Secretarial

Double submission of statutory form to Suruhanjaya Syarikat Malaysia (SSM)?

Double submission of statutory form to Suruhanjaya Syarikat Malaysia (SSM)?
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Double submission of statutory form to Suruhanjaya Syarikat Malaysia (SSM)?

A situation that may encounter on double submission:

• The director of the company submitted the form to SSM (usually over the counter at SSM office) in his/ her capacity without informing the company secretary.

• Appointed Company Secretary submits the same form via SSM system.

The consequences of double submission?

• SSM issued a letter to query both persons (director and secretary) on the submission of the form.

Under some circumstances, the director of the company may not receive the queries from SSM.

Click on this link to retrieve the query:: Pages - e-query (ssm.com.my)

Who to solve the problem?

• Director; or

• Appointed Company Secretary.

How to solve the problem?

1) Cancellation

Cancel the previously submitted form by a notice of withdrawal to SSM with a payment of RM500.00 to SSM.

2) Re-submission after cancellation

Submit again the form by either one of the persons (director or secretary)

3) Follow up

To ensure the completion, need to follow up and check the status via mydata or e-info system to ensure that the form appears in the document listing.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

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Audit Exemption - A higher threshold in qualifying criteria for exemption from audit

Audit Exemption - A higher threshold in qualifying criteria for exemption from audit
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New Proposed Audit Exemption for Sdn Bhd Malaysia

Audit Exemption - A higher threshold in qualifying criteria for exemption from audit

Background

This article relates to the qualifying criteria for the Audit Exemption (AE) that we published on 8 February 2022.

Suruhanjaya Syarikat Malaysia (SSM) issued a Consultative Document on the Proposed Review of AE Criteria for Private Companies in Malaysia on 2 February 2023 with the purpose to seek public response and feedback upon the proposal of new thresholds for the following categories:

1. Zero-Revenue Companies

• Turnover: No changes as remain at RM0

• Total Assets: Increase from RM300,000 to RM500,000 for the current financial year and the immediate past 2 financial years.

2. Threshold-Qualified Companies

• Turnover: Increase annual revenue from RM100,000 to RM1,000,000 during the current financial year and the immediate past 2 financial years.

• Total Assets: Increase from RM300,000 to RM1,000,000 for the current financial year and the immediate past 2 financial years.

• Employees: Increase from not more than 5 to not more than 30 employees at the end of its current financial year and immediate past 2 financial years.

SSM remains the same threshold for Dormant Companies category.

SSM Findings

From the Consultative Document (CD), SSM considered the following in formulating the above proposal:

1. SSM analysis on data available as at 30 November 2022

From Table 2 and Table 3 of the CD, the statistics reflected the overall percentage of AE submissions at a very low rate since the introduction in the year 2017.

Financial Year Ended (Rate)

2020 6%

2019 7%

2018 4%

SSM Explanation

Tag along in the analysis rate, SSM also listed 4 possible reasons for the low rate summaries as below :

a. awareness on the eligibility for AE;

b. procedure imposed by related bodies (such as licensing and regulatory authorities, banks) which require audited Financial Statement;

c. Company Directors' option to submit the audited Financial Statement; and

d. Other factors - limitation of data on the number of employees cause the requirement to submit the audited Financial Statement.

2. Findings of a survey

The Malaysian Institute of Accountants (MIA) conducted a survey in the year 2021 on “The Impact of Audit Exemption on Small Companies and Audits Firms.

MIA reported their findings summaries as below:

a. reasons to option for AE or not; and

b. the majority of respondents agreed to increase the threshold.

3. SSM comparative study in other 3 jurisdictions (United Kingdom, Australia and Singapore) on the trend of AE.

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A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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What is LLP in Malaysia?

What is LLP in Malaysia?
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What is LLP in Malaysia?

The Limited Liability Partnership (LLP) is an alternative business container regulated under the Limited Liability Partnership Act 2012 which incorporates the characteristics of a company and conventional partnership.

What is LLP (Limited Liability Partnership)?

1. Combination of a company and conventional partnership.

2. It’s governed under LLP Act 2012

Who does the registration of LLP?

Compliance officer - he/she may also be one of the partners of the LLP.

Where can register an LLP?

Registrar (SSM) - The compliance officer may log in to MyLLP portal to do registration

How to register an LLP?

Requirements

a) name of LLP

b) nature of business

c) registered office of LLP

d) partner’s details

e) compliance officer’s details

f) approval letter from the governed body (if any)

g) others relevant infomation

How to register an LLP?

Registration procedure

a) Either one of the partners will be appointed as a compliance officer.

b) he/she shall go to SSM office to do identity verification purposes to activate the portal account.

c) the registration of LLP will submit via MyLLP portal by the compliance officer.

d) reserve of LLP Name (SSM) must approve your name before you can register it).

e) you need to register the LLP within 30 days.

What documents do you get after registration?

- Company’s profile

- Certificate of registration

***the documents will be issued by SSM upon request together with the prescribed fee.

What are the registration fees for LLP?

There is a registration fee of RM500 to be charged by SSM

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

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Can I reuse a company name after strike off from SSM?

Can I reuse a company name after strike off from SSM?
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Can I reuse a company name after strike off from SSM?

On 30 January 2023, Suruhanjaya Syarikat Malaysia (SSM) issued a guideline related to the application to Court to reinstate the name of the company under Section 555(1) of Companies Act (CA), 2016.

This guideline is useful to the public (especially Company Directors) who felt upset by SSM's decision to strike off their company under Section 549.

SSM Power To Strike Off

This section gives SSM the legal power to strike a company off in the registrar where the company:

(a) is not carrying on business or operation;

(b) has contravened any of this act;

(c ) is being used for unlawful purposes; and

(d) is being wound up.

This reinstatement is applicable within 7 years after the name has been struck off by SSM.

How does it work?

Application process according to

1) Order 88 rule 2 of the Rules of Court 2012; and

2) Section 555 of CA, 2016.

The proceeding shall be commenced by the applicant (ie Plaintiff) to file in court an originating summons (“Originating Summons”).

The Originating Summons needs to be supported by an Affidavit in Support (“Affidavit”) setting out the grounds and evidence in support of the application.

General Guidelines

The Guidelines about the application for reinstatement under Section 555 of CA 2016 are summarised below: -

1. The Defendant: SSM is to be named as the defendant in the application;

2. Contents of the Affidavit:

The Affidavit must include the following: -

a) Info on the directors of the Company;

b) Info on the shareholders;

c) Consent letter from the other directors;

d) Address of the registered office;

e) Ground of the application; and

f) Other necessary and relevant facts (for example Annual Return and Financial Statement to prove that the company is in existence and operation or bank transaction reflected in the bank statement or there is the existence of ownership of assets).

The orders sought from the Court must include:

a) The Plaintiff lodges the overdue statutory documents not submitted previously such as Financial Statements, Annual Return and other related documents if any;

b) The cost of the proceedings of RM2,000 be paid by the plaintiff within 30 days of the order made;

c) An order that the cost of the application is borne by the plaintiff.

As the result, SSM may oppose an application that does not fulfill the requirements and the court ultimately has the discretion of whether or not to allow an application for reinstatement under Section 555 of CA 2016 to have proceeded.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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How to set up a company in Malaysia?

How to set up a company in Malaysia?
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KTP Get-Connected Session @ 31/03/23

  • Topic : How to set up a company in Malaysia?

  • Date : 31/03/23

  • Time : 10:30am

  • Location : Live Interview

  • Speakers : Jasmine Ma

  • Moderator : Koh Teck Peng

Proposed Agenda :

1) What company name you want your company to be called?

2) What words/symbols are prohibited by SSM for you to use?

3) How many directors do you want your company to have?

4) How many shareholders will your company have?

5) Does a company need a secretary?

6) What is the nature of the business of your company?

7) What is your company's paid-up capital?

8) How long for the whole process of incorporation?

9) & more

Recorded Webinar on YouTube

Stay tuned for the recorded webinar on our YouTube in the coming days.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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How to close LLP in Malaysia ?

How to close LLP in Malaysia ?
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How to close LLP in Malaysia ?

Dissolution of Limited Liability Partnership​

Section 50 of the Limited Liability Partnership (LLP) Act 2012 shall apply to a voluntary winding-up of a Limited Liability Partnership. S.51 of the LLP Act 2012 Power of Registrar to strike-off limited liability partnerships from the register is reserved for the Registrar.

3 options for closure:

1) Compulsory winding-up by Court

2) Voluntary winding up by partners (Preferable option)

3) Strike-off by SSM.

When partners of LLP do not wish to continue the business or have no successor to take over the entity, the partners may opt to close the entity by Voluntary Winding Up (VWU).

The basic requirement for Voluntary Winding Up (VWU)

Section 50(2) of LLP Act, 2012 required the LLP has:

1) ceased to operate and

2) discharged all its debts and liabilities

Who can apply?

1) Any one of the partner

2) Compliance Officer

with an authorised user to access MyLLP under SSM4U system

Application process with SSM to effect the VWU

  • Part A – Pre-application

  • Part B – Application

  • Part C – Post application

Part A - Pre-application process

As per Section 50(4) of LLP Act, 2012 and Item 4 in SSM Guideline

1) Send a notice to all partners by registered post;

2) Send and obtained a written notice of clearance and no objection from Inland Revenue Board (IRB) of Malaysia; and

3) Publish a notice in Malaysia newspaper as per Appendix A and B in

a. national language; and

b. English language

Part B - Application process

As per Section 50(3) of LLP Act, 2012 and Item 9 in SSM Guideline

1) Submit the application via MyLLP within 7 days upon compliance with Part A together with the following documents:

a. Statutory Declaration as per Appendix C;

b. copy of the notice sent to all partners;

c. written notice from IRB; and

d. copy of the notice published in the newspaper

Part C – Post application process

As per Section 50(7),(8) and (9) of LLP Act, 2012 and Item 14 to 16 in SSM Guideline

1) SSM will notify the applicant in writing on

a. declare that the LLP is dissolved if no further objection and withdrawal; and

b. entitlement to distribute its surplus assets (if any) among partners under the LLP agreement.

2) The applicant required to notify SSM of the completion of the distribution of surplus assets within 14 days to effective and complete the application process.

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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What Do You Mean by LLP?

What Do You Mean by LLP?
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What Do You Mean by LLP?

Limited Liability Partnership (LLP) is simply a combination of the feature if a partnership and a limited liability company.

Advantages of LLP company:

a) Limited Liability. Under LLP, the partners are only liable for the amount invested in the company (capital) if the company suffers a loss.

b) Separate Legal Entity. It is a separate legal entity like a company, thus this means a LLP can own property, enter into contracts and conduct business in its own name.

c) Flexible Management. LLP is considered to have a flexible management style where the partners could manage the business by themselves or appoint a manager to operate the business on behalf of them. This allows partner to focus on their areas of expertise.

d) Need Not Be Audited. For a LLP company, there is no need to lodge the audited financial statements under normal circumstances. This help the LLP company to save costs.

e) Continuity. The company can still continue to exist and operate even if one or more partners leave the company or die.

Circumstances LLP is Suitable

a) Professional Services. LLP is suitable for professional services provider like accountants, lawyers, consultants and etc. This is because they could benefit from the flexible management feature of the LLP that allows them to focus their own areas of expertise

b) SME. LLP is suitable for SME company because this type of business entity would normally prefer to have limited liability protection for its partners. Especially in the early stage of start-up when the company has very limited resources to repay any potential losses.

Reference

Limited Liability Partnership Act 2012

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

KTP Lifestyle

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Can my Sdn Bhd appoint more than one (1) company secretary ?

Can my Sdn Bhd appoint more than one (1) company secretary ?
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Can my Sdn Bhd appoint more than one (1) company secretary ?

Recently we encountered a question raised by Company Director asking whether Sdn Bhd can appoint more than 1 secretary for the company.

Section 235(1) of the Companies Act (CA) 2016 states that a company shall have at least 1 secretary. This means there is no prohibition to appoint more than 1 person to act as secretary for the company.

CA only prohibition this person to act in dual capital (ie as secretary and at the same time as a director) under Section 242 of CA2016 to avoid authorisation by the same person.

Additionally, the company cannot simply appoint anyone to act as the secretary.

There are requirements to be fulfilled before the appointment and the requirements are listed below:

I) Basic

a) a natural person;

b) age 18 years old and above; and

c) citizen or permanent resident of Malaysia who resident and having a principal address of residence in Malaysia

II) Qualification/ Professional requirement

a) a member of a body listed in the Fourth Schedule of CA2016; or

b) a person licensed under Section 20G of the Companies Commission of Malaysia Act 2001.

Who is responsible to appoint a company secretary?

Company Directors may not have a full understanding of the technical knowledge in compliance according to the act. Hence, he requires the assistance of a qualified person to attend to compliance matters.

Therefore, the secretary holds an official role in the company and is also an officer under Section 2 of the CA 2016.

This means the secretary is binding to the company. He/ she is required to play his/ her role as administrator to maintain the registered record with the Registrar of Company according to the act.

When to appoint a company secretary?

Within 30 days from the date of incorporation with written consent from the Company Secretary as stated in Section 236(2)&(3) of CA2016.

The appointment of a subsequent company secretary is made by the Board of Directors depending on the terms and conditions of such appointment.

Generally, Sdn Bhd may choose to have more than 1 company secretary.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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What are 5 responsibilities of the director under SSM?

What are 5 responsibilities of the director under SSM?
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What are 5 responsibilities of the director under SSM?

1) Lodgement of Annual Return (AR)

Section 68(1) of Companies Act, 2016 require a company to lodge the AR to SSM not later than 30 days from the anniversary of its incorporation date.

Penalty: Fine not exceeding RM50,000.00

2) Prepare Financial Statements

Section 248(1) of Companies Act, 2016 require a company to prepare the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM500,000.00 or imprisonment not exceeding 1 year or both

3) Circulation of Financial Statements

Section 258(1) of Companies Act, 2016 require a company to circulate the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM50,000.00

4) Lodgement of Financial Statements

Section 259 (1) of Companies Act, 2016 require a company Lodge the financial statement to SSM within 30 days from the circulation date.

Penalty: Fine not exceeding RM50,000.00 and if continuing offence, a further fine not exceeding RM1,000 for each day

5) Late Lodgement Fee

SSM issued a Practice Directive No.1/2017 – The Lodgement Requirements and Related Matter that further details out the penalty for late lodgement of documents.

For any documents that is lodged to SSM later than the prescribed timeframe as per stipulated in the Act, the following late lodgment penalty shall apply:

After deadline Penalty(RM)

* 7 days to 3 months RM50
* 4 months to 6 months RM100
* 7 months to 12 months RM150
* 13 months onward RM200

The Company is required to pay this penalty amount on the spot at the time filing for the documents to SSM.

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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SSM Heavy Fines on Company, Sole Proprietor and Partnership

SSM Heavy Fines on Company, Sole Proprietor and Partnership
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SSM Heavy Fines on Company, Sole Proprietor and Partnership

Update any changes in company information promptly

Recently we came across an interesting press release published by SSM on 26 October 2022 where the Registrar of Business (ROB) imposed a fine of RM4,000 on the owner of a sole proprietor as a result of giving a false business address.

This serves as a reminder to the public that prosecution will be taken against any person who is found to have given false or misleading statements and information to SSM. SSM is always consistent in regulating compliance with the law and ensuring the corporate community is aware of its responsibility and business ethics.

In this newsletter, we would like to emphasize and spread awareness to our client and the public that it is important to update the business or company’s particular promptly once there are any changes in the details.

Why it is important?

To avoid any heavy penalty imposed by SSM.

Accordingly to the following act governed under SSM, it is a requirement for the business owner or company’s directors to update any changes in the particular such as a change in residential address, or renewal passport number for foreign director and shareholder.

  • ROB Act, 1956 – Section 5B

  • Companies Act (CA), 2016 – Division 8 Registered Office and Registers - Section 51 and 58

When need to notify on the changes?

  • ROB - within 30 days from the date of changes

  • ROC - within 14 days from the date changes.

What are the penalty and fines if failure to comply?

a) Late filing fees are applicable as follows:

Private company:

- Not more than 3 months – RM 50.00

- More than 3 months but not more than 6 months – RM100.00

- More than 6 months but not more than 12 months – RM150.00

- More than 12 months – RM200.00

b) Compound upon conviction

ROB - not exceeding RM10,000 or to imprisonment for a term not exceeding 1 year or both

ROC -

i) Section 51 - not exceeding RM20,000

ii) Section 58 - not exceeding RM50,000

Final Words

In conclusion, the business owner and company directors’ must update any changes of information to SSM. The information provided to SSM must be true and correct to avoid any unnecessary penalty imposed by SSM.

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

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SSM Discount On Compound 2022

SSM Discount On Compound 2022
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SSM Discount On Compound 2022

6 common mistakes under Companies Act 2016 for Private Company “Sdn Bhd” (Part 2)

  1. Failure to display on invoice or any documentation – Penalty: Subject to SSM general offence penalty

  2. Failure to display on signboard – Penalty: Subject to SSM general offence penalty

  3. Late submission of Annual Return - Penalty: Max RM50,000

  4. Late preparation of Audited Financial Statement – Penalty: Max RM500,000 + imprisonment max 1 year

  5. Late circulation of Audited Financial Statements – Penalty: Max RM50,000

  6. Late submission of Audited Financial Statement – Penalty: Max RM50,000

SSM Discount On Compound 2022

  • Reduction rate :

    Up to 90% applies to all offences except for out of court settlement or Inquiry Paper

  • Reduction period :

    Until 31 December 2022. Any Compound that remains unpaid after this period will return to the original amount.

How To Get The Discount

Step 1 : Check compound status by:

a) Email to ar_compliance@ssm.com.my; or

b) online via e-Kompaun or EzBiz; or

c) visit any SSM office or call SSM Centre at 03-7721 4000

Step 2 : Prepare an appeal letter to SSM

Step 3 : Purchase Bank Draft, Debit/Credit Card, Money Order or Postal Order to the name of SURUHANJAYA SYARIKAT MALAYSIA

Step 4 : Deliver to any SSM branch for settlement of the compound with SSM receipt

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KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

KTP Lifestyle

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Advance to Directors

Advance to Directors
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Impact on Advance to Directors

🚩Issue

ABC Sdn Bhd is a dormant company (not yet commence since incorporation) with a share capital of RM100,000. There is a balance of advance to directors at the financial year ended 31.10.2022 where:

(i) Mr A holds 60% - RM60,000.

(ii) Mr B holds 10% - RM10,000.

What is the audit and tax impact on advance to directors?

🚩Opinion

Audit Impact

ABC company shall not make a loan to directors unless the loan or advances is made in the ordinary course of the company’s business according to section 224 of CA 2016.

Tax impact

Only the advances with internal funds made to Mr A whose shareholding > 20% is subjected to deemed interest which by referring to Paragraph 5.3 of Public Ruling No.8/2015 & Subsection 75A(2) of ITA 1967. Thus, Mr A’s outstanding balance will subject to deemed interest but Mr B will not.

Refer to Paragraph 6 of Public Ruling No. 8/2015, with the advances made to Director Mr A & B, the company is deemed to have commenced operation in accordance with subsection 21A (8) of the ITA 1967.

🚩Reasoning

Audit Impact

Section 224 of the Companies Act 2016 – Loan to director

• A company shall not enter any guarantee or provide any security in connection with a loan made to such a director by any other person, unless the loan is made:

(i) To meet the expenditure incurred or to be incurred by the director for the purpose of the company;

(ii) To a full-time director in purchasing or acquiring a home; or

(iii) Where the company has passed a resolution to approve a scheme for the making of loans to employees of the company and the loan is in accordance with that scheme.

• Penalty:

(i) An imprisonment of not > 5 years; or

(ii) A fine of not > RM3 million; or

(iii) Both.

Tax Impact

Subsection 75A(2) of the Income Tax Act 1967 – Meaning of a director

• A person who involved in the management of the company’s business; and

• Holds at least 20% of company’s ordinary share; or

• Directly or indirectly through other companies holds at least 20% of company’s ordinary share.

Public Ruling No. 8/2015

(a) Paragraph 5.3 – Determination and the amount of interest income deemed to be received by the company

• Internal funds: The amount of interest will be computed or determined based on the prescribed formula with ALR published by BNM in the basis year in which the loans or advances are given.

(b) Paragraph 6 - Loan or Advances by a dormant company to directors of the company

• A dormant company is deemed to have commenced operation if a loans or advances made to the directors in accordance with subsection 21A (😎 of the ITA 1967.

🚩Example/Sources

(i) Section 224 – Loans to director (Act 777, Companies Act 2016)

https://www.ssm.com.my/.../aktabi_20160915...

(ii) Definition of director

- Section 75A – Director’s Liability (Act 53, Income Tax Act 1967)

https://phl.hasil.gov.my/pdf/pdfam/Act_53_01032021_2.pdf

- Public Ruling No. 2/2019 – Director’s Liability

http://lampiran1.hasil.gov.my/pdf/pdfam/PR_02_2019.pdf

(iii) Public Ruling No. 8/2015 – Loan or advances to director by a company

https://phl.hasil.gov.my/.../LOAN_OR_ADVANCES_TO_DIRECTOR...

🚩Authored by Ong Xin Ying (Christine), Audit/Tax Junior of the Firm in her personal LinkedIn.

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Dividends the Companies Act 2016

Dividends the Companies Act 2016
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Dividends the Companies Act 2016

Continuous learning is part of our company culture…

We attended an external webinar on “Everything About Dividends” from Ms Leong Ai Wah on 11 November 2022.

The key takeaway from the webinar:

a) Dividend distribution requirements.

b) How is available profit determined?

c) Powers to declare dividends.

d) Dividend policy

e) Solvency test can be cashflow or ratio

f) Dividend distribution method

Summary of learning

Here is the summary reflected in the webinar is dividends can only be distributed to shareholders if the company has available profit and solvency.

Most of the time we focus on retained earnings, but in fact, the profits for the year can also be used to determine dividend distribution.

The power to declare dividends differs between companies with constitution and those company without constitution. The companies with constitution will be determined by the board of directors and followed by members at the annual general meeting. For companies without constitution, the decision is made only by the board of directors.

Dividend Policies

Dividend policies are divided into 3 categories namely Residual, Stable and Hybrid. The Residual policy is that dividends are paid only when all capital requirements are met, but with the Stable policy, dividends are paid annually regardless of earning fluctuations. However, the Hybrid policy is a combination of Residual and Stable.

Solvency Test

Typically, most of us assess a company's solvency by preparing a cash flow statement for the next 12 months from the payment date. In fact, in addition to the cash flow statement, we can also use the 3 ratios to do the solvency test. There are quick ratio, current ratio and solvency ratio.

Payment Mode

As we know, cash dividends are the most common payment method. In fact, there are any other payment methods, such as share dividends, also known as bonus issue. It will be paid up in full or in part non-cash using shares allocated or deemed allocated.

The third is set-off again amount owing, for example a company can declare a dividend to offset what is owed by shareholders.

Fourth, dividend in specie, also called the transfer of assets is also one of the mode of payment for distribute dividend. For example, land. The land is allocated according to the shareholders' shares.

Lastly, there are dividend reinvestment plans, which are plans that allow shareholders to reinvest cash dividends in additional company shares.

Thanks to the speaker – Ms Leong Oi Wah for hosting this webinar and giving us a clear picture of the dividend.

Authored by Caroline Teo, our assistant manager of the firm in our Group in her personal LinkedIn. http://bit.ly/3UQh5fE

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What is the penalty of late filing to IRB and SSM for my Sdn Bhd?

What is the penalty of late filing to IRB and SSM for my Sdn Bhd?
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What is the penalty of late filing to IRB and SSM for my Sdn Bhd?

1) Late Filing to IRB/LHDN

Generally, the standard penalties that will be imposed by IRB for late submission of tax return form is according to:

Section 112 of Income Tax Act 1967 - Failure to furnish return or give notice of chargeability

a) Section 112 (1) Failure to furnish return for one (1) YA

Penalty: RM200 – RM20,000; or

Imprisonment: not exceeding 6 months; or Both

b) Section 112 (1A) Failure to furnish return for two (2) YAs or more

Penalty: RM1,000 – RM20,000 and triple of tax payable with DG best judgement; or

Imprisonment: not exceeding 6 months; or Both

c) Section 112 (3) of Income Tax Act 1967

Penalty: Triple of the tax payable for the YA

However, in normal practice, IRB will charge the penalties based on the:

Operational Guidelines GPHDN 3/2020 - Guidelines on the imposition of penalties for failure to furnish tax returns

The Inland Revenue Board (IRB) has issued Operational Guidelines GPHDN 3/2020 - Imposition of penalties under subsection 112(3) of the Income Tax Act 1967, subsection 51(3) of the Petroleum (Income Tax) Act 1967, and subsection 29(3) of the Real Property Gains Tax Act 1976, dated 13 August 2020.

It replaced the earlier issued GPHDN 5/2019 of the same title that revokes Operational Guidelines GPHDN 1/2015 dated 5 March 2015, which only covered penalties under subsection 112(3) of the Income Tax Act 1967.

The following table set out the penalty rates for late filing as provided in the new guidelines.

Late filing period Penalty rate (%)

  • Within 12 months 15%

  • More than 12 months to 24 months 30%

  • More than 24 months 45%

• In normal practice, LHDN will directly impose a 45% penalty on the tax payable amount when a taxpayer has failed to furnish the return form in the prescribed time limit.

• LHDN will then issue a Form J letter detailing the penalty amount to the taxpayer and the amount must be paid within 30 days from the date of the letter.

• If the taxpayer fails to remit the tax amount before the due date, the Company will be liable for a penalty of 10% on unpaid tax.

• If the late filing period is less than 24 months, the taxpayer can submit the tax appeal to LHDN to request for the reduction of the penalty rate from 45% to 15% or 30% depending on the actual period the tax return form was submitted.

2) Late Filing to SSM

i) Lodgement of Annual Return (AR)

Section 68(1) of Companies Act, 2016 require a company to lodge the AR to SSM not later than 30 days from the anniversary of its incorporation date.

Penalty: Fine not exceeding RM50,000.00

ii) Prepare Financial Statements

Section 248(1) of Companies Act, 2016 require a company to prepare the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM500,000.00 or imprisonment not exceeding 1 year or both

iii) Circulation of Financial Statements

Section 258(1) of Companies Act, 2016 require a company to circulate the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM50,000.00

iv) Lodgement of Financial Statements

Section 259 (1) of Companies Act, 2016 require a company Lodge the financial statement to SSM within 30 days from the circulation date.

Penalty: Fine not exceeding RM50,000.00 and if continuing offence, a further fine not exceeding RM1,000 for each day

In addition to the penalties as stated above, SSM also issued a Practice Directive No.1/2017 – The Lodgement Requirements and Related Matter that further details out the penalty for late lodgement of documents.

For any documents that is lodged to SSM later than the prescribed timeframe as per stipulated in the Act, the following late lodgment penalty shall apply:

After deadline Penalty(RM)

  • 7 days to 3 months RM50

  • 4 months to 6 months RM100

  • 7 months to 12 months RM150

  • 13 months onward RM200

The Company is required to pay this penalty amount on the spot at the time filing for the documents to SSM.

Authored by Kam Shi Zhen (Bryan), a junior associate with the Firm.

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6 common mistakes of Sdn Bhd under Companies Act 2016

6 common mistakes of Sdn Bhd under Companies Act 2016
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6 common mistakes of Sdn Bhd under Companies Act 2016

1. Section 30 (1) :

The company does not display the company's name and registration number at the places where the business is carried on (signboard)

2. Section 30 (2) :

The company does not specify the name and registration number on all business documentation and correspondence.

3. Section 68 (1):

The company fails to lodge the yearly annual return within 30 days from the anniversary date of incorporation.

4. Section 248 (1):

Directors fail to prepare financial statements within

(a) 18 months from the incorporation date;

(b) 6 months from the subsequent financial year end.

5. Section 258 (1) (a):

Failure to circulate the financial statements within 6 months from financial year end.

6. Section 259 (1) (a):

The company fails to lodge yearly financial statements within 30 days from the circulation date.

Non-compliance with any of the above sections is subject to penalty.

Penalty ….to be revealed in the next posting

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First financial period

First financial period
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How do I find my financial year end if I incorporate a Sdn Bhd on 18/10/22?

“The beginning is the most important part of the work” – Plato

The same thing can be applied when 𝐝𝐞𝐭𝐞𝐫𝐦𝐢𝐧𝐢𝐧𝐠 𝐚 𝐧𝐞𝐰𝐥𝐲 𝐢𝐧𝐜𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞𝐝 𝐒𝐞𝐧𝐝𝐢𝐫𝐢𝐚𝐧 𝐁𝐞𝐫𝐡𝐚𝐝 (𝐑𝐞𝐟𝐞𝐫 𝐡𝐞𝐫𝐞𝐢𝐧 𝐚𝐬 “𝐒𝐁”) 𝐟𝐢𝐫𝐬𝐭 𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐲𝐞𝐚𝐫 𝐞𝐧𝐝.

As simple as it sounds, there is more to it than meets the eye. There are various compliance standards that the Company need to adhere to as well as multiple factors to be taken into consideration when making the financial decision on fixing the SB first financial year-end.

Firstly, the Company is required to comply with Section 248 of the Companies Act 2016 (refer herein as “CA 2016”)

Every SB is obligated to fix its financial year end (refer herein as “FYE”) within 18 months from the date of its incorporation.

Indeed,18 months may sound like a lot, but you may not want to max out the time frame given. The company may want to consider including a time buffer in their planning for unforeseen circumstances.

𝑰𝒔 𝒕𝒉𝒂𝒕 𝒊𝒕? 𝑫𝒐𝒆𝒔 𝒕𝒉𝒂𝒕 𝒎𝒆𝒂𝒏 𝒘𝒆 𝒄𝒂𝒏 𝒇𝒊𝒙 𝒐𝒖𝒓 𝒇𝒊𝒏𝒂𝒏𝒄𝒊𝒂𝒍 𝒚𝒆𝒂𝒓 𝒆𝒏𝒅 𝒂𝒕 𝒂𝒏𝒚 𝑭𝒀𝑬 𝒘𝒆 𝒅𝒆𝒔𝒊𝒓𝒆𝒅 𝒂𝒔 𝒍𝒐𝒏𝒈 𝒂𝒔 𝒘𝒆 𝒄𝒐𝒎𝒑𝒍𝒚 𝒕𝒐 𝒕𝒉𝒆 𝒂𝒃𝒐𝒗𝒆?

𝑩𝒆𝒇𝒐𝒓𝒆 𝒚𝒐𝒖 𝒋𝒖𝒎𝒑 𝒊𝒏𝒕𝒐 𝒚𝒐𝒖𝒓 𝒅𝒆𝒔𝒊𝒓𝒆 𝑭𝒀𝑬, 𝒍𝒐𝒐𝒌 𝒄𝒍𝒐𝒔𝒆𝒍𝒚 𝒇𝒐𝒓 𝒂𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝒄𝒐𝒎𝒑𝒍𝒊𝒂𝒏𝒄𝒆 𝒂𝒔 𝒃𝒆𝒍𝒐𝒘:

(𝐢) 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐭𝐨 𝐒𝐞𝐜𝐭𝐢𝐨𝐧 247 of 𝐂𝐀 2016

(a) If the SB becomes a subsidiary of any holding company that is incorporated in Malaysia within two years from its incorporation date, the FYE should be synchronized with the FYE of the holding company.

(b) Having said that, a holding company may apply in writing to the Registrar under Section 247(3) of CA 2016 if the holding company has good reason for the subsidiary to continue having a different financial year.

(c) Although the SB may initially fix its FYE differently compared to its holding company and change it on a later date (within two years of its incorporation date), but why go through the hassle when you can do it neat at the initial stage not to mention the additional professional fee that will be incurred when change of FYE involved.

(𝐢𝐢) 𝐓𝐚𝐱 𝐢𝐦𝐩𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 - 𝐏𝐮𝐛𝐥𝐢𝐜 𝐑𝐮𝐥𝐢𝐧𝐠 8/2014 (𝐏𝐑)

As stipulated under Para 4.2 of the PR, the first accounting period would be the first year of assessment for the SB.

But of course, if the Company intended to opt for (i)(c) above, the Company is obliged to comply to Para 5 of the PR as well.

All in all, of course, other than the above, there are a lot more factors which may come into play that may affect the decision such as the agreement with a third party, decision by key management personnel of the Company and etc. Hence, I am confident, each Company out there will come up with its best decision when fixing its first financial year end after a thorough consideration.

Authored by Calvin Lim, audit senior, from his personal Linkedin posting https://bit.ly/3SwfJFr

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Cases on promoters under the Company Act

Cases on promoters under the Company Act
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Cases on promoters under the Company Act

Who is a promoter?

“Someone who undertakes all necessary steps to form a company” - Twycross v Grant

What are Promoter duties?

  • Make an adequate disclosure

  • Does not exercise undue influence

  • Cannot make a secret

How to make an adequate disclosure?

Full disclosure of any transactions he had entered into on behalf of the company by way of

  • General meeting (Public Limited “Bhd”)

  • Board meeting (Private limited “Sdn Bhd”)

What does it mean by undue influence?

Where the “consent” is obtained by some pressure whereby the other party was in a disadvantaged position

Am I ever making a secret profit?

Profit in terms of rebates, discounts or incentives received without the company’s consent either by way of in the connection of the company or via its nominee (family related).

What if I breach my duties as a promoter?

Company may:

  • Rescind the contract

    Case law : Erlanger v Sombrero Phosphate Co

  • Recovery of secret profit

    Case law : Gluckstein v Barnes

  • Claim damages for breach of fiduciary duties

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Corporate and Business Information Data (CBID)

Corporate and Business Information Data (CBID)
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Corporate and Business Information Data (CBID)

Corporate and Business Information Data (CBID) is a business information tool available in SSM to customise data for both companies and businesses at a reasonable price.

The specific sets of data are divided into 3 segments as follows:

1. Demographic:- ie. gender, age, race, etc.;

2. Geographic:- ie. State, town, etc.; and

3. Financial:- ie. profit and loss, balance sheet, etc.

CBID become one of the important resources where users can obtain the information as research material to advantageously make a business decision in starting, operating, or even expanding the business.

The importance of CBID:

- business growth information in a particular location.

- marketing purpose and networking collaboration.

- specialised research and analysis.

- business or company expansion analysis either through joint ventures or alliances.

This product is accessible at e-CBID and the cost is listed below:

a) Companies

i) Processing Data / Statistics Fee - RM20/Application

ii) Companies Data Fee by Package - RM3/package per company

iii) List of Company – RM10/Company

iv) Companies Statistics Fee - RM100/statistic

b) Business

i) Processing Data / Statistics – RM10/Application

ii) Businesses Data Fee - RM10/Business

iii) Businesses Statistics Fee – RM20/Statistic

In conclusion, SSM encourages entrepreneurs to utilise the CBID platform for more accurate and reliable information to ease decision-making in business operations at an affordable price.

For more information, click here :

https://bit.ly/3AQ5QeO

https://bit.ly/3KVOdi8

 

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What is Attestation of Company Good Standing (ACGS)?

What is Attestation of Company Good Standing (ACGS)?
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What is the meaning of good standing from SSM?

What is Attestation of Company Good Standing (ACGS)?

ACGS is a confirmation from SSM that a company has met the criteria that were set in the issuance of this ACGS.

The Content in ACGS

Ø  Company Name

Ø  Company Registration Number

Ø  Incorporation Date

Ø  Types of the Company (Public /Private)

Ø  Registered Address

Criteria of ACGS Product for a Company

1.         Incorporated for at least 18 months from the date of purchase ACFS;

2.         Lodged its latest annual return and audited financial statements or certificate relating to an Exempt Private Company;

3.         Existence and not in the process of being wound up or struck off or dissolved ;

4.         Not dormant according to the nature of business;

5.         Has a registered address;

6.         The company or its directors do not consist of any outstanding compound; and

7.         The company or its directors do not have any pending prosecution case.

Why is ACGS important?

a) Official

            – Confirmation issued by SSM and able to verified by digital scan QR code

b) Compliance

– The company’s statutory form and return are filed, up to date and well maintain or organised

c) Trustworthy

             – Meet the criteria set up by SSM with confirmation and certification

d) Reliable

            – consistently good in quality or performance and able to be trusted

How to generate a company ACGS?

ACGS can be generated upon request by the user if it passes the set criteria.

Will be available in SSM e-info if the Company meets all the requirements.

Where to purchase and the cost?

The user can purchase ACGS from SSM e-Info website [https://www.ssm-einfo.my/]

RM105 for each purchase.

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Can a company provide financial assistance to purchase shares ?

Can a company provide financial assistance to purchase shares ?
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Can a company provide financial assistance to purchase shares ?

Section 123(1) of the Companies Act (CA) 2016 prohibited a company to give financial assistance, regardless directly or indirectly to any person or its shareholder to acquire its own shares or shares of its holding company.

In the context of financial assistance, it was not defined in CA 2016, however, as stated in the section itself, it could be in the form of a loan, guarantee or provision of security or otherwise connected to such purchase.

The rationale of Section 123(1):

• acquisition of shares should be using his/ her own resources;

• to prevent depletion and reduction of the company’s capital because such action might compromise the benefits and interests of the creditors of that particular company;

• to protect the shareholder’s right to expect, and by extension to protect them from the abuse of the company’s capital;

• to prevent manipulation of the market because when a company gives financial assistance to buy its shares, the outstanding shares will go down;

• increase Earning Per Share (EPS) of the company and simultaneously it can artificially increase the market price per share of the company and that’s how manipulation is done.

Exemption

However, there are exemptions made available under Section 125 and 126 of CA2016 :

a) where the lending of money is part of the company’s ordinary business such as bank or money lender;

b) where it is for a trust scheme for employees;

c) where the financial assistance is given to employees for their own benefit;

d) where the company is regulated by written laws relating to a bank, insurance or takaful or which are subject to the supervision of the Securities Commission;

e) where the company is not a public listed company and it has complied with the conditions listed in s126 where shareholders approved by passing a special resolution at a general meeting to give financial assistance not exceeding 10% of shareholders’ funds if the “whitewash” procedures are satisfied.

Penalties and Offences

Under Section 123(3) of CA2016 will impose a fine not exceeding RM3,000,000 or imprisonment for a term not exceeding five years or both upon conviction. Additionally, as per Subsection 4, the Court may order the convicted person to pay compensation to the company or another person who has suffered loss or damage as a result of the contravention that constituted the offence.

In conclusion, this provision restricts the company from using funds to assist a person to acquire shares. This provision catches some business owners off their guard and is surprised to learn that they are restricted to use the funds of the company to acquire shares as they like.

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THK Group of Companies THK Management Advisory Sdn Bhd 200401000220 (638723­X) THK Secretarial PLT 202304003367 (LLP0037327-LGN)

Wisma THK, No. 41, 41-01, 41-02, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru, Johor, Malaysia.
+6012-771 7903 (Secretary Department)
+6012-771 7803 (Account Department)
+607-361 3443

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