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.
HOW MANY TYPES OF COMPANIES?
Reviewed by Kamaruddin Mahmood
on
8:44:00 PTG
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