a company in Malaysia mightneed to fulfill certain requirements under the Companies Act 1965. Under theAct provided, incorporation can be done by a company limited by shares andunlimited company. The company limited by shares also comprises of privatelimited or public company. RationaleThe procedure of incorporation of companies consistsof several steps and procedures which making the process becomes undulycomplicated and may be seen as unnecessary obstacles. By examining this complexprocess, the new Companies Act 2016 has replaced, some of the procedures and requirementscould be revoked or simplified in order to simple and efficient way ofincorporating companies.
Under the new Act, the company’s name reservationsbecome optional by implementing the concept of ‘guaranteed name approval’. Theindividuals who want to incorporate a company have the option to use theproposed name or if the proposed name has not approved by the Registrar, thecompany could use the company registration number for a temporary period. Otherthan the application of company name, the adoption of Memorandum and Article ofAssociation (now regarded as Constitution) is also optional under section 31 ofCompanies Act 2016. Although it is optional to adopt a company constitution,the company still required to notify the nature of business to Registrar. Thecompanies who opt to adopt a company constitution may submit afterincorporation.In the procedure of incorporating a company, thestatutory declaration of the company’s promoters or directors which previouslyrequired to be completed before the commissioner’s oath is currently has been replaced to the ‘Statement ofCompliance. (SSM, 2017) In themeantime, the Act also provided that the appointment of a company secretary isnow optional. The company director can also act as the company secretary forprivate companies unless the proviso stated the same person is restricted toact as both director and secretary to perform such actions that require separateduties.
The principle of the new Act is to modernizing theCompanies Act. The incorporation procedures and requirements have beensimplified in order to encourage more entrepreneurs and businessman toincorporate a company. According to the new Act, there are certain changes inthe procedures of incorporation. The Companies Act 2016 provided incorporation processno longer requires multiple forms for application.
The registration forms nowhave been replaced with only one form, known as Super Form. (Refer to appendix1) It can be accessed via online through the MyCoID 2016 portal. According to the new Act provided the companysecretary is optional at point incorporation. The company can choose whether toappoint a secretary. The Board shall appoint a company secretary within 30 daysfrom the date of incorporation and also have to notify Registrar within 14 days.Upon the registration is success and approved, a notice of registration will besent to the company’s email.
This notice will be conclusive evidence sincethere is no certificate of incorporation.Impactsto the companiesWith these simplified procedures of incorporation, thepromoters may incorporate company easily once complied with all simplified lawsand procedures. The Super Form implemented to facilitate starting a businessand minimize the time and the cost of doing business, the company no need tosubmit multiple forms to SSM thus increase the business efficiency. Moreover,the abolishment of MoA and AoA enables the company more flexibility in theoperations of company under the new Act. However, if a company choose to adoptconstitution to strengthen the rights, powers, duties and obligations for eachdirectors and members under Section 31 (2) Companies Act 2016.
In conclusion, the simplified incorporation processenables the smooth running in the company operations. However, in the newCompanies Act 2016 still have some practical issues to understand. Companiescan consider seeking further clarifications and advices related to this. Sincethe advance in technology and everything can access through online, thebusiness process is now become more flexible, there will be more reforms,restatements and modifications coming in.