The new Companies Act
2016, which replace the old Companies Act 1965 has been passed in Parliament on
28th April 2016, then gazetted on 15th September 2016. According
to the The Star Online (2017), the effective date of the first phase of the implementation
of the new act was on 31st January 2016. I believe the readers will
want to know what are the major changes may happen after the implementation
date.
Here I want to share some
of the information that I received during the briefing about Companies Act 2016
organized by my company which is Afrizan Tarimili Khairul Azhar (AFTAAS).
Besides that, I have also make further research about the reaction from various
parties regarding the implementation of the new act. But before that, I just
want to remind that this article will not cover all areas as I just want to
convey the messages in a simple way as all readers are not from the accounting
background.
The purpose of the
introduction of the new act is to facilitate incorporation and reduce cost of
doing business, simplify the compliance, enhance internal control, governance
and corporate responsibility and to provide flexibility in managing companies.
Areas
of Change
1. AGM for the private companies is optional
For
private companies, the Annual Grand Meeting (AGM) will be not a mandatory for
them. The financial statements should be circulated to shareholders within 6
months of financial year end and lodged to SSM within 30 days of the
circulation. The communication among the members by using electronically form
is allowed. However, for Public Companies, the AGM is still a mandatory.
2. No Par Value Regime
There
will be no par value for the issuance of shares. The company can put any price
to issue the shares. Therefore, there will be no share premium and also capital
revaluation reserve (CRR). So, for the accounting students, you should aware
about this. To report the amount and value of the shares under the new regime,
there are two option. The first option is the company can capitalise the share
premium and also the credit revaluation reserve. Kindly refer to the image
captured below to understand on how the option can work.
3. No more authorised share capital
There
will be no more authorised share capital. Therefore, the companies may issue
unlimited number of shares. Previously, if they want to increase the number of
authorised share, they need to pay some amount of money to the authority. The
abolishment of authorised share capital will help to reduce their cost to run
the business.
4. Not all companies will be audited
In
the previous Companies Act 1965, all companies are compulsory to be audited.
However, in the new act, there is exception for the dormant and small
companies. According to the Draft Practice Directive 1/2017, the small companies
must be a private company and satisfy any two criteria for each two financial
years which are:
a)
Revenue is equal or less than RM300,000
b)
Total asset is equal or less than
RM500,000
c)
At year end, the total number of employee
is equal or less than 5 employees
However,
for small and dormant companies, they still need to lodge their financial
statement.
5.
Dividend
The
divided is to be declared out of profits available. The regulation is same with
the previous Companies Act 1965. However, under the new act, the dividend can
be distributed only if the company is solvent immediately after the
distribution. It means, after distribute the dividend, the company should has
the ability to settle their obligation such as pay the creditors within 12
months of the distribution. Therefore, the management of the company need to
assess the company’s ability carefully before declare the dividend. If the
improper distribution happen, the company has the power to recover the dividend
from shareholders, director, manager, or accountant (or any officer) who
authorised the payment.
It
means the creditor can claim their payment from the shareholder, director,
manager, accountant or the officer who authorised the payment and they need to
pay or settle the obligation by using their personal money. Not only that, the
guilty person will be liable to imprisonment of 5 years and/fine for RM3
millions.
According to Nee (2017),
the Companies Act 2017 will simplify incorporation procedures for companies and
bring significant cost savings for businesses through the creation of a more
business-friendly environment. I hope this article can help the readers to
understand about the changes that will happen after the implementation of the
new act. Please make further research to get more comprehensive information as
it is important and gives impact to the education and also to the business
sector.
References:
Phase one of Companies Act 2016 comes into effect.
(2017, February 1). The Star Online. Retrieved February 5, 2017, from
http://www.thestar.com.my/business/business-news/2017/02/01/phase-one-of-companies-act-2016-comes-into-effect/
Nee, E. A. (2017, January 3). Companies Act 2016 – a
game changer in 2017? The Sun Daily. Retrieved February 5, 2017, from
http://www.thesundaily.my/news/2115307
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| The author can be contacted through email: muhammadadamiium@gmail.com |
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