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Companies Limited By Guarantee (“CLBG”) may be incorporated under the Malaysian Companies Act 2016 (“CA”) as public companies. CLBG is defined under the CA as a company formed on the principle of having the liability of its member limited by the constitution memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. No company may be formed as, or become, a company limited by guarantee with a share capital.
In Malaysia, there are two (2) types of CLBG under the CA:
- CLBG without the word “Berhad” or “Bhd”, subject to approval from the Minister,(“CLBG without “Berhad” or “Bhd”); and
- CLBG with the word “Berhad” or “Bhd” at the end of its name (CLBG with “Berhad” or “Bhd”).
Factors to consider when proposing name for the CLBG:-
- The proposed name needs to be precise and reflects the category or objects of the company.
- A name for CLBG without “Berhad” which is misleading and relates to commercial activities will not be allowed as such company is non-profit orientated.
- If a person’s name is used, whether alive or deceased, need to obtain written consent from the owner or their family members / beneficiaries.
- If the proposed name is related to any existing company, written consent from the company concerned is required.
- Words which may be used are Foundation (Yayasan), Institute (Institut), Academy (Akademi), Corporation (Badan), Alliance (Gabungan), Federal (Persekutuan), Chamber (Dewan), Council (Majlis), Fund (Tabung), Memorial (Peringatan) and Centre (Pusat).
Note: CLBG with “Berhad” is not allowed to use the word “Foundation (Yayasan)” as part of its name.
- Words such as Association (Persatuan), Union (Kesatuan) and Society (Pertubuhan) are not allowed.
- Names which are related or connected with any political party will not be allowed.
- Usage of names connected with government agencies will not be allowed unless the incorporation and activities of the CLBG are sponsored by the government agencies concerned.
Activities of a CLBG to be formed must be in line with the following objects and maximum of three (3) objects are allowed in the constitution:-
- Providing recreation or amusement;
- Promoting commerce and industry;
- Promoting of arts;
- Promoting of science;
- Promoting of religion;
- Promoting of charity;
- Promoting of pension or superannuation scheme; or
- Promoting any other objects useful for the community or country such as –
- Social; or
Founders / directors must be fit and proper persons and qualified to act in such capacity under the CA.
For determining whether a person is fit and proper, the Registrar may:
- consider the experience, qualification and competency of the founder or director who would be assisting him in carrying out his duties as director of the CLBG;
- consider the reputation, character and integrity of the founder or director;
- conduct security vetting on the potential founder or director,
The Registrar may, if he is satisfied that the applicant is fit and proper and competent to perform the duties of a director under the CA, approve the applicant as a director of a CLBG.
- A CLBG must ensure that none of its members or directors uses the company or its financial resources to conduct any form of political or unlawful activities.
- The Registrar may require a CLBG to submit a segmental reporting together with its financial statements.
- Unless prior approval has been obtained from the Registrar / Minister, a CLBG:
- is prohibited to omit the word “Berhad” or “Bhd” from the company’s name;
- is prohibited to appoint new directors / trustee;
- is prohibited to amend its constitution;
- is prohibited from paying any fees, salaries, fixed allowances or any other benefits to its directors;
- is prohibited to solicit any contribution or donation or make any money collection from the public; and
- is required to comply at all times with all the provisions set forth in the constitution, other than the conditions mentioned above.
- A CLBG shall –
- apply its profits and other income for the purposes stated in the objects of the company;
- prohibit the payment of any dividend to its members; and
- require all the assets that would otherwise be available to its members generally be transferred on its winding up either -
- to another body with objects similar to its own; or
- to another body the objects of which are the promotion of charity and anything incidental or conducive to such objects.
- A CLBG shall not hold, acquire, charge, mortgage, sell, lease or dispose, land or property unless a licence has been obtained from the Minister.
- The Minister may impose special terms and conditions relating to the holding, acquiring, charging, mortgaging, selling, leasing or disposing the land or property as he thinks fit.
- A CLBG may apply to the Minister for a licence to omit the word “Berhad” or the abbreviation “Bhd” from its name. However, any CLBG intending to use the words “Yayasan” or “Foundation” must omit the word “Berhad” or “Bhd” from its name. The Minister may impose terms and conditions as he thinks fit in approving the application.
- The basis to support the approval of omitting the word “Berhad” or “Bhd” is that the CLBG must have a fund amounting to RM1 million cash as initial funding for its activities. The CLBG is required to get all of the cash has been pledged by potential contributors within six (6) month after it is established. A contributor can be either an individual or a company.
- Supporting documents from individual acting as contributor / donor
- A Statutory Declaration by the individual contributor and the amount that the contributor has agreed to contribute; and
- The latest bank statement OR fixed deposit receipt.
- Supporting documents from company acting as contributor / donor
- A resolution by the company the contents of which should among others include the amount that the company has agreed to contribute;
- Latest bank statement of the company; and
- Latest Audited Financial Statement of the company.
- Supporting documents from individual acting as contributor / donor
- A CLBG which had been incorporated for a period of three (3) years may also apply to omit the word “Berhad” or “Bhd”.
- Submission of name search application with the Registrar - The following additional information /documents needs to be given to support the application:
- Justification and purpose for using the word “Yayasan/Foundation/Institute” and omission of the word “Berhad” or “Bhd” as part of the company’s name;
- Explanation and justification by the promoter for the use of the proposed name.
- Any supporting or approval letter from any government agency or other organization for the use of the proposed name, if applicable;
- Supporting documents are required if the objects of the company relates to any Ministerial, Government Agency or any other authorities;
- A statement for reasons of incorporating a CLBG and not under the Societies Act 1966;
- A comprehensive write-up on the proposed company which includes the following:
- Purpose of incorporation
- Objects and proposed activities;
- Biodata, qualification and experience in charitable activities for each founders and proposed directors;
- Certified true copies identity card/passport of founders and proposed directors by company secretary;
- Letter of consent to act as founders and proposed directors;
- Draft constitution
- Information on the contributor/donor confirming the financial contribution of RM1 million to be made within 6 months from the date of incorporation. Supporting documents from committed contributor / donor.
- An estimated/forecasted income and expenditures for a period of two (2) years from establishment of the CLBG. The minimum total cash contribution of RM1 million must be shown in the year one (1) estimated income and expenditures.
- When all documents are in order and procedures are duly complied with, the Registrar will issue a certificate of incorporation for the company.
- Procedures mentioned under item G(1) shall apply except for item (a), (k) and exclude “The minimum total cash contribution of RM1 million must be shown in the year one (1) estimated income and expenditures.” from item (l).
- CLBG with “Berhad” is not allowed to use the word “Yayasan” or “Foundation” as part of its name.
The information in this document is not advice of any kind but general information only and should not be relied on as legal advice. Kensington Trust Group recommends seeking professional advice on legal or tax issues affecting you before relying on it. While Kensington Trust Group tries to ensure that the content of this document is accurate, adequate or complete, it does not represent or warrant, express or implied, its accuracy, correctness, completeness or use of any of the information. Kensington Trust Group does not assume legal liability for any loss suffered as a result of or in relation to the use of this document. To the extent permitted by law, Kensington Trust Group excludes any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this document.