Frequently Asked Question
What is a shareholder?
A shareholder (or stockholder) is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be classified as either direct or indirect shareholders. Direct shareholders are those who own the shares outright, while indirect shareholders are those who own shares through another party, such as a mutual fund.
The concept of a shareholder originated in the early days of corporate law as a result of the joint-stock company. In these companies, ownership was divided into equal parts (shares), with each part representing an interest in the company’s underlying assets. As companies grew and became more complex, it became difficult to track ownership interests and ensure that all owners received their proportional share of profits and liabilities.
How do I appoint a new shareholder?
According to the Malaysian Company Act 2016, a shareholder in a company can be appointed through one of three methods:
- By executing a resolution appointing the shareholder
- By entering into an agreement with the shareholder appointing the shareholder;
- By issuing shares to the shareholder.
Who is eligible to be a shareholder in a company?
Pursuant to the Malaysian Company Act 2016, a person is eligible to be a shareholder in a company in Malaysia if he or she is a citizen of Malaysia or lawfully resides in Malaysia.
In addition, the following persons are also eligible to be shareholders in a company in Malaysia:
- a body corporate incorporated outside Malaysia;
- a partnership formed outside Malaysia by two or more individuals who are not citizens of Malaysia and do not reside in Malaysia; or
- an unincorporated association formed outside Malaysia by two or more individuals who are not citizens of Malaysia and do not reside in Malaysia.
What are the procedures to add a new shareholder in a company?
Adding a new shareholder to a company requires compliance with the Malaysian Company Act 2016. The first step is to have the Board of Directors pass a resolution authorizing the issuance of new shares. Once that is done, the company must then file an application with the Registrar of Companies along with the necessary documents.
These include a copy of the board resolution, a list of current shareholders, and information on the new shareholder(s). After reviewing and approving the application, the Registrar will issue a certificate of incorporation which will officially add the new shareholder (or shareholders) to the company.
Who is the legal person to appoint a new shareholder?
According to the Malaysian Company Act 2016, a company secretary is the legal person to appoint a new shareholder. The company secretary is also responsible for ensuring that all changes to the company’s share register are made in accordance with the law.
Furthermore, a company secretary is appointed to advise and assist the directors of a company on compliance with the Act and to keep proper books of account and records of the company. According to Section 134(1) of the Malaysian Company Act 2016, where a company has failed to appoint a secretary or has ceased to have a secretary, the directors shall forthwith appoint one. In such circumstances, the directors would be wise to consult with an experienced corporate lawyer to ensure that they comply with all relevant provisions under the Malaysian Company Act 2016.
What are the consequences if a shareholder is not appointed?
Under the Malaysian Company Act 2016, a shareholder is not appointed, the consequences are as follows:
- The company may not commence business or exercise any corporate power until a shareholder is appointed.
- If the company does commence business or exercise any corporate power, every officer of the company who knowingly allows this to happen is guilty of an offence and liable on conviction to a fine and/or imprisonment.
How long does it take to appoint a new shareholder?
The process of adding a new shareholder to a company in Malaysia can take up to several weeks. This is due to the fact that various documents must be filed with the Registrar of Companies and approved before the new shareholder can be officially appointed. However, the actual time it takes to complete the process may vary depending on the specific circumstances of each case .
Besides, According to Section 79 of the MCA 2016, where a company has only one shareholder, that shareholder is deemed to be the company. In other words, the process of appointing a new shareholder in such a company is relatively simple – it can be done by way of an ordinary resolution passed at a meeting of the shareholders. Where a company has more than one shareholder, things become slightly more complicated. In such cases, the appointment of a new shareholder must be made in accordance with Section 173 of the MCA 2016.
What are the documents required to appoint a new shareholder?
According to the Malaysian Company Act 2016, the following documents are required to appoint a new shareholder:
- The shareholders’ resolution approving the appointment of the new shareholder(s);
- A copy of the new shareholder’s identity card or passport; and
- A declaration by the new shareholder(s) that he/she is not disqualified from being a director or shadow director under any written law in Malaysia.
How much is the fee to appoint a shareholder in a Malaysian company?
The fee to appoint a shareholder in a Malaysian company varies depending on the share amount. First payment goes to LHDN as a stamping fee and second fee goes to the Registrar of Companies within 30 days from the date of appointment of the shareholder.
What is the responsibility of a new shareholder?
A new shareholder (or member) in a Malaysian company has the following statutory responsibilities, as prescribed by the Malaysian Company Act 2016 (MCA 2016):
- To sign and submit the company’s shareholders’ agreement to the Registrar of Companies within one month of their appointment as shareholder;
- To approve any alteration in the share capital of the company, including change in authorised or issued share capital and special resolution for reduction of share capital, within one month from being notified of such alteration;
- Not to disseminate information which is false or misleading relating to the company, its directors or employees.
- Not to exercise control over more than 10% of the voting rights at any general meeting.
- To receive and read the company’s memorandum and articles of association;
- To acquaint himself with the nature of the company’s business and to refrain from dealing in any shares or securities of the company other than those in which he is interested as a shareholder;
- Not to promote any competing business or endeavour while he is a director or shareholder of the company.
- To exercise such care and diligence in respect of his shareholdings as an ordinarily prudent person would exercise in similar circumstances.
- Furthermore, according to Section 141 of the Act, a person who becomes a shareholder in a company must notify the company secretary of their name and address, and must also provide any other prescribed particulars. A new shareholder must also comply with Sections 149 to 154 of the Act, which deal with restrictions on transfer of shares, and Sections 155 to 165 which deal with registration of charges over shares. Under Section 166 of the Act, a company is not permitted to allot shares to a person who is not registered as such with the Registrar of Companies. So it is essential that all shareholders register their details with the Registrar.