KUALA LUMPUR: A company director who breaches the
newly-implemented Companies Act 2016 will face a heavier fine of up to RM3mil
and a maximum five-year term of imprisonment, or both, if found guilty.
The Companies Act 2016, which replaced the previous
Companies Act 1965, came into effect in stages from Jan 31, 2017.
InCorp director, Kong Ming Enn, said a director who
improperly used the company’s property, opportunities, information acquired by
virtue of position, or engaged in business which was in competition with the
company, would face the penalties mentioned above.
“The maximum of RM3mil fine is 100-fold increase from the
RM30,000 under the previous law,” he told a media workshop on the Companies Act
2016 in Kuala Lumpur on Tuesday.
InCorp is a company secretarial services provider owned by
Elegant Management Sdn Bhd.
Kong said any director who wilfully paid or authorised the
payment of any improper or unlawful distribution, if found guilty, would also
face a five-year jail term or a maximum RM3mil fine, or both.
“Under the new law, dividends are only paid out of profits
if the company satisfies the solvency tests, which generally relate to its cash
flow solvency and balance sheet solvency,” he said.
Kong said under the solvency test, a director has to ensure
that the firm would be solvent immediately after the dividend was paid.
“For example, a company must be able to pay its debts as and
when they are due within 12 months after the distribution of the dividend is
made,” he said.
He said despite that annual general meetings were no longer
be required for private companies under the new Act, they were still needed to
circulate the audited accounts among the shareholders within six months of
their financial year-end.
“Those who failed to do so faces a maximum RM500,000 fine,
or a less than a year of jail term, or both, if found guilty,” he said.
Other penalties under new Act included a maximum RM500,000
fine, or a less than a year of jail term, or both, if a director was found guilty
of failing to lodge the constitution with the registrar within 30 days from the
adoption of the constitution.
Under the new law, a company could replace the memorandum
and article of association (M & A) from the previous Act by the
constitution.
Kong said with the heavier penalties introduced under the
new company law, it would increase the awareness of the companies’ directors on
their responsibilities and duties.
“This will help to make Malaysian companies more
competitive,” he said.
Following the implementation of the new Act, which allowed a
company to be incorporated by or have only one member, and that single member
could also be the sole director of the company, Kong expected Incorp would
register about 1,000 new start-up companies by year-end, up from 300 in
previous year.
“We also foresee up to 30% of the sole proprietors will
convert to private limited companies (Sdn Bhd) in the next two to three years,”
he said.
Kong said under the new Act, a ‘Sdn Bhd’ company which
registered a taxable income of over RM400,000 would be charged with 18% of
company tax, whereares sole proprietor which earned the same amount of income
would have to pay 26% of company tax.