companies act 2016 malaysia

A 5 Minute Overview Of The Companies Act 2016

Raise your hand if you enjoy reading


Now raise your hand if you enjoy reading government acts.

Yeah, didn’t think so.

Given a choice, the average person can think of many less painful ways to pass the time, such as climbing into the mouth of a Siberian tiger.

siberian tiger over companies act 2016
To be fair, the tiger doesn’t mind either.

Unfortunately, you, dear reader, are not the average person.

You are a business owner.

You either want to incorporate a Sdn Bhd or you already have one.

And now, like it or not, it’s mandatory for you to understand the Companies Act 2016.

We know you don’t like it though, which is why we wrote this short and sweet guide.

Our main purpose: To give an overview of key sections in the Companies Act 2016 and make it easier for you to navigate it. We’ll link the official SSM document at the end of this guide, so by the time you finish reading, you will know exactly where in the document to find what you need.

Our secondary purpose: To show you just how much work goes into statutory interpretation and compliance, so that you save yourself the trouble by engaging us!

Overview of the Companies Act 2016

The Companies Act 2016 provides a comprehensive framework for the regulation of companies in Malaysia. It covers various aspects such as company formation, governance, and financial reporting. This legislation aims to enhance transparency and accountability in corporate practices and promote the interests of shareholders and stakeholders.

Key act terminology:

You’ll see some specific terms floating around government acts, especially with regards to text organisation. Here are ones you need to know:

  1. Act: The entire legal document on a particular subject.
  2. Section: A numbered division of the act addressing a specific aspect of the subject.
  3. Subsection / Subdivision: A division of a section, providing further details on a section.
  4. Provision: A specific rule or guideline concerning acceptable standards, conduct, and exemptions.
  5. Schedule: An attachment to the act providing additional information, such as forms, tables, or lists.

Now let’s look at the key areas a Sdn Bhd owner should know.

Parts of the Companies Act 2016

Now let’s look at the key sections a Sdn Bhd owner should know.

Part 1: Introduction

This part gives clear definitions of the various business structures available in Malaysia, as well as key terms related to statutory compliance and financial management such as the meaning of a ‘financial year’.

We don’t think there’s much else here, so we’ll move on to Part 2.

Part 2: Formation & Administration of Companies

Part 2 explains the conditions to incorporate a Sdn Bhd in Malaysia which varies by industry and citizenship.

Also, it crucially outlines the statutory compliance requirements that companies must meet moving forward, including restrictions on shareholders, mandatory documents to maintain and the deadlines and steps involved in submitting annual returns.

Part 3: Company Management

Part 3 sets out the roles and responsibilities of various company stakeholders including shareholders, directors, and company officers such as Company Secretaries. Indemnity and insurance for key company members are also included.

The act also sets the standards of auditing and financial record keeping that must be met, such as the need to engage an independent third-party auditor every year and keep financial records for the past seven years.

The part also addresses the various types of meetings companies must hold and their frequency.

Part 4: Company Cessation

Part 4 deals with the procedure of closing down a Sdn Bhd, including the strike off process, handling of assets, settling of existing debts, and allocation of remaining assets to shareholders after those debts have been cleared.

Part 5: Miscellaneous

This part is titled rather unhelpfully, so we’ll list out two of the four specific sections that you might want to know immedaitely.

Foreign Companies

The high level regulation of foreign owned companies that wish to operate in Malaysia, including prohibitions, registration processes, naming conventions, and more.

Enforcement & Sanctions

The rights and obligations of those suspected of or charged with committing an offence under the act, such as the right to legal representation and the obligation to produce company records to help investigations.

Also covers the list of offences, their definitions, and penalties.

There are a further two sections for General Provisions and Schedules, but those are not immediately relevant.

Am I now an expert on the Companies Act 2016?

Not even close!

This post was an appetiser to prepare you for the main dish.

The actual act comprises hundreds of sections and many hundreds of thousands of words.

Now that you know the rough outline of the act, you can zoom straight to the right part instead of trying to skim the document (ctrl+f isn’t very helpful when every search returns results from every part).

But, hey, that’s the price of running a Sdn Bhd in Malaysia.

You want to keep the authorities happy, gotta understand the rules and toe the line.

Don’t make Mr Policeman come for YOU!

As promised, here is the official SSM Companies Act 2016 PDF. Happy reading!

But wait, there might be another way.

You know how sometimes in university people who can’t be bothered just pay others to do their assignments?

We propose the same thing, only it’s 100% legal and mutually beneficial!

Let MISHU handle your compliance needs

Co sec Manager Fenny

As a Company Secretarial firm and business consultant, the MISHU team eats, lives, and breathes by assisting entrepreneurs with understanding and navigating the Companies Act 2016 (and a whole bunch of other acts too!)

If you like the idea a trusted business advisor who understands legislation and can advise, remind, and outright warn you on matters of regulatory compliance, we think this could be the beginning of a long and fruitful partnership – get in touch!

FAQs about the Companies Act 2016

  • What is the Companies Act 2016 and how does it regulate the legal formation of a company in Malaysia?
    💡The Companies Act 2016 is legislation to govern the formation and operation of companies in Malaysia including directors, types of companies, company name publication, registration of offices, shares, accounts, and liquidation, among others.

  • What are the requirements for directors and company secretaries under the Companies Act 2016?
    💡A private company must have at least one director, while a public company must have a minimum of two directors. They must be natural persons of full age, have their principal or only residence in Malaysia, and not be declared bankrupt. A company must have at least one company secretary who is a citizen or permanent resident of Malaysia and resides in Malaysia.
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