Ref. No.

: NYP/CRP/KONG/124/anis

Date: 13th October 2017

MR. & MRS. KONG BY HAND

No.15, Taman Jaya Indah,
Jalan Panglima, Seksyen 7,
40450 Shah Alam,
Selangor.

Dear Sir/Madam,

RE: THE INCORPORATION OF INTERNATIONAL GLOBAL HERBICURES

FOOD SUPPLEMENT SDN BHD.

We refer to the consultation session on 10th October 2017 which discussed on several legal
inquiries that you had concerning the incorporation of your company named International
Global Herbicures Food Supplement Sdn Bhd, and we offer our legal opinion based on the
following material facts.

1.0 MATERIAL FACTS

1.1 Mrs. Kong Lin Hee is the owner of Amma Kong’s Herbicures which deals with the
selling of herbal health products from home and due to her suggestion, both Mr. Kong
Lee Huat and Mrs. Kong Lee Hin would like to venture in bigger business together by
forming a new company called International Global Herbicures Food Supplement Sdn
Bhd.
1.2 Through Mr. and Mrs. Kong’s old home selling business, they managed to have few
international contacts and after few meetings, both Mr. Koola (Australian) and Ms.
Tamaru (India) have come to an agreement with Mr. and Mrs. Kong and they are
willing to invest in the newly proposed company.

1.3 The new company’s scheme includes that the share capital should be RM1,
000,000.00, Mrs. Kong would hold 35% of the shares, Mr. Kong would hold 20% and
the balance of 45% would be held by Mr. Koola and Ms. Tamaru in the ratio of 20%
and 25% respectively.

1.4 Apart from that, all shares issued in the company will be ordinary shares except that
Ms. Tamaru prefers that the company issues preference shares for her part of the
capital contribution. Mrs. Kong shares in the company will be paid by transferring of
her assets in Amma’s Kong Herbicures.

1.5 The company is a joint venture in which Mr. and Mrs. Kong would be responsible for
the Malaysian market of the product while Mr. Koola will be responsible for
Australian market and for Indian market, it will be managed by Ms. Tamaru. All four
of you would be directors of the company but Mrs. Kong will be the managing
director.

1.6 At the end of the consultation session, Mr. and Mrs Kong have emphasized to us that
they would like to know whether there will be any legal obstacles to their plan, what
are the matters that they should consider to be included in the joint venture agreement
to protect their interest, what are the procedures and all documentations required for
the registration of the company and they also requested a written constitution to be
made to properly regulate the affairs of the company.
2.0 LEGAL ISSUES

2.1 Whether a joint venture could be joined between Amma Kong’s Herbicures Sdn.
Bhd., Tamaru and Koola.

Joint venture is where two or more corporate body or individuals enters into
commercial agreement with a common objective. By having the joint-venture agreement, all
the parties will become alliances between each other. The joint venture can be documented
by way of joint venture agreement which will provide ownership and capital structure of the
Joint Venture Company, transfer of shares, and composition of the board of directors,
requirements concerning meetings of a company, financial policies and termination of the
agreement.

2.2 Matters needed to be discussed prior into entering joint venture agreement.

(a) Parties in the joint venture

Based on the previous discussion, it was agreed that the parties to the joint venture are
Amma Kong’s Herbicures Sdn. Bhd. and Tamaru along with Koola. The joint venture forms
the new company called International Global Herbicures Food Supplement Sdn Bhd.

(b) Type of the joint venture business

Amma Kong’s Herbicures(AKH) and Tamaru along with Koola will have to enter
into a joint venture agreement. The fact that AKH is a local private company, you will have
to decide on whether to form a public or private company on the newly formed joint venture
company. However, foreigners are only allowed to set up a private limited company.
Nevertheless, this can bring a lot of advantage to you because it ensure that you and other
shareholders will have more control to the company. This is by way of restricting the transfer
of shares of the newly formed company through the MOA and AOA of the company.

(c) Duration of the joint venture business

In respect of the duration of the business, we advise that the joint business is to be
carried on a long term basis to maximize the profits and to establish reputable name in
Malaysia.
(d) Profit distribution

The profits, losses, costs, liabilities, assets and other responsibilities, whether
pecuniary or otherwise as stated in Joint Venture agreement shall be borne by Amma Kong
Herbiscus and both Tamaru and Koola. The profit distributions should be divided accordingly
to the amount of shares that is owned. Koola’s scenario however, he will have to receive less
as he would only be a preferential shareholder.

(e) Directors, Subscribers and Secretary

Under the Companies Act 2016, the requirement of having at least two directors and
shareholders has been abolished. By virtue of Section 9 of the Act, incorporation of a
company only requires one shareholder and one director. Besides that, the Act only requires
one resident director who lives in Malaysia. On the other hand, while the requirement of
having a company secretary has now been included in the Act under Section 235 but he or
she may be appointed within thirty days after the incorporation of the company.

(e) The relevant documentation needs to be prepared

i. Constitution of the joint venture company

There is no express and direct legislation in governing the Joint Venture Companies,
which incorporated in Malaysia. However, when you entered a joint venture company, you
are bound by all the rules as agreed between both parties in the joint venture agreement.
Apart from that, other relevant legislation would be Companies Act 1965, Companies Act
2016 and Contract Act 1950.

Prior to formation of joint venture Company, you are required to deliver the
Memorandum of Association (MOA) and the Article of Association (AOA) to the Companies
Commission of Malaysia as stipulated under Section 18 of the Companies Act 1965.
However, it is further that if you do not wish to prepare any AOA of the company, you may
do so but you are required to adopt Table A of the 4th schedule of the act.

In the latest Companies Act 2016, Section 31 of the Act provides an option for your
companies. Your companies have the option to prepare either both constitutional documents
or not to prepare any. If you choose to prepare your very own constitution,
 Furthermore, in order to register a company, you are required to prepare Form 6
pursuance to Companies Act 1965. This form must be signed by the company secretary who
handles the registration and the name of the secretary should be included in the MOA and
AOA of the company.

The other forms required under the Companies Act 1965 are Form 9 and Form 13A.
Form 9 is the certificate of incorporation. This form will be issued by the Registrar upon
application made by the company and payment of a prescribed fee should be made as well.
Lastly, Form 48A (Statutory Declaration by a Director or Promoter Before Appointment)
must be submitted as the director or promoter must declares under oath that he/she is not a
bankrupt; and he/she has not been convicted and imprisoned for any prescribed offences.

We as your solicitor would like to offer our assistance in the corporate legal field to
draft the new MOA and AOA for the joint venture company for International Amma Kong’s
Herbiscus Sdn Bhd.

Due to the fact that your joint venture company will be incorporated in Malaysia, we
encourage the new company to adopt certain provision under Table A of the Companies Act
1965 to be inserted into the joint venture company’s AOA and MOA. This provision includes
the general meeting of the JVC, appointment of the directors, powers and duties of the
directors, share capital clause of the JVC and so on.

ii. Joint Venture Agreement

In order to create a joint venture business, it is important to have a joint venture

agreement. A joint venture agreement is an arrangement where two companies develop a new
entity to their mutual benefit. It normally involves a sharing of resources, which would
include capital, personnel, physical equipment, facilities or intellectual property such as
patent. A joint venture agreement should specify the name two companies involved, their
legal form and the legal address of records. The purpose of the joint venture should be
specified in the agreement.

iii. Termination of the Joint Venture Agreement

Since it has been your goal that this Joint Venture Agreement shall be in a long-term
period, there is no definite time to terminate the Joint Venture Agreement. However, you
have the right to terminate the Joint Venture Agreement in following circumstances:
 i. An event of Force Majeure.
ii. Delay by other party in performing the Joint Venture Agreement.
iii. Breach of the Joint Venture Agreement by the other party.
iv. The Joint Venture Company’s objective has not being fulfilled or achieved.
v. Insolvency, bankruptcy, dissolution or liquidation.

Therefore, due to circumstances mention above, you has the right to terminate the Joint
Venture Agreement if such circumstances occurred.

(f) Certificate of Halal from JAKIM

In Malaysia, the largest market by community would be the Muslim which makes up
nearly 70% of the country. Thus, if you intend to broaden your marketing pharmaceutical
products, it is advisable for you to obtain the Certificate of Halal from JAKIM. There are a
few requirements that you must follow in order to obtain the Halal certificate for your factory
which are as follows. First, the factory compound shall be fenced or having a control
mechanism to prevent any animals from entering the factory area. Second, workers are not
allowed to live in the factory compound. Besides, if you have more than one company that
manufactures the same product, you must apply the halal certificate to be applied on all of
those companies. Apart from that, when JAKIM issue the certificate of Halal it must comply
with the general guidelines in MS2424: 2012 Halal Pharmaceuticals, Pharmaceutical
Inspection Co-operation Scheme (PICs), decisions of National Fatwa Council for Islamic
Affairs or Fatwa decreed by the states and other act, regulations and standard guidelines.

2.3 Whether Ms Tamaru, a minority shareholder is entitled to preference share.

Ms Tamaru, an Indian investor who is a part of the joint venture, held 25% of the
shares of the company. The other three will be issued ordinary shares, whereas Ms Tamaru
prefer that the company issues her preference shares. Ms Tamaru is a minority shareholder in
the company and is responsible for the development of the Indian market.

In a company, all shares having the same par value will enjoy the same rights
irrespective of the amounts paid up on them .However, if the company wishes to differentiate
between the rights of different classes of shares, this should be clearly set out in the
company’s MOA or AOA. Section 65(1) of the Companies Act allows a division of shares
into different classes but the company’s MOA must state the amount of share capital which
the company proposes to register and the classes of shares the share capital will be divided
into as stated in Section 18(1)(c). Different classes of shares issued may carry different rights
,as provided in Table A, Article 2. Rights attached to shares may differ between classes in
regard to entitlement to dividends, priority in relation to payment of dividend ,voting rights
,priority in the repayment of capital ,right to surplus assets upon winding up.

Ordinary shares, as provided under Section 4 is any share that is not a preference
share. By being ordinary shareholders,Mr Koola,Mrs Kong and Mr Kong will have unlimited
voting rights at the general meeting.Moreover,all of them are able to influence the company’s
policies. Ordinary shareholders can participate beyond a specified amount in any distribution,
whether by way or dividend,or on redemption in a winding up. In addition, entitled to any
surplus assets of the company upon winding up. And upon winding up of the company,all
three of you are entitled to return of capital ,but only after preference shareholders and
creditors has been paid.However,as ordinary shareholders,they do not carry rights to fixed or
cumulative dividends,they can only receive dividends after preference shareholders has been
given dividends.However, if the company suffers from a poor financial year, the three of
them may receive little to nothing.

In Ms Tamaru’s case, she would only obtain a minor of voting rights in a resolution as
derived from the amount of shares Minico will hold. Mrs Kong, on the other hand, will be the
majority shareholder as she held most of the shares in the company.Even if the Company
agrees to issue preference shares to Ms Tamaru, those shares will not be able to add up to her
power to vote during a resolution. Ms Tamaru would only benefit in terms of certain return in
capital and dividends and a guarantee of return of dividends and capital upon the winding up
of the company.In order to ensure that Ms Tamaru’s rights and privileges as a preferred
shareholder is protected, she must ensure that those rights and privileges are expressly stated
in the Constitution. This is to ensure that in the event of dispute as to the rights and privileges
of Ms Tamaru as a preferred shareholder, the parties may refer to the Constitution for
clarification.

We herein advise that Ms Tamaru negotiates with the Company for terms that will
benefit her as a preferred shareholder with the Company. We would like to suggest that the
terms include the following;

a) Ms Tamaru shall hold preference share in the Company;

b) Ms Tamaru will receive dividend at the end of every year, beginning from the

year the sale and purchase agreement is entered into;

c) Ms Tamaru shall, as a preferred shareholder, have the right to vote on the

following occasions:-

i) during the period in which a dividend, whole or part of the dividend,

entitled to Ms Tamaru is in arrears for whatever reason, Ms Tamaru shall
be entitled to vote in any resolution and its vote shall be counted as one
vote per share in respect of the amount of shares in arrears;

ii) upon a proposal to reduce the share capital of the Company;

iii) upon a proposal affecting the rights attached to Ms Tamaru as a

preferred shareholder;

iv) upon a proposal to wind up the Company;

v) upon a proposal for the disposal of the whole of the property, business
and undertakings of the Company; or,

vi) during the winding up of the Company.

d) Ms Tamaru’s vote as a preferred shareholder shall be counted as one vote per

share subject to clause (c);

e) Ms Tamaru, as the preferred shareholder, will be prioritized in receiving the

return of capital and dividend than any other shareholders of different classes
every year;

f) Ms Tamaru’s preference shares shall be cumulative preference shares which

shall be redeemable every year, or if the Company has no profit to return the
dividend or capital on that year, the immediate year when there is profit to pay
for the dividend and capital; and,

g) the terms mentioned above shall be incorporated into the Constitution on the

date the sale and purchase agreement is entered into.

 The above are the terms that we suggest Ms Tamaru should be incorporated when
coming to an agreement with the Company to invest in preference shares.

2.3 Whether a written constitution is required for the management of the company.

The new Companies Act, namely Companies Act 2016 came into operation on the 31st
of January 2017. As under Section 32(1) of the Companies Act 2016, the new Act stipulates
that except for a company limited by guarantee, any company which is incorporated
beginning from 31st of January 2017 has the option whether to adopt a constitution or
otherwise. In other words, this means that a company is no longer required to have
Memorandum & Articles of Association for registration purposes and can operate without
any constitution.

In place of Memorandum and Articles of Association, the company may choose to

have a single document, to be referred to as the company’s constitution. If the company opts
to adopt a constitution, the adoption shall be by way of special resolution, in which will
require 75% or more of members who are eligible to vote to pass the resolution. For a
company which was incorporated before the Companies Act 2016 came into effect, the
existing constitution (Memorandum & Articles of association) will continue to be applicable
to such companies until the companies resolve otherwise.

However, it shall be noted that under Section 14(3)(c), although a company is no

longer required to have a constitution, the requirement to notify the Registrar of its nature of
business or when there is a change to the company’s nature of business is still the same as
provided under the Companies Act 1965. This information will be publicly available.

As in your situation, Mr. Kong, it is safe to say that the company you are trying to set
up is a private company limited by shares. As such, as under Section 32(1) of Companies Act
2016, you have the option to either adopt a constitution or otherwise. If you wish to adopt a
constitution, the adoption will require a vote of at least 75% of the members to pass the
resolution. The constitution must then be lodged with the Registrar, Similarly, any
amendment or alteration to the constitution must also be lodged. The constitution must also
be stamped, and e-stamping service is available through the MyCoID 2016 Portal.

2.4 Whether Mrs Kong, a majority shareholder can be appointed as the managing
director.

In International Global Herbicures Food Supplement Sdn Bhd,a company where Mr

Kong,Mrs Kong, Mr Koola ,Ms Tamaru are the shareholders in which Mrs Kong holds the
majority shares while the three of them holds the minority shares,question arises whether Mrs
Kong,who is a majority shareholder can be a managing director in the company.

A company consists of two main components, namely the Board of Directors and the
members of the company. The Board of Directors is a body that executes the company’s
dealings and transactions. This has been affirmed by Section 211 of the Act where it stated
that the business and affairs of a company shall be managed under the direction of the Board
of Directors. This also can be supported with the case of John Shaw & Sons (Salford) Ltd v
Shaw where the court ruled that the directors are conferred the powers to manage a company.
Section 212 of the Act highlighted that subject to the Constitution, the provisions set out in
the Third Schedule shall govern the proceedings of the Board of Directors. Furthermore,
according to Section 297 of the Act, the Board of Directors or any member of a private
company may propose for a written resolution when deciding on a matter relating to the
company.According to Section 196(1)(a) of the Act, a private company shall have a
minimum number of one director only. In a normal situation, it is common that the majority
shareholders would usually appoint the directors. Apart from that, a Managing Director
should also be appointed. The Managing Director will be responsible in managing the daily
operations of the company. The implementation of the company policy directed by the Board
of Directors will be the task of the Managing Director who will oversee the day-to-day
progress of the company.

Mrs Kong,a majority shareholder can be a managing director,whether or not she can
be a managing director who manage the company while holding majority of the shares of the
company must be taken into account.Shareholders and directors has different roles in a
company.Director of a company manage shares,whereas shareholders own the shares. If Mrs
Kong wants to be the managing director,she would be the one who manages the shares in
which she holds the majority of it. The separation in law between directors and shareholders
can cause confusion in the company.A shareholder has no right to be a director,and a director
does not need to be a shareholder,unless the MOA or AOA says so. Mr Kong decided to set
up a company with his wife,Ms Tamaru and Mr Koola,this relationship is represented in the
company by all of them being both directors and shareholders.However, some decisions has
to be made by the directors in board meetings and others to be made by the shareholders by
written resolutions or by resolutions passed at general meetings. Furthermore, some decisions
have to be made by the directors, but only with the shareholders' consent.For
instance,decision such as altering the company AOA can only be made by the shareholders.
Directors are subjected to the general fiduciary duty to act in the company's best interests,in
addition,directors are responsible to report annual account to the shareholders.While the
directors are in control of the day to day running of the company, with access to information
about its business and effective control over the calling and conduct of meetings, the
shareholders have an ultimate source of power, any director can be removed from office by
ordinary resolution.

In normal practice, the majority shareholders would usually appoint the directors.
Therefore, the directors that are appointed by the majority will definitely make decisions in
favour of the majority shareholder which may be detrimental to minority shareholder in the
company as they will determine the direction of the company. Due to that, in order to protect
interest of the minority shareholders, we recommend that minority shareholders to request to
nominate a director to represent them. The number of directors required for a private
company is one (1). Thus, if the company is to have a board of three (3) directors, we suggest
that the minority shareholder request to appoint one (1) director to represent. In regards to
Managing Director, the Managing Director shall be unanimously agreed upon by both Mr
Kong,Mr Koola and Ms Tamaru. The right to appoint the Managing Director also includes
the right to remove the person as a Managing Director. A Shareholders Agreement is vital to
regulate the rights, obligations, liabilities and protection of both parties. If at one point the
Shareholders Agreement is not able to protect minority shareholders’s right, they may invoke
protection from the Act. This can be applied where the affair of the company is conducted in
an oppressive manner or the powers of the directors are exercised in an oppressive manner or
when a resolution is passed it causes unfair discrimination or prejudice.

Mrs Kong as majority shareholder might use her majority power to get things done in
her favour and interest. We hereby suggest that for any transactions, all parties must mutually
agree before proceed and must be made in writing. For instance, issuance of shares is a step
for which a company must take in order to enhance its capital value. Thus, if Mrs Kong,
being a Managing Director and a majority shareholder decides to authorize the Company to
issue new shares and such issuance may dilute the shares that all the other minority
shareholder held, a pre-empt right must be included to not allow another member in the
company to bring in a new person without it being agreed upon by both sides. The new shares
issued must first be offered to the minority shareholder. Another possible difficulty may arise
where Mrs Kong may set up another business or company that may compete with the
company. This may give her profits that are prejudicial to the other minority shareholders.In
order to ensure that there is no conflict,it must therefore be set forth in the Shareholders
Agreement. This is to avoid any parties being in direct conflict with the ordinary course of
business of the company.

2.5 Whether the transfer of assets constitutes payment of shares of the company.

The transfer of assets for the purpose of the inquisition of shares is possible. Based on
the old Companies Act 1965, Section 98 states shares are movable property which are
capable of being moved. Furthermore, This is reflected under Section 86(1) of the
Companies Act 2016 where it is stated that through company’s resolution, paid-up shares
may be converted into stocks or vice-versa and without any restriction as to the amount. In
relation to that, transfer in such manner do not take away the rights of the shareholder whom
had gotten his shares through conversion of stock. Section 87 of the Companies Act 2016,
provide that stockholders have the same right attached to them similarly to that of a
shareholder. Despite the changes in law, it is still possible for it to be transferred.

That being said, Mrs. Kong may acquire her shares by way of using assets from
Amma Kong Herbicures as provided under Section 86(1) of the Companies Act 2016. Her
rights would also not be affected as it bears the same right and privilege to shareholders
whom had acquire their shares by paid-up manner.

2.6 What are the procedures governing the registration of a company.

 Every companies in Malaysia operates by adhering to the principles provided under
the Companies Act 2016 (“the Act”). For the purpose of registering a new company, section
14(1) of the Act provides that an application for incorporation shall be made to the Registrar.
The proposed company shall not be made for unlawful purposes as stated in section 14(2) of
the Act. Section 14(3)(a) to (f) further requires for such application to include a statement
from every person intended to form the said company containing the particulars of the
company’s name, status; whether it is a public or private company, nature of its business,
address of registered office together with the name, identification, nationality and place of
residence of every member and its directors.

Apart from that, section 14(3)(h) also mentioned that details of class and number of
shares taken by each member shall be included too whenever the company is of the type
limited by shares. Any other information may also be prepared as the Registrar required as
stated under section 14(3)(j) of the Act. Last but not least, section 14(4) of the Act requires
the proposed director to provide his consent statement regarding his appointment as director
in the said company and that he is not disqualified from being appointed as such.

If the Registrar is satisfied that all the requirements of the Act has been complied with
by the application and all the prescribed fee has been paid, the registrar shall enter the
particulars of the company in the register, issue a company’s registration number to the
company and issue a notice of registration in any manner as the Registrar may determine;
according to section 15 of the Act. Upon doing so, a certificate of registration will also be
provided by the Registrar under section 17 of the Act. The notice of registration issued by
Registrar will be conclusive evidence that all requirements concerning the registration had
been complied and such company is duly registered under the Act by virtue of section 19.

Upon being incorporated, according to section 18 of the Act, the company shall be in
existence, all members, shareholders and directors shall have their name registered in the
Company Register and deemed to have been appointed to their own office at that point of
time.

2.7 What are the rights of a shareholder in the company.

 Section 31(2) of the Companies Act 2016 states that for a company limited by shares
that chooses to have a constitution, the company, its directors and shareholders are bound by
the rights, powers, duties and obligations stated under the Companies Act 2016, except to the
extent that such provisions are modified by the constitution and such modifications are
permitted and do not contravene the Companies Act 2016. On the other hand, by virtue of
Section 31(3), if the company has no constitution, the rights, powers, duties and obligations
of the company, each of its directors and shareholders as set out under the Companies Act
2016 automatically applies.

Previously, the Companies Act 1965 states that all shares having the same par value
(shares of the same amount) enjoy the same rights irrespective of the amounts paid up on
them. If the company wishes to differentiate between the rights of different classes of shares,
this should be clearly set out in the company’s Memorandum or Articles of Association.

However, the new Companies Act 2016 states that nominal or par value is only
applicable at the point of issuance of shares. The issued price of shares will be determined by
the current value of the company, factors affecting the business of the company and the
capital that the company is seeking to raise.

The nominal value, per se, does not accord protection to the shareholders. Instead the
rights of shareholders are attached to the shares, which are the right to attend, speak and vote
at meetings of shareholders and the right to receive dividends. The rights of the shareholders
also depend on the number of shares held and not the value of shares when it was first
purchased.

As in this situation, it is safe to say that the more the number of shares held by each of
the members, the more rights are attached to the shares. As such, Mrs Kong who holds 35%
of the shares of the company will entitle her to more rights as attached to her shares, followed
by Ms. Tamaru who holds 25% of the shares of the company, and Mr. Kong and Mr. Koola,
who holds 20% of the shares each.

2.8 Whether all of the shareholders entitled to be directors

 A shareholder is any person, company or other institution that owns at least one share
or more of a company's stock. The phrase “Director” is defined in Section 3 of the
Companies Act 2016 (CA 2016) as any person occupying the position of a director of a
corporation by whatever name called and includes a person in accordance with whose
directions or instructions the majority of directors of a corporation are accustomed to act and
an alternate or substitute director. Section 196(1) (a) of the CA 2016 provides that a
company shall have a minimum number of directors of one director for a private company.

Since the company that you intend to create is a private company which is known as
“International Global Herbicures Food Supplement Sdn Bhd” (the company), the minimum
number of director required is one. However, the CA 2016 does not prohibit the company to
have more than one director in a company.

A private company is also defined under Section 3 of the CA 2016 as any company
which immediately prior to the commencement of this Act was a private company under any
corresponding previous written law, any company incorporated as a private company under
this Act or any company converted into a private company under Section 41, being a
company which has not ceased to be a private company under Section 42 of this Act.

Under this Section, your company falls under the second definition under Section 3 of
this Act as it is a new company incorporated as a private company under this Act.
Furthermore, Section 196(4) of the CA 2016 provides that the minimum number of directors
shall ordinarily reside in Malaysia by having a principal place of residence in Malaysia and
shall not include an alternate or substitute director. Based on the Sections stated above, in
order for Ms Tamaru from India and Mr Koola from Australia to succeed in being a director
for the company, both of them must have a principal residence in Malaysia.

Section 198(1) of the CA 2016 provides that a director must not be an undischarged
bankrupt, must not have been convicted of an offence relating to the promotion, formation or
management of a corporation, been convicted of an offence involving bribery, fraud or
dishonesty, been convicted of an offence under section 213 (not exercising reasonable care
and acting in good faith for the business of the company), 217 (not acting in the best interest
of the company), 218 (improper use of property and position), 228 (entering into a transaction
without the approval of the shareholders) and Section 539 (not keeping proper accounts) and
has not been disqualified by the Court provided for under Section 199 of the CA 2016.
 With reference of not being an undischarged bankrupt for a director, a bankruptcy
search must be conducted on all of the parties concerned who wants to be a director of the
company before appointing them as a director. However, if it is discovered that any of those
parties falls under the criterias mentioned in Section 198(1) of the CA 2016 above after
being appointed as a director, the acts done by the concerned director is valid as provided by
Section 204 of the CA 2016. Should any of the parties mentioned above falls under the
criterias mentioned under Section 198(1) of the CA 2016, the Registrar will have the power
to remove the name of the concerned person who is considered as a disqualified director from
the Registrar notwithstanding any provision in this Act or the constitution of the company. In
order for all of the parties (Mr and Mrs Kong, Mr Koola amd Ms Tamaru) to be directors,
they must not fall under any of the criterias set out under Section 198(1) of the CA 2016.

Section 201 of the CA 2016 provides that a person shall not be appointed as a
director of a company unless he has consented in writing to be a director and make a
declaration that he is not disqualified from being appointed or holding office as a director of a
company under this Act. This declaration is done by filling out Form 48 which is listed under
Schedule C of the CA 2016. Section 202(1) of the CA 2016 provides that a person named as
a director in an application for incorporation of a company shall hold office as a director from
the date of incorporation until that person ceases to hold office as a director in accordance
with this Act. Subsequent directors may also be appointed by the four directors above which
is the parties mentioned above by way of ordinary resolution as provided under Section
202(2) of the CA 2016. Based on this, your wife may also be appointed as a managing
director after obtaining all of the agreements from the other three parties since they are also
the shareholders of the company by way of voting.

This company must also keep at its registered office a register of its directors,
managers and secretaries as under Section 57(1) of the CA 2016, where in respect of a
director, details of his or her name, residential address, service addresses, date of birth,
business occupation and identification and particulars of any other directorships of public
companies or companies which are subsidiaries of public companies held by the director, but
it shall not be necessary for the register to contain particulars of directorships held by a
director in a company that by virtue of Section 7 is deemed to be related to that company. In
respect of your wife as the managing director, her full name, identification and residential
address, business address, if any and other occupation must also be included in the Register
under this Section.
 Another Register of each of the director’s shareholdings must also be kept as provided
under Section 59(1) of the CA 2016 which contains particulars of shares in the company or
in a related corporation being shares in which the director has an interest and the nature and
extent of that interest, debentures of or participatory interests made available by the company
or a related corporation being debentures or participatory interests in which the director has
an interest and the nature and extent of that interest, rights or options of the director or of the
director and other person in respect of the acquisition or disposal of shares in, debentures of
or participatory interests made available by the company or a related corporation and
contracts to which the director is a party or under which he is entitled to a benefit being
contracts under which a person has a right to call for or to make delivery of shares in,
debentures of or participatory interests made available by the company or a related
corporation.

Section 202(3)(b) of the CA 2016 provides that if a company also consists of a

company’s constitution, the Board of Directors may at any time, appoint a director in addition
to the existing director and the director appointed will hold office in accordance with the
terms of appointment with regards to a private company. A director also has to retire as
provided under Section 205 of the CA 2016. Section 205(1) of the CA 2016 provides that
the retirement of a director is governed by this Section unless if there is a specific provision
in the company’s constitution or the term of appointment. Since the company referred to here
is a private company, this private company may pass a written resolution in accordance with
Section 297 of the CA 2016 which gives permission for a private company to pass a written
resolution, to determine the retirement of a director.

Based on Section 202(3)(b) of the CA 2016, if your company also consists of a

company’s constitution, the Board of Directors may at any time, appoint a director in addition
to the existing director and the director appointed will hold office in accordance with the
terms of appointment with regards to a private company based on

As under Section 205(3) of the CA 2016, public companies are still required to hold
an Annual General Meeting (AGM) to determine the retirement of directors. However,
private companies are not obliged to hold an AGM under this Act and all meetings of a
private company are known as a meeting of members. Unless otherwise provided in the
company’s constitution, the company may also appoint any person who is not disqualified
under this Act to fill in the vacancy at the annual general meeting at which a director so
retires, and if no other director is appointed, the retiring director may offer himself for re-
election as under Section 205(6) of the CA 2016. A retiring director is eligible for re-election
as if he is not disqualified under this Act as according to Section 205(5) of this Act.
However, since a private company does not hold an AGM, the matter of filling in the vacancy
could be resolved by passing a written resolution also known as a director’s resolution which
requires all of the approval of the directors or it could also be included in the company’s
constitution.

With regards to the removal of directors, the company may remove a director before
the expiration of the director’s period of office by way of an ordinary resolution. A special
notice is required of a resolution to remove a director under this section or to appoint another
person instead of the director at the same meeting under Section 206(3) of the CA 2016.
However, a director cannot resign or vacate from his office if the number of the director of
the company falls below the minimum number required under Section 196(1) mentioned
above which is below than one person for a private company and any purported resignation
or vacation of office in contravention of this section is ineffective unless if another person is
appointed in his or her place as provided under Section 196(3) of the CA 2016.

Section 208(1) of the CA 2016 provides that the office of any of the directors
mentioned above holding a company will be vacated if the person resigns in accordance with
subsection (2) which provides that subject to Section 196(3) and 209 of the Act, a director
may resign from his office by giving a written notice to the company at its registered office,
has retired in accordance with this Act or the constitution of the company but is not re-
elected, is removed from office in accordance with this Act or the constitution of the
company, becomes disqualified from being a director under Section 198 or 199, becomes of
unsound mind or a person whose person or estate is liable to be dealt with in any way under
the Mental Health Act 2001, dies, or otherwise vacates his office in accordance with the
constitution of the company.

A notice under subsection (2) shall be effective when it is delivered at the address of
the registered office or at a later date specified in the notice. If a vacancy is created resulting
from circumstances referred to in subsection (1), the Board of Directors will have the power
at any time to appoint any person to be a director to fill such casual vacancy and the director
so appointed will hold office, for this company, in accordance with the terms of appointment
as provided under Section 208(4) of the CA 2016.
 Section 211(1) of the CA 2016 provides that where the business and affairs of a
company shall be managed by, or under the direction of the Board. The Board will have all
the powers necessary for managing and for directing and supervising the management and
affairs of this company subject to any modification, exception or limitation contained in this
Act or in the constitution of this company as provided under Section 211(2) of the CA 2016.
Based on this Section, the Board of Directors will function by managing, directing and
supervising the management and the affairs of the company.

Section 213(1) of the CA 2016 provides that the directors must at all times exercise
their powers in accordance with this Act, for a proper purpose and in good faith in the best
interest of the company. Besides that, Section 213(2) of the CA 2016 provides that the
directors must also exercise reasonable care, skill and diligence with the knowledge, skill and
experience which may reasonably be expected of a director having the same responsibilities
and any additional knowledge, skill and experience which the director in fact has. If any of
the directors contravenes this section, they would be committing an offence and if convicted,
will be liable to imprisonment for a term not exceeding five years or to a fine not exceeding
three million ringgit or to both as under Section 213(3) of the CA 2016. Looking at the
Sections mentioned above, you must ensure that all of the directors in the Board has
performed their duties as was set out in the provisions of the CA 2016.

3.0 CONCLUSION

Having explained the matters above, we hope that we have enlightened you on
matters sought by you. Kindly revert to us if there is any inquiry from your part in respect of
the advice.

Thank you.

Yours faithfully,

For and on behalf of Nahra Yasmin & Partners,

_____________________________

Nahra Yasmin Binti Anuar

Senior Partner