COMPANY AND OTHER FORM OF BUSINESS

FORM OF BUSINESS

Three main forms of business in Malaysia

- Sole proprietorship

- Partnership

- Company

What is a company?

·         A "company" is a business organization that is registered (or "incorporated") under the Companies Act, 1965 or its predecessor legislation.

·         Operationally, a small company may be run in exactly the same fashion as partnership. Legally, the organization created is subject to quite different rules.

·         The primary statute governing companies in Malaysia is the Companies Act, 1965 (the Act). Although based originally on English and Australian models, the Malaysia legislation is quite distinct from the equivalents in the UK and Australia today. Cases from these jurisdiction and from Singapore (which has a similar statute) are treated as highly persuasive in Malaysia

COMPARISON AND DISTINCTION BETWEEN A COMPANY AND A PARTNERSHIP

	COMPANY	PARTNERSHIP
Structure	A company is a person separate from its members	Two or more persons carrying on business with a view of profit
Registration	Need to be registered with the Registrar of Companies as under the Companies Act	Need to register their business under the Registration of Business Act 1956
Transferability	Shares in a company are generally transferable although the right of transfer may be restricted.	Generally, a partner cannot transfer his status as partner to someone else without the consent of all the other partners.
Management	Members of a company as such are neither its managers (directors) nor its agents.	Partners are agents of the firm for carrying on its business in the ordinary course of business and are generally entitled to manage the firm.
Number of Members	There is no maximum number of members (except private company in which the maximum is   fifty)	The maximum is twenty (Professional firm is fifty)
Constitution	A company must be constituted in writing i.e. MOA and AOA.	A partnership may be formed orally or in writing.
Capital and Liability	Capital subscribed by members for their shares cannot ordinarily be returned to them, but ( in a limited company) they are not liable for its debts once they hold fully paid.	Partners may withdraw capital but their liability for the firm’s debts to its creditor is unlimited.
Borrowing powers	Companies can borrow for purposes covered by their objects as contained in their MOA	Partners have unrestricted powers of borrowing in terms of amount and purpose.
Security over Assets	Companies can use current assets as security by creating floating charges.	Partners cannot create floating charges but they can mortgage the firm’s assets.
Rules, Procedure and Information To Public	Companies are subject to various statutory rules of procedure and are required to supply certain information to the public	Partnerships may be formed informally and they need not supply information to the public.
Dissolution	A company is dissolved by winding up and liquidation which is a formal procedure	Partnerships may be dissolved informally, e.g. by agreement of the partners.