Part 2 ; Company Law 1 Company law The general theory Partnership company Joint stock company.
Lecture 1 company law
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Transcript of Lecture 1 company law
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BP26103 COMPANY LAW
FIRST LECTURE
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PART 1: Framework
Course Outline
Course Evaluations
Suggested Readings
Expectations
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INTRODUCTION
Subject aims
The functions and structure of companies
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Subject aims
Become familiar with the company as a
form of business organisation
Understand the source, scope and nature of
the main legal rules that impact on
companies and their participants
Recognise the underlying design andconcerns of company law, the policy on
which it is based, and the arguments for
reform
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Subject aims (cont)
Understand the potential impact of company
law in company decision-making, and how
to plan for it
Understand the potential impact of company
law in company decision-making, and how
to plan for it
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Methodological aims
Learn to analyse complex fact situations
and apply relevant legal rules
Develop presentation skills through class
contribution
Develop written skills in logic, argument
and presentation
Develop strong self learning techniques
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Why study Company Law?
Business is well-managed;
Shareholders trusts
Publics confidence
Increase in the profit
Legally compliance;
Minimise the risk of potential legal suits;
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What is Company Law?
Deals with the formation of a company;
Confers special features on companies (separate legal
entity, artificial legal person);
Regulates the relationship between the participants in
companies;
Facilitates transactions and dealings between the
companies and third parties;
Regulates the relationship between the companies and the
government
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cont
Scope and operation of company law
Sources of company law
Regulation of companies
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What is company law?
General term used to describe the legal rules
governing:
formation and termination of companies
characteristics of companies
relationships between participants in companies
(such as members and officers) aspects of companies dealings with outsiders
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What is the purpose of company
law? Aims/purposes include:
investor protection
commercial stability and consumer confidence
balancing competing interests
efficiency
certaintystandard form rules
Ask yourself throughout the subjectdoesthe law achieve these aims?
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Company law in a nutshell
To regulate the relationship between:
Participants in the company;
The company and the government; and
The company and those whom the company
had dealings
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PART 2: Companies
The dominant form of business organisation
Over half a million companies in Malaysia
Created through a process of registration
under statutean artificial legal person
Have special legal characteristics (refer to
Lecture 3)
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The functions and structure of
companies What are companies and why do we have
them?
What are the key features of a company?
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What is the purpose of
companies? Traditionally, a means by which a large
group of people with capital and
management resources could come togetherto conduct an enterprise on an ongoing basis
Now also widely used for small business
and by individuals
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Classification of companies
A company limited by shares;
A company limited by guarantee;
A company limited by both shares and
guarantee;
An unlimited company
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Foreign Company
Holding and subsidiary company
Foreign Company
To be discussed during tutorial
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Small and large companies
Most companies are small businesses
In 2001, there were 809 companies listed on
the then Kuala Lumpur Stock Exchange(KLSE). (Listed companies are companies
in which you can buy or sell shares through
the BSKL.) What is the current number of companies?
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Important developments for small
businesses Distinction between public and private
companies
Salomons case
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The architecture of companies
Capital structure
equity capital (shares)
debt capital
Management structure
board of directors and other officers
members (shareholders)
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Historical development of the
corporate form Corporations aggregate as separate legal
persons
Joint stock as a means of financialparticipation
Incorporation as of right from mid 19th
century
Limited liability from mid 19th century
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Sources of company law
Where do I look for any rules that may
govern a proposed corporate action?
Examples:
electing new directors
borrowing money from a bank
bringing in new investors
Companies Act 1965
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Sources of rules (cont) Case law
Other sources
Companies Regulations 1966
Securities Commission Act 1993
SC exemptions, modifications and guidelines
Accounting standards and theFinancial
Reporting Act 1997
Bursa Securities Listing Requirement (for listed
companies)
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Sources of company law
Companies Act 1965
Securities Commission Act 1993 (amended in 2007)
Capital Market and Services Act 2007 Bursa Securities Listing Requirement
Code on Take-overs and Mergers 1998
Malaysian Code on Corporate Governance
Offshore Companies Act 199 Case law
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The operation of company law
Operates as a source of private rights
between individual parties (eg between
members of a company) Breach of provisions of the Companies Act
can also be a criminal offence or subject to
CCM sanctions
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Historical background
Prior to the enforcement of the Companies
Act 1965, company legislation in Malaysia
was administered by separate but similarOrdinances for each individual states.
Malaysia company law is greatly influenced
by the law enforced in the United Kingdomand Australia
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Companies Act 1965 Malaysias company law statute
Came into effect in 1965
Provides provisions on:
registration and formation of companies
regulates fundraising activities, shares and
debentures
regulates company management
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Enforcement of CA 1965
CA 1965 is enforced by the Companies
Commission of Malaysia (CCM) that came
into force on 16 April 2002;
Functions of CCM, inter alia, are:
To act as the governments agent
To encourage and promote proper conduct
among officers of the company;
to promote self-regulation;
to advise the Minister
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Case law
In a common law system, creates binding
legal rules
May apply:
in interpreting rules contained in the Companies
Act
in imposing additional rules
Doctrine of precedent
Considerthe significance of the facts
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Securities Commission
Responsible to administer securities laws
Powers derived from the Securities
Commission Act 1993 (SCA)
Objective to promote and maintain fair
efficient market
Functions : sec 15(1) of the SCA 1993
advise Minister on matters relating to securities
and futures industry
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Securities Commission (cont)
regulate matters relating to securities and
futures contracts;
suppress illegal and improper market practicesto promote development of securities market
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BURSA SECURITIES KUALA
LUMPUR (BSKL) Bursa Malaysia is an exchange holding company
approved under section 15, CMSA.
Exchange related services including trading,clearing, settlement and depository
It was known as the KLSE ( or BSKL) which
incorporated as a company limited by guarantee
under the Companies Act 1965in 1976
Following demutualisation exercise in 2004, KLSE was
renamed as Bursa Malaysia
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Bursa Malaysia (cont)
Objectives:
to administer and enforce rules in relation to
securities dealingsregulates listed companies
promotion and protection of investing public
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Capital Markets and Services Act
2007(CMSA) Replaced the 1983 SIA
Scope of CMSA:
formation and conduct of stock exchange and
clearing house
licensing
relation between stock exchange and issuers ofsecurities
prohibited market practices
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Code on Take-overs and Mergers
1998 Repealed the 1987 Take-overs and Mergers
Code
Modelled on the UK City Code on TakeOver and Merger
Key legislation on take-overs and mergers
Came into force : 1st January 1999
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Malaysian Code on Corporate
Governance 2000 Set by working group on Best Practices in
Corporate Governance (JPK 1)
Provides principles and best practices onstructures and processes for companies
towards achieving optimal governance
framework Constructive and flexible rules
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Offshore Companies Act 1990
Scope : Offshore companies or foreign
companies established in Labuan
Provides framework for:incorporation
registration
administration of offshore and foreigncompanies
Preferential tax treatment
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Self-quiz
1. Explain private and public company;
2. To what extent does a partnership differ
from a limited company;3. Explain the relationship between the
holding and subsidiary company
(the explanation for the classification is giventhrough students presentation)