The Companies (Amendment) Act 2019: The insertion of Subsection (6) to Section 66 of the Companies Act 2016

Before the Companies (Amendment) Act 2019, many have commented that Section 66 of the Companies Act 2016 has given rise to uncertainties as the scope and meaning of “document” is not defined. This is because by reading Section 66(2) of the CA 2016, in signing a document without common seal, it seems to mandate all documents to be signed by the director of that company to render the document as “validly executed by a company”. It states that:-

“(2) A document is validly executed by a company if it is signed on behalf of the company-

(a) by at least two authorized officers[1], one of whom shall be a director; or

(b) in the case of a sole director, by that director in the presence of a witness who attests the signature.”

The uncertainty is this: does this mean that in the absence of a common seal, all documents must be signed by the director to render them being validly executed by the company? If yes then this would be in conflict with Section 64(1)(b) of the CA 2016 which states that a contract may be made on behalf by a company by a person acting under its authority, express or implied, which may not be necessarily a director of the company.

To reconcile and clarify the confusion or uncertainty arising from the above, Companies Commission of Malaysia issued FAQs[2] (last updated 31.1.2017) specifically on this.

In answering the question of “What is the ambit and scope of section 66 with regards to the execution of document?”, SSM explained that “Section 66 should be read in totality to which the scope is intended to cover the execution of documents which are required under any written law/regulations or agreement to be executed under common seal.”

However, this clarification by SSM has no force in law unless and until it is recognised by the courts or codified in the statute itself. To give legal effect to the clarification by SSM, finally, by virtue of Section 3 of the Companies (Amendment) Act 2019, subsection (6) is inserted. It reads: “(6) For the purposes of this section, “document” means a document which is required to be executed by any written law, resolution, agreement or constitution in accordance with subsection (1).”

With this amendment, the meaning of “document” is defined. It is now certain that Section 66 is only confined to documents that are required to be executed by any written law, resolution, agreement or constitution in accordance with subsection (1). With the existence of such requirement (under the law, resolution, agreement or constitution), the manner of execution of document as provided under section 66(1) of the CA 2016 would be applicable (ie by common seal or signature by director as an alternative to common seal).

A good illustration of “any written law” falling under section 66(6) of the CA 2016 would be section 216 of the Sarawak Land Code. It provides as follows:-

“216. Corporation may execute under seal.

A corporation may execute an instrument[3] by affixing thereto the common seal of the corporation or by an attorney appointed under the common seal, and any such seal fixed to any instrument shall be sufficient proof of the Registrar that the same was affixed under proper authority, and that the instrument is binding on the corporation.”

Pursuant to this provision, instruments such as Memorandum of Transfer and Memorandum of Charge are to be executed with common seal.

Based on all of the above, one may argue that if a common seal is already expressly required under a written law (such as the Land Code), then section 66 is merely a repetition of that written law. Further, if a common seal is already required under the resolution or agreement or constitution, then section 66 is likewise a repetition but with express legal force. In whichever event, with or without section 66 of CA 2016, common seal still should or has to be affixed.

However, with Section 66(1)(b) CA 2016, it provides a possible alternative to a common seal. It can be replaced with signatures in accordance to subsections (2) and (3). It is provided under subsection (3) that a document signed in accordance with subsection (2) shall have the same effect as if the document is executed under the common seal of the company.

Having said that, while subsection (3) provides that signatures as per subsection (2) shall have the same effect as if it is common seal, it is pertinent to note that this does not override the express requirement of executing document by common seal such as the Sarawak Land Code and the National Land Code. Therefore, for the purpose of executing land instruments, it would appear that the option of signing with signatures as an alternative to common seal is superfluous and serves no purpose. Following from this, the option of not having common seal under section 66(1) would likewise be rendered meaningless.

As opined by SSM itself in its FAQs, “The fact that the company opted not to have a common seal does not override the provisions of such requirement under any other written laws. As such, the company may adopt a common seal when it becomes necessary to comply with the requirements of other written laws, for example when dealing with the Land Office.[4]”

This gives rise to the utility and practicality values of subsections (2) and (3) of Section 66 of the CA 2016 which recognise signatures by authorized officers as having the same force as common seal.

Based on the above, the option of placing signatures instead of common seal may only be exercisable for documents required to use common seal by resolution, agreement and constitution but not written law such as the Land Codes. Despite the comment by SSM in the FAQs, one may also argue that the option should also be made available to company without company seal instead of making one just for the purpose of land instruments as opined by SSM.

Coming back to section 64 of the CA 2016, unless it is otherwise provided under the Company’s constitution or resolution or agreement, company contracts can be formed without a common seal. In fact, it is valid and binding on the company as long as the promisor is someone having implied or express authority of the company. A contract can be formed in writing as well as orally. It is to be noted that this provision is similar to Section 35(4) (a) – (c) of Companies Act 1965 (now repealed). It is not necessary for that the promisor or signatory to be a director as required under Section 66 of the Companies Act 2016.

In a nutshell, with the latest amendment, the uncertainty on the scope of Section 66 of CA 2016 is put to rest. However, it is opined that in order to give full effect to this provision, other related laws should follow suit and should be amended in order to be in tandem with Section 66 of the CA 2016. For instance, section 216 of the Sarawak Land Code should be amended to recognise section 66 as the mode of execution.

The contents of this article or write-up are for informational purpose only. The information provided does not and is not intended to constitute legal advice. For legal advice, please contact us.

[1] Authorized officers are defined in Section 66(5) of the Companies Act 2016 as a director of the company, a secretary of the company or any other person approved by the Board.

[2] https://www.ssm.com.my/Pages/Legal_Framework/FAQS-ON-COMPANIES-ACT-2016-AND-TRANSITIONAL-ISSUES/part_g.pdf

[3] “instrument” means any printed or written document relating to the transfer of, or other dealing with, land, or evidencing title thereto, but does not include a caveat.

[4] https://www.ssm.com.my/Pages/Legal_Framework/FAQS-ON-COMPANIES-ACT-2016-AND-TRANSITIONAL-ISSUES/part_g.pdf

CAN A CONSENT JUDGMENT BE CHALLENGED?

What is a consent judgment?

A consent judgment is a judgment recorded or entered before a Judge or Court by consent of parties. It is basically an order or judgment based on a settlement or agreement of parties. In practice, normally, a consent judgment is entered after a successful mediation. The Judge or the Court does not decide on the case and its role is merely to record the terms that have been agreed by parties.

It has the legal force liken to a normal judgment – it can be executed and enforced against the non-complying party. While a judgment decided by the court based on the evidences before it, is appealable, a consent judgment is not.

While it is unlikely for a party to challenge a consent judgment after consenting to it, there are circumstances where a party can challenge a consent judgment. What are they?

To begin with, it must be noted that the mode of challenging is by filing an application to set aside and not by filing an appeal.

*A consent judgment has been entered. If you wish to challenge it, you don’t appeal against it. You set it aside.

It must be borne in mind that an appellant appeals when it is opined that that the deciding judge is wrong in reaching its decision. Therefore, an appeal will allow the matter be heard again by the appellate court.

For a consent judgment, there is nothing to be appealed against as it is not something that had been decided by the court. It is essentially a contract with the command of court.

“A consent judgment or order is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of the court, and its force and effect derives from the contract between the parties leading to, or evidenced by, or incorporated in, the consent judgment or order.”

Tan Geok Lan v. La Kuan [2004] 2 CLJ 301 Federal Court

The basis of a consent judgment is the existence of an agreement. Without an agreement, there will be no consent judgment. By this logic, if the agreement is vitiated, then the consent judgment could be set aside.

The grounds that can vitiate an agreement are the same as the grounds vitiating free consent which include fraud, mistake, total failure of consideration, misrepresentation, coercion, undue influence and other grounds in equity.

“A consent order is an order of the court carrying out an agreement between the parties. It used to be thought at one time that only a ground of fraud could cause a consent order to be set aside. It is now well settled that a consent order can be set aside on the same grounds as those on which an agreement may be set aside.”

Khaw Poh Chhuan v. Ng Gaik Peng & Yap Wan Chuan & Ors. [1996] 2 CLJ 185 Supreme Court

A consent judgment can also be set aside if the effect of the consent judgment would cause grave injustice to the party in question.

Lagenda Kencana Sdn Bhd v. Peter’s Holdings Sdn Bhd & Anor [2012] 3 CLJ 824 ]

Case scenario

Question:

Ms Lee has appointed Mr Aiman as her lawyer in a suit between Company ABC and herself. A consent judgment was entered into.

Can Ms Lee challenge the consent judgment by arguing that Mr Aiman does not have authority to enter consent judgment on her behalf?

Answer: Yes

However, it is hard to succeed on the ground of lack of mandate because it would be an uphill battle to prove it. Reasons as follows:-

1. The law has become well established that the solicitor or counsel retained in an action has an implied authority as between himself and his client to compromise the suit without reference to the client.

2. Any injustice suffered by the client could be resolved in the context of a claim against his counsel.

3. There is no obligation to prove express authority.

4. A solicitor or counsel by implication had authority to compromise. The petitioner and the court, are entitled to assume the existence of authority when the lack of authority is not specifically brought to the attention of the petitioner or the court at that material time.

5. If the plaintiffs genuinely have a gripe against their former solicitors, it is for them to take it up with their former solicitors; for it cannot validly form a premise for the setting aside of the consent judgment.

Stone Master Corporation Bhd V. Dato Koh Mui Tee & Ors; Dato’ Lee Fong Yin @ Lee Vun Ya (Third Party) [2019] 1 LNS 1571

It is however, possible if there are clear indications that the consent order was recorded without the authority or knowledge of the parties or any one of them, particularly where the effect of which, if not set aside, would cause grave injustice to the party in question.

Lagenda Kencana Sdn Bhd v. Peter’s Holdings Sdn Bhd & Anor [2012] 3 CLJ 824

Divorce, to file or not to file? – An Overview

1. To begin with, Section 4 of the LAW REFORM (MARRIAGE AND DIVORCE) ACT 1976 (hereinafter referred to as “LRA”) provides that a subsisting marriage shall only be dissoluble by the LRA. There are 3 instances where a marriage could be dissolved:-

   1. by the death of one of the parties; or
   2. by order of a court of competent jurisdiction; or
   3. by a decree of nullity made by a court of competent jurisdiction.

2. It is only after your marriage is dissolved that you can remarry. To remarry when your existing marriage is subsisting is an offence in law.

   1. Under Section 494 of the Penal Code, the offender shall be punished with imprisonment for a term which may extend to seven years, and shall also be liable to fine.

   2. If this fact (that you are married) is concealed from your “new spouse”, you are further liable under Section 495 of the Penal Code and shall be punished with imprisonment for a term which may extend to ten years, and shall also be liable to fine.

3. As mentioned in the 1^st paragraph above, there are 3 instances of dissolution of a marriage. This article will zoom in on dissolution by order of a court of competent jurisdiction.

4. When can you file a divorce? Can you file a month after your marriage?

   1. The earliest time when you can file divorce is 2 years after your marriage as required under Section 50 of the LRA.

   2. There is an exception. If you can prove that the case is one of exceptional circumstances or hardship suffered by the petitioner.

5. There are two types of divorce, by mutual or consent of both parties and without the consent of another party. We normally call it joint divorce petition (“JDP”) or single divorce petition (“SDP”).

6. The right to file divorce with mutual consent or agreement (ie JDP) falls under Section 52 of the LRA. The Petitioners filling the divorce petition would be both parties, husband and wife. The following must be fulfilled:-

   1. there is free consent;

   2. proper provision or term is made for the wife and the child.

7. The right to file divorce without consent or agreement from another party (ie SDP) falls under Section 53 of the LRA. It is provided therein that either party to a marriage may petition for a divorce on the ground that the marriage has irretrievably broken down. It must be proven that “the marriage has irretrievably broken down”.

   1. 1. In hearing the petition, the court shall inquire into the facts alleged as causing or leading to the breakdown of the marriage and, if satisfied that the circumstances make it just and reasonable to do so, make a decree for its dissolution.

8. Based on Section 52 and Section 53 of the LRA, the main difference is this: You don’t have to disclose to the court on the reasons of filing divorce if the divorce is mutually agreed. To the contrary, the reasons leading to the breakdown of marriage have to be sufficiently disclosed and proven if the divorce is not mutually agreed.

9. Apart from the above, before one files a SDP, there is another additional requirement to be fulfilled.

   1. The matrimonial difficulty must be referred to a conciliatory body (Tribunal of Marriage); and

   2. that body has certified that it has failed to reconcile the parties.

10. The referral to a government conciliatory body is to allow parties to the marriage to attend to what we normally call “counselling sessions” by the experts. This is a statutory effort to resolve the matrimonial difficulty to the satisfaction of the parties and to persuade them to resume married life together. In reality, when either party approaches the Tribunal, the intention is to fulfill the legal requirement but not to resolve the matrimonial difficulty as he or she would be thinking that the marriage is already beyond repair.

11. There are instances where this requirement can be dispensed. For instance, where the petitioner alleges that he or she has been deserted by and does not know the whereabouts of his or her spouse.

12. It is only when the requirement is fulfilled or the exception to the requirement is fulfilled that a SDP can be filed by either party under Section 53 of the LRA. This requirement does not apply to a JDP.

13. Further, before and when filing a SDP, the Petitioner (the Applicant) must consider whether there are sufficient facts or proofs of breakdown of marriage to satisfy the court that the marriage has irretrievably broken down.

14. How to prove that the marriage has irretrievably broken down? Proof of breakdown is codified under Section 53 of the LRA. In summary, they are adultery, unreasonable behaviours, desertion and separation for a continuous period of 2 years.

15. Based on the above, the best option to dissolve a marriage is by filing a Joint Divorce Petition. It involves lesser procedures and can be completed in a shorter time. Most importantly, both parties need not to go into the reasons of breaking up, which could be very unpleasant.