INTRODUCTION

TO MALAYSIAN NAME:
MUHAMMAD FAIQ BIN
INCORPORATION HAWARI
ID:

AND BUSINESS ACP01083653

ENTITY
 EFFECTS OF INCORPORATION
• Based on Section 16 (5) of
Companies Act 1965
1. The company has a
separate legal entity
distinct from its members
• Company: Artificial legal
person, recognised by the
law as having powers and
liability like an individual
Abdul Aziz bin Atan & 87 Ors. v.
Ladang Rengo Malay Estate Sdn. Bhd.
Fact: All the shareholders of the company
sold and transferred their entire shares to a
certain buyer. The question arose in the
dispute was whether the estate was sold
and if so whether a change of employer
took place
Held: that an incorporated company did not
change its personality or identity even
though all of shares have been transferred
to the new owner
 EFFECTS OF INCORPORATION
2. May sue and be sued in his own name
• Company having legal personality, only itself can enforce its right.

Foss v. Harbottle
Fact:
Two shareholders of a company brought action against directors of the
company for misapplication and improper use of the company’s property

Held:
As the injury complained of was injury to the company, the members
could not take action. Only the company had the right to sue.
 EFFECTS OF INCORPORATION
3. It has perpetual succession
• Company continues to exist until dissolved according to law or struck off by
registrar
Re Neol Tedman Holdings Pty Ltd
Fact:
Company had a husband and wife as its only shareholders and directors. They
dies in an accident and was survives by an infant child. The problem that arose
was the shares could not be transferred as according to the will of the deceased
to the infant child.
Held:
The court allowed the personal representatives of the deceased to appoint
directors of the company, so that these directors could allow the transfer of
shares to the child.
 EFFECTS OF INCORPORATION
4. Power to own property
• Company can own property, which does not belong to the members or
shareholders.
Macaura v. Nothern Assurance Co. Ltd
Fact:
Macaura sold all his timber to a company in which he held majority of shares.
He took out fire insurance in his own name. when the timber was destroyed by
fire, Macaura claimed compensation from the insurance company.
Held:
Macaura had no right to claim because when he sold the timber to the
company, he had given up his interest in it. Then timber was the property of
the company and Macaura no longer had insurable interest in it.
 EFFECTS OF INCORPORATION
5. The liability of its members is limited
• Company is liable for its own debts and obligations, not the members

Re Application of Yee Yut Ee

Fact:
Yee was a secretary in a company Later, he was appointed as a director in the
company. The company later retrenched its staffs without paying them
retrenchment benefits. The case was later brought before the High Court.
Held:
The High Court quashed the award, stating that a director is not liable for the
debts of an incorporated company
 LIFTING VEIL OF INCORPORATION
Judicial Exception Statutory Exception

1. Company used as 1. Section 36

sham/deception 2. Section 121 (2)(c)
2. Company used to 3. Section 304 (1)
evade legal
obligation/commit 4. Section 304 (2)
fraud 5. Section 365 2(b)
3. Company used as an
economic/commercial
entity
 Company
Types

Unlimited Limited

By
By Shares
Guarantee

Public

Private
 DIFFERENCES BETWEEN A COMPANY,
PARTNERSHIP AND SOLE PROPRIETORSHIP
Sole Proprietorship Partnership Companies

Structure Individual in business on his Two or more persons Company is a person separate
own from its members
Asset Personal property of the owner Personal property of all partners Separate legal entity

Registration Registrar of Business under Registrar of Business under ROBA Registrar of Companies under
ROBA 1956 1956 Companies Act 1965
Composition One person Two to twenty but no ceiling for No maximum number but for
professional firm private company limit to 50
Constitutions No agreement needed May be form orally or in writing Must be constituted in writing
(by memorandum and article)
Liability Unlimited liability Unlimited liability Limited liability

Dissolution Dissolved informally by the sole Dissolved informally e.g by Striking off
proprietor himself agreement of the partners Winding up and liquidation