You are the company secretary of Silver Hope Bhd, a plantation company listed on Bursa Malaysia.

The
board of directors of Silver Hope Bhd had recently appointed Datuk Gan as an additional executive
director of the company. The company’s Constitution requires directors of the company to hold 8,000
qualification shares. Datuk Gan has yet to purchase the qualification shares. Datuk Gan is also a director
of 25 other companies, 14 public companies (of which 4 are listed), 9 private companies, and 2
charitable organizations.

Required: (a) Discuss the restriction imposed by Bursa Malaysia on the number of directorship which
may be held by directors of public listed companies and state whether Datuk Gan is currently complying
with the restriction. (5 marks)

Pursuant to Paragraph 15.06, a director of listed company must not hold more than 5 directorships in
listed companies. Since Datuk Gan is a director of 4 public listed companies, he can still be a director of
Silver Hope Bhd. Datuk Gan therefore is complying with the restriction on number of directorship
imposed by Bursa Malaysia.

(b) Explain the actions that must be taken by Datuk Gan before and upon his appointment as a
director of Silver Hope Bhd in order to comply with the requirements of the Companies Act, 2016 and
any other relevant regulations.

(5 marks) Datuk Gan should take the following actions before and upon his appointment as director of
Silver Hope Bhd

• Make a declaration and lodge with CCM and the Official Receiver – Sec. 201 Form (The declaration by
a person before appointment as a director, or by a promoter before incorporation of corporation).

• To make disclosure for compliance with Section 219 (General duty to make disclosure) and Section 221
(Disclosure of interests in contracts, property, offices, etc).

• As required by Para 15.03 (1) of the Bursa Malaysia Listing Requirements (BMLR) - to submit to Bursa
Malaysia not later than 14 days of his appointment an undertaking in the form of Appendix PN21-C.

(c) Explain the corporate actions that must be taken by you as a company secretary subsequent to the
appointment of Datuk Gan. (10 marks)
You as the company secretary must undertake the following corporate actions:

• Since the company is a listed company, as required by Para 9.19 (12) of the Listing Requirements, an
immediate announcement to the Exchange must be made of any changes in the composition of the
board of directors.

• An announcement to Bursa Malaysia of the appointment of directors shall include information as

contained in “Part A of Appendix 9A” which includes the following: a) The name, age, nationality,
qualification of Datuk Gan and that he is appointed an executive director. b) Working experience and
occupation. c) Any other directorship of public companies held by Datuk Gan. d) Any family relationship
with any director and/or major shareholder of the listed issuer and e) The details of any interest in the
securities of the listed issuer or its subsidiaries.

• Remind Datuk Gan of the time within he must obtain the qualification shares. Every director, who is by
the Constitution required to hold a specified share qualification and who is not already qualified, shall
obtain his qualification shares within a period fixed by the Constitution after his appointment.

• Remind him of his duty to make disclosure for compliance with Section 219 (General duty to make
disclosure) and Section 221 (Disclosure of interests in contracts, property, offices, etc). Suggest to him
that he may give general notice of his interest in any contract, property, office etc as required by Section
221. Upon receipt of notice of compliance with Section 219, to make immediate announcement to Bursa
Malaysia (para 9.19(18)).

• Forward him with a copy each of the company’s Constitution, accounts and directors reports, interim
reports and circulars to shareholders (if any) for the past few years, trust deeds relating to debenture
stock or loan stock issued (if any).

• Advise him of the dates of board meetings (if to be held on fixed dates).

• If the company is an active company, inform the press.

• File Sec.58 Form with the CCM and update the Register of Directors.
• To notify SC in writing of the appointment of the Datuk Gan within 2 weeks of the appointment

Instagram Resources Bhd. is a company listed on the Main Market of Bursa Malaysia. The company has
been making profits for the past two (2) years. Recently, due to global economic downturn, the
company’s share price plunged from RM3.50 to RM2.50. This prompted the board of directors to pass a
resolution authorising the company to buy back its shares pursuant to section 127 of the Companies Act
2016. As the company secretary of the company, you are required to advise the board of directors on
the following:

(a) The rationale for share buy-back. (3 marks)

(b) The conditions that must be fulfilled before a company can exercise share buy-back. (7 marks)
(c) How may the board of directors account for the shares (known as treasury shares) after the share
buy-back exercise. (5 marks)

(d) The properties of treasury shares. (5 marks)

[Total: 20 marks]

Answer (a) The rationale for share buy-back is as follows: (i) To give company’s shareholders a price
nearer to that of its assets value. (ii) To provide a bolster to the company’s earnings per share. (iii) It
allows the company to make a good investment of its surplus corporate funds. (iv) It is an expedient and
cost-efficient way for the company to return surplus funds to the shareholders. (v) To reduce volatility of
share prices of the company. (vi) It allows the company to have greater flexibility in managing its
capital structure and dividend policy.

(b) The conditions to be fulfilled before share buy-back Section 127(2) are: (i) The Constitution of the
company must authorise such action. (ii) The company is solvent at the date of purchase and will not
become insolvent by reason of the purchase. (iii) The purchase must be made through the stock
exchange. (iv) The purchase must be made in good faith and in the interest of the company. (v) The
purchase must be authorised by shareholders of the company by way of ordinary resolution. (vi) The
directors must make a declaration of solvency at a board meeting. (vii) The share buy-back must be
made wholly out of retained profits or the share premium account. (viii) The purchase price must not be
more than 15% above the weighted average market price for the shares for the five market days
immediately before the purchase. (ix) The total amount of shares to be purchased or held as treasury
shares by the company shall not in aggregate exceed 10% of its issued and paid-up share capital and
shall not result in the company being in breach of the public shareholding spread or its issued and paid-
up share capital falling below the prescribed minimum.

(c) Sec 127 (7) CA 2016, the board of directors may: • Cancel all the shares so purchased and so diminish
the share capital by transferring such amount to the capital redemption reserve. • Retain all the shares
so purchased as treasury shares. • Retain part of the shares so purchased as treasury shares and cancel
the remainder. • Distribute the treasury shares as dividends to shareholders, such dividends to be
known as ‘share dividends’. • Resell the treasury shares on the market of the stock exchange. • Utilise
the capital redemption reserve in paying unissued shares of the company to be issued to members as
fully paid bonus shares.

(d) The properties of treasury shares. • No voting rights and not to be counted in determination of any
resolution. • No dividend entitlement. • Not taken into account in calculating the number of percentage
of shares of a class of shares for any purposes. • Not entitled to any notices of general meeting. • Not
taken into account for substantial shareholdings or take-overs. • No rights for requisitioning of meetings.
• Not counted for quorum purposes.

(b) The procedure involved in a members’ voluntary winding up.

(i) Convene a board of directors’ meeting: - Decide to convene a general meeting to recommend winding
up to the members. - Make a Declaration of Solvency (Sec.443 Form) – This is made by a majority of the
directors at a Board meeting. It states that in the opinion of the directors, the company will be able to
pay its debts in full within a period not exceeding 12 months after the commencement of winding up. It
must be made before the passing of the resolution for voluntary winding up (sec 443).

(ii) Lodge Sec.443Form with Companies Commission of Malaysia (CCM) before the date on which the
notices of the meeting at which the resolution for the winding up of the company is to be proposed are
sent out (sec 443(4)(c)).
(iii) Hold an EGM within 5 weeks of the date of the board meeting at which the declaration of solvency
was made to pass a special resolution to wind up the company, (If the company is being wound up
because it was formed for a particular period of time which has now expired, an ordinary resolution only
is needed), and the resolution for appointment of a liquidator.

(iv) Lodge Sec.43((2)(a) Form with CCM within 7 days of the EGM and publish notice of the resolution in
a newspaper circulating throughout Malaysia within 10 days of the EGM [sec 439(2)(b)].

(v) The liquidator must lodge with CCM and the Official Receiver, notice of his appointment and the
situation of his registered office on Sec.513(1) Form within 14 days after his appointment (sec. 513(1)).

(vi) The liquidator will then notify his appointment to the company’s auditors, solicitor, bankers,
employees, suppliers and customers.

(vii) The liquidator then winds up the company, realizing the assets, satisfying the liabilities, hold annual
meetings of members (if the winding up continues for more than one year) (sec 458).

(viii) After the liquidator has distributed the remaining assets, he will prepare complete set of accounts
of the winding up and convene a final meeting of members [sec 459(1) & (2)].

(ix) Within 7 days of the final meeting, the liquidator will file with the CCM and the Official Receiver,
Sec.459(3) Form together with a copy of the accounts (sec 459(3)).

(x) The liquidator will dispose of the company’s books and papers as the company by resolution in
general meeting directs, otherwise he must retain them for at least 5 years after the company’s
dissolution [sec 518(2) & (3)(b)].

(xi) The company is dissolved 3 months after the lodging of Sec. 459(3) Form with the CCM and the
Official Receiver
the procedure for the creditors’ voluntary winding-up are:

(i) Convene a BOD meeting to: ➢ To decide on the date of the statutory declaration ➢ Make/prepare a
statutory declaration in Sec.440 Form ➢ Appoint an approved liquidator

ii) Convene an EGM at a date not more than one month from the date of the statutory declaration by
sending out the necessary notice of EGM to members

iii) Convene the creditors meeting on the same day of the AGM

iv) The directors shall appoint one of their numbers to attend and he must be appointed by the
creditors to preside at the meeting.

v) The company must lodge the Sec.440 Form with the ROC and the Official Receiver

vi) At the EGM pass a special resolution to wind up the company voluntarily because it cannot continue
its business by reason of its liabilities and to nominate the liquidator.

vii) At the creditors meeting nominate a liquidator and if the creditors nominated different person than
person nominated in the AGM, the person nominated by creditors shall be the liquidator.

viii) A copy of the resolution in Sec.439(2)(a) Form shall be filed with CCM within 7 days after the passing
of the resolution and within 10 days give notice of the resolution in a newspaper.

ix) The liquidator must within 14 days of his appointment lodge a notice of his appointment and
situation of his office on Sec.513(1) Form with CCM and Official receiver.

x) The company shall cause the words “in liquidation” to be added after its name on every official
documents and letters

xi) The liquidator will then notify the auditor, bankers, insurers, suppliers, customers and employees of
the company.