CRG660

Corporate
Secretarial Practices

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CONVERSION OF COMPANY
Public Private
company company

Private Public
company company

Unlimited Limited
company company

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 DIRECTORS
Public company
• The minimum number of
shareholders = 1, and there is
no cap for maximum number.
• The minimum number of directors
required = 2 directors.
• The company could offer any of its
shares or debentures to the public.
• It is obligatory to hold AGM and
make annual reports on their
financials.
• Public companies are subject to
higher reporting standards and
listing rules by SSM and SC.
DIRECTOR
Private company
• The minimum number of
shareholders = 1, and the
maximum number allowed = 50.
• The minimum number of directors
required = 1 director.
• The right to transfer shares is
restricted.
• The company is prohibited to
offer any shares or debentures of
the company to the public.
• There is no need to publicly report
the financials of the company, nor
is there a need to hold an AGM.
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Conversion of
Public Private
Section 41 (1) states that a public company having a share capital
may convert to a private company by passing a special resolution
and shall lodge with the Registrar a NOTICE OF CONVERSION
specifying:
• An appropriate alteration to its name

• Alterations to the constitution (if the company has one) as necessary

to impose the restrictions, limitations and prohibitions of the Act.

SPECIMEN RESOLUTION
That the company be converted to a private company and that accordingly:

a. The name of the company be altered from ABC Bhd to ABC Sdn Bhd…
b. The constitution of the company be altered by the insertion of the
following new clause, stating:
• The right to transfer of shares…
• The number of members …
• Any invitation to the public to subscribe to any shares in or
debentures of the company … CRG660 4
• Any invitation to the public to deposit money with the company …
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Conversion of
Public Private
Section 41 (3) states that, upon the lodgement of the notice for
conversion, the Registrar shall -
• make alterations to the register to record the conversion.
• issue a notice of conversion and cancel the previous
NOR/certificate of incorporation of the company, as the
case may be.
• The conversion shall take effect on the issuance of this
notice.

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 DIRECTOR
Private company
• The minimum number of
shareholders = 1, and the
maximum number allowed = 50.
• The minimum number of directors
required = 1 director.
• The right to transfer shares is
restricted.
• The company is prohibited to
offer any shares or debentures of
the company to the public.
• There is no need to publicly report
the financials of the company, nor
is there a need to hold an annual
general meeting (AGM).
DIRECTORS
Public company
• The minimum number of
shareholders = 1, and there is
no cap for maximum number.
• The minimum number of directors
required = 2 directors.
• The company could offer any of its
shares or debentures to the public.
• It is obligatory to hold AGM and
make annual reports on their
financials.
• Public limited companies are subject
to higher reporting standards and
listing rules by SSM and SC.
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Conversion of
Private Public
Section 41 (2) states that a private company may convert to a public
company by a special resolution and shall lodge with the Registrar—
• NOTICE OF CONVERSION and specifying an appropriate
alteration to its name.

SPECIMEN RESOLUTION
“… that the company be converted to a public company and that the
name of the company be altered from ABC Sdn Bhd to ABC Bhd…”

• a statement in lieu of prospectus.

• a statutory declaration verifying that para 190(2)(b)
has been complied with.

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Conversion of
Private Public
• Once the ROC is satisfied with the application, a notice of
conversion will be issued and the previous NOR/certificate of
incorporation of the company (as the case maybe )will be cancelled.

• The limitations, restrictions and prohibitions imposed by the

CA2016 as embodied in the constitution (if any) of the private
company will cease to form part of the constitution.
• Restriction to the right to transfer its shares
• Limitation on the number of members
• Prohibition on invitation to public to subscribe for any shares or
debentures of the company
• Prohibition on invitation to the public to deposit money with the
company.

• Thus, when a conversion takes place, all those restrictions required

by CA2016 are deleted from the constitution, if there is one.
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Unlimited company
• An unlimited company, as the name
suggests, means that limited liability
does not apply to its
members/shareholders.
• As such, its members/shareholders
will be personally responsible for the
full extent of any losses it incurs.
Limited company
• A company is limited by shares
if its shareholders/members
(a.k.a. its owners) are legally
responsible for the debts of
the company to the extent of
any unpaid amount of their
shares in the company.
• a company is limited by
guarantee if the liability of its
members is limited to such
amount as the members
undertake to contribute in the
event of its being wound up.
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Conversion of
Unlimited Limited
Section 40(1)

Notice of conversion from an Company

unlimited company to a limited
company by special resolution:
Special resolution
• conversion of status
• appropriate alteration to Notice of
its name. conversion from
an unlimited to Notice of
• Fee of RM500. limited company conversion
• Original copy of notice of
registration or certificate
of incorporation. Registrar

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Effects of
Conversion
• Section 41(5) of CA 2016 states that a conversion of a company
under this section shall NOT:
• affect the identity of the company or any rights or
obligations of the company.
• render defective any legal proceedings by or against the
company.

• Section 41(6) states that any legal proceedings that could have
been continued or commenced by or against the company prior
to the conversion may, notwithstanding any change in the
company’s name or capacity in consequence of the conversion,
be continued or commenced by or against the company after the
conversion.
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Going Public

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Going Public
• Is a process of getting shares of the company traded in the stock
market (a public company becomes a listed public company).
• Private company must convert to public company before
applying for listing status.
• Reasons for listing:
• Raise additional capital to seize growth opportunities
• Enable current shareholders to realize their investment
• Encourage and reward loyal and committed employees
through employee equity scheme
• Enhance the credibility and profile of company as a public
listed entity in the eyes of customers and suppliers.
• Widen shareholder base.

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Chapter’s Exercises
Q1: Where the Registrar determines that a company has ceased to be
a private company and automatically becomes a public company, the
company needs to submit a statement in lieu of prospectus within 14
days from CCM's notice to the company.

TRUE / FALSE

Q2. The following is NOT a reason for converting from a private to a

public company

A. Raising capital through public issue of shares

B. Widening the shareholder base and spreading risk
C. Concentration on control of shares
D. Growth and expansion opportunities

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Chapter’s Exercises
JAN2018:
Going public is a process where a private company becomes a public
listed company. Give THREE (3) disadvantages of going public to the
company.
(4 marks)

Explain THREE (3) methods by which a public company can issue

shares to the public.
(9 marks)

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