In the past, under Companies Act 1965 (“CA 1965”), many people have the wrong perception thinking that one person controlling more than 50% shareholding in a Company, has the controlling power over the whole Management, including operation, Board of Director (BOD), etc.
The Transformation of the CA 1965 into new Companies Act 2016 (“CA 2016”) which came in force on 31st January 2017 allows one person to exercise his majority right.
Let’s explore, using the provision of the CA 2016, planning your Best Corporate Structure to avoid any dispute in the future.
Directors’ Structure
- Number of Director
Under CA 2016, you are allowed to form a one Director Company (i.e. only applicable to Sdn. Bhd.) to avoid any Director disputes.
But if your BOD consist of more than one person, it is adviced to always to form an odd number of directors such as 3, 5, 7 persons and so on to avoid any equality of the vote for a Resolution to be passed and also, the quorum for a meeting.
The party that has more shares will have majority over the rest of the Directors sitting in the Board, in order to control the management and operations of the Company.
- Directors’ Circular Resolution (“DCR”)/ Board of Directors’ Meeting (“BODM”)
Subjected to the Constitution of the Company on passing the Directors’ Resolution, if your Constitution states that a Resolution is to be passed by a majority, with the odd numbered Board of Director’s structure, you will have no issues to pass any Directors’ Resolution either by way of DCR or BODM.
Shareholding Structure
- Number of Shareholder
LESS is BEST. The provision of CA 2016 allows a shareholder to actually exercise your voting rights in accordance with your percentage of shareholding. The more shares you have, the more power you can exercise.
- Members’ Circular Resolution (“MCR”)
Passing an MCR pursuant to CA 2016 is dependent on the type of Resolution at stake, i.e. Ordinary Resolution (50%+1 share) and Special Resolution (75%), instead of the sign or execute by all shareholders approach under CA 1965.
If you hold 75% of the total paid up share in a Company, you will have the power to pass all Resolutions be it Ordinary or Special.
- Meeting of Members
All meetings in a private company are known as meetings of members (“MoM”). Passing the Resolution on the Removal of a Director and Auditor will be passed by way of MoM instead of MCR.
In the event a MoM is convened the requisite quorum must be present (i.e. generally a minimum of 2) for the meeting to be ordered. If the requisite quorum is not present, despite the presence of the majority shareholder holding 51% shares, the meeting cannot proceed to pass proposed resolutions.
However, if the company only has one member, that one member can make up the quorum.
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