Companies limited by shares
There are two types of companies that are limited by shares. These companies are usually private companies or public companies.
Most companies start business as private limited companies. Private limited companies can be started by two or more persons coming together to share their resources to start a business. Once the company is incorporated they will become the shareholders of the company. Private limited companies are identified by the abbreviation “Sendirian Berhad”. The abbreviation “Sendirian Berhad “can be shortened to “Sdn Bhd” or “S/B”.
Figure 1.2 Company limited by shares
Characteristics of a private limited company
- A private limited company cannot sell shares to the public. A private limited company usually will raise its capital for business through its shareholders’ own savings, bank loans, or loans through private arrangements with friends, relatives, etc.
- A private company must have a minimum of two members. The maximum number of members a private limited company can have is 50.
- A minimum paid-up capital of only RM2 is needed to start a private limited company.
- A private limited company having fulfilled the requirements for listing, may in future, list itself as a public limited company.
Effective 3 August 2009, the Main and Second Boards will be known as the Main Market. The Main Market is a single unified board for established companies. The old Mesdaq Market, which is for technology-based companies, is transformed into an alternative market for emerging companies of all sizes and sectors and will be called the ACE Market. Under the enhanced framework, changes would be made to the Capital Markets and Services Act 2007 (“CMSA”) and the regulatory functions of both Securities Commission (SC) and Bursa will be streamlined, Henceforth, companies that wish to be public listed will need to adhere to the following:
1. SC approval is required only for initial public offerings, reverse takeover, back-door listings, secondary listings, cross listings and transfer of listings. SC will continue its function as the gate-keeper to safeguard investor’s interests;
2. Secondary fund raising exercises such as rights issues, placements and issuing of securities that do not change the core business of the listed companies shall require Bursa’s approval. SC’s approval is no longer required.
3. *Admission route of listing is to be satisfied either by profit test or market capitalization test, if core business is that of infrastructure project, then listing requirement is to follow the Infrastructure Project Corporation Test.
Characteristics of a public limited company
1. A public limited company sources its capital by selling shares to the public.
2. A public limited company is identified by the abbreviation “Berhad”.
3. The abbreviation “Berhad” can be shortened to “Bhd”.