Opening a Sdn. Bhd.: what those documents actually are

Hook

A boss pulls a sheet of paper out of his folder and says to me: "This is my certificate of registration." I take one look, and usually I have to tell him something he does not much want to hear: "That is not the one." Not that he has been cheated. It is that under the new Companies Act, a company's birth certificate changed — and what a lot of people are holding is still the old idea of it. This episode goes through the documents you meet when you open a company, one at a time. By the end you will know what is missing from your folder.

Section 14: the one you lodge

The first document in opening a company is the section 14 application. The provision is very plain: a person who desires to form a company applies to the registry. And there is more to put in that application than most people expect. The provision lists: the company's name; whether it is a private company or a public one; the business it intends to carry on; the registered address; for each shareholder, the name, identification, nationality and ordinary place of residence — and where a shareholder is itself a company, the name, place of incorporation, registration number and registered address of that company; the particulars of every director; the particulars of the secretary, if there is one at that stage; and the class and number of shares, and how many each shareholder takes. And the application has to be accompanied by a declaration from each promoter or director confirming that he consents to act. Why does it matter? Because it is your company's original settings file — who the shareholders are, who the directors are, who takes how many shares, all of it starts here. And we have seen it too many times: years later, when there is a split, a share sale or a loan application, someone goes back to this document and finds that what was filed is not what everybody remembers. So: keep your own copy of this one.

Section 15: the real birth certificate

The registry receives the application, and if it is satisfied and the fee has been paid, the provision says it does three things. One, enter the company's particulars in the register. Two, assign the company a registration number. Three — issue a notice of registration. Note that last one. The provision goes on to say: the company exists from the date of incorporation stated in the notice of registration. And there is a separate provision saying that the notice of registration is conclusive evidence that the company is duly registered. "Conclusive evidence" is a term of art in law, and it carries a lot of weight. In other words: the notice of registration under section 15 is your company's birth certificate. Not anything else.

Section 17: the certificate you have to buy separately

So what about the "certificate of incorporation" everybody talks about? That is section 17. The provision is one sentence, but it is the key sentence: the Registrar may issue a certificate of incorporation, after the company applies for it and pays the prescribed fee. Look at three things in that. One, you only get it if you apply. No application, no certificate. Two, there is a separate fee. Three, it is not what the company's existence rests on. That is the section 15 document. So the order runs like this. The moment your company is registered you have the section 15 notice of registration — automatically. The section 17 certificate is a piece of paper you go and apply for separately and pay separately for. Should you get it? It depends what you need it for. Some banks, some tenders and some foreign authorities ask for that certificate by name. Then go and apply. But if it is only to "prove my company exists" — the section 15 document is enough, and in law it is the stronger of the two.

About the name

Going back a step, to the name. Before you open a company the name has to be searched, and it can be reserved. The provision restricts names — it may not duplicate another, it may not mislead, and some words need separate approval. The registry also has the power to refuse registration. Here is a very practical reminder: the name being approved does not mean you own the brand. A company name is a matter for the registry; a trade mark is another body and another set of law. Same name, different thing. You have registered the company name, and somebody else may still register the same name as a trade mark — and the other way round as well. To protect a brand, registering the company is not enough; that has to be done separately.

A constitution: do you need one?

Next is the document most people are unclear about: the constitution. Under the new Companies Act a company limited by shares may have a constitution, but it is not compulsory. With no constitution, the Companies Act itself is your default rulebook. So do you need one? My answer is: it depends whether there is a second shareholder. If it is only you — the default rules will usually do. If you have a partner — I strongly recommend one. Why? Because a lot of things you assume are obvious may have a default answer that is not the one you had in mind. Take the example we have used before: the pre-emption right — when a company issues new shares, do the existing shareholders have to be offered them pro rata first? The provision opens with the words "subject to the constitution". Which means the constitution can change it. And whether a share transfer needs the directors' approval, what happens to the shares when a shareholder leaves, what happens in a deadlock — these are all things a constitution should deal with. Without a second shareholder, you will never use it. With a second shareholder, you will be glad you wrote it.

One thing to do within thirty days of incorporation

The company is registered, and that is not the end of it. The provision says: the first company secretary must be appointed within thirty days of the date of incorporation. Thirty days. And not just anybody can be the secretary — there has to be written consent and the person has to be qualified. While we are here, two more things that are also settled right at the start. Directors: a private limited company must have at least one director, whose principal place of residence is in Malaysia. Share capital: under the new Companies Act shares have no par value. So talking about "one ringgit a share" is no longer correct. And the law sets no minimum amount you have to put in — but banks, licensing bodies and tender committees each have their own views, so judge that by your trade.

So what should be in your folder

That is the run-through. Now, what to keep. A newly opened private limited company should have at least this in the folder. One, a copy of the section 14 application — your company's original settings. Two, the section 15 notice of registration — the birth certificate. Three, the constitution, if one was made. Four, the minutes of the first directors' meeting — appointing the secretary, fixing the financial year, opening the bank account. Five, the register of members and the register of directors. Six, the company seal and the bank account opening documents. The section 17 certificate — apply for it only if you need it. If you do not have a single one of these, that is not your fault; nobody ever handed them to you. Ring your company secretary and ask for a complete set. This is your property.

To close

To close in a sentence: opening a company is quick, a day or two. But what is settled in that day or two stays with you for years. Who the shareholders are, who takes how much, what the constitution says — changing all that later is ten times harder than writing it down at the start. Want to open a company, or find out whether the setup you have now is right? Grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.