NATURE OF COMPANIES, FORMATION AND ITS CLASSIFICATION pdf

1. NATURE OF
COMPANIES

2. FORMATION

3. CLASSIFICATION
OF COMPANIES

Prepared by : Norzelawati Umar

1. NATURE OF COMPANIES

• SECTION 18 COMPANIES ACT 2016 ‘according to the date of incorporation mentioned in the
notice of registration…there shall be a company existed and shall be kept by the Registrar of
CCM’

• Company is a corporate body.
• It is “separate legal entity” and independent from the member in the company.

SEPARATE LEGAL ENTITY

1 entity=natural person 1 entity=fake person This concept is very useful
because the shareholders are
frequently changing. Unlike
partnership and sole trader. If the
shareholders change the company

remain the same.

2. FORMATION OF COMPANIES

• Section 9 CA 2016, provides that, a company shall
have …………….

a) Name
b) One or more members having limited or unlimited

liability
c) For the company limited by shares, one or more

shares
d) One or more directors.

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Continue :

• Section 14 CA 2016 – shall apply to the Registrar and can be
formed by one person.

• The application to formed a company shall include:
1. Name of the proposed company
2. Status (private or public company)
3. The nature of the business
4. The address
5. Who is the member/director/secretary
6. Number of shares by members

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• Section 14(2) CA 2016, company cannot be
formed for any unlawful purpose. i.e any
purposes which is contrary with the law.

• Section 17 CA 2016, Certificate of
incorporation is a birth certificate of the
company.

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3. CLASSIFICATION OF COMPANIES
(a) according to liability of member)

Company limited by shares Company limited by guarantee Unlimited company

• Sec 10 – “if the liability • Sec 10 – “if the liability of • Sec 10 – the
of its members limited to its members limited to the members in this
the amount of unpaid amount guarantee to company are liable to
shares purchased by contribute by the all the debts and
them” members in the obligations (same as
dissolution” partnership and sole
• Example : trader)
• Example : • Example :

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CLASSIFICATION OF COMPANIES (b) according to status)

Private company Public company

• Characteristics : • Characteristics :
• shall offer to public any shares or
• shall not offer to public any shares
or debenture. debenture
• Shall allot any shares to the public
• Shall not allot any shares to the • Shall invite public to deposit money
public
for fixed periods or payable at call
• Shall not invite public to deposit
money for fixed periods or payable • Unlimited number of members
at call • Bhd

• 50 members

• Sdn Bhd

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TUTORIAL QUESTIONS: TOPIC 1

1. Define company.
2. When does the existence of a company is recognized?
3. Which body responsible in issuing certificate of incorporation.
4. Define “separate legal entity”.
5. Explain why “separate legal entity” is useful to the corporation.
6. Classify the company according to

a) Liability of members
b) Status
7. Explain 4 differences between private company and public company.

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