The study on the separation of ownership and control of malaysian companies under the new companies act 2016

Kamaliah, Salleh and Noor ‘Ashikin, Hamid and Noraida, Harun and Asiah, Bidin and Zuhairah Ariff, Abd Ghadas (2018) The study on the separation of ownership and control of malaysian companies under the new companies act 2016. In: International Conference on Law and Globalisation 2018, 21 Oct 2018, UNISZA.

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Abstract

It has long been established that the law separates the management and ownership of a company as between directors and members. Primarily the directors run and manage the company’s affairs in line with the law and the company’s constitution. In this respect, the directors owe several duties to the company. As for the members, they are recognised by the law to hold certain rights and interests which they can exercise in the company. Members and directors have two completely different roles in a company. The members own the company by owning its shares and the directors manage it. Despite of separation of powers between the two, there has been inclination on the part of the members to participate to greater extent in the company’s dealings. Further, the new Section 195 of the Companies Act 2016 ("CA 2016") confers new right on members in the sense that they may pass a resolution to make recommendations to the directors on management matters. Therefore, this paper aims to discuss the extent of the likelihood for members to interfere with the management of the company and compete with the directors in managerial decision making. The method used in this study is content analysis of the reported Malaysian and international law cases as well as the statutory provisions. The study reveals that section 195 of the CA 2016 can be used by members as platform to raise their voice in relation to matters which are within the powers of directors, hence the separation becomes slightly vague. Nevertheless, in the absence of the latest judicial decision to test the application of section 195, further review on its application may be required in order to determine methods to measure if a members’ recommendation is truly made in the best interests of the company.

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