Key Highlights of the Companies Amendment Bill 2019

The Companies Amendment Bill 2019 has been tabled for First Reading in the Dewan Rakyat (House of Representatives) on 8th July 2019. The Amendment Bill will make amendments to the Companies Act 2016 (Act 777).

Key amendments

1. Amendment to section 4 of Act 777 - in particular subparagraph 4(1)(a)(iii) to provide that a corporation shall be deemed to be a subsidiary of another corporation if the corporation holds more than half of the total number of issued shares. This amendment seeks to affirm the application of the no par value environment for the purpose of calculating the total number of issued shares of the corporation.
2. Amendment to section 66 of Act 777 - to introduce a new subsection (6) which provides a definition for “document” to specify the type of documents that is required to be executed in accordance with subsection 66(1) of Act 777.
3. Amendment to section 72 of Act 777 - subsections 72(4) and (5) of Act 777 to provide that if the shares are redeemed out of profit and is available for dividend, a sum equal to the amount of the shares redeemed shall be transferred into the share capital accounts of the company.
4. Amendment to subsection 247(3) of Act 777 - to provide that the directors may apply in writing to the Registrar not less than thirty (30) days before the circulation of the financial statement of the holding company for an order to authorize any subsidiary of the holding company to not coincide its financial year with the holding company. This amendment seeks to allow the Registrar to have an ample time to process the application and to avoid deliberate non-compliance by the Company.
5. Amendment to section 304 of Act 777 - to provide that the company is required to circulate written resolution proposed by members once the members have deposited or tendered to the company, a sum sufficient to meet the company expenses, not later than one (1) week before the company becomes subject to the requirement to circulate the resolution under section 302 of Act 777.
6. Amendment to section 340 of Act 777 - paragraph 340(1)(c) to provide that the appointment and fixing of the remuneration of auditors shall be transacted at the annual general meeting in every calendar year. This makes it clear that at every Annual General Meeting, one of the items on the agenda must be that of the remuneration of auditors to be deliberated and fixed.
7. Amendment to section 386 of Act 777 - to provide that a receiver or receiver and manager that has been appointed under section 385 of Act 777 may continue to exercise all the powers provided to the receiver or receiver and manager under section 386 of Act 777. Further subsection 386 (1) is amended to the following:-
   1. by substituting for the words “commencement of winding up of a company” the words “appointment of a receiver or receiver and manager under section 385”;
   2. by deleting the word “and” at the end of paragraph (a); and
   3. by substituting for paragraph (b) with the paragraph: “(b) a receiver and manager may continue to act as a receiver as referred to in paragraph (a); and”; and
   4. by inserting after paragraph (b) the following paragraph: “(c) a receiver and manager may continue to exercise all the powers of a receiver and manager for the purpose of carrying on the business of the company provided that the receiver and manager obtains consent from the liquidator or if the liquidator withholds his consent, the consent of the Court.”
   This section specifically deals with the appointment of a receiver or receiver and manager when a company has been wound up upon an application to Court by a debenture holder or creditors of the company. There is no provision explaining situations when it is a non-Court winding up such as members’ voluntary winding up or creditors’ voluntary winding up.
8. Paragraph 409(a) of the principal Act is amended by substituting the word “and” at the end of the paragraph the word “or”.
   
   Section 409 of the CA 2016 provides that the Court shall dismiss an application for judicial management if essentially (i) a receiver or receiver and manager over substantially all the assets of the company has been appointed and (ii) the making of the order is opposed by a secured creditor.
   
   The Bill proposes to amend the word “and” to “or”. This means that even is a single creditor opposing the same would defeat the judicial management application. This may cause problems and issues as to how this provision would be a corporate rescue mechanism in situations where other elements of judicial management are satisfied.
9. Amendment to section 433 of Act 777, primarily aimed at making clear the process of applying for and renewal of liquidators license.
   
   Sub clause 13(a) seeks to provide that the application under paragraphs 433(1) (a), (c), (d) and (e) with regard to the qualification of a person to be appointed as a liquidator under section 433 of Act 777 does not apply to the company that has been wound up by member’s voluntary winding up or creditors’ voluntary winding up.
   
   Sub clause 13(b) seeks to introduce the following new subsections (4a), (4b) and (4c) into section 433 of Act 777.
   
   The proposed subsection 433(4a) seeks to empower the Minister, upon giving an approval for the appointment of a liquidator under subsection 433(4) of Act 777, to impose any limitation or condition as he thinks fit.
   
   The proposed subsection 433(4b) seeks to provide that the period for every approval or renewal of a liquidator under this section is two years.
   
   The proposed subsection 433(4c) seeks to empower the Minister responsible for finance to delegate all or any of his powers under this section to any person or body of persons.
10. An amendment to include a new section, section 580a Act 777 to provide that the company, acting as plaintiff in any action or other proceedings, is required to give a sufficient security for costs. This amendment also seeks to provide that the Court may direct the costs of any action or proceedings to be borne by the party to the action or proceedings. This provision is to safeguard the interest of defendants in an action brought by a company.

This was as a result of the Companies Act 2016 removing the provision for an application for security for costs which was initially provided for under section 351 of the Companies Act 1965.