HOW MANY TYPES OF COMPANIES?

CLASSIFICATION OF COMPANIES

There are various classifications of companies in company law: s 10(1), CA 2016. A company may be

              i.        a company limited by shares

             ii.        a company limited by guarantee

            iii.        an unlimited company

Companies are further classified as public and private companies, with some private companies being exempt private companies and as holding and subsidiary companies, according to certain special attributes.

A company limited by shares shall either be a private or a public company – s.11(1). A company limited by guarantee shall be a public company –s.11(2). An unlimited company shall either be a private or public company –s.11(3).  

The table below shows above provision:

Types of company	Private	Public
Company limited by shares	√	√
Company limited by guarantee	×	√
Unlimited company	√	√

1. COMPANY LIMITED BY SHARES

A company limited by shares is formed on the principle of having the liability of its members limited to the amount, if any, unpaid on the shares respectively held by them: s.10(2) CA 2016

It is a company which is formed with shares capital. Once a company has issued shares it cannot return the capital to the shareholders.

A shareholder may pay in full or in part for the shares. This will depend on the how the company wishes to raise its capital.

However, it should be noted that a shareholder need not pay more than the amount unpaid on the shares:  His liability is limited – FAIRVIEW SCHOOLS BHD v INDRANI RAJARATNAM & ORS [1998] 1 MLJ 110.

In TAN TIEN KOK v MEDICAL SPECIALIST CENTRE (JB) SDN BHD (1994) 3 MLJ 469, the issue was whether members of the respondent company (a limited company) were liable for payment of a surcharge as resolved by the Board of Directors by amendment of the company’s articles. It was held by Mohd Ghazali JC that the shareholders were not liable to pay the surcharge (for the purpose of enabling of its debt to be paid). Fundamental principle of company law the company is separate and distinct from its members and the members’ liability limited to the extent of his unpaid shares.

If a shareholder has paid for his shares in full he is known as a fully paid shareholder. In such a case, the company cannot ask for further contribution from the fully paid shareholder. If a shareholder has only paid partially, he is known as partly paid shareholder. In such a case, the shareholder will have to pay when the company makes a ‘call’.

A company limited by shares is required to have, as part of its name, the word ‘Berhad’ or its abbreviation ‘Bhd’, to denote to the public that members’ liability is limited.

2. COMPANY LIMITED BY GUARANTEE

S.10(3) - A company limited by guarantee is formed on the principle of having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event the company is wound up:

The members of the company must pay the amount as stipulated in the constitution, but only if the company is wound up:. The members of a company limited by guarantee cannot be called shareholders since such company has no share capital. No company shall be formed as, or become, a company limited by guarantee with share capital – s.12 CA 2016.

The objects of the company must suit provision under section 45 (1) of CA 2016, as follows:

a.    Providing recreation or amusement

b.    Promoting commerce and industry

c.    Promoting art

d.    Promoting science

e.    Promoting religion

f.     Promoting charity

g.    Promoting pensions or superannuation scheme

h.    Promoting any other objects useful for the community or the country

A company limited by guarantee shall apply its profits or other income in achieving or promoting its objects s.45(2)(a). The profits could not be used to pay dividend as it was prohibited under s.45(2) (b) CA 2016. 

The company also shall require all the assets that would otherwise be available to its members generally be transferred on its winding up to either another body with similar objects or another body which objects are promotion of charity and anything incidental or conducive to such object s.45(2)(c) CA 2016.

Thus, a company limited by guarantee will usually apply to the Companies Commission of Malaysia (CCM) to omit the word ‘Berhad’ or the abbreviation ‘Bhd’ in its name:- s.45(3) CA 2016. Only a public company can be limited by guarantee.

If a company limited by guarantee wishes to buy land, it must obtain the approval of the Minister of Domestic Trade, Co-operatives and Consumerism:

3. UNLIMITED COMPANY

An unlimited company is one whereby the liability of members of the company to contribute to the company’s assets is not limited. The company may request the members to contribute more than the amount invested. - s.10 (4) CA 2016

An unlimited company’s name will contain the word ‘Sendirian’ or the abbreviation ‘Sdn’. The word ‘Berhad’ or ‘Bhd’ cannot be used since it is not a limited company. Hence, an unlimited company is a private company and not a public company. Obviously, members of the public would not be interested to invest in a company where their liability is unlimited.

An unlimited company is like a partnership or sole proprietor-ship in that members’ liability is unlimited. However, unlike such companies, an unlimited company is an entity and capital can be returned to members. Thus, members are not burdened with being tied down to the company.