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Chapter 2 Incorporation of a company
1. Promoter
- Person who carries out the procedure necessary to incorporates a company.
- Who undertakes to form a company with reference to a given project and set it
going.
- Who takes the necessary steps to accomplish that purpose.
- Twycross vs. Grant 1877.

2. Duties of promoters
- Duty to disclose any profit or benefit that he makes to the company.
- Duty to make full disclosure of the transactions he had entered into an behalf of
the company.
- Duty not to disclose confidential information to outside.
- Duty not to hide his personal interests through a nominee.

3. Remedies for breach of promoter duties.
a. Rescission of the contract.
- The promoter must return any benefit or profit he had gained and the company
must return the property.

b. Recover the secret profit.
- The company must show that the failure of promoter to disclosure secret profit.

c. Claim damages.
- The company must prove that it had suffered a loss.
- The company may sue for damage for breach of fiduciary duty.

4. Pre-incorporation contracts.
- Ratification may be expressed or implied.
- An express ratification is where the company passes a resolution.
- Implied ratification is where the company does some act affirming the contract.
- Ratification must do within a reasonable time.

5. Incorporation procedure.
a. Reservation of company name.
- Completion and submission of Form 13A Company Act.
- Payment of a RM30 fee for each name applied.
- When the proposed companys name is approved by SSM, it shall be reserved for
3 months from the date of approval.

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b. Document to be lodged.
- Memorandum of association.
Name clause, objects clause, capital clause

- Articles of association
Board meeting
General meeting
Notice of meeting
Power and responsibilities of directors.

- Form 48A
Statutory declaration of the directors.
Prove that they are not bankrupt or been convicted by court.

- Form 6
Statutory declaration regarding compliance with all statutory regulations.
Signed by a director and secretary of the company.

- Additional documents:
Original copy of Form 13A
A copy of the letter from SSM approving the name
A copy of the identity card of director & secretary.

- Certificate of corporation.

6. Company should components:
a. Director (min 2)
b. Members (min 2 and can be a director)
c. Secretary (MIA)
d. Auditor
e. Other office.

7. Independent legal entity.
a. Is a body corporate.
b. Is capable of suing and being sued.
- A company has the power to make contracts and can sue and be sued on these
contracts.
- Can sue in the name of the company itself or by the directors.
c. Has perpetual succession.
- A change in the membership does not affect the existence of the company.
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d. Has power to hold land.
- A company can own property, and this property will continue to be owned by the
company regardless of who owns the shares in the company.
e. Liability of members.
- Limited by shares.

8. Lifting of the corporate veil
a. A sole remaining member of a company may be liable for the payment pf the debts of
the company if at any time the numbers of members of a company is reduced to
below two and it carries on business for more than six months while the number is so
reduced.
b. Any office of a company signs, issues any bills of exchange wherein the name of the
company is not so mentioned, he shall be liable.
c. Enter into a contract, while he believes that companies are unable to settle the debts,
that person are personally liable for the whole of the debt.
d. Any business of the company has been carried on with intent to defraud creditors of
the company, he shall be personally responsible.

9. Content of MOA.
a. Name of company.
b. Objects of the company
c. In the case of company limited by shares, the amount of share capital of the company
and the division of the shares.
d. The liability of the members is limited.
e. The full name, addresses and occupation of the subscribers.

10. Ultra Vires
- If its activities are not related to the establishment of the company as contained in
the objects clause, the company is said to be acted ultra vires.
- beyond the power & lack of power
- Action of company which is ultra vires is not valid.
- Company cannot be sued based on the ultra vires contract.
- Company cannot sue those who involved in the contract of ultra vires.

11. Alteration of memorandum.
- May be made voluntarily by the company by way of a special resolution.
- By the direction of the Registrar.
- Be approved by majority of members entitle to attend and vote.
- Company intending to alter its object clause must give by post 21 day written
notice specifying the intention to propose the special resolution.
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- Cancellation of the objects.
Not less than 10% of the companys share capital
Not less than 10% of the companys members.
Not less than 10% of the companys debenture.

- A copy of the special resolution must be lodged with the Registrar within 14 days
after the expiration of the 21 days.

- Share capital may alter its capital structure by ordinary resolution.
Increase its share capital by the creation of new shares.
Divide all its capital into shares of large amount
Convert all paid-up shares into stock or stock into paid-up shares
Subdivide shares into shares of a smaller amount than is fixed by by the
memorandum
To cancel shares.

12. Content of Articles of association (AOA)
- Registered office
- Classes of shares
- Transfer of shares
- General meeting
- Directors
- Account & audits
- Dividends.
- Notice to members
- Winding up
- Alteration of share capital

13. Alteration of Articles
- By special resolution
- Approved by majority of member.