190 Governing legislation

Governing legislation

The governing legislation on arrangement and reconstruction come under the Part VII of the Companies Act. This part:

1. Authorises the company to make a compromise with its creditors and members and stipulates the information to be provided (Section 176 – 177), and

2. Makes provisions for the facilitation of the reconstruction and amalgamation of companies (Section 178).


Definitions of compromise or arrangement (Section 176 (11) CA)

It is not defined in the Companies Act 1965 but their general meanings are as follow:

A compromise is an adjustment of conflicting interests by modification of each, an implication of some element of accommodation on creditors and members.

An arrangement is an order with an implication of give and take.

Both terms are interpreted fairly liberal by the Courts, the substantive provisions of a scheme being regarded as more important than the name given to it.

The term “arrangement” at Section 176(11) includes the re-organisation of the share capital by the consolidation of shares of different classes or by the division of shares of different classes or by both these methods.



Definitions of reconstruction or amalgamation (Section 178 CA)

Reconstruction is the resuscitation of a company affected by substantially the same persons as before (“substantially the business and the persons interested must be the same”).

Amalgamation is the welding of two undertakings.

The difference between reconstruction and amalgamation is that the latter involves the blending together of two concerns, not merely the continuance of one concern.”

A listed company undertaking a scheme of compromise, arrangement, amalgamation or reconstruction must make an immediate announcement to Bursa Securities for the proposed scheme and also in the event of any material development in the same (para 13.02 Bursa Malaysia Securities Listing Requirements).

Once a company has acquired 90% of the shareholdings of another company, it should not be prevented from converting the other company into a wholly owned subsidiary by a small dissenting minority of 10% or less, but should be entitled to acquire the holding of that minority. This applies where the requisite 90% shareholding has been acquired by one company. It does not apply where two or more companies have jointly acquired a 90% stake in the transferor company


BCS 202/05 Corporate Compliance Management Copyright © 2011 by Wawasan Open University. All Rights Reserved.


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