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CRG 530 COMPANY SECRETARIAL PRACTICE GROUP ASSIGNMENT – PAST YEAR QUESTION PREPARED BY : MOHD SAZALI BIN MOHD SALLEH 2011473332 HAFIZI BIN AHMAD 2011215082 WAN MOHD TAUFIQ BIN MOKHTAR 2011840704 MOHD NASRUL BIN ZAKARIA 2009549697 PREPARED FOR : MISS JULIANA BINTI MAT JUSOH

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CRG 530 COMPANY SECRETARIAL PRACTICEGROUP ASSIGNMENT – PAST YEAR QUESTION

PREPARED BY :MOHD SAZALI BIN MOHD SALLEH 2011473332HAFIZI BIN AHMAD 2011215082WAN MOHD TAUFIQ BIN MOKHTAR 2011840704MOHD NASRUL BIN ZAKARIA 2009549697

PREPARED FOR :MISS JULIANA BINTI MAT JUSOH

1. THE LEGAL FRAMEWORK OF CORPORATE SECRETARYSHIP

2. FORMS OF BUSINESS OWNERSHIP

3. COMPANY SECRETARY

PART ATHE LEGAL FRAMEWORK

OF CORPORATE SECRETARYSHIP

State four (4) functions of the Securities Commission of Malaysia. (Oct 2008 - Q3) (4 marks)

Briefly explain four (4) regulatory functions of the Securities Commission of Malaysia. (Jun 2012 - Q9) (4 marks)

The Securities Commission Malaysia (SCM) is the financial regulatory agency in Malaysia. State FOUR (4) main regulatory functions of the SCM. (Jun 2013 - Q7) (4 marks)

Answer :-The 4 main regulatory function of the SCM are:-

Regulating all matters relating to securities and futures contracts Regulating all matters relating to unit trust schemes Regulating the take-over and mergers of companies Licensing and supervising all licensed persons

Differentiate between the functions of Bursa Malaysia and Securities Commission. (Apr 2011 - Q6) (4 marks)

Answer : Bursa Malaysia Securities CommissionRole An exchange holding company approved under

S15 of the Capital Market and Services Act 2007. It operates a fully-integrated exchange, offering

the complete range of exchange-related services including trading, clearing, settlement and depository services.

Central authority responsible for the regulation and development of the securities and futures industries in Malaysia.

Established under the Securities Commission Act 1993 Statutory body entrusted with the responsibility of regulating and

systematically developing the Malaysia’s capital markets.

Objective Maintain an efficient, secure and active trading for investors

• To promote and maintain fair, efficient, secure and transparent securities and futures markets;

• To facilitate the overall development of an innovative and competitive capital market;

Functions Empowered to govern the stock exchange, brokers and companies participating in the Bursa Malaysia through the Listing Requirements and Practice Notes.

1. Registering authority for prospectuses of corporations other than unlisted recreational clubs

2. Approving authority for corporate bond issues3. Regulating all matters relating to securities and futures contracts4. Regulating the take over and mergers of companies5. Regulating all matters relating to unit trust schemes6. Licensing and supervising all licensed persons7. Supervising exchanges, clearing houses and central depositories8. Encouraging self-regulation9. Ensuring proper conduct of market institutions and licensed

persons

PART AFORMS OF BUSINESS

OWNERSHIP

What is an exempt private company and what are the advantages of being an exempt private company? (Apr 2010 - Q4, Oct 2010 - Q1 & Jan 2013 - Q3) (4 marks) Briefly explain the meaning of an ‘exempt private company’ and its advantages over other private companies. (Jun 2013 –Q8) (4 marks)

Answer:-A private company be classified as an exempt private company if fulfill the following characteristics namely:

It must not have more than 20 members The shares must not owned directly or indirectly by a corporation

The advantages:

Exempted from submitting its FS with its annual return to CCM – FS still need to prepare

Exempted from complying with the restriction on loans to directors and persons connected to directors under S133

Table A of the 4th Schedule of Companies Act 1965 stipulates the restriction of a private limited company by shares pursuant to Section 15 of the Companies Act 1965. Identify four restrictions as stated in the Articles of Association. (Jan 2012 – Q2) (4 marks)

• Restricts the right to transfer shares in the company;

• Limits the number of shareholders to 50 (joint holders are counted as one person and employees and ex-employees who became member while employed are not counted)

• Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company; and

• Prohibits any invitations to the public to deposit any money in the company.

PART ACOMPANY SECRETARY

How can a person be disqualified from acting as a company secretary? (Oct 2008 – Q7) (3 marks)

Answer :

Section 139C of CA 1965 stated that a person be disqualified if he/she:i. Undischarged bankruptii. Convicted whether within or outside Malaysia,

• Any offence in connection with the promotion, formation or management of a corporation• Any offence involving fraud or dishonestly – convicted with the imprisonment of 3

months• Any offence involving dishonestly or lack of reasonable diligence in the discharge

of duties • Insider trading• Any offences in which proper company accounts are not kept

iii. Ceased to be a holder of a valid license issued by SSMiv. No longer a member of the professional body

How can a company secretary vacate his office when none of the directors of the company can be communicated? (Apr 2007 – Q3) (3 marks)

How would the company secretary vacate office when none of the directors of the company can be communicated? (Apr 2009 – Q8) (3 marks)

How can a company secretary vacate his office when none of the directors of the company can be communicated? (Jan 2013 – Q8) (4 marks)

Answer:-A company secretary can vacate his office by:-

Lodge the FORM 48E ( Notice of intention to Vacate the Office of Secretary) if that none of the directors of the company can be communicated with the last known residential address

Filed it with Companies Commission of Malaysia (CCM) After the expiry of 1 month from the date of notification the company secretary cease

to be secretary. However the company secretary should responsible for any act or omission done before the secretary vacated the office

Company secretary plays a vital role in the governance and administration of a company's affairs. What are the objectives of the Code of Ethics for a company secretary? (Apr 2008 – Q7) (3 marks)

The Company Secretary’s Code of Ethics (CSCE) is formulated to enhance the standard of corporate governance. Briefly explain the aims of the CSCE. (Jun 2013 – Q5) (4 marks)

Answer: Position of Company Secretary involved with internal affairs of the company which

demand ethical conduct among Company Secretary To enhance the standard of corporate governance, and To instill professionalism and effectiveness among Company Secretary To uphold the spirit of responsibility and social accountability in management field To enhance and upgrade the professional competency

Company secretary plays important role in the administration of a company's affairs. Briefly explain any four (4) core duties of a company secretary. (Oct 2010 - Q10) (5 marks)

Answer : i. Board & general meetings

Managing Board and general meetings. ii. Memorandum & Articles of Association

Ensuring that the company complies with its M&A of Association iii. Statutory Registers

Maintaining statutory registers include registers regarding members, company charges, directors and secretary, etc.

iv. Statutory Returns

Filing information with CCM to report certain changes regarding the company.

(Jan 2012 – Q5)

What are the qualifications of a company secretary pursuant to section 139 of the Companies Act 1965? (4 marks)

Answer• Be of full age i.e. 18 years of age and above• Have his principal or only place of residence in Malaysia• Be a member of any of the prescribed professional bodies namely MIA, MAICSA,

MICPA, Malaysian Bar Council, Persatuan Peguambela Sarawak, Persatuan Undang-undang Sabah and MACS

Or

Possess minimum following qualifications / experience: -• SPM / STP with 5 years of work experience, or• Holders of Certificate, Diploma or Degree (in the fields of law, company secretarial

practice, management, business administration or accounting) need 3 years, 2 years and 1 year of work experience respectively.

PART BCOMPANY SECRETARY

(Apr 2010 – Q4)You are a company secretary employed by KM Management Consultancy Sdn. Bhd., a professional corporate secretarial firm offering corporate secretarial services to small and medium sized corporations. For the last few months, the firm has failed to contact the directors of Kenanga Sdn. Bhd, one of your clients. The firm tried all means of communication such as sending mail to their business premises but it was returned, sending electronic mail but no reply and neither were the directors answering their phone or fax. You are now thinking of vacating the office of the company secretary of Kenanga Sdn. Bhd.

(Apr 2010 – Q4)a) Discuss the relevant sections of the Companies Act 1965 that allow you to vacate

the office of company secretary. State the required documents to be lodged to Companies Commission of Malaysia.

oluntarily. Answer :Voluntary vacation is through resignation or cessation of contract.Involuntary vacation of office may be through death, removal or dismissal.The office of the company secretary cannot be left vacant for more than one month at any one time.

Lodge the FORM 48E – Notice of intention to Vacate the Office of Secretary – if that none of the directors of the company can be communicated with the last known residential address

Filed with CCM After the expiry of 1 month from the date of notification – cease to be

secretary However – should responsible for any act or omission done before the secretary

vacated the office

(Apr 2010 – Q4)b) If the directors of Kenanga Sdn Bhd are unhappy with the secretarial services

provided by you, and would like to remove you as their company secretary, discuss the necessary procedures for the removal of company secretary.

Answer :

1. A company Secretary may resign by giving resignation letter to the board.2. The position of the vacant secretary must not be left unfilled for more than one

month.3. Form 49 – reflecting the resignation and appointment of new secretary must be

lodged with the Registrar of Companies.4. In practice, the removal of secretary and appointment is done simultaneously.

(Apr 2010 – Q4)c) Recently, there were a few university students undergoing their practical training

at the firm. Alya, one of them has expressed her interest in pursuing a career as acompany secretary. She seeks your advice to explain the necessary qualification to become a company secretary in Malaysia.

Answer :i. Full ageii. Residence in Malaysia iii. A member of a professional body approved by the Minister of Domestic Trade and

Consumer Affairs; The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) The Malaysian Association of Company Secretaries (MACS) The Malaysian Institute of Accountants (MIA) The Malaysian Institute of Certified Public Accountants (MICPA) The Malaysian Bar The Sabah Law Association The Advocates’ Association of Sarawak

iv. licensed by the SSM pursuant to section 139B of the CA: not bankrupt, not a criminal, resides in Malaysia, full age the minimum qualification:

SPM + 5 years of work experience Holders of certificate, Diploma, or degree + 3 yrs, 2 yrs & 1 yr work of

experience respectively

(Apr 2010 – Q4)d) Wafi, one of the firm's staff who is just newly appointed as an assistant company

secretary would like to know the procedure for application and renewal of company secretary's licence.Answer :

Section 139B. Licence to act as company secretary.

(1) For the purpose of section 139A(b), an application for a licence shall be made to the Registrar in the prescribed form and manner. (2)FORM48B - The Registrar may require an applicant to supply him with such further information as he considers necessary in relation to the application. (3) The Registrar shall only grant or renew the licence if -(a) after consideration of the character, qualification and experience of the applicant; and (b) after consideration of the interest of the public,he is of the opinion that the applicant is a fit and proper person to hold a licence. (4)FORM48C - Every licence granted under this section, including a renewal of the licence, shall be in force for a period of three years after the date of the issue thereof, unless sooner revoked by the Registrar. (5) An application for renewal of a licence shall be made not later than thirty days before the expiry of the licence. (6) Notwithstanding subsection (5), where an application for the renewal of a licence is made less than thirty days but before the expiry date of the licence, the Registrar may for any special reasons he deems fit accept such application for consideration.FORM 48D - CCM will reject the renewal if they are in opinion that the applicant has failed to act honestly or has failed to used due diligence in the discharge of his duties as a secretary

QUESTION 4Mr. Shazly has been a practising company secretary for almost 10 years. He is currently working with Excel Logistics Bhd, a public limited company. As a professional trained in corporate matters, Mr. Shazly has exercised his duties with due care and diligence.

However, in November 2011, Mr. Shazly who acted as a guarantor for his friend's personal loan was declared a bankrupt by the Malaysia Department of Insolvency due to a default in the payment of the loan. The board of directors was aware of the current status of Mr. Shazly. The board members agreed to retain him as a company secretary because Mr. Shazly has shown his capability and ability while performing his duties. In the meantime, a board meeting is convened to appoint an additional company secretary.

Jan 2012 - Part B

Company Secretary

Can Excel Logistics Bhd retain Mr.Shazy as a company secretary? Justify your answer pursuant to the provision of section 139C of the Companies Act 1965. (6 marks) • Excel Logistics Bhd cannot retain Mr.Shazy as a company secretary as stated in the provision of section 139C of

the Companies Act 1965 which is a person is disqualified to act as a secretary if:• he is an undischarged bankrupt;

– he is convicted within or outside Malaysia of:– any offence in connection with the promotion, formation or management of a corporation– any offence involving fraud or dishonesty punishable on conviction with imprisonment for three months or more– any offence involving dishonesty and lack of reasonable diligence in the discharge of his duties– insider trading– any offence in which proper company accounts are not kept

• he ceases to be a member of the professional body prescribed by the Minister under Section 139A of the Act• he ceases to be a holder of a valid license issued under Section 139B of the Act• If a person continues to act as a secretary for the company after he is disqualified under Section 139C, without

leave of the Court, he and every director who knowingly permits him to act in the capacity, are guilty of an offence.

Mr. Shazy would have been disqualified from being a Company Secretary upon him being adjudicated a bankrupt person in November 2011. However, company can retain he as employees provided the company should appoint another qualified secretary to be the first secretary

b) Explain the provisions of sections 139(6) and 139(3) of the Companies Act 1965 regarding the procedure for the appointment of a company secretary. (6 marks)

Section 139 (6) of the Act requires

• a person before appointment as secretary to make a declaration in the FORM 48F (Declaration by a person before appointment as Secretary) that

• he is not in contravention of Section 139A and 139C of the Act and • he consents to act as a secretary of the company.

While in accordance to Section 139(3) of the Act, • the secretary shall be appointed by the director and one of those secretaries shall

be present at the registered office of the company by himself or his agent or clerk on the days and the hours which the registered office is to be accessible to the public.

• The office of the secretary of company shall not be left vacant for more than 1 month at any time.

• If the office is vacant or for any other reason the secretary is not able to act, any officer of the company is authorized to act on behalf of the directors.

Jan 2012 - Part B

Company Secretary

Jan 2012 - Part B

c) If Mr. Shazly was a discharged bankrupt and later appointed as a director, can he sign any documents on behalf of the company either as a director or secretary of the company? (3 marks)

If a person is appointed as a secretary of the company and at the same time is also

appointed as a director of the company, he is not authorized to sign any documents on behalf of the company in his capacity as a director and the secretary of the company at the same. For example, in attesting the use of the common seal of the company, the same person shall not sign in his capacity as a director and as secretary of the company

Company Secretary

d) State five (5) legal restrictions imposed on the company secretary as an officer of the company. (5 marks)

(Total: 20 marks)

• Using the property of the company• Using the information acquired by virtue of his position as an officer of the

company• Using his position as such officer of the company• Using the opportunity of the company which he became aware of, in the

performance of his functions as an officer of the company; or• Engaging in business which is in competition with the company.

Jan 2012 - Part B

Company Secretary

Company Secretary

Jun 2012 - Part B

QUESTION 1Lina Suriani works as a file keeper in MZ Consultancy Sdn Bhd, a secretarial and business management company. She assists the seniors in filling up the business and company related forms. She graduated with a Diploma in Accounting but due to financial constraints, she is not able to further her studies. However, she is interested in becoming a company secretary.

Required:a) Advise Lina Suriani on how she may become a company secretary without furthering

her studies. (6 marks)

Lina Suriani may become a company secretary under S139B CA, which stated the following minimum qualifications: -• She is not a bankrupt• Not a criminal as stated in S130(1) of CA• Resides in Malaysia and above 18 years of age• Minimum qualifications / experience of Sijil Pelajaran Malaysia / Sijil Tinggi

Pelajaran Malaysia with 5 years of work experience; or• Holder of a Certificate, Diploma or Degree (in the fields of law, company secretarial

practice, management, business administration or accounting) with 3 years, 2 years and 1 year of work experience respectively.

b) Outline the procedures that Lina Suriani should follow in order to apply for a company secretary's license in Malaysia. (6 marks)

Lina Suriani should do the followings: -• Submit the application form using Form 48B – Application for Company

Secretary’s Licence• CCM will call Lina Suriani for an interview. She will be assessed on her knowledge

in relation to company law and company secretarial practices.• If successful, CCM will issue Form 48D – Company Secretary’s Licence, which is

valid for 3 years• 30 days before expiry of the licence, Lina Suriani may submit Form 48C –

Application for Renewal of Company Secretary’s Licence to CCM• Lina Suriani is required to attend continued professional education courses before

renewal of her licence.

Company Secretary

Jun 2012 - Part B

c) Yusof, a friend of Lina Suriani, is also a company secretary in MZ Consultancy Sdn Bhd. His license will expire on 25 September 2012. He seeks your advice on the following:

i) The last acceptable date for him to renew his license.

Yusof should submit his application to renew the licence latest by 27 August 2013, i.e. at least 30 days before the expiration date. However, if the application is submitted less than 30 days but before expiry, CCM may accept such application for consideration.

Company Secretary

Jun 2012 - Part B

ii) The effect if Yusof failed to renew his company secretary's license prior to the last acceptable date. (4 marks)

Yusoff is disqualified to act at the material time when he ceased to be a holder of

valid license as he not renewed his license within time limit. He and the director who knowingly permits him to act in that capacity, are guilty of offence

Company Secretary

Jun 2012 - Part B

d) Fazira, a new staff in MZ Consultancy Sdn Bhd does not understand the vacation of office of company secretary pursuant to the Companies Act 1965. Discuss the relevant provisions in the Companies Act 1965 that allow a person to vacate the office of company secretary. (4 marks)

Where the office of the secretary of a company shall not be left vacant for more than a

month at any one time, the secretary may lodge form 48E – Notice of Intention to Vacate the Office of Secretary, on the grounds that none of the directors of the company can be communicated with the last known residential address.

The said Form must be filed with CCM. With this notification, Fariza shall cease to be the

Secretary of the company on the expiry of one month from the date of the notice. Section 139(1E) states that the secretary shall not be relieved from liability for any act or

omission done before the secretary vacated the office.

QUESTION 5(Jun 2013) Part B

Jamal, Dave and Alan are the directors of TECO Sdn.Bhd. Maya Karin is an experienced licensed company secretary who has worked for TECO Sdn.Bhd. for the past five years. The board of directors has found out that Maya has not renewed her license as required by section 139B of the Companies Act 1965. At the same time, she has also failed to file the company’s annual returns for the past two years.

Jamal and Dave who are also the two major shareholders of TECO Sdn.Bhd. had requested Maya to issue share certificates to their friend, Aaron without a proper resolution. In consideration for Maya’s assistance, Jamal and Dave promised not to make any claim against her for not filing the annual returns on time for the past two years. Alan has heard about this improper arrangement and is concerned with the legality of the above transaction.

a) What are the provisions in section 139 of the Companies Act 1965 pertaining to

the qualification and disqualification of a company secretary? Relate your answer to the case above. (8 marks)

Answer :- According to section 139 of the Companies Act 1965, the qualification to act a

company secretary are :- - must be full age i.e. 18 years and above thus the appointment of body corporate

or a firm as the secretary of the company is prohibited - must be residence in Malaysia - A member of a professional body approved by the Minister of Domestic Trade and

Consumer Affairs;The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA) The Malaysian Association of Company Secretaries (MACS) The Malaysian Institute of Accountants (MIA) The Malaysian Institute of Certified Public Accountants (MICPA) The Malaysian Bar The Sabah Law Association The Advocates’ Association of Sarawak

- licensed by the SSM pursuant to section 139B of the CA:

not bankrupt, not a criminal, resides in Malaysia, full age the minimum qualification: SPM with 5 years of work experience Holders of Certificate, Diploma, or Degree with 3 years, 2 years and 1 year

work of experience respectively. The disqualification to become a company secretary are :- - Undischarged bankrupt - Convicted whether within or outside Malaysia

Any offence in connection with the promotion, formation or management of a corporation

Any offence involving fraud or dishonestly – convicted with the imprisonment of 3 months

Any offence involving dishonestly or lack of reasonable diligence in the discharge of duties

Insider trading Any offences in which proper company accounts are not kept

- Ceased to be a holder of a valid license issued by SSM - No longer a member of the professional body

According to the case, it show that Maya has not renewed her license as required by section 139B of the Companies Act 1965 therefore she become disqualified to

become the company secretary.

b) If Alan is dissatisfied with Maya’s professional conduct, how can he remove her from office? (4 marks)Answer:-

Yes, Alan can remove Maya from the office. He can pass the resolution to remove the secretary and notify CCM by filing FORM 49 within one (1) month from the effective date of removal and register of secretaries must be updated accordingly.

Alan should disclose reasonable ground of such removal by disclose improper professional conduct done by Maya such as not renew her license as required by Act, failed to file the company’s annual returns for the past two years and improper arrangement with Jamal and Dave to issue share certificates to their friend, Aaron without a proper resolution.

c) Had you been appointed as the company secretary for TECO, what would be

your actions to rectify the following situations:

i) Issue of share certificates without a proper resolution check all the document related to issuance of share certificate such as FORM32A

– Form Of Transfer Of Securities and Register of Member that keep by the company and investigate the document whether have a proper resolution or not

check the evidence that the shareholder is the member of the company – stated the number of share he holds with company common seal

if certain share certificate have enough evidence that it acquire not through proper resolution, the share should be transmission to other member approved by board meeting in the act of law

The invalid share certificate will become paperless when the transmission complete and the company’s register of member have to be update

,

ii)Failure to file annual returns for two consecutive years.

In order to rectify the problem , the following action will be take :- check the financial statement of the company for the years involved and; conduct the Extraordinary General Meeting (EGM) to discuss with members about

the problem and ask them to check whether the annual return of the years involved prepared by previous company secretary are true or not

after annual returns of both year have been rectify and approved through the board meeting, the annual return report have to be signed by the director, by the manager or by the company secretary of the company. The duty of company secretary is to lodged it to the CCM immediately after that.

TECO Sdn.Bhd. have to pay any fine and penalties that enforced by law to the appropriate authority such as CCM and Tax authority because of late submission of the 2 consecutive year of annual returns.

(8 marks)(Total: 20

marks)

THANK YOU