OMT340 OMT340- PRINCIPLES OF CORPORATE COMPLIANCE Our classes will be: 1. 14 Dec 2011 6.00 9.

9.00pm (Intro to Malaysian law & Company law) 2. 21 Dec 2011 6.00 9.00pm (Intro to meetings, types of meeting) 3. 2 Jan 2012 (make up for 7 and 14 Dec) 9.00am 12.00pm (Monday) (convening a meeting, constituting a meeting) 4. 2 Jan 2012 (make up for 28 Dec) 2.00pm 5.00pm (Monday) (conducting a valid meeting) 5. 4 Jan 2012 6.00 9.00pm (Quiz 1all the above) 6. 11 Jan 2012 6.00 9.00pm (Practical work of company secretary) 7. 18 Jan 2012 6.00 9.00pm (BOD meeting) 8. 25 Jan 2012 6.00 9.00pm (Quiz 2 item 6 & 7) 9. 1 Feb 2012 6.00 9.00pm (Defamation) 10. 8 Feb 2012 6.00 9.00pm (Employment law) 11. 15 Feb 2012 6.00 9.00pm (Quiz 3 item 9 & 10) TEXTBOOK: Faculty Manual REFERENCES: Hall, L. Meetings. Their Law and Practice. 2nd Ed. London: MacDonald and Evans 1986. Kang Shew Meng. Company Secretarial practice In Malaysia. June 2003. LexisNexis. Smith & Keenans. Company Law. 12th Ed. London: Pearson Education. (2002). Maimunah Aminuddin. Malaysian Industrial Relations and Employment Law. 4th Ed. McGraw-Hill (Malaysian) Sdn. Bhd. (2003) COURSE INFORMATION Credit Unit: 2 Contact Hours: 3 Course status: Core Course Outcomes At the end of the course, you will be able to: 1. explain the roles of the corporate officer, functions and duties focus on corporate meetings and employment needs 2. apply the law and best practices in meetings and ensure corproate compliance. 3. recognize the general principles of Malaysian employment law and apply them within the organization.

Course Description This introductory level course is essentially divided into four different areas. The syllabus starts with the introduction to the overall Malaysian legal system such as the sources of law and the court system. It then covers a range of specific legal areas relating to various aspects of business relating to the law that include the formation and constitution of companies, and the functions, management and conduct of company meetings. The final section tends to instill knowledge and key skills in handling the overall responsibility of legal issues in employment relationships. Syllabus Content 1. Introduction to Malaysian Law - Definition of law - Classification of law - Sources of law - The court system

2. Introduction to Company Law 1.2.1 Legal entity of a company 1.2.2 Types and classification of companies 1.2.3 Formation of a company 1.2.4 Memorandum and articles of associations 3. General Principles of Law and Practice Relating to Meeting 1.3.1 Types of meeting 1.3.2 Convening, constituting and conducting of a valid meeting 1.3.3 The practical work of a company secretary in conducting a meeting 1.3.4 Defamation and defences 4 Introduction to Employment Law 1.4.1 The contract of employment 1.4.2 Basic statutory benefits and protection accorded to employees 1.4.3 Termination of employment 1.4.4 Trade dispute and industrial actions 2.0 2.1 2.2 2.3 2.4 Teaching Methodology Lecture Tutorial Cases and relevant authorities Guest speaker

3.0 Assessment The student will be assessed as follows: 3.1 Continuous Assessment Tests 15% Comprehensive Test 15% Project 15% Assignment 5% 3.2 Final Exam

50%

50%

1.

INTRODUCTION TO MALAYSIAN LAW

What is Law? To the layman, law is understood as being a general rule of conduct. In the Oxford English Dictionary, law is defined as the body of enacted or customary rules recognized by a community as binding. However, the word law had been given many definitions by lawyers. Law in relation to justice The aim of the law is to attain justice in society. Justice is an abstract idea of right and wrong, fairness and equality. Therefore, the aim of a given law is to encourage the doing of what is right or just in a particular set of circumstances. However, it its application to a particular set of circumstances, a law may not always appear to be just. For example, it is a rule of law that theft is a crime under Section 378 of the Penal Code of Malaysia and is punishable by imprisonment or a fine or both. Law, the State and the Constitution Malaysia, which consists of Peninsular Malaysia, Sabah and Sarawak is one political unit, but is not governed by the same set of laws. However, there are two important links which unite the two parts of the Malaysia the Parliament and the Federal Court. The Malaysia Parliament can and does legislate for the whole country while the Federal Court acts as a final court of appeal for the whole country. What is State? Legal systems in Malaysia are administered almost entirely on the basis of the political state. Within Malaysia, there are thirteen States altogether. Every state has a government and has rules which lay down who shall govern and how. Unlike the UK where there is an unwritten constitution derived generally from the common law, statutes and conventions, Malaysia has a written constitution. The written constitution in Malaysia is called the Federal Constitution (FC). The FC declares itself as the supreme law of the Federation. Classification of Law In classifying the law system, there are three broad divisions, namely: Public Law Basically the law which governs the relationship between individuals and the State. It may be further subsidivided into two categories: Constitutional lawlays down the rights of the individuals in the State. supremacy of Parliament and rights of citizen. It deals with questions such as

Criminal lawcodifies the various offences committed by individuals against the State aims at punishing criminals and pressing crime.

International Law Is defined as that body of which is composed for its greater part of the principles and rules of conduct which States feel themselves found to be observe and commonly do observe, in their relations with each other. International law is subdivided into two categories: 1. Public international lawthe law that prevails between States. 2. Private international lawprivate international law or conflict of laws as it is often called is a part of municipal law, as a result of which in every country there will be a different version of it. Classifications of Law

Private Law Private law is concerned with matters that affect the rights and duties of individual amongst themselves. Private or civil law is intended to given compensation to persons injured, to enable property to be recovered from wrongdoers, and to enforce obligations (contracts and trusts). Contracts are based on agreement. The law of contract are the branch of private law which determines when a promise or a set of promises is legally enforceable. Tort is based on an obligation imposed by law. A tort is a civil wrong. It is the breach of a general duty which is imposed by the law (and not agreed between the parties). A trust is an equitable obligation binding a person (trustee) to deal with property over which he has control (trust property) for the benefit of persons (beneficiaries) Sources of Malaysian Law 1. written Law Is the most important source of law. Refers to that portion of Malaysian law which includes the following: 2. The Federal Constitution The Federal Constitution is the supreme law of the land/country. Besides laying down the powers of the Federal and State Governments, the FC enshrines the basic or fundamental rights of the individual.

3. State Constitution There are also Constitutions to the thirteen States comprising the federation, which form part of written law in Malaysia. Each state also possesses its own constitution regulating the government of that State. 4. Legislation Refers to law enacted by a body constituted for this purpose. In Malaysia, laws are legislated by Parliament at federal level and by the various State Legislative Assemblies at state level. Laws that are enacted by Parliament after 1946 but before Malaysias independence in 1957 are called ORDINANCES, but those made after 1957 are called ACTS. On the other hand, laws made by the State Legislative Assemblies (except in Sarawak) are called ENACTMENTS. The laws in Sarawak are called ORDINANCES. Legislature as a source of law has become more important than case law or procedures. It is being increasingly used as a means of repealing, amending, enacting or codifying the law. Subsidiary Legislation The Interpretation Act, 1967, defines subsidiary legislation as: any proclamation, rule, regulation, order, notification, by-law or other instrument made under any Ordinance, Enactment or other lawful authority and having legislative effect Unwritten Law Unwritten law is simply that portion of Malaysian law which is not written, i.e., law which is not being enacted by Parliament or the State Assemblies and which is not found in the written Federal and State Constitutions. Unwritten law is found in cases decided by the courts, local customs, etc. Unwritten law therefore, comprises of all principles of English law applicable to local circumstances, judicial decision of the superior courts and customs of the local inhabitants which have been accepted as law by the courts. English Law. Forms part of the laws of Malaysia. Can be found inter alia in the English common law and rules of equity. Judicial decision Malaysian law can also be found in the judicial decisions of the High Court, Court of Appeal and the Federal Court and the Supreme Court, Federal Court and the Judicial Committee of the Privy Council. Decisions of these courts were made, and still are being made, systematically by the use of what is called the doctrine of binding judicial precedent. Hierarchy of Precedents The general rule regulating the Hierarchy of Precedents is based on the principle that decisions of higher courts bind lower courts and some courts are bound by their own decisions. In order to understand this principle, one should understand the court system in Malaysia. Briefly, the present court system is in Figure 2 as follows:

Customs Relating to family law, ie marriage, divorce, and inheritance are given legal force by courts in Malaysia. Adat applies to Malays, prior to the enforcement of the Law Reform (Marriage and Divorce) Act, 1976, Hindu and Chinese applied to the Hindus and Chinese respectively. Muslim Law The FC provides that States have the power to administer Muslim Law. The head of Muslim religion in a State (except for Penang, Malacca, Sabah, Sarawak and the Federal Territories) is the Sultan. In Penang, Malacca, Sabah, Sarawak and the Federal Territories The Yang diPertuan Agong is the head. The courts which enforce Muslim law in the country are the Syariah Courts. Muslim law applies to Muslims only and does not apply to non-Muslims. Another element of Malaysian law is Muslim law or Islamic law. It is increasingly being applied in our local laws, e.g. Islamic bankingincorporates Islamic law into banking laws. Muslim law applies to all persons who are Muslim.

2.

INTRODUCTION TO COMPANY LAW

COMPANY Definition The word company means a company incorporated pursuant to the Companies Act 1965 or pursuant to any corresponding previous enactment. Section 16(5) of the Companies Act 1965 states, LEGAL ENTITY OF A COMPANY

Effect of incorporation On and from the date of incorporation specified in the certificate of incorporation but subject to this Act the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company and of suing and being sued and having perpetual succession and a common seal with power to hold land but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is provided by this Act.
The above statement means that the incorporation of a company brings forth the following effects: 1. that the company is a body corporate with the powers of an incorporated company; 2. that it may sue and be sued in its own name; 3. that has perpetual succession; 4. that it may own land; and 5. that the liability of its members may be limited The General Rule: Salomons Case The fact that a company was a legal entity separate from its participants was affimed just over 100 years ago in the leading case of Salomon v Salomon & Co. Ltd

What are the facts in Salomons case? Mr. Salomon ran a boot manufacturing business as a sole trader. After the business was established, Mr. Salomon incorporated a company in which he and members of this family were the only shareholders, and he sold the business to the company. The company paid Mr. Salomon part of the purchase price for the business immediately (in the form of shares in the capital of the company) and agreed to pay the remainder over time. To secure its obligation to pay, the company gave Mr. Salomon security over its assets in the form of a company charge. The effect of the charge was that the companys assets had to be used to pay out Mr. Salomon in full before they could be applied to pay out the companys other, unsecured creditors. Mr. Salomon controlled the company by holding almost all the shares in the company and also through his appointment as its managing director and through an agreement with the members of his family that they would exercise their rights to participate in the management of the company in accordance with his directions. What was the legal issue in Salomons case? When the companys business failed, the value of the assets was insufficient to pay out both Mr. Salomon and and the companys other creditors. The creditors argued that Mr. Salomon should not receive the benefit of the charge (giving him the right to be paid in priority to them), because the degree of control he exercised over the company meant it should be treated as being his agent, or trustee for him, in the conduct of the business. If

the company were Mr. Salomons agent, or were operating the business as trustee for him, he would have been required to indemnify the company for the debts it had incurred. What did the court decide? The case is significant because the House of Lords held that, despite the fact that Mr. Salomon controlled the company, it was not his agent or trustee. The company was treated as operating the business in its own right, and as being separate from its controller, Mr. Salomon. Therefore, the charge given by the company to Mr. Salomon was valid and he was entitled to be paid his debt even though other creditors of the company would not be paid because the company had insufficient assets to pay all its creditors.
The fact that a company is a separate entity from its contollers was emphasised in the context of corporate groups by the High court in its decisions in Industrial Equity Ltd v Blackburn and Walker v Wimbourne. LIFTING THE CORPORATE VEIL The principle that a company is a person separate from its members and also from the directors and others who manage it can produce unsatisfactory results in certain circumstances. Thus, some EXCEPTIONS to this principle have evolved. In these exceptions, the company is treated as in some degree identified with its members or directors or managers. These exceptions are described as cases of lifting the veil of incorporation, and arise in the following instances: Example of Statutory exception: If the number of members of a company (other than a company whose issued shares are wholly held by a holding company) is reduced below two and it carries on business for more than six months while number is so reduced, a person who is a member of the company during the time that it so carries on business after those six months, and is aware of it, is personally liable for all the debts of the company contracted after those six months and may be sued therefore. The company and that member shall also be guilty of an offence against the companies Act Section 36, CA 1965. Example of Judiciary exception:

Gilford Motor Co v Horne (1933) The respondent, Mr. Horne, had contracted with the appellant, the Gilford Motor Company, not to solicit its business customers when he left its employment. After he had ceased to work for the appellant, Mr. Horne formed a company which carried on a competing business and began to solicit the appellants customers. Mr. Horne was neither a director nor a shareholder in this company his wife and an employee of the company (who, incidentally, called Mr. Horne Boss!) were the only directors and shareholders. Held: An injunction to restrain further breaches of Mr. Hornes covenant was granted against both Mr. Horne and the new company. The court of Appeal saw the company as nothing more than a sham, a stratagem to circumvent the covenant to which Mr. Horne was a party. Mr. Horne was effectively carrying on business through the agency of this company.

Basic types of Companies There are two (2) basic types of companies, they are: i) Statutory Companies Formed under special Acts of Parliament. Usually known as Statutory authorities or Bodies and are under state control. E.g. Bank Pertanian Malaysia, Petronas, Water Works Authority, MARA (Majlis Amanah Rakyat), Malaysian Timber Industry Board. Registered Companies Formed under the CA 1965. The essential feature of registered companies is public registration, i.e. the registration of certain documents with the Suruhanjaya Syarikat Malaysia (SSM).

ii)

A company having share capital may be incorporated as a private company or a public company. TYPES OF REGISTERED COMPANIES There are basically two (2) types of registered companies: a) Private Company b) Public Company

a)

Private Company

A company with a share capital (whether limited or unlimited) may be incorporated as a private company if its memorandum or articles of associations contains all of the following: Restricts the rights to transfer its shares.

This may involve giving a right of pre-emption to other members before shares can be transferred to persons not already members, or providing that a transfer may take place if approved by the board of directors.
Limits the number of members to not more than 50.

A member is a person who has agree to become a member and whose name is entered in the register of members. Joint holders of shares are considered as one person.
Prohibits any invitation to the public to subscribe for any share in or debentures of the company.

A private company is prohibited from inviting the public to subscribe for the companys shares or debentures, and from inviting the public to deposit money with the company.
Prohibits any invitation to the public to deposit money with the company for fixed periods or payable at call, whether interest-bearing or interest-free. May lose its status and the privileges enjoyed as a private company.

 b)

In Malaysia, a private limited company has the words Sendirian Berhad (Sdn. Bhd.) as part of/at the end of its name. A private unlimited company has the word Sendirian (Sdn.). Public Company

A company other than a private company is a public company. May offer shares and debentures to the public for subscription and such shares are freely transferable. In Malaysia, a public limited companys name must end with the word Berhad (Bhd.).

A company that is not a private company is a public company. Other distinctions between public and private companies are as follows:

CLASSIFICATION OF COMPANIES S14(1) of the CA 1965 provides that any two or more persons associated for any lawful purpose may, by subscribing their names to a memorandum and complying with the requirements as to registration, form an incorporated company. S14(2) provides the classifications of companies under the CA 1965 reads: A company may be: i) ii) iii) iv) Companies limited by shares Companies limited by guarantee Companies limited both by shares and guarantee or Unlimited companies

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A company can be a company with limited liability or unlimited liability. A company with limited liability means that the liability of its members is limited by shares or by guarantee with or without a share capital.

i)

Company limited by shares A company formed on the principle that the members liability is limited by the memorandum of association to the amount, if any, unpaid on the shares taken up by them. Once the shares are fully paid up there is no further liability. If the company becomes insolvent the members are not required to make any further contributions to discharge its debts. A company limited by shares is incorporated for the purpose of acquiring profit. Guaranteed companies (not formed for the purpose of making profit) One for which the liability of the members is limited by the memorandum to the amount which the members have undertaken or guaranteed to contribute to the assets of the company on winding up. Prior to 1st. February 1986, a guarantee company could be limited both by guarantee and shares, either a private or public company. After 1st. February 1986, no company may be formed as, or become a guarantee company with share capitalafter that date, all shall be public companies as only companies having share capital can be private companies. Companies limited by guarantee are formed usually for non-profit making purposes such as for promoting a charity, recreation, charity, common interest, religion or profession and do not usually have share capitaluseful to the community not involving the acquisition of gains by the company or by its individual members and supported by subscriptions of their members. It shall have the word Berhad or Bhd., at the end of its name. Unlimited companies Unlimited companies are rare and decreasing in number. Defined as a company formed on the principle of having no limit placed on the liability of its members. Members are responsible for all the liabilities of the company. The unlimited liability of a member will only arise if the company is wound up and is unable to meet its debts. A past member is liable only if he had ceased to be a member less than a year prior to the winding up. An unlimited company with a share capital may be a private or a public company.

ii)

iii)

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SPECIAL CLASSES COMPANIES There are i) ii) iii) iv) v) i) five (5) special classes of companies: Investment companies Foreign companies Trustee corporation Co-operative Societies

Investment companies A public company declared by proclamation of the Minister published in the Government Gazette. Engaged primarily in the making of investments in marketable securities for the purpose of revenue and for profit and not for the purpose of exercising control. It is subject to the following restrictions: prohibited from having outstanding borrowings in excess of twice its net tangible assets. cannot invest an amount more than 10% of its net tangible assets in one corporation. the amount invested in the ordinary shares of one corporation cannot be more than 10% of the subscribed ordinary share capital of the corporation. cannot underwrite any issue of authorized or non-authorized securities to an amount exceeding 40% or 20% of its net tangible assets. cannot issue a prospectus or permit a prospectus to be issued on its behalf unless the prospectus specifies the type of security in which it is among the objects of the company to investto invest within Malaysia or outside Malaysia or both. cannot purchase any other investment company or any corporation overseas which is a proclaimed investment company. if it holds shares in other investment companies, it shall divest all shares within 3 years. cannot buy or sell or deal in any raw materials or manufactured goods for the purpose of profit shall not speculate in commodities.

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ii)

Foreign Company A company, corporation, society, association or other body incorporated outside Malaysia. an unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or to hold property in the name of the secretary or other officer of the body or association duly appointed for the purpose and which does not have its head office or principal place of business in Malaysia. the phrase to carry on business or carrying on business include: establishing or using a share transfer or share registration offices. administering, managing or otherwise dealing with property situated in Malaysia as an agent, legal personal representatives or trustee, whether by servants, agents or otherwise. Trustee Corporations A company registered as a trust company under the Trust Companies Act 1949. A corporation that is a public company under the CA 1965 or under the laws of any other country which has been declared by the Minister to be a trustee corporation for the purposes of the CA 1965. Co-operative Societies Registered under the Co-operative Societies Act 1993. Has the word Koperasi as part of its name and the word Berhad as the last word in the name. A registered co-operative society is a body corporate which has a separate legal entity.

iii)

iv)

v) Societies These are various societies, associations and clubs registered under the Societies Act 1966. Not formed for carrying on business activities. CA 1965 does not recognize a society as a corporation.

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FORMATION OF A COMPANY A company can be formed by the following basic procedures: obtain approval for the proposed company name. lodging with the Registrar of Companies certain documents including: the Memorandum and Articles of Association. statutory declarations by promoters and directors (Form 48A). particulars of directors and registered office (Forms 44, 45 and 49). declaration of compliance (Form 6). a statement of the allotment of shares to the subscribers to the Memorandum (Form 24). payment of registration fees.

Factors being looked upon by the Registrar before issuing the certificate of incorporation are: the the the the requirements of the CA 1965 have been complied with. Memorandum and Articles of Association do not infringe the Act. objects are lawful. name of the company is not contrary to the CA 1965.

MEMORANDUM AND ARTICLES OF ASSOCIATION (M&A) Both are fundamental documents of a company. The affairs of a limited company are governed by the Memorandum (M@A) and Articles of Association (AA). The M@A and AA (or M&A) are usually combined into one, consisting of 2 parts with the first part being the M@A and the second part is the AA. The M@A controls a companys dealings with the outside world whilst the AA regulates its internal affairs. Where the memorandum and articles conflict, the memorandum prevails. Both bind the company and its members to the same extent as if they respectively had been signed and sealed by each member. A copy of the memorandum and articles shall be supplied to any member who requests for it on payment of a sum of RM5 or less as the directors may fix.

Memorandum of Association (M@A) The M@A is often described as the charter of the company. It regulates the external affairs of the company. It defines the essential components of the structure of the company, i.e.: i) the name of the company, which must end with the words Sendirian Berhad ii) the situation of the companys registered office iii) the objects of the company, i.e. the nature of business intended to be carried on. The National Economic Action Council (NEAC) decides that the object clauses in the M&A is restricted to 3 only. It was claimed that when there are too many object clauses, the public may get confused and have problem in identifying the actual objectives of the company. This restriction is intended to direct companies to state their core business and it did not in any way limit powers of a company as contained in the 3rd Schedule of the CA

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1965. If the companies want to have more than 3 object clauses, the company must give reasons and ground to support this. Also, contains conditions introduced for the benefit of the creditors and the outside public as well as of the shareholders. Regulates the external affairs of the company; the relationship of the company with the outside world. The content of the M@A may also help to determine the type and nature of a company e.g. a company limited by guarantee would have limited by its memorandum the liability of its members to such amount as the members may respectively undertake to the assets of the company in the extent of its wound up.

Articles of Association (AA) The AA contains the regulations for internal management of the companys affairs. A company limited by shares may register with the SSM its Articles, or it may adopt all or any of the regulations contained in the model Articles as provited by the CA 1965, i.e. Table A of the 4th Schedule of CA. A director should be well versed with the AA as it is from the articles that he/she can ascertained his powers and the procedures to be complied with. Once the powers as stated in the AA, are vested in the directors, only they may exercise them. Shareholders cannot control the way in which directors choose to act provided their actions are within the scope of the powers given to them. AA prescribe internal regulations for a company. Deals with the internal affairs of the company such as: name of the company issue of shares, transfer of shares, forfeiture of shares, conversion of shares alteration of capitals general meetings and the proceedings directors, managing directors secretary common seal accounts dividends and reserves winding up, etc. other matters of internal nature

The names, address, identity card and occupation of each subscriber must be stated in the AA and witnessed by a third party whose name, address and designation must be disclosed.

DOCUMENTS Memorandum of Association (M@A) Articles of Association (AA) Review Questions 1. 2. 3. 4. 5.

STAMPING FEES CHARGED RM100.00 RM10.00 RM100.00 RM10.00

Define the word company. Explain the effect of incorporation. Describe the three (3) types of company. Explain briefly the four (4) classes of company. Distinguish between public and private company.

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3.

INTRODUCTION TO MEETINGS

MEETING Definition of Meeting An assembly or a group of people for a lawful purpose or the coming together of more than one person for any lawful purpose. (In Sharp v. Dawes, 1976) The word meeting prima facie means a coming together of more than one person. One individual alone does not constitute a meeting even if he represents two or more members; eg. as a proxy for another member or by being a member both in his own right and as trustee for another. Due to modern technology; it is not necessary for everyone to attend the meeting in the same room provided that there are adequate audio-visual links to enable everyone attending to debate and vote on matters affecting the company. As long as the conversations over the telephone took place with everyone hearing everyone else, the directors meeting would be valid.

The Requisites of a Valid Meeting A valid meeting is a meeting which has been: i) Properly convened: called by persons with the proper authority and with proper notice of meeting sent out. proper notice means: send notice to every person entitled to attend. the notice should be sent in 21 days before the meeting. notice must be free from anything calculated to confuse or mislead. it is essential to state important contents, i.e. place, date, day, time. notice should be issued by the secretary with the authority of the convening body. Properly constituted: With the requisite persons present to form a quorum. In which there is a chairman. Chairman is validly appointed in accordance with the rules. From which no persons who are entitled to attend are excluded. The quorum prescribed by the rules must be present. iii) Properly conducted: In accordance with the rules governing the meeting (i.e. the Articles of Association (AA)). ONE MAN MEETING Despite the above definition which states that a meeting usually consists of two or more persons, one person attending can constitute a valid meeting in exceptional circumstances. Class Meeting

ii)

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Where one person holds all the shares of a particular class of shares, e.g. preference shares, that person alone would constitute a valid meeting of shareholders of that particular class. Board or Committee Meeting

Where the articles allow the directors to fix the quorum for board meetings and to appoint committees consisting of such member or members of their body as the directors think fit, they may decide that one director shall be a quorum for board meetings or appoint only one member of their body to constitute a member. Meeting of a Wholly-owned Subsidiary (CA 1965 S147)

As wholly-owned subsidiary has only one member (i.e. its holding company), the corporate representative of the holding company constitutes a valid quorum for meetings of shareholders of the subsidiary. Meeting Convened by the Court (CA 1965 S 150)

The court may, in the event where the company has found that, for any reason impracticable to call a meeting (in any manner) in which meetings may be called, or to conduct the meeting in the manner prescribed by the articles or the CA 1965, by its own motion, or on application of any director or member, may convene or order a meeting to be called under s150 where one member of the company present in person or by proxy shall constitute a valid quorum at that meeting. Meeting Convened by Sole Continuing Director

Where the number of directors is reduced to less than the statutory requirement, i.e. two, the continuing director may act for the purpose of appointing the number of directors to that required number. The sole continuing director therefore duly constitutes a board meeting to appoint directors. Criteria for Quorum is by Percentage of Shares Value

Where the relevant criterion in determining the quorum is by the percentage of the share value and not the physical person present, an individual shareholder who owns the prescribed share value or more will be sufficient to constitute a quorum Creditors Meeting

Where one creditor has proved his debt in a winding-up proceeding and if there is only one creditor entitled to vote or where one creditor who held proxies for all other entitled creditors, that creditor will constitute a quorum.

REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. Define the word meeting. Describe three (3) requisites of a valid meeting. Under what circumstances can one man constitute a meeting? What does properly convened meeting means? Explain briefly four (4) types of one-man meeting. When can a person conduct a creditors meeting?

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TYPES OF MEETING There are THREE (3) types of general meetings: 1. Statutory Meetings (SM) 2. Annual General Meetings (AGM) 3. Extraordinary General Meeting (EGM) Statutory Meetings A statutory meeting is held only by Public Companies Limited by share. This meeting is held only once, at the beginning of the companys life. Section 142 (1) the company shall within a period of not less than one month and not more than three months after the date at which it is entitled to commence business hold a general meeting of the members of the company to be called the Statutory Meeting. The director is responsible for convening the meeting. If he fails to take all reasonable steps to ensure that the meeting is held, he is guilty of an offence S142 (10). The director shall at least seven days before the meeting is held to forward a report called the statutory report to every member of the company and to lodge a copy of it with CCM S142 & 145. At the meeting the members present may discuss any matter relating to the formation of the company or arising out of the Statutory report S142.

The Annual General Meetings It is held once every calendar year Section 142 (1). However, a company does not need to hold an AGM if the first AGM is held within 18 months of its incorporation. It is the directors responsibility to convene an AGM, but sometimes the court may on application of any member (who control the substantial fraction of the votes in the company) order the AGM to be called. AGM is the only forum and opportunity for the members to meet and query the directors on matters pertaining to the running of the company. Nature of business at an AGM (refer to Art 46 of 4th Schedule): Appointment of, and the fixing of remuneration, of the auditors Reappointment of directors in place of those retiring The approval for the issue of the share Declaration of dividends The consideration of the accounts, balance sheets and the reports of directors and auditors

Extraordinary General Meetings Any general meeting other than the annual meeting is an extraordinary general meeting (EGM). An EGM is convened to transact special business or to pass resolutions which are urgent and cannot be delayed till the next AGM. This meeting may be convened by: Two/more members holding not less than 1/10 (one-tenth) of the companies issued share capital

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For a company which does not have share capital, not less than 5% of the members Director of the company The directors must convene a general meeting if required to do so by requisition A meeting may be requisitioned by: Any member holding not less than 10% of paid-up (share) capital as carries voting right. Any members representing 10% of the total voting rights for company without share capital.

The directors must convene a meeting of be held as soon as practicable within 2 months after the receipt of the requisition by the company. If not, the requisitionist may convene the meeting themselves within three months of the date of the deposit of the requisition S144 (3). Any reasonable expenses incurred by the requisitionist in calling the meeting to be paid by the company, which may be reimbursed out of the sums due to the defaulting directors by way of fees or other remuneration Section 144 (4). If it is impracticable to call a meeting as in accordance with the Act or AA, the court may order a meeting if there is application by: The court own motion The director Members who are entitled to vote or their representative The burden to prove impracticable to call a meeting is imposed on the applicant, e.g. All directors died.

Re Noel Tedman Holding Pty Ltd (1967) QD R 561 The company had only 2 members who were also directors. They were both killed in a car accident. Therefore there were neither member nor director, a meeting could not be convened in the normal way. The application was made by the personal representative of the deceased shareholder and the court order to call a meeting. However, no members attended the meeting and the court authorized the personal representative to make up the quorum and to pass a resolution to appoint directors.
REVIEW QUESTIONS 1. State three (3) types of general meeting 2. Describe briefly about statutory meeting. 3. Explain briefly about: i. Annual General Meeting (AGM) ii. Extraordinary General Meeting (EGM) 4. Who can call for an Annual General Meeting? 5. What is the nature of an Annual General Meeting?

CONVENING OF MEETING A meeting must be convened only by the persons with proper authority or persons entitled to summon it and proper notice must accordingly be sent out under and with the authority. A meeting, if convened without the authority of the persons vested with the authority to call for such meeting, is an improperly convened meeting and the notice issued for such meeting is therefore invalid, and any resolution passed thereat will be null and void. The provisions of the articles regarding the form/method and contents of the notice must be closely observed and complied with in order for the notice of meeting to be valid. No meeting shall be held if the notice of meeting is invalid.

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The Convening Authority Only the persons entitled or empowered either by the CA 1965 or the companys articles of association to summon a meeting can give a valid and effective notice of meeting. Summarized hereunder are the persons empowered to convene general meetings of a company: The board of directors has the authority to convene a meeting of the company. If authorized by the articles, any director may, whenever he thinks fit convene an extraordinary general meeting (EGM) and the secretary shall on such requisition convene the EGM. Two or more members holding not less than 10% of the issued share capital of the company, or if the company has no share capital, not less than 5% in number of the members or such lesser number as allowed by the articles, may call a meeting. Any of the requisitionists representing more than one-half of the total voting rights of all the requisitionists requisitioned for an EGM may proceed to convene the EGM if the directors fail to convene the EGM as requisitioned by the members within 21 days after the date the requisition was received. The court has the power to convene or direct the calling of a general meeting of the company where it is for any reason impracticable to call the meeting in any manner as provided by the articles. In the case of a directors meeting, the chairman of the board has the power to convene the meeting and a director may also at any time and the secretary shall on the requisition of a director, summon a meeting of the directors. The defect in authority in convening meetings may be rectified by all of the persons entitled to attend and vote at the meeting. The defective notice may be ratified at the meeting itself or before the meeting. The defect in the constitution of the convening authority must be raised immediately the moment it becomes apparent. Delay in raising the defect tantamounts to condonation and will prevent the validity of the meeting from being effectively challenged.

NOTICE Definition The notice of a meeting is any form or method of communication adopted by the convenor(s) to summon to the meeting all persons entitled to attend. Thus, notice must be served in the form, or by the method laid down in the rules governing the meeting; or Form or Method of Notice If the rules make no such provision, then any reasonable form or method may be used, namely: Verbal notice Press notice Bill posting Handbills distributed from door-to-door Separate handwritten or typewritten notices Notice board Broadcasting

Contents of Notice The normal contents of a notice of meeting are: The name of the company.

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The type of meeting. The date, day and time of the meeting. The place of the meeting. The business of the meeting indicating the nature of any special business to be transacted, i.e. the agenda. The date of the notice. The signature and name of the person who signs and issues the notice (in practice it would normally be the person authorized by the convenor, e.g. that of the secretary). Notes to the notice regarding appointment of proxy, the time and place for deposit of the proxy form (in the case of general meeting of company).

The notice should bear the stamp of authenticity of the authority of the authorized source convening the meeting. By the CA 1965 s 35(5), a document requiring authentication by the company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal. Entitlement to notice In general, notice must be given to all persons entitled to attend the meeting, failure to do so might affect the validity of the meeting. But the omission to send notice may be excused, e.g. a) The rules often provide for waiver of notice, where the omission is accidental.

b) Where all persons entitled to attend are present without notice, and all express assent to that which is being done: Re Express Engineering Works (1920)
c) Where those not summoned were beyond summoning distance e.g. where a member was abroad: Smyth v. Darley (1849); or where a member was too ill to attend in any case: Young v. Ladies Imperial Club (1920).

NOTE: It is, however, always advisable to send proper notice to all persons entitled to attend a meeting, and not rely upon the apparent disability or a member at the time as an excuse for failing to summon him. In the event of the member informs the conveners that he will not be able to attend the meeting, that should not be relied upon as a waiver of notice: Re Portuguese Consolidated Copper Mines (1889), Rex v. Langhorn (1836).
Period of Notice The following general rules are applicable: a) The length of notice required is usually provided for in the rules; if not, reasonable notice must be given.

b) Longer notice is usually required for a meeting at which special business is to be transacted, e.g. 21 days notice may be required, whereas only 14 days notice may be required for ordinary business. c) Unless otherwise provided in the rules, it is implied that the number of days stated are clear days, i.e. they are exclusive of the day of service of the notice and of the day of meeting: Re Railway Sleepers Supply Co. (1885). d) Failure to give adequate notice may result in the meeting being rendered invalid; if, for example, only 7 days notice is given instead of the (say) 21 days notice required by the regulations concerned.

e) Inadequacy of notice may, however, be excused if all, or some specified proportion of the members entitled to attend the meeting so agree: Re Oxted Motor Co. (1921).

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Service of Notice a) The period of notice required is usually measured in clear days, which exclude the day of service of the notice and the day on which the meeting is to be held. But the day of service of the notice may have different interpretations. b) In some cases, the rules may indicate when notice is deemed, to have been served, e.g: 24 hours after posting, or At the time of posting

c) If the rules are silent on the subject, reference must be made to the Interpretation Act 1978. This provides that a notice is deemed to be served on the day on which, if posted, it would be delivered in the ordinary course of post. Failure to Properly Convene A Meeting One of the defects in respect of which the validity of a meeting might be questioned. It might, however, arise in various ways, in particular: a) Omission to send notice to every person entitled to attend, i.e. where there are no grounds for excusing the omission. b) c) d) Inadequate (short) notice, i.e. where no provision is made or excusing the inadequacy Ambiguity of the notice. A notice must be free from anything calculated to confuse or mislead Omission of important contents, such as the failure to mention that special business is to be transacted.

NOTE: Although, normally essential to state place, date, day and time of the meeting, it would, no doubt, be permissible to dispense with any mention of the actual time, where one meeting is to be held immediately after another, in that case, the notice may indicate that the second meeting will commence at the conclusion of the first meeting. e) Unauthorised issue of notice. The issue of notice by the secretary without the authority of the convening body is inadequate and the meeting rendered invalid: Re Haycraft Gold Reduction Co. (1900).
Nevertheless, if the notice is adopted and ratified (confirm/approve) by the proper convening body before the meeting is held, it may become a good notice, in which case the meeting is not invalid: Hooper v. Kerr (1900).

AGENDA Definition The word agenda means things to be done, but in practice it is more commonly applied to the agenda paper, which lists the items of business to be dealt with at a meeting.

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Form of Agenda An agenda may take various forms, according to requirements, and in some cases, to the kind of meeting to which it refers, namely: a) A skeleton form of agenda, i.e. in bare outline or summary form, giving headings only of the items to be dealt with. As a rule, this form is used when it is to be included as part of the notice circulated to those entitled to attend the meeting b) A detailed form of agenda, with a complete heading to identify the meeting, and setting out in draft form the resolutions to be submitted to the meeting c) The chairmans copy of the agenda paper may be supplied with more detail than the copies issued to those attending the meeting, and a wide margin may also be left on his copy for the purpose of note-taking

NOTE: The secretary may also provide himself with a more detailed copy of the agenda paper. After the meeting, he can then convert successful resolutions into draft minutes.
Contents of an Agenda Paper The following points are important: a) Heading

The agenda paper should be suitably headed, to indicate the kind of meeting, also where and when it is to be held.

NOTE: Although it may not always be necessary in practice, for examination purposes it is recommended that the name of the organization holding the meeting should be shown as a bold heading at the top of the agenda paper.
b) Arrangement

Items must be arranged in the order (if any) indicated in the rules governing the meeting. Whether the rules indicate the order or not, the items ought to be arranged in a logical order. A typical order of business would be as follows: Apologies for absence Minutes of the previous meeting Correspondence Reports of chairman, treasurer, etc Non-routine business of an important nature Date of next meeting

NOTE: It is often considered advisable to first deal with the routine items of business, so as to leave more time for special or non-routine business, which may need more time for discussion. c) Items of business included

No business should be placed on the agenda paper unless it comes within the scope of the notice convening the meeting, and is within the power of the meeting to deal with it. d) Any other business

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Although it is very common to find this item on agendas its use is not advisable. The main problems posed by its use are: Members may be forced to consider and debate items for which they have not prepared The item is usually at the end of the agenda and members may be prepared to vote in favor of a motion merely because they are ready to go home.

Therefore, if this item is used the chairman must confine its use to the consideration of informal or unimportant matters. e) Ease of reference

To ensure ease of reference: The contents ought to be sufficiently clear and explicit to enable members to understand what business is to be dealt with. In a lengthy agenda, each item should be numbered, and in the more detailed form of agenda it is often advisable to use headings and even sub-headings to show the subjects to be dealt with.

Preparation of An Agenda The rules of an organization may state what is to be included in an agenda, if not, the head of the organization will be responsible and he will normally delegate the preparation to the secretary. Obviously, it is impossible to lay down a standard method of preparing an agenda paper, as so much depends upon the nature and importance of the meeting concerned; however, the following points ought to be borne in mind in most cases: a) Ensure that no relevant item of business is omitted; this can be achieved in various says, namely:

Consult the chairman and any other officials who may have business to include. Refer to the minutes of the last meeting for any business, or decisions which were then deferred, and for reminders of the routine annual, half-yearly or quarterly recurring items. Keep a special file or folder of documents, such as reports, correspondence, etc., which are likely to be required at the next meeting. Prior to that meeting, sort and arrange these documents.

b) Refer to the rules governing the meeting, particularly if they regulate the order in which items of business are to be dealt with. Care must be taken to arrange the items in a logical order for the following reasons: If it is properly drawn up and well arranged, an agenda is self-explanatory; furthermore, it prevents confusion, reduces the number of questions put to the chairman, and shortens the meeting. The chairman is less likely to have to request the meeting to agree to an alteration in the order of business.

c) Where motions are to be submitted in writing, ensure that they are received within any time limit imposed by the rules. In a detailed form of agenda, it may be the practice to include them in the agenda, in the actual words of the motion, if the rules so provide.

NOTE: In the chairmans copy of the agenda, the names of proposers and seconders of the motions may be stated.

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d) Obtain approval of the agenda in its final form, prior to inclusion in the notice or separate circulation. Such approval may be obtained informally from the chairman or, e.g. in the case of limited company, by formal resolution of the board of directors. Retention of Agenda Papers a) Chairmans copy of the agenda paper

Although the chairmans notes on his copy of the agenda paper may sometimes be of assistance to the secretary when writing up his minutes, it is considered that, the minutes having been approved and signed, the chairmans copy of the agenda paper ought to be destroyed. b) Failure to do so might cause confusion later, if it is found that the hastily-drafted notes of the chairman do not coincide with the secretarys minutes as finally drafted. c) Nevertheless, at least one copy of the agenda paper should be retained by the secretary from which to prepare his minutes, particularly if he uses a detailed form of agenda paper with a wide margin for notes, similar to that provided for the chairman.

NOTE: As a rule, the secretary prefers to prepare notes for the minute book in a small note book, rather than on the agenda paper.

Place of Meeting (CA 1965 s 145A) Any meeting, including adjourned meetings held in accordance with the requirement of the CA 1965 Part V Division 3, e.g. the statutory meeting, AGM, EGM and meetings of any class of members of the company, shall be held in the state where the registered office is situated. This statutory requirement confines only to general meetings and class meetings of a company and does not apply to a meeting of the directors. A meeting held outside the state where the registered office is situated is not necessarily null and void; it would however, constitute a breach of s145A and may render the company liable to a fine under the CA 1965. However, if the meeting is convened at a place where not all the members can attend, it will ordinarily be a fraud on the power to convene a meeting.

REVIEW QUESTIONS 1. Who can convene a meeting? 2. What is a notice? Describe the form of notice? 3. State briefly the essential contents of a/an: a) Notice b) Agenda 4. Briefly describe three (3) forms of agenda. 5. Explain the points that you have to borne in mind in order to prepare a good agenda. 6. Briefly describe the chairmans copy of the agenda.

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CONSTITUTING OF A MEETING QUORUM Definition The minimum number of people who must attend the meeting (or their proxies, if permitted) for it to be valid. The quorum will be fixed in the companys articles of association. In a large public company, the required quorum is often large. In a small company, the quorum requirement will be a low number, perhaps two. Table A, Art 47 provides that the quorum requirement is two. Generally, the companys AA will provide that, in determining whether a quorum is present, each person attending is counted only one, even it they attend in more than one capacity (for eg. in their own right as a member and in their capacity as proxy for another person: Sharp v Dawes, 1876/a meeting attended by one person was held not to constitute a proper quorum). The casual meeting The casual meeting of sufficient members to constitute a quorum does not, however, constitute a valid meeting. It fails because proper notice of the meeting must be given to all persons entitled to attend it. Thus, where there are only two persons on a board of directors, their casual meeting together does not constitute a valid meeting, if either of them objects: Barron v. Potter (1914). Absence of quorum Absence or inadequacy of the quorum may arise in the following cases: Failure to muster/gather a quorum If the prescribed quorum is not present when the meeting is due to start, the meeting should be formally adjourned because, legally there is no meeting.

NOTE: To save a meeting, some leniency is frequently permitted by the rules, e.g. half-an-hour extensions may be permitted; and if a quorum is not present within half-an-hour from the time originally appointed for the meeting, it must be adjourned to (say) the same day in the following week at the same time and place
Failure to maintain a quorum If a quorum is not maintained, it is open to anyone present at a meeting to draw the chairmans attention to that fact. It is then his duty to declare a count out and to adjourn the meeting.

NOTE: Whether the chairmans declaration of a count out can effectively invalidate business subsequently completed at the meeting may depend, to some extent, upon the wording of the rules.
Effect of absence of quorum

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The general principle is that business transacted is invalid. However, a reference to a procedural irregularity in sec 355 includes a reference to an absence of a quorum. It provides that the accidental failure to give notice of a meeting to a member will not invalidate the meeting unless the person who did not receive the notice applies to the Court to have the meeting declared void.

Incompetent quorum Only persons competent to take part in the business of a meeting constitute a quorum; thus, at common law, a quorum must be a disinterested one: Yuill v. Greymouth Point Elizabeth Railway Co. (1904). Therefore, unless the rules permit, a person may be denied the right to vote at, and unable to form part of a quorum of, a meeting transacting business in which that person has conflicting interests. CHAIRMAN Definition A chairman is the person duly endowed with authority to control and superintend the conduct of meeting. A chairman derives his authority from his appointment, and the mode of his appointment will depend upon the type of meeting over which he is called upon to preside. The chairman should be properly appointed. The appointment of a chairman of a meeting is usually provided for by the articles. The specific requirements in the articles must be precisely followed. For example, Table A art 49 provides that the chairman of the board (if any) shall be the chairman at every general meeting of the company. If there is no such chairman or he is not present within 15 minutes after the time appointed for the holding of the meeting, or if he is unwilling to act, the members present shall elect one of the members to be chairman of the meeting. Therefore, if there is a chairman of the board, he shall be chairman for every meeting of the company, failing which the members present shall elect one of the members to chair the meeting. If the articles do not provide for the appointment of chairman of a general meeting, any member elected by the members present may be chairman of the meeting. Duties of a Chairman Some of the duties may be set out in the regulations governing meetings, but many more are implicit in his appointment or arise out of common law. Notice. Before the meeting commences he ought to satisfy himself that it has been properly convened. Constitution. He must also ensure that the meeting is properly constituted:

That his own appointment in order. That a quorum is present.

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Conduct. During the whole course of the meeting, he must ensure that the proceedings are conducted strictly in accordance with the rules which govern the meeting. Preservation of Order. He has a duty to preserve order. For this purpose he may have power to order the withdrawal of offenders, but this is a power which depends upon the nature of the meeting and where it is held Order of Business. He must ensure that business is dealt with in the order set out in the agenda paper unless the meeting consents to a variation of the order Discussion. He has a duty to allow reasonable time for discussion; on the other hand: he must restrain irrelevant discussion. He must allow no discussion unless there is a motion before the meeting. He must give equal opportunity to those who wish to speak. Those in the minority must be allowed to express their views on the subject under discussion; nevertheless, a small, noisy minority must not be permitted to monopolies the proceedings. Sense of the Meeting. He must ensure that the sense of the meeting is properly ascertained with regard to any question which is properly before the meeting.

Powers of Chairman The chairman derives his powers principally from the rules which govern the meeting over which he presides, but also, to some extent, from common law. His powers from either or both of these sources may be summarized as follows: To maintain order. To this end he must use his discretion in dealing with emergencies as they arise. To decide points of order as they arise, and to give and maintain his rulings on any points of procedure. To use a casting vote where there is an equality of votes, and if the rules confer this power. To order the removal of disorderly persons. Where necessary, reasonable force may be used to effect the removal, if the person concerned has failed to withdraw after being requested to do so by the chairman. At a private meeting the chairman has the power to order the removal of any person who has no right to be present. In both the above categories a trespass is committed. To adjourn the meeting. Unless the rules give him express power to adjourn in specified cases, the chairman derives his power of adjournment from the meeting. If he were to adjourn without the consent of the meeting, another chairman may be appointed by the meeting and business resumed.

NOTE: The only case in which a chairman appears to have the power to adjourn at common law arises when a meeting is adjourned for the express purpose of taking a poll: R v DOyly (1840). Essential Qualities of Chairman
To enable a chairman to carry out his duties successfully, and to exercise his powers for the greatest benefit of the meeting he must obviously possess an adequate knowledge of meeting procedure. But the successful chairman must also possess certain essential qualities, in particular: Personality. He must have the ability to command respect of the meeting, and this largely depends upon his personality and bearing. Impartiality. He must possess a sense of fairness, and make his decisions with strict impartiality. If he is not the head of the organization he should leave the chair when he wishes to address the meeting himself in formal debate. Strength of Character. He must be courteous and yet have the strength of character to be firm when ruling on points of order and in enforcing the rules of the meeting. Strength of character must not, however, be confused with the overbearing, dogmatic and obstinate attitude of the inadequate chairman who may, for a time, force his ideas upon the meeting but certainly loses its respect.

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Resourcefulness. To enable him to make quick decisions, deal with quarrelsome members and answer awkward questions, he must have an adequate supply of tact, patience and good humor, these are essential in the make-up of the resourceful chairman. Ability to Maintain Discipline. To possess and exercise this ability he must set a good example by his own punctual and regular attendance at meetings, and by his own sense of orderliness. Clarity of Speech. The making of lengthy speeches is not one of the chairmans normal duties; if, therefore, he is able to announce clearly the decisions of the meeting, that is all that is normally required of him. The garrulous chairman is generally, regarded as a poor one, in fact, a good chairman is often the one who says least.

ADJOURNMENT Definition Adjournment means that the proceeding of a meeting is broken off for the time being and it is to be continued at the time as fixed by the motion adjourning the meeting, or if the motion does not fix the time, be called to continue by a fresh notice. In principle, the adjourned meeting may only deal with the remainder of the business for which the original meeting was convened, as it is deemed to be a continuation of the original meeting, unless proper notice of the additional business has been given. A resolution passed at an adjourned meeting is treated as having been passed on the date on which it was in fact passed (e.g. the date of the adjourned meeting and not on any earlier date). It is the privilege and the right of the members present to decide whether they should continue the business of the meeting in that day or adjourn it until a subsequent date. The power to adjourn the meeting is vested with the meeting. The chairman must obtain the consent of the meeting (e.g. by a motion of the meeting to adjourn), in the case where a quorum is present, to adjourn the meeting from time to time. The chairman is not entitled to stop the meeting at his own will and pleasure. If the chairman adjourns a meeting at his own will and pleasure without the consent of the meeting, there is no true adjournment, and the meeting remain in being and is competent to go on to transact any incomplete business. The chairman cannot terminate a meeting by leaving the chair before its proper business is disposed of. However, if the chairman closes the meeting after making a bone fide ruling based on independent and expert legal advice that there is no valid business before the meeting, the meeting terminates. The chairman however, may adjourn the meeting of his own accord where it is impossible to maintain order, i.e. where there is violent misconduct. He may also adjourn the meeting to assist the business of the meeting, e.g. for the purpose of taking a poll. However, in both circumstances, the adjournment may only be for as long as is necessary. No business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting where the adjournment took place. Fresh notice is required if new business is to be introduced at the adjourned meeting. When a meeting is adjourned for 30 days or more or when the meeting is adjourned sine die (i.e. without fixing the date for the adjourned meeting), notice of the adjourned meeting must be given. Therefore, if the meeting is adjourned for less than 30 days (i.e. with the date for the adjourned meeting fixed by the motion for adjournment) if shall not be necessary to give any notice of an adjournment. However, in practice, it would still be prudent to send out a notice to resume the meeting as the members need to be informed of the resumption of the meeting in order to ensure that there will be members present for the meeting to transact the unfinished business. Listed companies are required to make an announcement if a general meeting is adjourned and when an adjourned meeting is called. The following circumstances warrant for an adjournment: Where the accounts are not ready for submission at the AGM Where it is impossible to maintain order of the meeting, the chairman may adjourn the meeting to enable tempers to cool Where there is a lack of quorum

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Where the meeting fails to maintain a quorum Where necessary, for the purpose of taking a poll (ie where the circumstances demand for adjournment as the chairman may deem fit) Where within half an hour from the time appointed for the meeting, a quorum is not present, the meeting (except a meeting convened upon the requisition of members which shall be dissolved) shall stand adjourned to the same day in the next week at the same time and place, or to such other day, place and time as the directors may determine.

POSTPONEMENT Definition Postponement refers to the putting-off of the meeting to a later date before the meeting was held. A meeting once properly convened (ie after the notice of meeting has been validly issued), cannot be cancelled or postponed, unless the articles permit. The meeting must be proceeded with. If members entitled to attend are present in accordance with the notice of the meeting, and the number is sufficient to constitute a quorum, they may elect a chairman and conduct the meeting in accordance with the notice. Where a general meeting has been convened to be held on a certain day, the directors cannot postpone the meeting to another day unless the articles allow. The directors cannot bring forward the time originally fixed for the meeting. In the absence of a power to postpone meetings, a meeting held on the postponed date is an invalid meeting. Where the power to postpone meetings is provided for in the articles, it must be strictly construed.

PROXIES Definition A proxy is a document in writing by which one person authorizes another to attend a meeting (or meetings) and to vote on his behalf; or A person authorized in such a document to act for the appointor, i.e. in the present context, to attend a meeting (or meetings) and to vote on behalf of the appointor. The Act (s.136) overrides common law, i.e. it empowers any member entitled to attend and vote at a meeting of a company having share capital: To appoint any other person (whether a member or not) as his proxy, to attend and vote instead of him; and In the case of a proxy appointed to attend and vote on behalf of a member of a private company, the proxy is also given the right to speak at the meeting(s) concerned.

The Act (Company Act 1965) At common law, there is no right to appoint a proxy: Harben V Phillips (1883)

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The Act overrides common law, i.e. it empowers any member entitled to attend and vote at a meeting of a company having share capital: To appoint any other person (whether a member or not) as his proxy, to attend and vote instead of him; and In the case of a proxy appointed to attend and vote on behalf of a member of a private company, the proxy is also given the right to speak at the meeting concerned.

However, unless the articles otherwise provide: The power to appoint a proxy is not given to a member of a company having no share capital. A member of a private company can appoint only one proxy to attend on the same occasion whereas it is implied that a member of a public company having share capital can appoint one or more proxies. A proxy is not entitled to vote except on a poll.

Table A (Company Act 1965) Table A (Article 69) accordingly provides that the instrument appointing a proxy must be deposited with the company: Not less than 48 hours before the time for holding the meeting or adjourned meeting or, In the case of a poll, not less than 24 hours before the time appointed for the taking of the poll, and in default, the instrument of proxy shall not be treated as valid.

Issue of proxy forms An invitation issued at the companys expense to some only of its members, requesting them to appoint as proxy a person (or persons) specified in the invitation is prohibited, unless: The proxy form was made available to every member on written request; or Where it had been sent to a member at his written request

Note: Although it is common practice to send proxy forms along with notices of meetings, this section is designed to prevent directors from sending proxy forms, at the companys expense, only to members from whom they might expect support.
Form of proxy Form is articles usually set out the form of proxy to be used, and may or may not require attestation of the appointors signature. Table A (Article 68) provides that: A proxy must be in writing, signed by the appointor or his attorney duly authorized in writing. If the appointer is a corporation, it must be under seal or signed by a duly authorized officer or attorney. Table A (Article 70) provides a specimen of an ordinary proxy form, which is to be followed as closely as circumstances permit.

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Two-way proxy the stock exchange regulations require that the use of two-way proxy forms shall not be excluded. Such a form of proxy enables a member, through his proxy, to vote for or against a motion. A special proxy is one, which is valid for one meeting only and at any adjournment thereof. It is now free of stamp duty. A general proxy is valid for more than one meeting; in this case, the proxy form requires a 50p stamp.

REVIEW QUESTIONS 1. Define a) quorum b) disinterested quorum 2. what constitutes a quorum for a general meeting of public company b) a private company 3. Discuss some circumstances in which one person may constitute a valid quorum of a meeting

CONDUCTING OF A VALID MEETING MOTIONS AND RESOLUTIONS Motion and resolution are often used discriminately or interchangeably. differentiated. Definition A motion (i.e. the effect of something being moved) is a proposal or proposition put forward at a meeting for discussion before it has been duly passed by a majority vote. A motion is a proposed decision the origin of a resolution, so to speak. A resolution (i.e. the result of something being resolved) is a motion that has been accepted or voted on and agreed to by the necessary majority. A resolution is therefore a proposal submitted to a meeting that has been carried at the meeting (or on a poll or by a ballot). It is a decision or expression of intention of a meeting. Thus, a resolution is passed at the meeting and is recorded as such in the minutes. However, they should be

Form of a motion A motion is the basis of a potential decision. If it is passed, it becomes a resolution and has legal effect. The substance and wording of each motion needs care and foresight. A motion must have the following form: It must be moved by a person who is qualified to do so. It is usually commenced with the word That. It must be lawful, not seditious, obscene, defamatory or productive of disorder.

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It should be in definite terms free from ambiguity, i.e. should be in precise and definite language and its intention and import should be clear. The wording should be explicit and lucid to guard against any uncertainty or misrepresentation as to what is to be voted on. It should be in a positive, affirmative form. It should be plain and complete so that the resultant resolution when read in future, identifies with certainty its objective and substance. It should be in the form of one proper, grammatical sentence, but a motion may comprise several parts put together grammatically in one sentence. It must be in the form and manner required by the rules governing the meeting (e.g. be in writing, signed by the mover and handed to the chairman). It must not be in conflict with the articles of association and any statutory or other legally binding provisions. It must be relevant, i.e. within the scope of the notice or business in hand and in the order as shown on the agenda. It must not directly or in effect, constitute either a negative of a resolution already passed at the same meeting or an attempt to reverse the result of a motion lost when voted on at the same meeting. It should not be redundant by being merely a repetition of an earlier decision or established policy.

Disposal of motion The following are the various ways a motion may be disposed of:

Where it is put to vote after allowing adequate time for discussing it, and it is either carried or rejected by the meeting. Where it is put to the meeting as a substantive motion, i.e. after various amendments have been accepted, and either carried or rejected. Where it is shelved, i.e. that the question be not now put. Where it is dropped: o by the proposer with the consent of the meeting (a dropped motion); o having no seconder (where the rules require a seconder to a motion); and Where it is temporarily shelved (where a motion for adjournment was carried) until the adjourned meeting is held.

Types of motion There are four (4) types of motion: 1. Original motion a proposition submitted for debate 2. Substantive motion the motion which is finally put to the meeting after any amendments approved by the meeting and have been incorporated in it. 3. Formal motion this is a procedural motion, intended to regulate the procedure and conduct of a meeting, with the principal objects of facilitating and expediting the business to be transacted at the meetings. 4. Dilatory motion this is the term which is used to describe the misuse of a formal motion. i.e. it is use to impede the progress of the meeting or prevent discussion on a motion before reasonable time has been given to it. (In this case, the chairman may reject the motion if he considers it has been proposed frivolously/playfully). a) Original or substantive motions that do not deal merely with matters of procedure or form, but propound the substantive issue for consideration and action at the meeting. Example:

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Amendment to Motions A motion can be amended by: Adding, inserting, or deleting words of the original motion Substituting words, phrases, or whole sentences for others in the original motion Rearranging words of the original motion or Any combination of the above

Types of resolution There are two (2) types of resolutions: i) Directors resolution ii) Members resolution 1. Ordinary resolution 2. Extraordinary resolution i) Directors resolutions

The directors of a company must act collectively as a board on behalf of their company, save in so far as authority may be delegated to an individual director to engage in transactions as an agent for the company. The board of directors exercises its powers by passing resolutions either at a meeting of directors or by resolutions in writing. The articles regulate the mode of transacting business at a meeting of directors. The articles usually empower the directors as a body to regulate their meetings as they think fit. Directors or board resolutions generally (as provided by articles) require a simple majority of votes and a determination by a majority of directors shall for

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all purposes be deemed the boards determination. The chairman of the meeting may be endowed with a second vote or a casting vote to resolve cases of equality of votes. Unless the articles provide otherwise, directors do not vote by proxy. However, most articles provide that a director may appoint any person to be an alternate to exercise all powers of the appointor in his place in the absence of the appointor. ii) Members resolutions

The CA 1965 contemplates two types of members resolutions: Ordinary resolutions Special resolutions

Prior to the commencement of the CA 1965, there was another type of members resolution called extraordinary resolution. It is provided under CA 1965 that all extraordinary resolutions duly and appropriately passed before the commencement of the CA 1965 shall be treated as special resolutions. For companies incorporated before the commencement of the CA 1965, where the articles require any matter to be done by extraordinary resolution, that matter may be done by special resolution. a) Ordinary resolutions

When used. This, the commonest form of resolution, is used for all routine business at general meetings, and for all business at board meetings. Majority required. It is passed by a simple majority of members entitled to vote and actually voting, at a meeting of which proper notice has been given in accordance with Articles.

Extraordinary resolution Definition An extraordinary resolution is one passed by a majority of not less than three-fourths of such members as, being entitled to do so, vote in person or, where proxies are allowed, by proxy, at a general meeting of which notice specifying the intention to propose the resolution as an extraordinary resolution has been duly given.

Note: A three-fourths majority means that at least three-fourths of those actually voting must be in favor of the resolution before it is deemed to be passed. If, for example, there are at least 15 votes in favor out of a total of 20 votes cast, that would amount to a three-fourths majority.
When required. Such a resolution is required only where either the Act or the Articles of a company so provide.

The period of notice required for a meeting at which an extraordinary resolution is to be passed is not specifically stated in the Act; therefore, it will vary according to the kind of meeting at which the resolution is to be passed, for example:
21 days notice at least, if it is to be passed at the annual general meeting; 14 days notice at least, if it is to be passed at an extraordinary general meeting;

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7 days notice at least, if it is to be passed at an extraordinary general meeting of an unlimited company.

Contents of notice (for extraordinary resolution) Registration. A copy of every extraordinary resolution must be filed with the Registrar within 15 days after it has been passed.

A copy of every extraordinary resolution must be annexed to, or embodied in, every copy of the Articles issued after the passing of the resolution.
Stock exchange regulations. In the case of a company whose shares are listed on the stock exchange, four copies of any extraordinary resolution must be delivered to the share and loan department of the stock exchange concerned.

Special resolution Definition A special resolution is defined in the Act as a resolution passed by the same majority as required for an extraordinary resolution at a general meeting of which not less than 21 days notice specifying the intention to propose the resolution as a special resolution has been given.

Note: It will be observed that a special resolution differs from an extraordinary resolution only as regards the notice required, for example, a special resolution requires at least 21 days notice in all cases. Inadequate notice may be excused, for example, if less than 21 days notice is given, subject to compliance with the provisions of s.133

When required. A special resolution is required only where prescribed by Act, and in any additional cases where the companys Articles so provide; that is, the Article may demand a special (or extraordinary) resolution where an ordinary resolution would suffice for the purpose of the Act. a) a) b) c) It must must be passed by three-fourth majority of those present and voting at meeting of which 21 days written notice must be given s152(1). It may be passed at short notice only if that is agreed to by a 95% majority of the members who have the right to vote at a meeting. The circumstances which requires a special resolution are:

to alter the object clause of M&A (s28(1), s31(1). to reduce the issued capital of the company to amend companys constitution to wind up the company

(The Act requires a special resolution for almost any alteration of the companys constitution or capital structure.)
Registration. A copy of every special resolution must be filed with the Registrar within 15 days after it has been passed.

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A copy of every special resolution must be annexed to, or embodied in, every copy of the Articles issued after the passing the resolution.
Stock exchange regulations. In the case of a company whose shares are listed on the stock exchange, four copies of any special resolution must be delivered to the share and loan department of the stock exchange concerned.

MINUTES Definition A written record of the business transacted at a meeting. Contents of a Minutes The following items are typical contents of a minute: Heading: This usually includes: o Name of the body, e.g. company, which held the meeting o Kind of meeting, e.g. annual general meeting o Place of the meeting o Day and date of the meeting (The time is not usually stated)

NOTE: Obviously, the name of the body concerned need not be shown in the minute book, but examination candidates ought to include it when drafting specimen minutes.
Names of those present, including (where applicable) those in attendance, i.e. those who are there by invitation, or ex officio, and not as members.

NOTE: The recording of names applies more particularly to board meetings, and other comparatively small assemblies. In the case of large meetings, only the number present needs to be recorded, if at all.
Minutes of resolution: Records of decisions taken and resolutions passed, e.g. Resolved: That the Official Seal, an impression of which is impressed in the margin hereof, be and the same is hereby adopted as the Official Seal of the Company. Minutes of narration: Records of items of business which do not require formal resolutions. Thus, the above minute of resolution might have been preceded by the following minute of narration: The Secretary produced a design for the Official Seal of the Company. Names of proposers and seconders: Whether to record the names of proposers and (where necessary) seconders in the minutes is usually dependent upon the size or kind of meting concerning; for example: Board meetings and committee meetings: Names of proposers and seconders are not usually recorded. General meetings: In the case of large meetings, names of proposers and seconders are usually minuted. Serial number: Each item of the minutes is usually serially numbered. This is particularly necessary in the case of loose-leaf minute books, where the numbers may run serially right through the whole of the book. The use of serial numbers, moreover, facilitates reference and, where applicable, the crossindexing of minutes according to subject-matter. Chairmans signature: The chairman usually depend his signature at the next succeeding meeting, after that meeting has verified the accuracy of the minutes and passed a resolution to that effect.

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NOTE: The chairman signing need not have been in the chair at the original meeting.
he Essentials Of Good Minute Writing There are basically five (5) criteria essentials for a good minute: Authentic: As the minutes may subsequently be required as evidence in a court of law, they must give a precise account of the proceedings of the meeting, and nothing more.

NOTE: The minutes of a meeting must not read like a report, thus, it is quite unnecessary to record the discussions and debates which preceded the passing of the various resolutions.
Complete: The minutes must be complete, and in sufficient detail to enable a person who was not present at the meeting to understand fully what business was transacted. Concise: Minutes must be as concise as possible, but completeness must not be sacrificed for the sake of conciseness. Free from ambiguity: that is:

Date, numbers, amounts, quantities, etc., must be clearly stated. Documents, such as share certificates, must be clearly identified, e.g. by number. Officials and persons concerned in making decisions, giving or receiving instructions, etc., must be named or otherwise described, so as to indicate with certainty who is intended. Past tense: Minutes, being a record of what was done, i.e. decided, must be written in the past tense.

The Minute Book There are generally two (2) ways of keeping a minute book: A bound minute book is still favored by many secretaries and has its advantages over the looseleaf minute book in some respects: The minutes are less liable to falsification and loss of the loose sheets. Many of the rather elaborate precautions required when using a loose-leaf minute book are unnecessary. A loose-leaf minute book, on the other hand, is perhaps more in keeping with modern method; that is, the minutes are usually dictated (either to a shorthand-typist or into a dictating machine) by the secretary from his notes, typed on loose-leaf binder which constitutes the minute book. The loose-leaf minute book is not without its disadvantages. Its advantages are as follows: The tedious work of writing the minutes the bound book is avoided.

NOTE: It is, of course, possible to have the minutes typed on a sheet and pasted into the bound book, but the book soon becomes bulky and the additional thickness tends to put undue strain on the outside covers.

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At suitable intervals, the earlier sheets of minutes can be removed from the loose-leaf binder, and securely filed away in the safe or strong-room; thus, apart from saving space, there is a saving in cost as one loose-leaf binder replaces any number of bound book. Precaution: The usual precautions taken to prevent falsification of the records and removal of the sheets are as follows: A suitable locking device is incorporated in the spine of the book itself, the keys being kept by, say, the chairman and secretary. Keeping the minute book itself in a safe or strong-room, preferably fire-proofed. Blank sheets placed in the charge of the secretary of other responsible official. Sheets numbered serially throughout the minute book. Each sheet initialed by the chairman at the time of signing the minutes of the last preceding meeting.

Reading The Minutes Not compulsory. The reading of minutes at the next meeting is not compulsory, unless the rules specifically require it. Often taken as read. In practice, with the consent of the meeting, they are often taken as read, particularly if copies of the minutes have been circulated to members prior to the meeting.

Approving the minutes After the minutes are read (or taken as read), a motion is put to the meeting, recommending their adoption as a true record of the proceedings of the preceding meeting to which they refer; if approved, they are signed by the chairman.

NOTE: Approval is to be regarded merely as verification of the accuracy of the minutes; that is, a member who votes in favor of approving the minutes does not thereby indicate that he was necessarily in agreement with resolutions passed at the last meeting; nor does he confirm the minutes, as neither confirmation nor ratification is necessary.

Minutes as evidence: Even after signature of the chairman, the minutes are only prima facie evidence; that is, they are not the only admissible evidence of the proceedings at the meeting to which they refer: Re Fireproof Doors (1916).

NOTE: It is, however, possible to include a provision in the regulations that (in the absence of fraud or bad faith) the minutes, having been signed by the chairman, shall be conclusive evidence: Kerr v. Mottram (1940).
Alteration Of The Minutes No erasures should be made during preparation of the minutes, i.e. in the minute book itself or in the sheet to be inserted in a loose-leaf minute book. Any errors made should be ruled out and the substituted word or words neatly written or typed above or alongside. Errors subsequently discovered, i.e. at the next meeting, or at a later date, should be dealt with formally. In any case of doubt as to the accuracy of the minutes, an amendment may be put to the motion for their adoption; if the amendment is carried, the necessary alteration(s) must be made.

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NOTE: As a general rule no alteration can be allowed after the minutes have been signed by the chairman. Nevertheless, as already indicated, evidence may be brought to prove that the minutes are incorrect: Re Fireproof Doors (1916), unless the rules provide that the minutes, having been signed by the chairman shall be conclusive evidence in the absence of fraud or bad faith: Kerr v. Mottram (1940).
VOTING It is a long established principle that the will of a corporation is expressed by the whole or a majority of the corporation. The act of majority is regarded as the act of the whole. The principle that the majority decision is supreme is expounded in the decision in Foss v Harbottle. Thus, the majority judgment is deemed to represent the true sense of the meeting and is binding on the whole body: Case: Foss v Harbottle (1843)

The two plaintiffs, suing on behalf of themselves and all the other members of the corporation, except those who committed the injuries complained of alleged that the defendants, who were the directors and promoters of the company, had, inter alia, sold land to the company at an undisclosed profit. Court held: The individual minority shareholders were not the proper plaintiffs and could not therefore, sue. If a wrong had been committed it had been committed against the company and therefore, the proper plaintiff was the company. It was not open to individual members to assume to themselves the right of suing in the name of the company. Although this was a rule which could be departed from, it should not be, save for reasons of a very urgent character. In the circumstances, there was nothing to prevent the company from obtaining redress in its corporate character regarding the matters complained of.
The view or opinion, or intention, or will regarding a question before the meeting, i.e. the sense of meeting, is ascertained by taking a vote. Thus, whether a motion is carried or rejected is decided by voting. A resolution is passed when the majority of the votes cast is in favor of the motion.

Methods/Forms of voting There are six (6) generally recognized ways of voting: 1. 2. 3. 4. 5. 6. By By By By By By voices a show of hands poll ballot division acclamation

Show of Hands Article 54 of Table A clearly state that on show of hands every person present who is a member or a representative of a member shall have one vote. At common law, there is no right to vote by proxy. Thus, a proxy cannot vote on show of hands unless the articles provide otherwise.

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The procedure for voting by show of hands involves the chairman, who first requests those in favor of the motion to raise their hands upon which their votes are counted. Each person at the meeting has one vote. The voting does not take into account variation in sizes of shareholdings or other entitlements, nor the presence of representatives of absent members entitled to vote. He then requests those against the motion to raise their hands and their votes are counted. Usually, a secretary is requested to count the votes, Where the attendance is large, it will be prudent on the part of the chairman to call for the aid of a few tellers (persons who count the votes) in counting the votes and scrutineers (who verify the votes counted) so that the results will not be impeached for fraud or obvious errors.

Poll A poll has two main characteristics: The votes are cast in writing, ie it is voting by written ballot. The votes are proportionately to the number of shares held and may be cast on behalf of absent members who have appointed proxies.

A poll provides a method of voting which gives all entitled persons an opportunity to exercise their vote and where voting entitlements vary, it provides a safeguard against a minority of persons with large shareholdings being over-voted by a majority of persons who have small shareholdings.

In practice, a poll is usually demanded when the result of a vote by a show of hands as declared by the chair seems different from the result likely to be achieved by a poll. This does not mean a poll must be demanded after the result of a show of hands; a poll may be demanded prior to a vote being taken by show of hands. Voting by Ballot

A ballot is a method of secret voting. It is employed when secrecy is desired, such as in electing officials. Voting by Division

This method is not commonly used. The members being counted by tellers as they divide and proceed to their respective sides to cast the vote. Voting by Acclamation/Voices

Voting by acclamation is used when the voting is unanimous or nearly so and usually effected by clapping. It is generally utilized when passing votes of thanks, appreciation and congratulation. Voting by voices or oral consent or negation, is by voting aye or nay or yes or no.

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Casting Votes A casting vote is a second vote given to the chairman to resolve the situation where there is an equality of votes (whether on a show of hands or on a poll). A chairman has no casting or second vote at common law if the voting is equal. The articles must specifically provide so if the chairman is to be given the casting or second vote. It is a common practice for articles of association of companies to expressly provide the chairman of the meeting with a second or casting vote where there is equality of votes. Voting at Board Meeting The conduct of board meetings. Board meetings are usually informal in character; nevertheless, the Articles may regulate the proceedings. In practice, however, the directors are often allowed to regulate their own meetings. Table A (Article 98) on the subject of board meetings provides that:

The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes, the chairman shall have a second or casting vote.

Polls A common law right although voting must be by show of hands in the first place, there is a common law right to demand a poll. The Act (Co Act 1965) makes it quite clear that, so far as companies are concerned, there is a right to demand a poll. It provides:

-That any provision in a companys Articles is void which would exclude the right to demand a poll, except: On a motion to elect a chairman; or On a motion for adjournment of the meeting That any article is rendered void which seeks to make ineffective a demand for a poll made:

By not less than five members entitled to vote at the meeting; or By a member or members holding shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all the shares conferring that right. That a proxy is entitled to demand, or joins in the demand for a poll.

Table A the provisions of Table A (Article 58) on the subject of demanding a poll were stated in XVIII, 2 and should be compared with those of s.137 of the Act, stated above.
Procedure on taking a poll after an effective demand for a poll the following procedures are undertaken:

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Time, place and method to be adopted. Usually, the chairman has power to decide when, where and how the poll is to be taken. Table A gives him this power, but with certain exceptions, namely: o On a motion for election of a chairman; o On a motion for adjournment of the meeting. Chairmans announcement the chairman, having made his decision, announces the time and place for taking the poll, and explains the method to be adopted. If the demand for a poll had been anticipated, so that voting slips and/or polling lists are already available, he may decide (or be compelled by the Articles) to take the vote at once. If, on the other hand, the poll will entail much preparatory work (or if he considers other business of the meeting to be more pressing), he will probably decide that the poll shall be taken at a later date, and make an announcement to that effect. Appointment of scrutineers when the poll is taken, the chairman usually appoints scrutineers. Where opposition parties are known to exist and are easily identifiable, he may select one or more scrutineers from each party, or permit each party to appoint its own scrutineers. Voting slips are issuedto all members and (where applicable) proxies present, on which they will record: o Vote for or against. o Number of votes to which they are entitled. o Signature o Voting slips are collected entered on polling lists (either by polling clerks or the scrutineers themselves) and checked by the scrutineers. o As an alternative to the issue of voting slips, the members may proceed to tables suitably arranged and lettered, and themselves sign a polling list, after indicating in a separate column the number of shares and/or amount of stock held. In that case, separate polling lists are provided for votes cast for and against the motion. o After checking and counting the votes cast for and against the motion, the scrutineers will report the result to the chairman. If the meeting is a large one, the scrutineers usually present their report in writing, stating the number of votes cast for and against the motion. o The chairman announces the result of the poll, and may or may not state the number of votes cast for and against in accordance with the usual practice of the company concerned.

However, the methods of voting commonly used at company meetings are by a show of hands and by poll. Table 6.2 explained the differences between show of hands and poll. Show of hands Poll The usual way of conducting a vote by show of hands was that the number of people who indicate their vote by raising their hand is counted and the result is declared, regardless of the number of shares held by each of the people voting and without counting proxies. The number of votes cast for or against the resolution (rather than the number of people voting for or against it) are counted. In the absence of any provision to the contrary in the articles, each member has one vote per share in a voting by poll. If the share capital consists of stock or units of stock each member has one vote per stock or unit of stock.

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Figure 4: Differences between show of hands and poll

REVIEW QUESTIONS 1. Explain 1. 2. 3. 4. 5. in relation to a quorum: Its disinterestedness Its maintenance In what respects might a quorum prove incompetent to act? Explain how the absence or inadequacy of quorum might arise. Distinguish between a motion and a resolution. Explain briefly: 1. Original motion 2. Substantive motion. 3. State the nature and purpose of a formal motion. 4. What do you understand by adjournment? In what circumstances may a chairman adjourn a meeting on his own responsibility? In what circumsntances has he no option but to adjourn? 5. Distinguish between adjournment and postponement of a meeting. 6. What are minutes? State what information you would record therein and the safeguards you would introduce where the minute book is of the loose-leaf variety. 7. What are the main contents of the minutes of a meeting? 8. Describe briefly six (6) methods of voting. 9. Distinguish between : 1. Show of hands 2. Poll

12. Describe briefly the procedures on taking a poll. 13. What is casting vote? When can a chairman use a casting vote?

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PRACTICAL WORK OF COMPANY SECRETARY

Review Questions Describe the duties of a secretary at a: a) b) General meeting. Extraordinary meeting.

When is the first director meeting should be held? What are the items discussed in the subsequent directors meeting?

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DEFAMATION Definition Defamation shall consist of the publication to a third party of matter in which all the circumstances would be likely to affect a person adversely in the estimation of reasonable people generally. (Faulks Committee Report) In other words, defamation is the publication of a statement which affects a persons reputation in that it tends to lower him in the estimation of right-thinking members of society generally by making them shun or avoid him. A statement which disparages a mans reputation in relation to his office, profession, calling, trade or business may be defamatory. For example: DEFAMATORY STATEMENTS These may be made about any natural person (human being) or artificial legal person (corporate body) and certain unincorporated associations, which have the necessary personality recognized by law. Although a defamatory statement can be made in a variety of ways (e.g. in writing, verbally, pictorially or by gesture), legal action for defamation may be divided broadly into: Libel Definition: Defamatory statement/representation in a permanent form.

Legal action for libel may be taken: where the defamatory statement was made in writing, in print, or some other permanent form. whether the plaintiff can prove actual damage or not, i.e. he need not have suffered any pecuniary loss.

Slander Definition: Defamatory statement that was made orally, or in some transient form of expression. Legal action for slander may be taken: Where defamatory statement that was made orally, or in some transient form of expression, e.g. slander may be expressed merely by gesture. where the plaintiff can prove that he sustained actual damage. But this does not apply in all cases; thus it is not necessary for the plaintiff to prove that he suffered any actual pecuniary damage in the following cases: o Slander imputing a crime for which he could be sentenced to imprisonment. o Slander imputing certain infectious or contagious diseases to the plaintiff. o Slander imputing unchastity or immorality of a woman or girl. o Imputations in relation to the plaintiffs office, profession or trade.

The defamatory nature of such a statement need not be understood by everyone, i.e. the implication may be apparent to only a limited number of persons. The person purporting to have been defamed may not be specifically named in the statement; it is sufficient if there are some who could reasonably be expected to infer that the plaintiff was the person referred to. Thus, the plaintiff, in order to prove defamation by innuendo, may be required to show that. ( i) although prima facie the statement complained of does not refer to him, it might reasonably, in all the surrounding circumstances, be understood to do so. (ii) although the words used, when taken out of context, were not defamatory, they would be likely to convey a defamatory meaning when published to persons.

ELEMENTS OF DEFAMATION The following elements must be satisfied to prove defamation: The words must be defamatory

To be defamatory the words must first tend to lower the plaintiffs reputation in the estimation of right-minded persons, or must tend to cause him to be shunned or avoided. They must refer to the plaintiff

If the plaintiff is mentioned by name, it can be easily proven. It is not necessary that the defendant should have intended to refer to the plaintiff Hulton v. Jones. They must be maliciously published

The publication is the communication of the words to at least one person other than the person defamed Bata v Bata. Communication to the plaintiff himself is not enough, for defamation is an injury to ones reputation, and reputation is what other people think of a man, and not his own opinion of himself. DEFENCES In an action for defamation, certain defences are available to the defendant according to the circumstances and/or occasion. There are three defences in an action for defamation which are: 1. Justification (or truth) 2. Fair comment 3. Privilege, which may be absolute or qualified. Justification To succeed with this form of defence, the defendant must prove that the defamatory words complained of were true in substance and in fact. So long as the defendant can establish justification by evidence, he has a good defence even though he may have been actuated by ill-will or spite. Fair comment This is a defence, which is available only on matters of public interest, the defendant has a defence so long as

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Public interest. The matter commented upon must be of public interest e.g. all matters of State and politics, local government, and the conduct of public officials etc, are properly the subject of fair comment. Truth. It must be an expression of opinion and not an assertion of fact. Fair. The comment must be fair. Statement of opinion. The comment must not be malicious (that is, with an evil motive).

Privilege a) Absolute privilege

This privilege provides a complete defence, even though the statement complained of was false or malicious. The circumstances or occasions on which a plea of absolute privilege is available may be classified as:

Parliamentary: i.e. in respect of statements made by Members of Parliament in the House of Lords or in the House of Common.
b)

Statutory: i.e. given by statute in respect of Parliamentary courts, also in certain tribunals exercising judicial functions. Legal professional: i.e. in respect of statements made between client and legal adviser.

Qualified privilege

If the plaintiff can prove that the defamatory statement complained of was made maliciously, e.g. by giving undue publication, a plea of qualified privilege is of no avail to the defendant. If however, malice is not proven, qualified privilege extends to the following:

Fair and accurate reports of proceedings in Parliament, appearing in newspaper or elsewhere. Fair and accurate reports of judicial proceedings to which the public has access. Fair and accurate reports of public meetings, if publication is for the benefit of the public. Statements made in discharge of a legal, moral or social duty, to a person who has an interest in receiving such statements; thus former employers reference concerning the character of a servant is protected by qualified privilege when given to a prospective employer. Fair and accurate reports of proceedings of certain courts and legislatures outside Great Britain, etc., contained in newspapers and certain periodicals.

3.

Effect of an Apology

An apology for the defamatory statement by the defendant may mitigate damages and its absence may aggravate them Felding v. Variety Incorporated. Apology however, does not affect his liability. The mere absence of an apology cannot by itself aggravate damages. REVIEW QUESTIONS 1. 2. 3. 4. a) b) 5. How can a defamatory statement be made? Distinguish between libel and slander defamatory statement. Describe briefly five (5) types of defences that can be use in defamation cases. Differentiate between : absolute privilege qualified privilege Briefly explain apology and payment into court.

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4.

EMPLOYMENT LAW

Introduction To Industrial Relations (IRA) and Employment Act (EA) Industrial Relations and Employment Act examine the relationship between workers and their employers within the working environment. Provide the legislative framework for the system of industrial relations. Outline the rights and obligations of the parties at the work place The rights and obligations of employers and employees differ depending upon whether the workers belong to a trade union or not. However, the employment laws lay down provisions which affect not only unionized workers but all employees. Some of the laws clarify the rights of trade unions and employers whose workers are unionized and others set down minimum welfare provisions which apply all workers, whether unionized or not.

EMPLOYMENT LEGISLATION The major pieces of employment-related legislation: 1. 2. 3. 4. 5. 6. 7. 8. Laws providing for basic benefits Employment Act, 1955 Wages Councils Act, 1947 Sabah Labor Ordinance Sarawak Labour Ordinance Children and Young Persons (Employment) Act, 1966 Workers Minimum Standards of Housing and Amenities Act, 1990 Weekly Holidays Act, 1950 Pensions Act, 1980

Laws establishing the industrial relations framework a) Trade Unions Act, 1959 b) Industrial Relations Act, 1967 Public Services Tribunal Act, 1977

Social security laws Employees Provident Fund Act, 1991 Employees Social Security Act, 1969 Workmens Compensation Act, 1952

c)

Safety laws Factories and Machinery Act, 1967 Occupational Safety and Health Act, 1994

d)

Law restricting employers from hiring non-citizens

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 e)

Employment (Restriction) Act, 1968

Law relating to training of employees Human Resource Development Act, 1992

Brief outlines of some of the important laws: The Employment Act lays down provisions to protect workers from exploitation provides minimum benefits for all workers covered by the Act establishes certain rights for both employers and employees

The Employees Provident Fund Act establishes a system of compulsory savings so that employees will have money to support themselves once they retire covers all employees and administer by the Employees Provident Fund Board

The Employees s Social Security Act administers by the Social Security Organization (SOCSO) ensures that employees receive compensation in case of work-related accidents or illness

The Occupational Safety and Health Act establishes guidelines and lays down the responsibilities of the various parties in industry in relation to safety and health

The Trade Union Act seeks to control the activities of trade unions so that they can develop in an orderly and peaceful manner lays down rules and regulations which unions are required to follow

The Industrial Relations Act regulates the relations between employers and workmen and their unions as well as laying down rules to help prevent and settle disputes between the two parties, thus ensuring peaceful industrial relations as far as possible

ROLE OF GOVERNMENT IN INDUSTRIAL RELATIONS Acts as legislator through Parliamentdrafts and presents the law Administrator through the Ministry of Human Resourcesenforces the system Participant as the largest employer in the country towards the public sector workmenwhat government does have an impact on employees Briefly outlines some of the Government roles throughout several bodies:

a) Ministry of Human Resources

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Responsible for administering and overseeing the industrial relations system with basic objectives such as: to protect the welfare of workers (their safety, health and rights). to promote good employer-employee relationships through a stable and peaceful industrial relations system. to equip the unemployed with basic industrial skills and improve the skill level of the work force. to assist in maximizing the countrys manpower resources through manpower planning.

b) Department of Labor, Peninsular Malaysia Enforces the Employment Act, 1955; the Workmens Compensation Act, 1952; the Wages Councils Act, 1947; the Children and Young Person (Employment) Act, 1966, the Employment (Restriction) Act, 1968; and the Workers Minimum Standards of Housing and Amenities Act, 1990. Through the labor court it inquires into disputes between workers and employers over payment or nonpayment of wages, allowances, retrenchment and other benefits due to employees under their individual contracts of employment or as required by the employment laws.

c) Department of Industrial Relations Responsible for the functions of labor and industrial relations matters. Administers the Industrial Relations Act, 1967. Helps settle disputes between employers and employees through conciliation.

d) Department of Trade Unions Give a central role in the growth of the trade union movement. Has the authority to register newly formed unions, de-register unions found breaking the law, check unions annual accounts and generally to investigate any specific complaints made against a particular union (e.g. the use of union fund and the election of union officials).

e) Department of Occupational Safety and Health Responsible for the major task of implementing the Occupational Safety and Health Act, 1994 and Factories and Machinery Act, 1967.

f) Employees Social Security Organization (SOCSO) Implements the Employees Social Security Act, 1969, an insurance scheme with compulsory membership for all workers whose wages do not exceed RM3,000 per month. Provides benefits to workers and their dependants in the event of work-related accidents.

g) Employees Provident Fund (EPF) Implements the Employees Provident Fund Act, 1991, which all employees and employers must make monthly contributions, that made available to employees on their retirement. The purpose of the fund is to ensure workers are not destitute once they retire from work.

h) Human Resource Development Corporation Enforces the Human Resource Development Act, 1992, in order to encourage employers to train their workers through a fund Employers in certain sectors of the economy are required to contribute 1 per cent of their payroll to the fund every month

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When approved training is conducted the company concerned can claim for reimbursement of the costs involved

i) Industrial Court A specialized tribunal established under the Industrial Relations Act, 1967 to arbitrate disputes between employers and employees. An independent body governed by the rules of the judiciary and plays a crucial role in the Malaysian industrial relations system.

OVERVIEW OF EMPLOYMENT ACT Employment Act lays down provisions to protect workers from exploitation. provides minimum benefits for all workers covered by the Act establishes certain rights for both employers and employees has been amended a number of times since it was first introduced and till now, a number of proposals have been put forward to upgrade or alter interpretations of certain parts of the Act, either because of clarifications made by the Courts or because of a change of public policy

COVERAGE OF THE EMPLOYMENT ACT Covers all employees with no age relevant. Works in Peninsular Malaysia. [Workers in Sabah/Sarawak are covered by the Labor Ordinance, Sabah (caption 67) and Sarawak (Caption 76)] Works in private sector. Public or Government sector employees, consisting of the civil service, statutory bodies and local authorities, have been exempted from the Act. Covers employee who earns not more than RM1,500 per month; not include: o Commission o Substance allowance o Overtime payment o Annual bonus o Without regard to the employees wages, the worker is: A manual labor: a person who works in non-office work or has work done with the hands Supervisors of the labor; e.g.: supervisor in a factory Drivers or mechanics of vehicles (operate/maintain mechanically propelled vehicle)

(Any dispute on job category, Labor Department is authorized to decide. The Act has also revealed that job title is not the key factor in deciding whether or not a person is covered by the Act. Thus, all employees in the private sector in West Malaysia whose wages are not more than RM1,500 per month are covered even if they are holding positions as executives, officers or managers). Domestic servants, i.e. o Maid o Gardener o Cook o Nanny o Butler

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(However, domestic servant is exempted in all section (from all the key provisions relating to minimum benefits) except 14 days notice prior to terminating service).

Employee who has entered into a contract of service/contract of employment Covers all part-timer, temporary and legally employed immigrant

INDIVIDUAL EMPLOYMENT CONTRACTS An agreement by individual to work for another in return for remuneration (also known as Contract of Service/Contract of Employment). made orally or written. If orally, likely misunderstandings or disputes will occur, therefore, a written contract is prefferd. Where Employment Act is silent on particular matter, employer and employee are free to agree upon issue; e.g.: the Act is silent upon the quantum of wages. Therefore, both parties are free to negotiate and agree to the quantum of wages Employer is free to offer a more favorable term/benefit; e.g. giving more annual leave. Employment Act requires: More than one month contract of service to be in writing. A clause of the manner to terminate service by either party. It is illegal for employer to include a clause to restrict employees right to organize, join and participate in registered trade union. Once agreed by both parties, the contract of service cannot unilaterally be changed by either parties. (unilaterally: decision or action taken by one party without the agreement of the others). If an employer wishes to change, he needs to do with the express and preferably written agreement of the employee. If the employer does so without the employees agreement, employer MAY face with a claim of constructive dismissal on the ground of breach of contract. Therefore, an employer must ensure it is legal and flexible enough to outlast changes in working environment. Employee should read carefully the contract and discuss with employer should any clauses are unclear or unacceptable. Contract of Service vs. Contract for Service: o Contract of Service: an agreement made or sugned by an individual to work for another in return for remuneration. o Contract for Service: an agreement madr or signed by an individual to provide a service to others. Therefore, it is a self-employed agreement and it will be not protected by the Employment Act.

BASIC RIGHTS OF EMPLOYEE a) Wages Maximum wage period is no longer than one month. An employer is free to pay more frequently but it is common for once or twice a month. Do not need to follow a calendar month. Payment must be paid not later than 7 days after the end or the last day of wage period. The 7 days given is known as the grace period. If the employer fails to do so, there is a breach of the contract of service by the employer.

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The mode of payment must be in legal tender, i.e. cash, with written permission of employee by way of cheque or direct credit into bank account. When a contract is terminated because a contract comes to an end; or a employee resigns or gives required notice of termination; or an employer terminates an employee; therefore, wage must be paid on employees last day of work. If an employee resigns without notice, any wages owing must be paid not later than the third day after the contract is terminated. The Act is silent on the minimum wages or the quantum of wages. It is the agreement between an employer and an employee as stated in employment contract of service or in a collective agreement where an employee belongs to a Trade Union. Minimum wages exist only in the Wage Council Act, 1947 for: o Cinema workers o Shop Assistants o Hotel and Catering Workers o Penang Stevedores o It is set for RM185 per month for those over 18 years old. o It is advisable to pay wages according market rate and experience.

b)

Probation

When an employee is first offered a job, it is common practice that he or she will be placed on probationa trial period of employment. The requirement will be stated in the offer of employment and is intended to allow both the employer and the employee to give each other a trial period. The employer will monitor the employees work to see if he is capable of doing the job for which he was hired as well as whether he can adapt himself to the culture of the organization. Employers may terminate the employees services during the trial period when he or she turns out to be unsuitable for the job. Employee may also leave the job for which they feel not suited with either unable to cope with the work assigned or uncomfortable with the social environment at the workplace. The Industrial Court has made a number of rulings which are helpful to guide employers how to treat probationers that include

Dismissal during probationary period is acceptable because of misconduct or on the grounds of redundancy. Appropriate procedures should be followed before the termination is affected. Suitable training, coaching and guidance should be given so that a probationer can perform his work. Performance should be monitored and appraised by the immediate superior. Written documentary evidence should be kept to prove that appraisal has been conducted. Any unsatisfactory performance should be given once or more warnings, preferably in writing. If warnings have been given to the probationer prior to the expiry of his probationary period, and he does not improve and reach a satisfactory standard of performance, his services may be terminated at the end of the probationary period. If no prior warnings were given, the employer may need to extend the probationary period by issuing a letter to the employee explaining to him why he cannot be confirmed in his appointment at that time. If, at the end of a probationary period, an employee remains in service but receives no letter of confirmation from his employer, it will be considered that he is still a probationer. He will remain a probationer until he is either confirmed or his services are terminated. If a probationers contract makes it clear that certain benefits and privileges will only be given to the employee once he is confirmed in his position, yet he receives these benefits during his probationary period, he may be deemed to be confirmed if a dispute over the issue comes before the courts.

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c)

Working hours

The Employment Act includes a number of provisions relating to working hours. Employer has more freedom to organize the working hours of those not within the scope of the Act. Section 60 of the Act sets limits on the normal working hours for employees as agreed in the contract of service as follows: Maximum 8 hours per day. Maximum 48 hours per week. After 5 hours of working, 30 minutes break (non-stop break) should be given. Employee can be given a break early but not later than 5 hours. Maximum 12 hours per day inclusive of overtime. Maximum overtime per month is 104 hours. Shift workers hours can exceed 48 hours per week, but over 3 weeks they have an average of 48 hours. Exception: o Maximum daily working hours can be extended to 9 hours if employee works for 5 or 5-day week. o Any extended break whereby employee is free to use the time as he pleases is not considered working hours. The break is outside working hours. o Any work done in excess of the normal hours of work is considered overtime and is to be paid at special rates. o Employment Act disallows employee from working more than 104 overtime hours in any one month. Therefore, any work done on a rest day or public holiday is not considered overtime. Overtime

d)

Working hours which are outside the normal working hours or the number of hours of work carried out in excess of the normal hours of work per day. As a general rule, an employee cannot be required to work overtime. The employee must agree to work in excess of his normal hours of work where the overtime is voluntary basis. An employee has the right to decide whether to work overtime or not when so requested by the employer. But, there are a number of exceptions to the rule (exception also applies to work on the rest day). Any employee can be required to work overtime in the case of: o an accident, actual or threat at work o Essential work to the community o Essential for the defence/security of Malaysia o Urgent work for machinery or plant o Interruption of work which is impossible to foresee. (E.g. disruption in power/water supply which was not known to the employer in advance) o Employed in essential services o When an employee has agreed to work overtime but at the appointed time fails to turn up, his absence from work is considered misconduct and should be treated like any other misconduct for absence. o When an employer wishes his employee to work overtime, he should have a system whereby the employee is requested or directed (where that is legally permitted) in writing to carry out the overtime on certain dates at certain times and the employee is required to sign his agreement to do the work. o It is for the employer to decide whether there is a need for overtime work to be carried out. If the employer decided not to pay any overtime work, the employer shall not permit or require the employee to work exceeding such limitation of time being prescribed on the employees working hours. o If an employer wants the employee to do overtime but does not want to pay overtime the employer should increase the employee wages for more than RM1,500 a month.

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e)

Absence without Permission

Employment Act, S15(2) states that an employee shall be deemed (assumed) to have broken his contract of service with the employer without prior leave from his employer when: he has been continuously absent from work for more than 2 consecutive working days (3 days onward/eg Monday to Wednesday or Friday to Monday)

UNLESS he has a reasonable excuse for such absence. The employer has to decide on the reasonable excuse, i.e. illness or accident of the employee or a family member death in the family natural disaster; e.g. flood, fire, landslide detained by police Any employee has to inform or attempted to inform his employer of such excuse prior to or at the earliest opportunity during such absence. An employee is not automatically terminated from the job; but employer has the right to do so with 2 conditions: An employee has no reasonable excuse An employee has not/attempted to inform When an employee is absente for one or two days, it is a misconduct for which disciplinary action can be taken. If the employer decides to terminate the employee for being absent for one or two days, the employer cannot claim any indemnity from the employee. When the above 2 conditions exist and the employee has been absent for more than 2 consecutive working days, it is a breach of contract on the employees part.

o o o o o o

o o o

f)

Rest Day

An employee is entitled to one rest day per week. The employer may decide on which day that depends on the employers business nature. As there has been a trend to introduce a 2-day weekend break, if a 5-day work per week: o second day of weekend is a rest day o other day is an off-day o For a shift worker, the rest day is a minimum of 30 hrs. o However, an employee is not entitled to rest when: o On maternity leave o Sick leave o Receive temporary disablement benefits o Collect rest day is when a worker will be having a 4-nonstop rest days or more, e.g. for the offshore workers or hotel workers situated on an island o Director General of Labor Department is empowered to permit rest days to be granted on any day of the month. o Employee is entitled to know his/her rest days roster at least 1 month in advance. The rest day roster must be provided by the employer.

Work on Rest Day:

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Under Employment Act, employee cannot be required to work on rest day (where employee works on rest day, he is entitled to) UNLESS:

For Monthly Rated Worker: If works on a rest day that up to a half-days work, he/is entitled to half a days wages (he will not only receive his normal monthly wages but also extra pay) If work more than half, but not exceeding normal hours of work, he/is entitled to one days wages

For Daily Rated Worker: If works on a rest day, i.e. after completing the normal hours of work, payment rate is 2 times the hourly rate of pay, i.e. If works less than half of the normal hours of work, will be paid one full days wages If works between half the normal hours and the full hours, he is entitled to 2 days wages Example: If a daily rated employee works on his rest day for one day from 9 am to 5 pm, he will get double wages for that day. If he works less than half a day, i.e. from 9 am to 10 am, he will get one days wages. Employee cannot be required to work on rest days UNLESS: o The job does require shiftwork o There is an accident, actual or threatened at work o Essential work to the community o Essential for the defence/security of Malaysia o Urgent work for machinery or plant o Interruption of work which impossible to foresee o Employed in essential services

g) Public Holidays Employment Act grants employees a minimum of 10 public holidays, where 4 days are mandatory/compulsory: National Day Agongs Birthday State Rulers Birthday Labor Day Employer can decide for the other 6 days. Last minutes announcement of public holiday by the government, employees are does not entitle unless reward by employer. Employees entitled need to be informed in advance of the public holiday of the year. If a public holiday falls on workers rest day, next day shall be a paid holiday. If an employee works 5-day week and public holiday falls on the 1st of the 2 days off, it will be the employers discretion whether to award/grant the holiday or substitute holiday. It is possible to substitute any public holiday other than the compulsory 4 days, for any other day in the year but must be agreed by both parties on mutually agreement. If a worker is on sick leave during any of the 10 holidays, the employer must grant another day in substitution. But, if the employee is absent form work without permission on working day, immediately before or after a public holiday he is not entitled to pay for holiday. The employer may require an employee to work on public holiday but the employee will be entitled for 2 days wages for the day.

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If an employee is requested to work overtime on public holiday, he is to be paid at 3 times of his hourly rate pay. Annual Leave

h)

An employer must decide the annual leave his employees are to be entitled to and a clause of this should be included in the employees written terms and conditions of employment. In the Act, the minimum annual leave is stated as follows: Less than 2 years service Between 2 years to 5 years More than 5 years = = = 8 days 12 days 16 days

An employee will be entitled for annual leave after completing one years service with the employer. Therefore, the employee should have to work first before permitted to take leave. Thus, the employee has to works for a year and then is entitled to take leave earned in that year in his second year of service. Further, the Employment Act states that my employee who is absent more than 10% of working days in a year without the employers permission and without reasonable excuse shall not be entitled to annual leave. If an employee applies for leave but the employer does not approve, e.g. until at the end of the year, therefore, the employee is entitled to get paid. The payment must be paid based on how many days his leave is. Unused leave which an employee does not apply to use, is not entitled for the payment. Any leave which is not used and not carried forward will be forfeited. Employment Act does not entitle an employee to carry forward annual leave. Therefore, it is the employers discretion and not all employers permit employee to carry forward leave. Sick Leave

i)

Employee is entitled to the following minimum paid sick leave per year: Less than 2 years service Between 2 years to 5 years More than 5 years = = = 14 days 18 days 22 days

To receive paid sick leave, an employee must fulfill certain conditions imposed by the Act: o Must be certified unfit for work by registered medical practitioner (including registered dentist/dental surgeon) appointed by the employer. o Must have a certificate from a dental surgeon. o If the employer has not appointed any panel doctors, certification will have to be accepted from any registered doctor including a medical office in a government hospital or facility. o Must inform the employer of his sickness within 48 hours of commencing the sick leave. o However, the Employment Act recognizes certain circumstances: If an employee is not able to visit panel doctor, particularly when medical emergency occurs, or When an employee is away from his normal residence Therefore, in which case, the employer must accept the medical certificate of any registered doctor. o In the case of an emergency, doctor should be requested to make a statement to this effect on the medical certification. o If an employee is hospitalized, his leave entitlement increases up to 60 days per year inclusive of the normal sick leave.

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j)

Payment of Medical Bills

The law requires an employer to pay for any medical examination to determine whether an employee is ill; and if he is; the nature of his illness. The law does not seem to require the payment of medical treatment. However, in Malaysia, normal practice to issue a single bill for examination and treatment. Itemized bill could be demanded by employers but generally they pay all medical bills presented by the employees from the panel doctors To cover hospitalization charges and the more costly bills charged, insurance coverage can be bought by the employer. Some employers also pay bills for their employees dependants. One way to control medical costs, is by making the employer is to agree to pay up to a certain amount per year. Example: The employer provides a policy that the employer will pay RM100 per year. If the costs exceed the RM100, the employee will have to pay the balance.

g)

Notice of Termination

The employment Act provides employer and employees freely to agree on the notice period. The Employment Act (Section 12) says:

Either party to a contract of service may at any time give to the other party notice of his intention to terminate such contract of service.
However, there are 2 provisions relating to notice of termination: The length of the notice period required of each party must be the same The employer can decide on the notice period required and have this agreed to in the contract of service.

It is preferably that it should be put in writing clearly. If the contract of service is silent (no provision is made), then the notice period will apply: Length of Service Less than 2 years Between 2 to 5 years More than 5 years Length of the Notice Period 4 weeks 6 weeks 8 weeks

Any party which terminates contract without giving notice or giving proper notice will owe an indemnity to the other party. Indemnity is a sum of money equivalent to the amount of wages which would have been earned during the notice period (section 13). (Indemnity can also be as stated in the contract of service) If any party still fails to give proper notice and further fails to pay the indemnity, therefore, the party who is owed the money can make a complaint at Labor Department. If Employee fails If Employer fails

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1. Employer makes a complaint to Labor Department 2. Employee will be summoned to Labor Department 3. Labor Department issues an order to employee to pay employer 1. If still employee fails to do so, employer may sue employee in Civil Court 2. Employee makes a complaint to Labor Department 3. Employer will be summoned to Labor Department 4. Labor Department issues an order to employer to pay employee

1. If still employer fails to do so, Labor Department will take an action to sue employer in Civil Court on behalf of employee

Notice of termination is not required if : a) b) c) employee is dismissed for misconduct when employee retires as per his employment contract upon expiry of fixed-term contract

When contract is terminated because contract comes to an end; or the employee resigns and gives required notice; or an employer terminates an employee; therefore, the wage must be paid on the employees last day of work. If an employee resigns or an employer terminates an employee without proper notice, any wages owing MUST be paid not later than the third day after contract is terminated. v) Termination

A contract of employment comes to an end because: a) Resignation An employee voluntarily leave or quit (with or without notice). An employee must give proper notice of termination or any failure may owe him an indemnity to employer.

b)

Retirement An employee is required to leave as stated in the contract of employment or when reaching the retiring age. No law in Malaysia requires a private sector employee to retire at any particular age. However, an employer is free to include a clause relating to retirement age in contractmost employers require at the age of 55. If, an individual employment contract is silent in relation to retirement age, the court generally decides that an employer has no right to terminate the contract as long as the employee is still performing satisfactorily.

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c)

Fixed-term contract An employee is employed for specified periods If an employee leaves without the employer consent before completing contract period, he can be sued for breach of contract. Therefore,an employer can claim damages to cover: The cost incurred in recruiting. The cost incurred in training the employees replacement. The wages would have been earned up to the end of contract period. If the employer terminates the employee before expiring date, the employer will liable to pay the employee for the breach of contract, i.e. compensation for loss of employment calculated to wages and benefits which would have been paid during the remainder of contract. If an employee is recruited on a fixed-term contract (without good cause) for a job which is clearly ongoing and for which the employer can provide no justification for having fixed-term contract; then the employees contract is not renewed, Industrial Court may find it as unfair dismissal. Employee dies or employer dies o Only relevant if the employer is a sole-proprietor Retrenchment/Lay-off o If an employer retrenches (terminates) an employee on the ground of redundancy. o Redundancy occurs when the employer has excess workers (too many employees). o Causes of redundancy: Changes in technology: must be proven by the bill of equipment being bought. Mergers: two or more companies joining together to form one larger one and this must be proven by legal document. Reorganization of the work (aka restructuring exercise: An employer reorganizes the organization because they can reduce headcount without jeopardizing profits. To reduce cost or the employer has financial problems: must be provedn by financial statement. Closure of the whole company due to poor management. Frustration of Contract If an employee is unable to perform his work for which he was contracted on account of beyond his control

reasons

The possible causes: o detention by authorities for a lengthy period of time. o prison sentenceapproximately more than 6 months). o ISA (2 years detention). o Drug Rehabilitation (2 years). o Serious or terminal or prolonged illness (eg. Cancer, AIDs). o Incapacitated (result of accidentloss of hand, eye, leg, etc. that make employee incapable to perform work). o Loss of license an employee is unable to practice a particular profession, trade or to perform job (eg. Drivers license of a driver or professional license of a doctor, architect or lawyer). Non-confirmation of a Probationer o When an employer chooses not to confirm an employee on a probationary appointment. o On completion of a probationary period, a new employee must be evaluated and decision made as to his suitability for his post. Breach of Contract

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Under Employment Act, if an aemployee is absent for more than 2 days without permission and without reasonable excuse and without an attempt to inform the employer of such excuse; therefore he is deemed to have broken his contract. Dismissal When an employer terminate the employees employment because the employee has committed misconduct or his performance is not up to a standards expected by the company. Constructive Dismissal When an employee walks off the job because the employers actions which amount to a major breach of contract. The breach is so serious that a continuous employment made impossible for the employee to tolerate (e.g. The failure to pay salary or contractual benefits, humiliation and harassment, failure to provide work, a demotion without cause, etc.).

i)

Retrenchment

This is a situation where an employer terminates the service of one or more employees because no longer work available for the person in the organization but it must be in bona fide (in good faith). The employer needs to take all possible measures immediately when he is aware of the organizations problems where retrenchment should be taken depending on the seriousness of problem and the state of the national economy.

Tactics used to avoid retrenchment : Retrain and Redeploy o Any vacancy filled by redundant worker who is willing and able to be retrained and redeployed to the new post. o Move redundant worker to other department. o Recruitment Freeze Stop recruiting new employees in that particular position. o Voluntary Separation The employer invites and encourages employees to apply to leave voluntarily the company by offering sufficient monetary incentive. o Reduce Costs Cutting down on luxuries and unnecessary expenditure. o Look for New Business Opportunities The employer needs to have a long-term measure. o It will depend on the management quality in leading the company and the state of the national and international economy. o Cut Wages and Working Hours The employer needs to reduce wages and working hours in helping to save costs. This will be only a temporary measure. The action must be taken with the employees consent. If the employer insists on pay cut without the employees agreement, the employee can walk-off the job and claim constructive dismissal.

Steps to be Taken When Retrenchment is Avoidable Identify which employee to be retrenched

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o o o o o o o o o

The criteria should be according to the need for the efficient operation of the establishment or undertaking. The ability, experience, skill and occupational qualifications of individual workers required by the establishment or undertaking. Consideration on the length of service and status (non-citizens, casual, temporary, permanent). Age of the worker. Employees family situation. Choose the FOF Principle (Foreign Out First). Then, choose the LIFO Principle (Last In, First Out). In LIFO, the most junior employee or the one who most recently joined the organization will be retrenched while the more senior employee will be retained. Normally, LIFO will be applied at the level of job grades.

Draw-up an action plan o Give as early a warning, as practicable, to the workers concerned. o Notice period should be at least that required by contract of employment. o Introduce schemes for voluntary retrenchment and retirement and for payment of redundancy and retirement benefits. o Retire workers who are beyond their normal retiring age. o Assist the worker to find work outside the undertaking in cooperation with the Ministry of Labor and Manpower. o Spread termination of employment over a longer period. o Ensure that no such announcement is made before the workers and their representative or trade unions have been informed.

j) Termination Benefits Not all employees are entitled to termination or retrenchment benefits. Termination benefits are only for employee: Within the scope of the Employment Act Has more than 1 year or 12 months service Within the scope of a collective agreement which there is a clause requiring such benefits Has a clause requiring such benefits in his individual contract of employment under the Employment Act, the minimum benefit: 10 days wage for every year of service for employee with 1 to 2 years service 15 days wage for every year of service for employee with 2 to 5 years service 20 days wage for every year of service for employee with more than 5 years service

i) ii) iii)

The minimum benefit must be paid not later than 3 days after the employees last day of service. If none of the above situation applies, an employee is not entitled to any benefit.

OVERVIEW OF INDUSTRIAL RELATIONS ACT What is Industrial Relations? It means the relationship between an employer and his employees pertaining to the employees employment or non-employment, terms and conditions of work, grounds of termination of employment, etc. Each party has its rights as well as obligations and in order to establish a harmonious industrial relationship

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Some of these rights and obligations may be expressed, i.e. written out in a contract of service, while many others are implied, i.e. understood to be the norm in an industry, and therefore taken to be understood by the parties concerned Expectations of Employer and Employee: Employees Expectation

Employers Expectation Productivity Profitability Loyalty Discipline Avoidance of wastage Proper care and usage of tools & machines Safety Obedience to lawful orders Co-operation Industrial harmony Wages/salary Fringe benefits Security of tenure of employment Job satisfaction/promotion Conducive work environment/safety Medical attention Leave Retirement benefits Retrenchment benefits Industrial harmony

Industrial Relations focuses on:

i) Rules and laws which have impacts on the workplace ii) Terms and conditions of employment iii) The process by which the terms and conditions are established and made. The Industrial Relations system in Malaysia is tripartite systems, i.e. Decision making process is made up of 3 parties. The parties or participants are:

i) The employer ii) The employees (or union representing the employees) iii) The government Workmen within Scope of Industrial Relations In Section 2, Industrial Relations Act 1967 states:

A workman means any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward, and for the purposes of any proceedings in relation to a trade dispute includes any such person who has been dismissed, discharged or retrenched in connection with or as a consequence of that dispute, or whose dismissal discharge or retrenchment has led to that dispute.
Any person from the top management to the ordinary workers in an industry, provided he has a contract of employment to work for hire or reward.

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An apprentice and a family member employed in a family business, provided he regularly receives a salary (remuneration) from that family business. An employee being dismissed, discharged or retrenched from a trade dispute arises out of a dismissal, discharge or retrenchment. An employee resigns because his employers conduct or behavior toward him was so unreasonable that he could not tolerate it and thereby claims constructive dismissal.

General Guidelines in Deciding A Workman There is a contract of employment The workman agrees to provide his own personal services and skills The workman performs the work personally for the employer The employer has the right to control the manner in which the work is done There is remuneration to be paid by the employer

Trade Dispute Define by the Industrial Relations Act as:

Any dispute between an employer and his workers which is connected with the employment or nonemployment or the term of employment or the condition of work of any such worker. It is also known as Industrial Disputes

Causes of Trade Disputes An individual who has a grievance or complaint, and is represented by his union and who has exhausted the grievance procedure without getting a satisfactory result A difference of opinion between a union and an employer as to the appropriate terms and conditions of service for the workers A difference of opinion as to the interpretation of a collective agreement or Industrial Court award The non-implementation of a collective agreement or Industrial Court award Termination of service of an employee or employees

Types of Action When a peaceful method fails to settle a dispute, both parties; employees and employers, may take the following industrial actions permitted by the law: Industrial Action by Employees Picket The Industrial Relations Act (Section 40) allows workers to attend at or near their workplace. The purpose of picket: o To peacefully give information to the public and other workers o To persuade other workers not to work if a strike has already been declared o To embarrass the employer o The picket must not intimidate anyone, must not obstruct the entrance or exit to the organization, and must be peaceful. o Only those workers directly involved in the dispute can participate in the picket. o Picketers, providing they keep within the confines of the law as outlined above, do not require a police permit for their activities as picket is a legal activity.

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Picket is done by: the prominent display of banners and placards with derogatory comments about the employer and management requesting passers-by to show their support by pressing their vehicle horns a willingness to give information to the mass media that will in turn publicize the dispute between the workers and the union Often held at lunch-time and before or after working hours. If a strike has been declared, picket will be held throughout the day.

Strike Occurs when a group of workers refuse to work until the employer accepts their demands. It involves a refusal to continue work or to accept work, which is intended to result in any limitation, restriction, reduction, cessation or dilatoriness in the performance of their duties connected with their employment. Strikers must be a member of a registered union. There must be a trade dispute between the striking workers and their employer. A secret ballot must be taken before the strike commences and it is only valid for 90 days. In essential services, 21 days notice of strike must be given to the employer. Strikes are not permitted: o over a collective agreement which has been deposited with and accepted by the Industrial Court. o over management prerogatives, i.e., those matters prohibited from being included in collective bargaining proposals. o during and immediately after the proceedings of a Board of Inquiry appointed by the Minister. o after a trade dispute has been referred to the Industrial Court for arbitration. o over a recognition dispute which is being resolved by the Minister. o over a union claim for recognition. o in the public sector, if the YDP Agong refuses permission for the dispute to be referred to the Industrial Court.

Industrial Action by Employer Lock-out Under o o o o o Section 2, Industrial Relations Act 1967, a lock-out means: the closing of a place of employment the suspension of work the refusal by an employer to continue to employ any number of workmen employed by him The employer refuses to allow the workers to work until the dispute between them is settled. Often, when the workers go on strike, the employer retaliates by closing the factory or refusing permission for the strikers to come into the workplace. o Alternatively, the employer may take steps to fight a strike by keeping the firm operating, either by placing managerial or non-union employees in the strikers job or by hiring replacement workers. o Lock-out is a very effective way of ending a strike because workers realize that their action is not having any negative economic consequences on the employer, then they may decide to go back to work.

REVIEW QUESTIONS 1. Briefly describe Employment Law. 2. What is employment legislation?

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3. Describe briefly the laws establishing the industrial relations framwork. 4. Why do you think the Individual Employment Contract is necessary to each worker? 5. Describe the basic rights of employee in relations to: 1. Wages 2. Probation 3. Working hours 4. Overtime 5. Absence without permission 6. What does rest day mean? 7. Describe briefly the followings: 1. Termination 2. Notice of termination 3. Retrenchment 8. What are the areas focus on in the industrial relations. 9. Explain briefly the meaning of workmen within the scope of Industrial Relation. Lock-out is a way of ending a strike. Please explain.

Contact Detail ASSOC. PROF. DR. RAJA SUZANA RAJA KASIM Research Fellow Accounting Research Institute Universiti Teknologi MARA

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