Private Limited Company
Company Limited by Guarantee
What is a company limited by guarantee?
A company limited by guarantee is a public company which is formed for purposes beneficial to the community and which prohibits payment of dividends to its members.
A company limited by guarantee needs to comply with the laws in the Companies Act 2016 that apply to public companies. Companies limited by guarantee must include the words ‘Limited’ or ‘Ltd’ after their name (unless they are eligible for an exemption from this requirement).
Limited by guarantee means that the members guarantee to pay a fixed but small amount of money in the event of the liquidation of the company. The members agree in writing (known as a ‘guarantee’) to pay a nominal amount (usually RM20 – RM100) to the property of the company. If the company is wound up, the liability of the members is limited to the nominal amount that they have guaranteed.
What are companies limited by guarantee most commonly used for?
- A company limited by guarantee may be a suitable structure for nonprofit organisations.
- A company limited by guarantee is also suitable for a subsidiary organisation, as it can be set up with just one member.
Syarikat berhad menurut jaminan atau dikenali sebagai Yayasan hendaklah ditubuhkan bagi tujuan seperti berikut (selari menurut Seksyen 45(1) Akta Syarikat 2016):
- menyediakan reakreasi dan hiburan;
- mempromosikan perdagangan dan industri;
- mempromosikan seni;
- mempromosikan sains;
- mempromosikan keagamaan;
- mempromosikan kegiatan amal kebajikan;
- mempromosikan skim pencen atau persaraan;
- mempromosikan apa-apa objek yang berguna dan bermanfaat kepada komuniti dan negara.
What is a Limited Liability Partnership?
A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit elements of partnership and corporation. In a LLP, each partner is not responsible or liable for another partner’s misconduct or negligence. This is an important difference from the traditional partnership under the Malaysia Partnership Act 1961 in which each partner has joint and several liability.
In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders must elect a board of directors under the laws of various state charters. The board organizes itself and hires corporate officers who then have as “corporate” individuals the legal responsibility to manage the corporation in the corporation’s best interest. An LLP also contains a different level of tax liability from that of a corporation.
Main Characteristics of LLP
- LLP is a body corporate, and it has a legal personality separate from its partners.
- LLP has perpetual succession
- Any changes in relation to partners of an LLP will not affect the existence, rights or liabilities of LLP.
- LLP has unlimited capacity and capable of suing and being sued and acquiring, owning, holding and developing or disposing property.
The LLP may be formed by any business group to carry on any lawful business purposely to make profit. However, the main targeted business groups are as follows:
- Professional such as lawyers, accountant, doctors.
- Small and medium sized businesses
- Joint ventures
- Venture capitals
Company Secretary Requirement
In accordance with the Section 2 of the Companies Act 2016, company secretary is deemed as an officer of the company. Meanwhile, section 235 of the CA 2016 requires a company shall have at least one secretary.
By virtue of section 235(2), a company secretary shall be:
(a) a member of a body as set out in the Fourth Schedule; or
(b) a person licensed by the Commission under section 20G of the Companies Commission of Malaysia Act 2001.
The Role of the Company Secretary
The company secretary is an officer of the company and his duties can be wide ranging. While the Companies Act 2016 does not generally specify the role of the company secretary, however, they usually undertake the following duties:
- maintaining the company’s statutory books, including:
- a register of present and past directors and secretaries
- a register of all shareholders, past and present and their shareholdings
- a register of any charges on the company’s assets
- minutes of general meetings and board meetings
- a register of the debenture holders (typically banks).
- filing annual returns at SSM. Other documents which must be filed include the directors’ report and auditors’ report (unless the company is exempt), and financial statements, including details of the company’s assets and liabilities.
- arranging meetings of the directors and the shareholders. This responsibility will involve the issue of proper notices of meetings, preparation of agenda, circulation of relevant papers and taking and producing minutes to record the business transacted at the meetings and the decisions taken.
- informing SSM of any significant changes in the company’s structure or management, for example the appointment or resignation of directors.
- establishing and maintaining the company’s registered office as the address for any formal communications.
- ensuring the security of the company’s legal documents, including for example, the certificate of incorporation and constitution/ memorandum and articles of association.
- advising directors on their duties, and ensuring that they comply with corporate legislation and the articles of association of the company.