Procedures

for the Registration of a Private Company

- Application must 1st be made to CCM for a search as to the availability of the name for incorporation of the intended co. - This is done by ling Form 13A (Request for availability of name). - The ling fee will be RM30. - The proposed name, if available and if CCM is satised that the name can be registered, is automatically reserved for a period of 3 months from the date of lodgment of Form 13A - The reply from CCM consists of a name approval/rejection letter issued to the applicant together with a duplicate copy of Form 13A lodged.
During the 3 month period for which the proposed name is reserved, the following incorporation documents must be lodged with CCM in order to incorporate the co.

1. Memorandum of Association
- Most important document in the creation of a co. as it sets out he constitution and objects of the co. - This document contains the cos name, its objects, the amount of share capital and whether the co. is unlimited, limited by shares or guarantee -Section 16(1) and 18(1) CA65 - This document must contain the names of at least 2 persons who are to be the rst directors of the proposed co. and the name of the 1st secretory - Section 122(3) CA65 - The memo must be signed by at least 2 subscribers (must write in their own handwriting the no. of shares each of them have subscribed for) in the presence of witnesses. If the co. has a share capital, then the subscribers must take at least one share. Section 18(2) CA65 - The memo will also contain an incorporation clause stating that the subscribers are desirous of being formed into a co. -Section 18(1)(h) CA65

2. Articles of Association
- This document sets out the internal regulations of the co. - Deals with matters such as the rights attached to particular shares, the calling and conduct of meetings. - A co. limited by shares need not register their own articles as Table A will automatically apply if it does not le (all other companies must le). - Articles must be dated, signed by the same subscribers, and witnessed in the same way as the memorandum.

3. Statutory Declaration by Promoters and Directors (Form 48A)

- Every person before being appointed needs to make a statutory declaration that he is not an undischarged bankrupt and has not been convicted in or outside of Malaysia of oences involving fraud or dishonesty, and that he consents to act as a director of the co.

4. Declaration of Compliance (Form 6)

- This is a declaration made by the 1st secretary, stating that the requirement of the CA relating to formation have been complied with.

5. Statement of Capital & Initial Shareholdings

(only required for co. limited by shares) - This statement must be delivered by all co. with share capital. - Alternatively, a statement of guarantee is required by co. limited by guarantee.

6. Registration Fee
- Is payable on registration. - Upon registration, the Registrar will issue a certicate of incorporation - Section 16(4) - Once a certication has been given, it is conclusive evidence that the requirements of the CA have been complied with. Section 361 CA65 - A private co. can commence business as soon as it is incorporated but a public co. must not start its business or borrow money until the Certicate of Commencement of Business has been issued.

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(D98 Q6; J08 Q6)

Promoters

- Promoter of a co. refers to the person who undertakes the responsibility of setting up a co. - Section 4 CA65 Denes a promoter in relation to a prospectus as a person who was a party to the preparation of a prospectus. - This denition does not adequately explain the position of a promoter. The most frequently cited denition is that given by Cockburn CJ. in the case of Twycross v Grant one who undertakes to form a co. with reference to a given project and to set it going and who takes all necessary steps to accomplish that purpose. - Therefore, the person who forms a co. is called a promoter, a term which covers the person who actually registers the co. and also those who make business preparation for the co.

Duties
- The promoter is in duciary relationship with the co. he promotes and as such he owes duciary duties towards it. This means that he is in a position of trust and must all times act honestly and in good faith for the benet of the co. as a whole. These Duties are: 1. A duty not to make a secret prot in connection with the promotion of the co. Where he does make any prot or acquire any other benet from it he owes a duty to make adequate disclosure to the co. The disclosure is required to be made either to an independent BOD or to all the members of the co. In most cases, there will not be an independent BOD as the promoter himself is likely to have nominated the directors and quite often he himself may be a director. 2.A duty to a/c to the co. for the benet of any subsequent contract to acquire property which he intends to sell the co. 3.A duty not to exercise undue inuence or fraud. 4.A duty not to hide his interest through a nominee.

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Remedies for Breach of Duties

(D98 Q6; J08 Q6)

- The remedies can only be obtained by the co. and not the s/holder - Habib Abdul Rahman v Abdul Cader - The promoter must be performing that act in his capacity as a promoter and not otherwise - Re Cape Breton - If a secret prot was acquired prior to the commencement of the promotion & the co. elects not to rescind but to proceed with the contract with the promoter, it is not permitted to recover the secret prot made by the promoter - Tracey v Mandalay Pty Ltd
- In the event of breach of duty by the promoter, the co. may have recourse the following remedies:

Rescission
- Upon the discovery of the breach by the promoter, the co. is entitled to rescind any contract it has entered into with him. Erlanger v New Sombrero Phosphate Co (Held - as there had been no adequate disclosure
of the circumstances of the sale, the co. was entitled to rescind the contract.)

Recovery of the Secret Prot

- The co. may also be entitled to recover any secret prot made by the promoter. Gluckstein v Barnes (bought co over for
$140k. Debentures were redeemed at full value and they made a good prot. Later, they formed another co. and sold the co. to the new co. at a prot of $40k. the prot of $40k was disclosed but not the prot they made on the redemption of the debentures. Held - they were in breach of their duties as promoters and the co. was entitled to recover the prot from them.)

Damages for Breach of Fiduciary Duties

- The co. may also be entitled to claim damages from the promoter for breach of his duciary duties. Re Leeds and Hanley Theatres of Varieties Ltd

- However, it must be borne in mind that rescission is an equitable remedy and courts may not grant such a remedy if it is inequitable so to do. - Thus the remedy of rescission may be lost, for example where there has been undue delay in initiating the action, where 3rd parties have acquired rights bona de and for value and where the parties cannot be restored to their original position. Lagunas Nitrate v Lagunas Syndicate

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Pre-incorporation Contracts
(J95 Q9b)

A pre-incorporation contract is one, which is purportedly made by or on behalf of a co. at a time when the co. has not yet been formed.

English Position
At common law - eect of the contract on the co. - VOID This was because until the co. was incorporated it had no capacity to contract. Further it also could not ratify the contract after its incorporation. Kelner v Baxter
(In this case A, B and C purportedly acting on behalf of the Gravesend Royal Alexandra Hotel Co Ltd which was in the process of being formed, entered into a contract for the purchase of wine form K. The wine was delivered to the co. after its formation, but it went into liquidation before K was paid.)

Malaysian Position
Eect of the contract on the person contracting - Personally liable prior to ratication by the co.

Governed by Section 35(1) and (2) CA65

Held - the co. was not liable. - However, A, B and C were personally liable, and no ratication could release them from such liability

- Section 35(1) CA65 any contract or other transaction purporting to be made by a co. prior to its formation or by any person on behalf of a co. prior to its formation may be ratied by the co. after its formation and thereupon the co. shall become bound by and entitled to the benet thereof as if it had been in existence at the date of the contract or other transaction and had been a party thereto. - Section 35(2) CA65 prior to ratication by the co. the person or persons who purported to act in the name of, or on behalf of the co. shall in the absence of express agreement to the contrary be personally bound by the contract or other transaction and entitled to the benet thereof. - Thus in Malaysia, a pre-incorporation contract is ratiable by the co. after its incorporation. Once ratied, either party can sue the other upon the contract.

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