Lecture 1 company law

8/12/2019 Lecture 1 company law

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BP26103 COMPANY LAW

FIRST LECTURE


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PART 1: Framework

Course Outline

Course Evaluations

Suggested Readings

Expectations


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INTRODUCTION

Subject aims

The functions and structure of companies


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Subject aims

Become familiar with the company as a

form of business organisation

Understand the source, scope and nature of

the main legal rules that impact on

companies and their participants

Recognise the underlying design andconcerns of company law, the policy on

which it is based, and the arguments for

reform


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Subject aims (cont)

Understand the potential impact of company

law in company decision-making, and how

to plan for it

Understand the potential impact of company

law in company decision-making, and how

to plan for it


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Methodological aims

Learn to analyse complex fact situations

and apply relevant legal rules

Develop presentation skills through class

contribution

Develop written skills in logic, argument

and presentation

Develop strong self learning techniques


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Why study Company Law?

Business is well-managed;

Shareholders trusts

Publics confidence

Increase in the profit

Legally compliance;

Minimise the risk of potential legal suits;

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What is Company Law?

Deals with the formation of a company;

Confers special features on companies (separate legal

entity, artificial legal person);

Regulates the relationship between the participants in

companies;

Facilitates transactions and dealings between the

companies and third parties;

Regulates the relationship between the companies and the

government


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cont

Scope and operation of company law

Sources of company law

Regulation of companies


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What is company law?

General term used to describe the legal rules

governing:

formation and termination of companies

characteristics of companies

relationships between participants in companies

(such as members and officers) aspects of companies dealings with outsiders


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What is the purpose of company

law? Aims/purposes include:

investor protection

commercial stability and consumer confidence

balancing competing interests

efficiency

certaintystandard form rules

Ask yourself throughout the subjectdoesthe law achieve these aims?


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Company law in a nutshell

To regulate the relationship between:

Participants in the company;

The company and the government; and

The company and those whom the company

had dealings

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PART 2: Companies

The dominant form of business organisation

Over half a million companies in Malaysia

Created through a process of registration

under statutean artificial legal person

Have special legal characteristics (refer to

Lecture 3)


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The functions and structure of

companies What are companies and why do we have

them?

What are the key features of a company?


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What is the purpose of

companies? Traditionally, a means by which a large

group of people with capital and

management resources could come togetherto conduct an enterprise on an ongoing basis

Now also widely used for small business

and by individuals


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Classification of companies

A company limited by shares;

A company limited by guarantee;

A company limited by both shares and

guarantee;

An unlimited company


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Foreign Company

Holding and subsidiary company

Foreign Company

To be discussed during tutorial


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Small and large companies

Most companies are small businesses

In 2001, there were 809 companies listed on

the then Kuala Lumpur Stock Exchange(KLSE). (Listed companies are companies

in which you can buy or sell shares through

the BSKL.) What is the current number of companies?


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Important developments for small

businesses Distinction between public and private

companies

Salomons case


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The architecture of companies

Capital structure

equity capital (shares)

debt capital

Management structure

board of directors and other officers

members (shareholders)


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Historical development of the

corporate form Corporations aggregate as separate legal

persons

Joint stock as a means of financialparticipation

Incorporation as of right from mid 19th

century

Limited liability from mid 19th century


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Where do I look for any rules that may

govern a proposed corporate action?

Examples:

electing new directors

borrowing money from a bank

bringing in new investors

Companies Act 1965


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Sources of rules (cont) Case law

Other sources

Companies Regulations 1966

Securities Commission Act 1993

SC exemptions, modifications and guidelines

Accounting standards and theFinancial

Reporting Act 1997

Bursa Securities Listing Requirement (for listed

companies)


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Companies Act 1965

Securities Commission Act 1993 (amended in 2007)

Capital Market and Services Act 2007 Bursa Securities Listing Requirement

Code on Take-overs and Mergers 1998

Malaysian Code on Corporate Governance

Offshore Companies Act 199 Case law


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The operation of company law

Operates as a source of private rights

between individual parties (eg between

members of a company) Breach of provisions of the Companies Act

can also be a criminal offence or subject to

CCM sanctions


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Historical background

Prior to the enforcement of the Companies

Act 1965, company legislation in Malaysia

was administered by separate but similarOrdinances for each individual states.

Malaysia company law is greatly influenced

by the law enforced in the United Kingdomand Australia


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Companies Act 1965 Malaysias company law statute

Came into effect in 1965

Provides provisions on:

registration and formation of companies

regulates fundraising activities, shares and

debentures

regulates company management


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Enforcement of CA 1965

CA 1965 is enforced by the Companies

Commission of Malaysia (CCM) that came

into force on 16 April 2002;

Functions of CCM, inter alia, are:

To act as the governments agent

To encourage and promote proper conduct

among officers of the company;

to promote self-regulation;

to advise the Minister


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Case law

In a common law system, creates binding

legal rules

May apply:

in interpreting rules contained in the Companies

Act

in imposing additional rules

Doctrine of precedent

Considerthe significance of the facts


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Securities Commission

Responsible to administer securities laws

Powers derived from the Securities

Commission Act 1993 (SCA)

Objective to promote and maintain fair

efficient market

Functions : sec 15(1) of the SCA 1993

advise Minister on matters relating to securities

and futures industry


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Securities Commission (cont)

regulate matters relating to securities and

futures contracts;

suppress illegal and improper market practicesto promote development of securities market


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BURSA SECURITIES KUALA

LUMPUR (BSKL) Bursa Malaysia is an exchange holding company

approved under section 15, CMSA.

Exchange related services including trading,clearing, settlement and depository

It was known as the KLSE ( or BSKL) which

incorporated as a company limited by guarantee

under the Companies Act 1965in 1976

Following demutualisation exercise in 2004, KLSE was

renamed as Bursa Malaysia


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Bursa Malaysia (cont)

Objectives:

to administer and enforce rules in relation to

securities dealingsregulates listed companies

promotion and protection of investing public


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Capital Markets and Services Act

2007(CMSA) Replaced the 1983 SIA

Scope of CMSA:

formation and conduct of stock exchange and

clearing house

licensing

relation between stock exchange and issuers ofsecurities

prohibited market practices


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Code on Take-overs and Mergers

1998 Repealed the 1987 Take-overs and Mergers

Code

Modelled on the UK City Code on TakeOver and Merger

Key legislation on take-overs and mergers

Came into force : 1st January 1999


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Malaysian Code on Corporate

Governance 2000 Set by working group on Best Practices in

Corporate Governance (JPK 1)

Provides principles and best practices onstructures and processes for companies

towards achieving optimal governance

framework Constructive and flexible rules


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Offshore Companies Act 1990

Scope : Offshore companies or foreign

companies established in Labuan

Provides framework for:incorporation

registration

administration of offshore and foreigncompanies

Preferential tax treatment


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Self-quiz

1. Explain private and public company;

2. To what extent does a partnership differ

from a limited company;3. Explain the relationship between the

holding and subsidiary company

(the explanation for the classification is giventhrough students presentation)

Lecture 1 company law

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Transcript of Lecture 1 company law