Preparation needed for new Companies’ Act
KUCHING: With the new Companies’ Act 2016 coming into effect today, industry experts warn of increasing complexities in compliance and advise companies to be thoroughly prepared.
The Companies Commission of Malaysia (SSM) will begin enforcement of the new Companies Act 2016 starting January 31 which will be carried out in stages.
The new Act will introduce a sizeable amount of changes aimed to streamline the management and incorporation of companies. Heavier penalties have also been added in attempt to ensure enforcement of these changes.
Amarjeet Singh, a partner of Ernst and Young (EY) Tax Consultant Sdn Bhd, said the new Companies’ Act 2016 introduces a range of enhancements and “will probably require some time for all stakeholders to be familiar and comfortable with the incoming regulations.”
“As there are a number of new items that have been introduced under the new Act, it is hoped that all relevant professional bodies will take the initiative to educate and familiarise all stakeholders with the new Act and bring them
As there are a number of new items that have been introduced under the new Act, it is hoped that all relevant professional bodies will take the initiative to educate and familiarise all stakeholders with the new Act and bring them up to speed.
up to speed,” he told The Borneo Post recently.
Weighing in on the discussion, Datuk Abang Abdul Karim Tun Abang Openg, president of the Sarawak Chamber of Commerce and Industry (SCCI) said generally, it would be company auditors and lawyers who would need to be very well versed with the new Act.
“They will need to be very familiar with all new changes and requirements in order to help their companies’ business activities facilitate compliance with the new Act,” he told The Borneo Post.
However, as there is still uncertainty over changes that will be implemented first, public practicing chartered accountant Wong Ching Yong expected this transition into the new Act to be rather complicated due to the vast increase of number of sections.
“Under the old Companies Act 1965, there were only 374 sections. Under the new Act however, there will now be 620 sections,” explained Wong.
Wong who is also an approved company auditor and liquidator, stressed on the importance of ensuring compliance as the new Act places emphasis on achieving corporate governance and comes with heavier penalties for failure of non- compliance in order to reinforce accountability.
One of the new penalties include an imprisonment term not exceeding five years or a fine not exceeding RM3 million, or both.
“This will be a huge change for many companies as previously, it was not uncommon for companies to borrow in order to pay out dividends to their shareholders.
“Hence it is extremely important for companies to ensure its stakeholders are adequately educated on these changes,” Wong said.
Amerjeet added that executive management should also know their rights and obligations in order to facilitate strategic decision-making in the best interest of the company.
But with so many changes to come and no indication of what changes would be implemented first, the task may be very daunting for smaller companies who may not possess the resources to do so.
Dormant companies and companies with small assets and turnover as well as a limited number of employees however, can heave a sigh of relief as the SSM has proposed to exempt these companies from being audited.
For companies that exceed these requirements, Amerjeet advised companies to look into their existing Memorandum and Articles of Association (M&As) to see which provisions require amendments.
Wong agreed with this move and explained that under the new Act, there would be no more M&As and instead companies can opt to have constitutions which may be modified or carried over from its existing M&A.
Hence, it was important for companies to revaluate their existing M&As and consider amendments, a fresh draft or even a complete disposal if necessary.
“I would suggest to all stakeholders to get whatever they can from the media in order to keep up-to-date with any current developments on what changes will be implemented first,” advised Karim.
Despite the increased complexities in compliance, all three experts and industry observers are optimistic that the new Act will be beneficial to the Malaysian business landscape overall.
Amarjeet Singh, EY Tax Consultant Sdn Bhd partner