1
Law 201 Assignment
Perpetual succession the existence of the company will be continued and the business will be carried on until it officially wound up. It is included in the principle of corporate personality which is defined in the S20 Company Act 2016 as a corporation is a company has an independent legal entity from the company's members. This principle of separate legal entity was held in the case of Salomon v A Salomon & Co Ltd. Also, perpetual succession is listed content of S20 Company Law 2016 as the company will continue to exist until the company are deregistered. Since a company is an artificial person, the principle of perpetual succession is necessary for a company. Especially for the corporation owed by many people or maybe thousands of people, the principle of perpetual succession is important as no one can guarantee the changes such as insolvency, death of members will never happen. Having the perpetual succession, the existence of company will not be influenced by its member.
If a company wishes to enjoy the advantages of corporate personality, it should be a corporation which also can be known as company incorporated under the Companies Act 1965. Incorporation is an act or legal process to form a corporation or company with the principle of separate legal entity. To register the company to a corporate, there are some legal steps need to be taken by the company. There are two stages included in the procedure of incorporation which are pre-incorporation procedure and post-incorporation requirements. These are the steps required by law which should be taken by the promoter who was known as the person who form and promote the company. In the pre-incorporation procedures, the promoter must select an appropriate for the proposed company and waiting for the approval of the Registration of Company. However, S22 (1) of the Company Act 1965 provided that "If the proposed company name is same with or similar to the existing's company name, the name has been reserved to another company or it was unacceptable in ROC's opinion, or it was the name that the Minister has directed the Registrar of company not to accept, the proposed name will be rejected by ROC." Finally, if the name proposed didn't collide S22 (1) of the Company Act 1965, ROC would reserve the name for the company for three months. After being approved to use the proposes name, the registrant has to submit the documents required by ROC included the memorandum and articles of association, declaration of compliance by the first secretary and statutory declarations by the first secretary and promoter within 3 months. In contrast, the step of incorporating a company under the Company Law 2016 is simplified. The applicant is required to provide a statement which contains the information listed in S14 (3) Company Act 2016. Thus, the lodgement of memorandum and articles of association accompany with statutory declaration are not required, and the requirement for reservation of company name is also thrown away. However, S27 (1) of the Company Act 2016 provided that "a person shall apply to the Registrar to confirm the availability of a proposed name". S26 Company Act 2016 prescribes that "a name is available if it is not undesirable or unacceptable, identical to an existing company, corporation or business, identical to a name that is being reserved under this Act, or a name of a kind that the Minister has directed the Registrar not to accept for registration". Then, the next stage is post-incorporation requirements. Based on the Company Act 2016, a private company has fewer post-incorporation requirements and it can start business immediately upon the issuance of the notice of registration. However, a public company should take additional steps and comply the matters stated in S190 (1) & (2) of Company Act 2016. Besides, the public company with share capital must hand in and register a prospectus with the Securities Commission before the company is entitled to issue shares.
A company incorporated always exist no matter how the changes occur. The existence of company will cease only when it is deregistered which is defined in S20 (b) of the Companies Act 2016. S432 (1) Company Act 2016 provided that there are two modes to end a company which included voluntary winding up and compulsory winding up. Voluntary winding up can be divided into two forms which are member's voluntary wing up and creditors' voluntary wing up. The members' voluntary winding up happens in the situation of all the members of company agree to wind up the company and the company is solvent and it is able to pay all their debts. The liquidator will be assigned by the members at the member's meeting to bring the existence of company to an end which is prescribed in S432 (2)(a) Company Act 2016. In the members' voluntary winding up, the directors must make a declaration of solvency. There are some requirements when making a declaration of solvency which stated in S443 Company Act 2016. First, when a company decide to wind up voluntarily, the sole director or the majority directors of the company may prepare a declaration of solvency which is required by S443 (1) Company Law 2016. Second, the director must make the declaration of solvency completely before the notices of the member's meeting to make a decision for the winding up of the company are given. Next, the declaration is required to contain the information included the effect that the directors have enquired into the affairs of the company; the opinion has been made at a meeting of directors that the company will be respond to pay all its debts within twelve months after the winding up pf company is commence; a statement contains the assets, liabilities, the expenses estimated to wind up. If the debts are not paid in full by the company within the twelve months after the resolution is passes, the directors must prove themselves otherwise they will be considered to make the declaration without a reasonable ground. Besides, the members may pass a resolution to wind up voluntarily in any circumstances stated in S439 (1)(a) Company Act 2016 as " when the period, if any, fixed for the duration of the company by the constitution expires, or the event, if any, occurs, on the occurrence of which the constitution provide that the company is to be dissolved and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily" . Moreover, the creditors' voluntary winding up is different from the member's voluntary winding up. The directors will choose creditors' winding up when the insolvency of company occurs. In this situation, the liquidator will be appointed to end up a company by the creditors at the creditors' meeting which is provided by S432 (2)(b) of The Company Act 2016. Not like the members' voluntary winding up, the declaration of solvency by the directors is not required in the creditors' voluntary winding up. Thus, the differences between the members' voluntary winding up and creditors' voluntary winding up are the appointment of liquidator and whether there is a declaration of solvency by the directors.
The second mode of winding up a company is compulsory winding up. Compulsory winding up is a company has to be wound up under the order of the Court on the petition of any of the person listed down in S464 (1) of The Company Act 2016 which includes the company, a creditor, a liquidator or a member. A person involved in the company can petition to wind up a company if he can prove the circumstances is sufficient to wind up a company. No any member can be prohibited by a company regulation from petitioning for wining up a company was held in the case of Re Peveril Gold Mines Ltd (1898). The Court may order a company to wind up only in the circumstances which mentioned in S465 (1) of the Company Act 2016 as "a special resolution by the company that the company is to be wound up by the Court"; "the company failed to perform in lodging the statutory declaration"; "the company has not reached the minimum requirement of member; the company is not able to pay all the debts"; "the directors place their own interest more important than the interest of the company's members, or acting unfair or unjust manner to other members"; "when the period, if any, fixed for the duration of company by the constitution expires or the event, if any, occurs on the occurrence of which the constitution provide that the company is to dissolved"; "the company may be ordered to wind up if the opinion of the Court is just and equitable"; "the company has held a licence under the Financial Services Act 2013 or the Islamic Financial Services Act 2013, and that the licence has been revoked or surrendered"; "the company is being used for unlawful purposes or any purpose prejudicial to or incompatible with peace, welfare, security, public interest, public order, good order or morality in Malaysia". If the company contravene S465 (1) of the Company Act 2016, it will be ordered to be wound up. When the company is ordered to be wound up, the company should appoint a liquidator. If no any liquidator is appointed, the Office Receiver will become an interim liquidator and may continue the power of liquidator until there are someone who capable of becoming the liquidator which is prescribed in S477 (1) Company Act 2016. The liquidator has to do all the matters which is necessary on winding up a company and divide its assets. Therefore, the liquidator need to liquidate the company's assets and pay to the creditors according to the order of priority: secured creditors, preferential creditors, general creditors, members. If the proceeds from the company's assets cannot cover the company's liabilities, the members are liable to pay the liabilities. However, a company cannot be wound up by the petition of a person which held in the case on Mann v Goldstein (1968). In this case, the petition of Mr Sidney Goldstein and his wife, and Wallander Laboratories Ltd was sought an injunction by Peter and Anita, as the debts were under dispute. They are equal shareholders in a business, and the business was managed by Anita Mann, run by MR Sidney Goldstein. After that, they quarrelled and negotiated to separate the business, but the negotiation was failed. Mr Goldstein petitioned to wind up the company and indicating that Mr Mann was owed £1869 of director's fee which was declared in1959 - 1960 and was not paid. Mr Mann didn't deny this, but indicated that the debts was paid out in weekly from 1965 – 1967. In this case, the partners actually were arguing the existence of debts, so the petition of wingding up was rejected. Moreover, the petition of winding up a company will be dismissed when there are not sufficient tangible interest in what is left over after wing up was held by the case of Re Rica Gold Washing Co. In this case, a member petitioned to wind up a company and he got 75 full paid up £1 shares. But actually shareholders must be paid if there any surplus remain after the debts and liabilities of fully were paid. Thus, the petition cannot be accepted.
In conclusion, the registration of company and the winding up of company are clearly stated in the Company Act 2016, the company should go through every single detail in the Company Act and not to contravene it. If a person can understand the law of company, the process of forming and managing a company will be easier. Beside that, the knowledge of law is essential for the director and members of company nowadays. Even though the Company Act 2016 is the latest updated, some details need to be referred to the Company Act 1965.
Reference
Teacher, Law. [2013]. Principles Of Corporate Personality Company Law Essay. Retrieved from: https://www.lawteacher.net/free-law-essays/company-law/principles-of-corporate-personality-company-law-essay.php?cref=1 (Assessed: November 2013)
Percetakan Nasional Malaysia Berhad. Companies Act 2016.
Retrieved from: https://www.ssm.com.my/sites/default/files/companies_act_2016/aktabi_20160915_companiesact2016act777_0.pdf
Wikipedia[2015]. Mann v Goldstein.
Retrieved from : https://en.wikipedia.org/wiki/Mann_v_Goldstein
Wai Meng. [2017]. Essential Company Law in Malaysia.
Subang Jaya, Selangor Darul Ehsan : Thomson Reuters Malaysia Sdn Bhd
Wikipedia [2017]. Re Peveril Gold Mines Ltd.
Retrieved from: https://en.wikipedia.org/wiki/Re_Peveril_Gold_Mines_Ltd
[1896] UKHL 1
[1898] 1 Ch 122 is a UK
[1968] 1 WLR 1091
[1879] 11 Ch D 36
2
Law 201 Assignment
Law 201 Assignment
