Seven Key Changes of the Companies Amendment Bill 2019
The Companies Amendment Bill 2019 has been issued and appears to have been tabled for First Reading before the Dewan Rakyat on 8 July 2019. The amendment Bill has also been passed by the Dewan Rakyat on 10 July 2019. The amendment Bill will make amendments to the Companies Act 2016 (CA 2016). I have since updated this article to take into account the Parliamentary debate of the amendment Bill.
I highlight seven of the more significant amendments. There will be welcome clarification of the effect of section 66 on the execution of what sort of documents, as well as the redemption of preference shares out of capital.
#1: Section 66 to Only to Apply to Specific Types of Documents
All documents referred to under the Evidence Act executed on behalf of the company require at least one director to sign that document about the possible uncertainty of validity of signed documents under section 66 of the CA 2016. The term ‘document’ mean would only a document which is required to be executed by any written law, resolution, agreement or constitution in accordance with section 66(1) i.e. by the affixing of the company’s common seal only.
#2: Redemption of Preferences Shares Out of Capital – Section 72
Section 72(5) of the CA 2016 will now be amended such that only shares redeemed out of profits would require a transfer of an equivalent sum into the share capital accounts of the company. The ambiguity of redemption of preference shares out of capital will be removed. Redemption of preference shares out of capital will only need to meet the requirements of section 72(6) which essentially only requires the solvency statement. There is no need to further transfer profits into the share capital account.
#3: AGM of Public Company: Appointment of Auditor – Section 340
An amendment is made to section 340(1)(c) of the CA 2016 for the annual general meeting of a public company to substitute the words “the fee of directors” to the words “the remuneration of auditors”. This will make clear that for the AGM, one of the items must be for the appointment and the fixing of the remuneration of auditors.
#4: Appointment of Receiver or Receiver and Manager after Winding Up – Section 386
The existing section 386(1) of the CA 2016 states that after the commencement of winding up of a company, a receiver may continue as a receiver and exercise all the powers of a receiver. A receiver and manager may also exercise all the powers of a receiver and manager for the purpose of carrying on the business of the company with the consent of the liquidator or from the Court. Under this section section 386(1) they shall continue to act as an agent of the company.
#5: Severe Dilution of the Power to Appoint Judicial Manager – Section 409
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.
#6: Recognised professional body, license and renewal of liquidator – Section 433
Section 433 of the CA 2016 will be expanded to cater for the Minister of Finance to impose limitations or conditions on the liquidator’s licence, to approve or to renew the liquidator’s licence for a period of two years, and to also delegate these powers to any person or body of persons.
#7: Security for costs – section 580A
A new section will be introduced to the CA 2016 to re-introduce the provision for the grant of a security of costs. Where a company is the plaintiff in any action or other proceedings, and if it appears by a credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant, the Court may order the plaintiff to give sufficient security for costs. This was an issue since the security for costs provision had been inadvertently removed under the CA 2016.