MGM4183 Venture Formation

Entrepreneurship
The Legal Form of New Ventures

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The law relating to incorporation of a company in Malaysia
is governed by the Malaysian Companies Act, 1965.
As per the act any company doing business or wishing
to do business in Malaysia must register with the
Companies Commission of Malaysia (CCM) under the
Companies Act 1965.

http://www.ssm.com.my/

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PROCEDURE FOR
INCORPORATION
Apply CCM using Form 13A + Name search
Submit documents within the three months to secure the use of
the proposed name:
Memorandum and Articles of Association
Declaration of Compliance (Form 6)
Statutory declaration by a person before appointment as a director,
or by a promoter before incorporation of a company (Form 48A).

The Memorandum of Association shall describe the
company's name, the objects,
the amount of its authorized capital (if any) proposed for registration
and
its division into shares of a fixed amount.
A certificate of incorporation will be bestowed by the Registrar
of Companies once registration procedures are completed
and approved.
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REQUIREMENTS OF A LOCALLY INCORPORATED
COMPANY
A company must :
maintain a registered office in Malaysia where all books and documents required
under the provisions of the Act are kept. The name of the company shall appear in
legible romanized letters, together with the company number, on its seal and
documents.

A company cannot deal with its own shares or hold shares in its holding
company.
Each equity share of a public company carries only one vote at a poll at any general meeting
of the company.

The secretary of a company must be a natural person of full age who has
his principal or only place of residence in Malaysia.
He must be a member of a prescribed body or is licensed by the Registrar of Companies.
The company must also appoint an approved company auditor to be the company auditor
in Malaysia.

In addition, the company shall have at least two directors who each has
his principal or only place of residence within Malaysia.
Directors of public companies or subsidiaries of public companies normally must not exceed 70
years of age. It is not incumbent that a company director should also be a shareholder.
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Sole Proprietorship
One company, one owner
Require only license(s) to
open
Low costs involved
Owner has total control
Disadvantages
Unlimited personal liability
Owner represents sum total of
management resources
No shares to sell to investors
Financial institutions may be reluctant to
assume risk of a loan
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Partnerships
Association of two or more
people who co-own a business
for the purpose of making a profit
Terms are spelled out in a
partnership agreement or subject
to the Uniform Partnership Act
Disadvantages
Unlimited liability
Difficult to continue if one partner is
unable to participate
Cant sell shares; may experience
difficulties raising capital

Limited partners
Invest but forego right to manage
Share in the profits according to the
limited partnership agreement
Have limited liability
Limited liability partnership
All partners are limited
partners
Individuals pay taxes
http://www.ssm.com.my/en/berita/news.
php?id=43
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Corporation
Separate legal entity apart from owners
May engage in business, make contracts, own property,
pay taxes, and sue and be sued

Domestic corporationdoes business in the state in
which it was created
Alien corporationformed in other country
Establishing a Corporation:
Registration
Articles of incorporation
Shareholders elect directors
Directors appoint corporate officers
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Advantages of
Corporations
Limited liability for stockholders
Ability to attract capital
Continue beyond lives of founders
Shares are transferable
Liquidity can be very high
Disadvantages of
Corporations
Complex and expensive to start
Profits subject to double taxation
Subject to legal and financial requirements
Record and report decisions and financial data
Hold annual meetings
Consult with board
File reports with SEC
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Limited Liability Company
Cross between a corporation and a partnership
Income flows through to owners who pay taxes as
individuals
Can only offer two of the following:
Limited liability
Continuity of life
Free transferability of interests
Centralized management
The Joint Venture
Resembles a partnership without general or limited partners
Purpose is very limited
All participate in management and decision making
Taxed like a partnership
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Business Contracts
Promises that are enforceable by law
Contract lawbody of laws designed to assure that
parties entering into contracts comply with their provisions
Elements of a Contract
Legalityintended to accomplish a legal purpose
Agreementincludes a legitimate offer and
acceptance
Considerationsome of value must be exchanged
Capacitypersons must have capacity to enter into
agreement
Breach of contract may result in
Compensatory damages
Specific performance
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Franchising
A system of distribution in which legally independent
business owners (franchisees) pay fees and royalties to a
parent company (franchisor) in return for the right to
Use its trademark
Sell its products or services
Use the business model
Types of Franchising
Trade-name franchisingallows sale of products under
franchisors name and trademark

Business format franchisingprovides franchisee with a
complete business system
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Benefits of Franchising
Training and support
Standardized products and services
National advertising
Buying power
Financial assistance
Site selection and territorial
protection
Proven business model
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Drawbacks of Franchising
Fees and royalties
Enforced standardization
Restricted freedom over purchasing
and product lines
Poor training programs
Market saturation

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Trends in Franchising
Smaller outlets in nontraditional
locations
Co-branding franchise
International franchising
Expansion of types of businesses
being franchised

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Entrepreneurship

The Legal Form of New Ventures

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