Assignment on Discussing and Applying new para 2.19B from Main Market Listing Requirements.
1. Guidelines
on the Assignment
i. This is a research topic which requires
candidates to discuss and analyse the recent amendments to the Main Market
Listing Requirements which allow companies to issue documents through
electronic means.
ii. This assignment
is divided into the following parts:
Part A – How
receptive are companies towards the new para 2.19B MMLR?
The students are required to randomly select TEN (10)
companies listed on the Main Market of Bursa Malaysia to determine whether
these companies have applied para 2.19B.
The requirements to be complied with are:
Part A – How receptive are companies towards the new para
2.19B MMLR?
a)
Explanation of the results
in a table format.
No.
|
Selected Companies
|
Application to Para 2.19B
|
1
|
IOI Corporation Berhad
|
No
|
2
|
JERASIA Capital Berhad
|
No
|
3
|
KAMDAR Group (M) Berhad
|
No
|
4
|
Kumpulan Powernet Berhad
|
No
|
5
|
LPI Capital Bhd
|
No
|
6
|
Turiya Berhad
|
No
|
7
|
Malayan Banking Berhad
|
Yes
|
8
|
Top Glove Corporation Bhd
|
Yes
|
9
|
Sunway Berhad
|
Yes
|
10
|
KPJ Healthcare Berhad
|
Yes
|
b)
Explanation of results in words.
(5 marks)
According to the table in part (a), six out of ten public listed
companies have not applied Para 2.19B in their communication with the
securities holders, which are IOI Corporation Berhad, JERASIA Capital Berhad,
KAMDAR Group (M) Berhad, Kumpulan Powernet Berhad, LPI Capital Berhad and
Turiya Berhad. The other four companies have adopted and applied in their
practice which are Malayan Banking Berhad, Top Glove Corporation Bhd, Sunway
Berhad and KPJ Healthcare Berhad.
After checking and analyzing the companies’ websites and Bursa Malaysia,
there is no evidence found that the 6 companies are using electronic means to
send the documents to their shareholders, either through electronic mail or
other forms of electronic means. There is also no announcement made in Bursa
Malaysia in changing their constitution to apply Para 2.19B.
For the other four companies, they are applying Para 2.19B as there are evidence found that they have made
announcements in Bursa Malaysia in changing their constitution to apply Para 2.19B. The electronic means
used by all these four companies are electronic mail and website. For Top Glove
Corporation Bhd and Sunway Berhad, other than electronic mail and website, the
company also uses any other electronic platform which is maintained by the
company or third party that can host information in a secure manner for access
by members to communicate with its members.
Apart from that, documents that can be sent by electronic means are
stated in each of these four companies’ constitution as well. The documents
include notice such as notice of general meetings and board meeting as well as
annual reports for all four companies and any other documents required by the Main Market Listing Requirements,
Companies Act 2016 and the
rules. For Top Glove Corporation Bhd, the documents includes any other
communication between the company and the members such as resolutions and
supply of information which can be sent through electronic means to the
members.
c)
Evaluation of the results.
(10 marks)
As mentioned above, there are six out of ten companies that have not
applied Para 2.19B. There are
a few possible reasons why these companies have yet to apply this practice.
Firstly, the practice is still new to the companies. Bursa Malaysia has
just added this practice in the Main
Market Listing Requirements on 29 November 2017, which means it is only
one year after the addition to the listing requirements. Thus, the companies
might not be aware of this new practice, unless they have undergone certain
training or seminars. Moreover, there might have other significant matters to
solve in the company and thus, the company secretaries do not put much emphasis
on the communication of the shareholders.
Besides, some elderly shareholders might not familiar to the internet and
do not have an email address. Therefore, it is not convenient for the companies
to send documents to these shareholders by electronic means. Elderly
shareholders might prefer to receive a hard copy of the documents where they do
not need to worry that they might not receive any document sent by the
company.
Other than that, companies have yet to apply this practice as they are
required to change their constitution in order to apply this practice. It is a
complicated and costly process to change the constitution. The companies need
to first pass the special resolution as required in Section 36(1) of Companies Act 2016. It is not convenient as
listed companies are not allowed to pass written resolution. Therefore, in
order to alter the constitution, the companies will need to call for a general
meeting or wait until next annual general meeting to pass the resolution. Then,
the companies are will need to notify the Registrar of the amendment of constitution
and lodge a copy of the new constitution within thirty days from the date of
special resolution passed. For those companies who did not follow these
procedures, they are liable to a fine not exceeding RM10,000, and in the case
of a continuing offence, a further fine not exceeding RM500 for each day is
imposed.
Apart from that, from the four
companies which have applied Para
2.19B, there are some similarities found among the companies. Firstly,
they are the Top 100 Companies for Overall CG & Performance in 2017 ranked
by Minority Shareholders Watchdog Group. This has shown that these four
companies emphasize a lot on corporate governance compliances and corporate
governance performance in its company. Therefore, they will mostly be aware of
this new practice and follow it accordingly to enhance their corporate
governance performance.
Also, these companies are all FTSE
Bursa Malaysia Top 100 as at June 2018 (MyPF, 2018). Moreover, all these four
companies earn a profit as recorded in their annual report. Malayan Bank Berhad
earns a 11.5% profit, Top Glove Corporation Bhd earns a 32.3% profit, Sunway
Berhad earns 2.7% profits and lastly KPJ Healthcare Berhad earns a 6% profits.
This shows that it might be possible that companies that are earning a profit
and are listed in FTSE Top 100 might be applying Para 2.19B.
Part B - Encouraging companies to adopt the
new changes in para 2.19B MMLR
a) Four advantages of para 2.19B
Enhance effective
communication
The Company’s Act 2016 allow
for the companies’ communication to be performed electronically to connect and
embed a transparent communication channel with its stakeholders to provide a
clear and effective financial position which would eventually enhance the company
performance. This includes the transmissions of matters related to meetings and
resolution together with related documents and financial information’s. The IOI
Corporation Berhad board is responsible for setting up the strategy and
policies overseeing the risk and corporate governance by monitoring the
progress of the corporation closely. Therefore, it is essential for the company
to implement electronic means to ease the communication barrier to achieve
their objective (Acba, 2014). Moreover, the proper conduct of the communication
among the shareholders would ensure long term success whilst being able to
achieve the interest of all shareholders. The speed of communication are
enhanced as the related parties such as shareholders are notified on the documents available and notice being
published or communicated among shareholders and the companies promptly. The
IOI Corporation Berhad can utilize the communication with electronic means as
it would ensure the information transmitted to the securities holders are done
effectively. The listed issuers that propose to send information and documents
via the electronic means must ensure their constitutions approve the use of
electronic processes and the shareholders consent is taken as well.
Accessibility
of Documents and Annual report
The annual report could be passed to the shareholders upon request
verbally or through written format which includes the details and notice of the
annual general meetings as well. The disclosure and Transparency rules are
implemented as to treat all shareholders and documents fairly. The Schedule 4 of the 2006 act also
stated the company that issues any documentation such as the annual reports are
allowed to use the electronic means to communicate as the notice and reports
are sent to all shareholders at the same time. Shareholders that are not able
to attend to the meetings would still receive the updated information regards
to the company as the distribution of the annual reports that are costly and
time consuming can be reduced as well. For
instance, IOI Corporation are able to obtain the governance framework on audit
and risk management and attain integrity in the corporate reporting and grow a
meaningful relationship with the shareholders by making available the annual
reports to them. Internal process and technology are implemented to safeguard
the integrity of the information in electronic means. Besides, the voting polls
in the annual general meeting can also be performed as this would help the
shareholders as well to monitor the performance in the company. Whereby, the
review of the board evaluation and effectiveness, reviewing the remuneration
and reviewing the nomination can be done via this means which would also
provide the shareholder on voting and favors the decision making as well. The
listed issuers’ website and e-mail address also includes the shareholders
request, queries and contact numbers (Acba, 2014). The available links are also
available for the annual report to be downloaded. This would enhance the
shareholders communication with the company in the other hand being able to
obtain current information’s whilst also being participated in the updated data.
Increase
access to company Websites
IOI Corporation can send and supply information via websites with the
approval of shareholders via the electronic communication. IOI can pass a
resolution and amend the articles of association in order to utilize the
websites to communicate with the shareholders. This would ease the notification
process by the shareholders when the company sends information via the
websites. Apart from that, the terms of references and company policies of each
Board committee are available on request of the Company secretary. Moreover,
details on the training of the Board and information of the group are available
in the website. The corporate governance sections can also be presented in the
company websites for the reference of the shareholders as such details can be
monitored effectively. The accessibility of the stakeholders is wider as the
websites can be visited anytime and anywhere to obtain various information on
the services and products as well. The current event that occurs in the company
can also be kept in tracked by the shareholders with the feedbacks and
providing recommendation or any suggestions for added improvement as well. IOI
Corporation would be more aware of the company performance as clients and
investors would have high level of confidence in the company for future
investments as the documents are issued through the websites are noticeable and
reliable. The notices of meeting, presentations and various other documents can
be viewed in the websites too.
High security
and reduce distribution cost
IOI Corporation Berhad deals with
its financial institutions and exchanges department repeatedly thereby, the
security papers and investment trust documents which comprises of details on
surplus fund in current account, money markets and time deposits are crucial
documents which is in need of high security in transmitting them to the related
parties. Hence, implementing electronic means would also secure the available
document and ease the transmission being taken to send to the person in charge.
Therefore, the paragraph 2.19b
should be implemented as e- deliveries are much safer than paper delivery. The
verification process involve in electronic communication supersedes that of
standard mail and emphasis better tracking and quicker correction of problems.
This would also enhance the monitoring system for verifying shareholders and
participants as they will securely receive information as the financial
information are not being mailed indiscriminately. Moreover, electronic
communications can also reduce the distribution and printing costs and
eventually the finance cost of the companies and in the long run enhance the
speed of communications and also being environmental friendly as this is also a
way forward for both company and shareholders (Bureau, 2014). The shareholder
of the company would also encourage electronic means since the cost of quality
issues regards to the distribution and packaging can be mitigated as this are
additional expenses that would benefit the company by reducing it. Apart from
that, IOI Corporation for instance can also reduce the operational cost and
time consumed by implementing the electronic communication as shareholders can
receive information and documents in a faster pace and costs are saved
immensely as it is more cost efficient.
b) Comparative study of the para 2.19B with two other countries.
The country that implements electronic
means widely by law would be Australia and United Kingdom whereby the
governments are involved in the telecommunication developments and have a key
role in regulations regards to the electronic communications. They have also
been contributing by practicing laws that permits the members and shareholders
of the companies to best support the electronic communications.
In Australia, the Electronic Transactions Act 1999 facilitates the use of
electronic communications for the transactions and business in their dealings
with the government and companies. Section
11 in the Act refers to the production, intention and the copyrights of
the documents in electronic forms (EFile Cabinet, 2015). Apart from that, Part 3 of the Act describes the
means of the document being communicated or serviced as the documents sent to
the electronic address must be in a standard format. The para
2.19B is widely emphasizes to implement in the companies stated in the
law as the secretary of the corporation are recommended to put into operations
the electronic transmission as a vital requirement in the company practices.
The Electronic Transactions Act of 1999 were created
and implemented to provide a secured environment for the electronic
communication and transactions to take place. This act also includes,
validating the legality of electronic transactions, ensuring fair treatment and
acceptance of various forms of electronic methods to communicate. Over 70
percent of Australians now have access to electronic means as the communication
routine as there is a significant for the shareholders to receive opportunity
to elect from electronic communications.
The two basic principles that are being considered by
the ETA are functional equivalence whereby, this act makes certain electronic
transaction and paper documents are treated equally by the law. Followed by
that, technology neutrality are also a vital principle as this act is to not
discriminate between different forms of technology to ensure both company
software are treated equally for efficient communications.
The Section 8
generally states that a transaction cannot be considered invalid simply in part
or more electronic communication means. In the other hand, Section 11 emphasize the documents can be submitted
electronically even if other law and regulations still requires paper documents
(EFile Cabinet, 2015). It is also recommended by the principles stated above to
suggest that the corporate governance sectors are also available in their
websites as any announcement made does commence with the law. The company in
Australia also emphasis on electronic voting’s as accurate and fair result
could be obtained to justify the voting’s in the companies. They have also been
expanding their communication policies and practices as the adoption of this
practice are claimed to improve the relationship between the shareholders and
their companies. This would in the long run enhance the corporate sector with
immense trust and understanding of the performance and roles.
Next country would be the United Kingdom whereby in the
year 2006, the Companies Act 2006
was in the process of implementation as some of the provisions gradually came
into force on 20th January 2007. This sections deals with the communication
sector with the shareholders and others as well including the electronic
communications and communication via website. Apart from that, the legislation
was introduced in the United Kingdom to ensure the provisions regarding
notification of interest in share and rights to investigates are also defined
through the companies to communication. The company shares that are trade on a
regulated market or the United Kingdom Market are deemed to comply with the
communication requirement in the Chapter 6 of the Financial Service Act
Disclosure Rules and Transparency Rules.
The steps requires involved first, reviewing and if
needed revising the articles of association and seeking the approval of
shareholders for the electronic and website communication. Apart from that, the
Schedule 5 of the 2006 Act
allows the companies to communicate with the shareholders via electronic form
and websites with the consent given by shareholders (Lexology, 2007). In
addition, the 2006 Act had also introduced a new provision whereby the
companies are given an electronic address in the notice meeting by emphasizing
the communication of shareholders via electronic means. However, request
letters are given to the shareholders requesting for agreement to receive
document or information in an electronic form and providing an electronic
address for this purpose. The agreement must be completed within 28 days in
order to further continue the communication electronically as the request
letter can be during the submission of the notice of annual general meeting.
The companies are entitled to amend the articles in order to be able to send
and receive information from shareholders by the website.
The websites
were recommended by the legislations as to use the websites and other
electronic means such as mails and issue documents for the reference of the
shareholders. In the UK, the shareholders are given option to implement
electronic communication such as using the web portal for the shareholders to
receive swiftly and enhance the coordination in the company. The companies in the
United Kingdom have larger shareholders list and are suggested to supply
information to shareholders via websites with the submission of resolutions.
Part B - Steps necessary to adopt the new
changes in para 2.19B MMLR (15 marks)
a) Advise
the company as to the steps necessary (10 marks)
The
basic companies’ act of Malaysia is the shaped on the basis of Australian
Uniform Companies Act 1961 and United Kingdom Companies Act 1948. After several
years of adjustments in the company legislation it was finally attuned in CA
1965. However, CA 1965 is replaced by the new companies’ act 2016 which is
passed by parliament on 28th of April 2016. This act contains a lot
of changes in order to make the corporate vehicle more striking for business. According
to the above scenario it is seen that the company is a public company. It has
been said that the companies other than private company in section 2 of CA 2016 or follow the procedures of section 190 and are listed in the stock exchange and also
oversee by the stock exchange rules are the public company.
Under
CA 1965, it was mandatory
for all the company to have a memorandum and article of association which at
present known as constitution but at present in CA 2016 this requirement is written off from the act. In s31 and 38 of CA 2016 state that only company limited by guarantee shall
have a constitution and other may have or not which is optional. The company
only can change the constitution is by issuing of special resolution.
There
is no such precise measures and meeting requirements under CA 2016 by which changes may
be effected. Changing in the constitution has no major influence on the
existence of the company. For changing the constitution a decision need to be
provided by the board of directors (is the individual who elected by voting to
carry out general business activities and control of a company) in the annual
general meeting (In Section 340 of CA 2016 mentioned that only public company is required to hold
an AGM). It is prohibited for any public company to run his business without
following CA 2016. It is mentioned in CA 2016
section 35 (2) that the company shall
be constrained from carrying on any business or activity that is not within
those 35(1 a).
In section 36 of CA 2016 is mentioned that company are allowed to alter its
own constitution. Similarly, in order to adopt 2.19B MMLR the company need to
change its constitution first. The section 36 indicates the procedure of
amending constitution.
Ø By providing special resolution it is
possible for the company to change the constitution unless the company itself
forbids the alteration.
Ø A written 21 days’ notice need to give to the
shareholders upholding the purpose of special resolution.
Ø All the members and the debenture holder also get a notice
in the meeting.
Basically
the decision of implementing 2.19B
MMLR is taken by the
Board of Directors in the board meeting in which they find the scope and
discuss about the documents. As this is a public limited company therefore, the
constitution need to be passed by vote. According to s.306 (4) CA 2016 after triumphing 75% of vote from shareholders on
the special resolution the directors will be able to change the constitutions. Each
member should vote for the benefit of the company as a whole. So, it is members
who decide what is best for the company and in this circumstances court will
not obstructs unless the decision is not practical that man could have made. As
in the above is already discussed about the importance of the 2.19B for the companies.
Therefore, in order to implement this section the following procedures need to
be done:
1. The special resolution must specify the intention to
change the constitution. This special notice should be in written according to S. 321(1) of CA 2016 and given to ‘every member, director and auditor of
the company. About the selection of venue it is prescribes in s327 CA 2016 that the meeting can be anywhere as long as the
main venue in Malaysia and the presence of chairperson is mandatory. A member
can appoint anyone to be their proxy as CA 2016 remove the restriction of the qualification of
proxy.
2.
After the approval of special resolution, an e-form (“Notification of
Alteration” in Schedule B of MyCoID) need to be marched with the Registrar
containing the special resolution.
3.
In accordance with section 37 of CA 2016 an office copy of
an order, e-form (Court Order) and copy of the constitution as altered or
amended is lodged with the Registrar for registration within 30 days after the
application has been resolute by the court.
Following this requirements the
alteration of constitution that is implementing 2.19B MMLR can take effect.
If company or any officer break the rules of s36(3) or compel an offence will be penalized not exceeding RM 10,000 and a
further fine not exceeding RM 500 each day will be applied if the offence
continues after conviction. Members or debenture holders are allowed to object
to the court on the alteration of amendment. Therefore, prior to registration
it is a good practice to have meeting with the stakeholders and take singed by
every subscriber to the constitution which will basically work as both witness
and the subscribers will know that they are bound to abide by the constitution
of the company.
The court has the power to cancel
the alteration, confirm the alteration in part or confirm the alteration. It is
mandatory to abide by the terms and condition which is enforced by the court
after the confirmation. The order of court and resolution must be lodged with
the Registrar within 14 days after the decision of the court. After the
confirmation, the alteration will come into effect when it will lodged.
a. A natural person
b. 18 years and above, and
c. Citizen or permanent resident of Malaysia.
Therefore, following the above rules the form is
filled by the person who meet all the above requirements. The following are the
documents that CS need to fill up in order to change the constitution.
1. Sample
of Special Resolution Notice.
References:
ACBA. (2014,
March 20). Electronic communication with shareholders-
Not as easy as clients think. Retrieved November 24, 2018 from https://www.acbanet.org/2014/03/20/electronic-communications-with-shareholders-not-as-easy-as-clients-think/
Choy, G. (2018, May 21).
Incorporating a Company under the Malaysian Companies Act 2016. Retrieved from http://learn.asialawnetwork.com/2017/05/17/incorporating-a-company-under-ca2016/
Company's Constitution. (n.d.).
Retrieved from https://www.yycadvisors.com/company-constitution.html
EFile Cabinet.
(2015, November 5). Australia’s
Electronic Transactions Act of 1999. Retrieved November 20, 2018 from https://www.efilecabinet.com/australias-electronic-transactions-act-of-1999/
KPJ Healthcare Berhad. (2017). Annual report. Kuala Lumpur.
Lexology. (2007, February 22). Companies
Act 2006: Electronic communication and public company shareholdings. Retrieved
November 20, 2018 from
https://www.lexology.com/library/detail.aspx?g=2715ba6c-02c9-4f8a-bc2c-3b5855a86cd3
Logistics Bureau. (2014, August 6).
Logistics and Distribution Cost Reduction Techniques. Retrieved November 21,
2018 from
https://www.logisticsbureau.com/logistics-and-distribution-cost-reduction-techniques/
Malayan Bank Berhad. (2017). Annual report. Kuala Lumpur.
MyPF. (2018). Bursa Malaysia Top 100. Retrieved from https://mypf.my/investing/equities/bursa100/
NOTICE OF 41ST ANNUAL GENERAL
MEETING. (n.d.). BURSA MALAYSIA BERHAD. Retrieved from http://bursa.listedcompany.com/newsroom/Notice_of_41st_AGM_of_Bursa_Malaysia_Berhad.pdf
Seong, C. F. (2018). Guide to
Company Secretarial Practice in Malaysia (4th ed.). Kuala Lampur, Malaysia:
Commerce Clearing House.
Shih, L. (2018, May 14). Companies
Act 2016: Effective 31 January 2017 -. Retrieved from https://themalaysianlawyer.com/2017/01/16/companies-act-2016-effective-date/
Sunway Berhad. (2018). Annual report. Subang Jaya, Selangor.
Top Glove. (2018). Annual report. Shah Alam, Selangor.
To download the word file click on the following link:
https://drive.google.com/open?id=1_xwvDvEE3sPBJsFBLOXiWlWEiF7ZRn3H
https://drive.google.com/open?id=1_xwvDvEE3sPBJsFBLOXiWlWEiF7ZRn3H
For Forms Download
2. https://drive.google.com/open?id=1L4bkFUzjfcJHb89H4dtSQj9L4QNjwKXQ
3. https://drive.google.com/open?id=15qL4wtjeON8AfVObPcn6wSsGfELIde2g
