Business Law

Corporate and Partnership Law

Introduction: In Malaysia, business activities are mostly

conducted by sole traders, partnerships companies and trading trusts.

Each of these business entities are subject to specific legal rules governing its organization.

Many of these rules are simply derived from common law or from equity.

Corporate and Partnership Law

Types of Business Organization

Types of Business Organization: The following are types of business that

operate in Malaysia:1)Partnership2) Sole Proprietorshipc) Company – Private & Public Company

Corporate and Partnership Law

Types of business organization in Malaysia

A partnership is defined in Section 3 (1) of the Partnership Act 1961 as

“the relation which subsist between 2> persons carrying a business in common with a view of profit”.The definition provides three essential ingredients for partnership to exists, namely :1. Existence of Business2. carried on in common between the

partners and3. with a view of profit

Corporate and Partnership Law

What is a Partnership:

In the recent case of Chooi Siew Cheong v Lucky Height Development Sdn Bhd [1995] 1 MLJ 513, the Federal Court held that there was no partnership resulting from a joint venture agreement between landowner and a housing developer because each party to the agreement intended wholly separate business, there was no business in common with a view of profit.

Corporate and Partnership Law

Cox v Coulson [1916] 2 KB 177 (English Court of Appeal )

The Court of Appeal held that sharing of gross returns did not create such a partnership.

Partnership therefore are about business carried on by persons who intend to share in the net profits of that business.

Corporate and Partnership Law

Partnership Advantages & Disadvantages

Advantages: Easy to set up and operate @less formalities. Ideas, talents and skills can be pooled together from

partners for better management. Equity can be increased from existing partners. Income tax is not imposed on the partnership business

but instead on the individual partners.

Corporate and Partnership Law

Type Of Business

Disadvantages• Business liabilities are unlimited. Personal

assets can be seized by court order since no distinction between personal & business assets.

The life span of the partnership business depends on the life spans of the business.

If partner declared bankrupt, dies or become insane business has to be dissolved.

Difference of opinion and conflict may lead to breakup of the partnership.

Corporate and Partnership Law

2) Sole Proprietorship Formed under the Business Act 1956,

Registered with CCM ,Form A is for Registration This type of business is owned by an

individual or sole person and has simple business structure.

Some sole trader can operate as big business, e.g. Family run business.

Example of Sole trader – tailor, Beauty Saloon, restaurants, launderettes, mini market etc.

Corporate and Partnership Law

SOLE PROPRIETORSHIP

Advantages Easy to manage the business and all decision

made by the owner- manager. Low start up capital, no heavy investment and

flexibility in operation. Easy to form and dissolve with minimum

formalities. Nobody shares the rewards of the business, all

profit will go to the owner.

Corporate and Partnership Law

Disadvantages Limited source of capital, lack of capital to

expand the business further. The liability is unlimited Failing which all assets will be ceased by

court order to be sold, and cash generated will used to pay all outstanding creditors.

Corporate and Partnership Law

3) Company In Malaysia parent legislation in regards to

companies is Company Act 1965 According to Company Act 1965, The types

of company that can be form by an investor or prospector is as follows:- Company Limited by Guarantee Company Limited by Share Company limited by both by Share and

Guarantee. An unlimited company.

Corporate and Partnership Law

COMPANY

Once a company is incorporated/ Registered it enjoys the benefits such as:-

Perpetual succession A Company may Own Property Separate Legal Entity ( Salamon v Salamon

1897) Section 16 (5) of CA 1965 A Company may be sue and sued A Company can act through its Agent.

Corporate and Partnership Law