Monday, 28 March 2016

Companies Bill 2015 – Doing business will not be the same anymore

A comment by Dr Aiman Nariman Binti Mohd Sulaiman, Professor at the International Islamic University Malaysia and author of Malaysian Company Law: Principles and Practices:

(Speaker for the upcoming Wolters Kluwer (WK) seminar, “Companies Bill 2015 – Doing Business Will Not Be The Same Anymore” to be held at Concorde Hotel, Kuala Lumpur)

The Companies Bill 2015 contains wide ranging reforms including the introduction of several provisions that impact on shareholders’ right to participate in decision making and directors’ authority to manage the company’s business.There are also changes in relation to meeting rules and procedures. 

Some significant changes to the Companies Bill 2015 include:

  • governance and decision making framework;

  • rules that are intended to enable a company to response to its changing needs for capital in a more efficient and practical manner; and

  • providing new restructuring option for companies facing financial liquidity or operational dilemmas.

While all these are intended to benefit the company, these changes are tricky to manoeuver. One of the changes in the Companies Bill 2015 relates to shareholders’ power to instruct the board on any management matters and on day to day business operations.

The Companies Act 1965 enables shareholders to convene meetings themselves or to request that the company convene a meeting on behalf of the requisitionists, and to put items on the agenda.

 However, there are limits on the exercise of these powers. Shareholders cannot interfere or intervene in the exercise of directors’ powers to make business decisions except where the Companies Act or the constitution requires the power to be exercised by shareholders. Therefore, shareholders have limited power to table their own proposal on management matters. Directors are also not subject to the wishes of the members in exercising the board’s management powers. In relation to shareholders power to convene meetings, the purpose of the meeting must not be an improper one and the agenda cannot include resolutions that the general meeting has no power to pass. This restriction applies even where the resolution is expressed to represent a non-binding opinion or request.

This is set to change with the introduction of s 195 which provides:

    “(2) a meeting of members may pass a resolution which makes recommendations to the                    Board on matters affecting the management of the company.
       (3) any recommendation made under subsection (2) shall not be binding on the Board, unless the recommendation is in the best interest of the company, provided that—
                   (a) the right to make recommendations is provided for in the constitution; or
(b) passed as a special resolution.”

During the course of the WK seminar on the Companies Bill 2015, my fellow speakers and I will explain how this section operates and highlight what are the potential roadblocks and how to deal with these challenges. Knowing how to deal with proper meeting rules and procedure and address shareholders’ proposals enables a company to make decisions in a  timely and decisive manner. These are important to provide certainty for the business and reduce unnecessary costs and litigations. As shareholders, knowledge of how to present proposals is crucial if shareholders intend to make directors accountable. 

In the seminar, changes to existing rules that determine how and what can be done regarding alteration of a company’s capital structure will also be discussed.

Participants will gain the following benefits from attending the seminar:

  • Anticipate and avoid potential pitfalls in navigating the new company law rules under the Companies Bill 2015.

  • Discuss the new framework for decision making by general meeting and its interaction with the board of directors.

  • Learn about available solutions to conflicts that may arise between the board and the shareholders, including shareholders’ powers of removal and election of directors and self-help remedies for shareholders and investors.

  • Understanding new restructuring options for companies facing financial liquidity or operational dilemmas.

Please click on the following link for further information.

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