Companies Act 2016 (Act 777) - Key Legal Terms and Definitions

Comprehensive vocabulary flashcards covering the core corporate definitions, legal requirements, governance mechanisms, and corporate rescue doctrines under the Malaysian Companies Act 2016 (Act 777).

Corporation

Under Section 3, any body corporate formed, incorporated, or existing in Malaysia or outside Malaysia, including any foreign company, limited liability partnership, and foreign limited liability partnership; it excludes any body corporate declared a public authority or instrumentality not for commercial purposes, corporations sole, co-operative societies, and trade unions.

Subsidiary

Under Section 4, a corporation deemed to be controlled by another corporation if the other corporation controls the composition of its board of directors, controls more than half of its voting power, holds more than half of its issued shares (excluding preference shares), or is a subsidiary of that other corporation's subsidiary.

Ultimate Holding Company

Under Section 5, a corporation that has another corporation as its subsidiary and is not itself a subsidiary of any corporation.

Wholly-Owned Subsidiary

Under Section 6, a corporation that has no members except another corporation or its nominee, or a wholly-owned subsidiary of that other corporation or its nominee.

Company Limited by Shares

Under Section 10, a company formed on the principle that the liability of its members is limited to the amount, if any, unpaid on shares held by those members.

Company Limited by Guarantee

Under Section 10, a company formed on the principle that the liability of its members is limited to such amount as the members undertake to contribute to the assets of the company in the event of it being wound up; under Section 11, it must be a public company.

Unlimited Company

Under Section 10, a company in which there is no limit placed on the liability of its members.

Private Company

Under Section 42, a company limited by shares that has not more than fifty shareholders, restricts the transfer of its shares, and is prohibited under Section 43 from offering shares or debentures to the public or inviting the public to deposit money.

Beneficial Owner

Under Section 2, the ultimate owner of the shares, expressly excluding a nominee of any description.

Preference Share

Under Section 2, a share by whatever name called that does not entitle the holder to the right to vote on a resolution or to any right to participate beyond a specified amount in any distribution, whether by way of dividend, redemption, in a winding up, or otherwise.

Equity Share

Under Section 2, any share which is not a preference share.

Exempt Private Company

Under Section 2, a private company in the shares of which no beneficial interest is held directly or indirectly by any corporation, and which has not more than twenty members none of whom is a corporation.

Debenture

Under Section 2, includes debenture stock, bonds, sukuk, notes, and any other securities of a corporation, whether constituting a charge on the assets of the corporation or not.

Doctrine of Constructive Notice (Non-Application)

Under Section 39, the rule that no person is deemed to have notice or knowledge of the contents of a company's constitution or documents merely because they are registered by the Registrar or kept available for inspection, except for instruments of charges.

Solvency Test

Under Section 112, a standard satisfied if immediately after a relevant transaction there are no grounds for the company to be found unable to pay its debts, the company is able to pay debts falling due across the succeeding twelve months (or within twelve months after winding up commences), and assets exceed liabilities.

Solvency Statement

Under Section 113, a statutory statement made and signed by directors declaring they have inquired into company affairs and formed the opinion that the company satisfies the solvency test for a specified transaction, supported by all directors for capital reduction/preference share redemption, or a majority for financial assistance/buybacks.

Treasury Shares

Under Section 127, shares purchased back by a stock exchange-quoted company and retained rather than cancelled; they confer no rights to vote, attend meetings, or receive dividends or asset distributions.

Substantial Shareholder

Under Section 136, a person who holds an interest in one or more voting shares in a company where the aggregate number of such shares is not less than five per centum of the total voting shares in the company or of a particular class of voting shares.

Business Judgment Rule

Under Section 214, a statutory presumption that a director meets the duty of care, skill, and diligence if they make a business judgment in good faith, for a proper purpose, without a material personal interest, properly informed under the circumstances, and reasonably believing it is in the best interest of the company.

Nominee Director

Under Section 217, a director appointed by virtue of employment or as a representative of a member, employer, or debenture holder, whose legal duty to act in the company's best interest must never be subordinated to the interests of their nominator.

Director's Service Contract

Under Section 231, a contract under which a director of a public company undertakes personally to perform services as a director or otherwise for the company or its subsidiary, or under which such services are made available by a third party.

Ordinary Resolution

Under Section 291, a resolution passed by a simple majority of more than half of the members who are entitled to vote and do vote in person or by proxy at a meeting or on a written resolution.

Special Resolution

Under Section 292, a resolution of which not less than twenty-one days' notice has been given, passed by a majority of not less than seventy-five per centum of the votes cast by members entitled to vote and voting in person or by proxy.

Derivative Proceedings

Under Section 347, court proceedings initiated, intervened in, or defended by a complainant in the company's name and on its behalf with leave of the Court, abrogating common law rights to bring such actions.

Corporate Voluntary Arrangement

Under Division 8 of Part III, an insolvency rescue mechanism enabling eligible companies to propose a composition of debts or scheme of arrangement supervised by a qualified nominee, accompanied by an automatic moratorium under Section 398.

Judicial Management Order

Under Section 405, an order made by the Court placing an insolvent or distressed company under the management of a court-appointed judicial manager to achieve business survival as a going concern, a compromise or arrangement, or a more advantageous asset realization than winding up.

Members' Voluntary Winding Up

Under Section 444, a voluntary liquidation of a company where the directors have made and lodged a statutory declaration of solvency under Section 443 confirming the company can pay its debts in full within twelve months.

Creditors' Voluntary Winding Up

Under Section 444, a voluntary liquidation where no statutory declaration of solvency has been made by the directors, requiring meetings of creditors and enabling creditors to nominate the liquidator.

Inability to Pay Debts

Under Section 466, a statutory ground for winding up where a company fails to pay or secure an indebted sum exceeding the prescribed threshold within twenty-one days of a formal notice of demand, fails to satisfy court execution, or is proved unable to pay liabilities as they fall due.

Disclaimer of Onerous Property

Under Section 531, the liquidator's statutory power, exercisable with leave of the Court or committee of inspection, to renounce unprofitable contracts, unsaleable assets, or land burdened with onerous covenants within twelve months of winding up.