Key points on members’ written resolutions under the Companies Act 2016
- By : Wong Mei Ying
- Category : Article, Company Law
The Companies Act 2016 of Malaysia (“CA 2016”) repealed the Companies Act 1965 (“CA 1965”) on 31 January 2017. The CA 2016 brings various changes to the way companies conduct their businesses. Some of the changes relate to the way written resolutions are passed by members of companies. Compared to the CA 1965, the CA 2016 prescribes in greater clarity the procedures for passing members’ written resolutions.
This article sets out some key points to note in relation to members’ written resolutions under the CA 2016.
1. Type of companies which may pass members’ written resolutions
Section 290 of the CA 2016 states that a private company may pass a members’ resolution by a written resolution or at a meeting of the members, while a members’ resolution of a public company may be passed at a meeting of the members. The effect of section 290 of the CA 2016 is that it is no longer open for a public company which is not listed to pass a members’ resolution by way of a written resolution.
In contrast to the CA 2016, section 152A(1) of the CA 1965 allowed both private and public companies to pass members resolutions by way of written resolutions. It is obviously not feasible for a public listed company to pass a members’ resolution by way of a written resolution due to the large number of members of a public listed company. However, such option was open for an unlisted public company under the CA 1965.
2. Voting percentage to pass a resolution
Under section 306(4) of the CA 2016, a written resolution is passed when the required majority of eligible members have signified their agreement to the written resolution. Section 293(1)(a) of the CA 2016 clarifies that unless otherwise provided in the constitution of a company having a share capital, every member shall have one vote in respect of each share held by him on a vote on a written resolution. This means that if the written resolution is an ordinary resolution, it is passed if agreed to by members holding more than 50% of the voting shares, and if the written resolution is a special resolution, it is passed if agreed to by members holding at least 75% of the voting shares. The CA 2016 removes the requirement of unanimous consent of members of a private company to pass a written resolution under section 152A(1) of the CA 1965.
3. Requirement to expressly state a members’ written resolution is a special resolution
Section 292(2) of the CA 2016 provides that if a resolution of a private company is passed as a written resolution, the resolution is not a special resolution unless it is stated that it is a special resolution and passed as a special resolution. Under the CA 1965, there was no express requirement to state a members’ written resolution was a special resolution for the resolution to take effect as a special resolution.
4. Prohibition on members’ written resolution to remove a director or auditor
Section 297(2) of the CA 2016 prohibits the use of a members’ written resolution to remove a director or auditor prior to the expiry of his or her term of the office. There was no equivalent provision under the CA 1965.
5. Eligibility of members to receive written resolution
Section 298 of the CA 2016 clarifies the laws relating to the eligibility of members to receive a proposed written resolution when it is circulated. In respect of a private company, the members who are eligible to receive a resolution proposed as a written resolution are members who would have been entitled to vote on the resolution on the circulation date of the resolution. If a person who is entitled to vote on a written resolution changes during the course of the day the written resolution is circulated, the eligible members shall be the persons entitled to vote on the resolution at the time that the first copy of the resolution is circulated to a member for the member’s agreement. This removes the difficulty of ascertaining who are eligible to vote on a members’ written resolution in the event of a change of members while the proposed resolution is in circulation.
6. Circulation date of members’ written resolution
Section 299 of the CA 2016 sets out the rules relating to the date of circulation of a members’ written resolution. The circulation date of a members’ written resolution shall be the date on which copies of the written resolution are circulated to members. If copies are circulated to members on different days, the circulation date of a members’ written resolution shall be the first of those days. Section 298 (as set out in paragraph 5 above) and section 299 of the CA 2016, when read together, provide clarity on the eligibility to vote when a members’ written resolution is circulated on different days.
7. Manner in which a written resolution to be circulated
Section 300 of the CA 2016 expressly states that a written resolution shall be circulated in hard or electronic form. Unless otherwise provided in the constitution, a members’ written resolution circulated in hard copy shall be sent to any member either personally or by post to the address provided by the member to the company for such purpose or if circulated in electronic form, a members’ written resolution shall be transmitted to the electronic address (email) provided by the member to the company for such purpose. The CA 2016 reflects what is happening in practice as circulating a resolution by email is prevalent and expeditious compared to circulating a resolution by post or personal delivery.
8. Members’ written resolutions to be accompanied by statement
Under section 301 (circulation of written resolution proposed by directors) and section 303 (circulation of written resolution proposed by members) of the CA 2016, a copy of members’ written resolution must be accompanied by a copy of statement setting out the procedure for signifying agreement or otherwise to the resolution and the date by which the resolution shall lapse if the resolution is not passed. This is a new requirement under the CA 2016.
9. Procedures for signifying agreement to written resolution
Section 306 of the CA 2016 prescribes the procedures to signify agreement to a proposed members’ written resolution. A member signifies his agreement to a proposed written resolution when the company receives from him an authenticated document identifying the resolution to which it relates and indicating his agreement to the resolution. The document shall be sent to the company in hard copy or electronic form. A member’s agreement to a written resolution, once signified, shall not be revoked.
It is not clear from the CA 2016 as to what constitutes an “authenticated document”. Very often, a company may need to pass a members’ resolution urgently. This may pose a problem if the members are not in Malaysia as they will not be able to deliver hard copy of the original signed resolution to the company expeditiously. It is argued that, at the very least, on a restrictive interpretation, a scanned copy of a members’ written resolution which is physically signed under hand and then emailed by a member to the company should be accepted for the purposes of section 306 of the CA 2016 as it fulfils the requirements under section 306 namely (i) the document is authenticated (in the sense that it is verified as genuine) by virtue of the member emailing the resolution personally to the company; (ii) the document identifies the resolution to which it relates; (iii) the document indicates the member’s agreement to the resolution; and (iv) the document is in electronic form. This is not to say that resolutions which are signed electronically (i.e. through various tools available on the market such as PDF signature) are not authenticated document for the purposes of section 306. The acceptance (or non-acceptance) of electronic signature for a members’ written resolution has yet to be tested under the CA 2016.
10. Period for agreeing to written resolution
The CA 2016 further prescribes the period for a member to agree to a written resolution. Section 307 of the CA 2016 provides that, a written resolution proposed by members of a company lapses if it is not passed before the end of the period of 28 days beginning with the circulation date, unless otherwise provided in the constitution.
Conclusion
The CA 2016 sets out in greater details the procedures for passing a members’ written resolution. Persons tasked with the responsibilities of preparing members’ written resolutions should take note of the requirements under the CA 2016 to avoid any contravention of the laws.
The information in this article is intended only to provide general information and does not constitute legal opinion or professional advice.