SSM Licensed Secretary common mistakes
SSM Licensed Secretary · Understand the traps and how to avoid them.
Treating the company as bound by a pre-incorporation contract signed in its name by a promoter, and advising that the company can simply 'ratify' it after incorporation.
Candidates carry over general agency intuition and forget that section 65 of the Companies Act 2016 makes a pre-incorporation contract binding on the company only if it is ratified (with or without variation) within a reasonable time, and that the promoter is personally liable on the contract unless a contrary intention is expressed, with a right of indemnity against the company for ratified contracts. The 'automatic adoption' assumption is very common.
What to do instead
Memorise the s 65 mechanism as a three-step test: (1) contract made before incorporation by a person purporting to act for the company, (2) ratification by the company within a reasonable time, (3) consequence - company bound, promoter personally liable unless excluded, promoter entitled to indemnity for ratified contracts. Practise by drafting the ratification board resolution and the indemnity clause, and distinguish ratification of a contract from ratification of an act.
Advising a private company to hold an AGM or to file annual returns on the old Companies Act 1965 timetable, or missing the statutory deadline for the first annual return and financial statements.
The Companies Act 2016 abolished the mandatory AGM for private companies and replaced the lodgement regime with annual return plus financial statements/circular to members within prescribed periods. Candidates revise from older materials or rely on general knowledge, so they miss the exact 30-day window after the anniversary of incorporation for the annual return and the separate deadlines for circulating and lodging financial statements.
What to do instead
Build a one-page timeline table for a private company and a public company: annual return within 30 days of the anniversary of incorporation; financial statements lodged or circulated within the period prescribed by s 258 and the practice directives; first financial statements period. Then drill with dates: given an incorporation date, compute the exact due dates. Note the exceptions and the consequences of late lodgement.
Answering questions on directors' duties by listing only the statutory duty to act in the best interests of the company, without identifying the specific director, the conflict, and the procedural step (disclosure and approval) that would cure it.
Candidates memorise the s 213 duty list as a checklist and then produce generic essays. Exam questions are usually scenario-based and award marks for applying the duty to the facts, naming the interested director, and stating whether board or member approval is required and whether the interested director may vote or be counted in the quorum.
What to do instead
Use a fixed answer structure: identify the duty (s 213 and s 221 for conflicts), identify the director's interest and the nature of the conflict, state the disclosure obligation and to whom, state whether approval is required and by which organ, state the effect on voting and quorum, then state consequences. Practise on at least five scenarios: related-party contract, corporate opportunity, competing business, use of company property, and insider information.
Confusing the par value, issue price, share premium and the amount payable on a share, and therefore mis-stating the entries in the share capital accounts or the amount of capital that must be maintained.
The Companies Act 2016 moved Malaysia to a no-par-value regime, but candidates still import par-value concepts from older texts or from other jurisdictions. They then treat the entire issue price as share capital or fail to recognise that amounts received above the amount credited as paid-up go to a share premium account with restricted uses.
What to do instead
Learn the no-par-value mechanics: the amount credited as paid-up is a matter of the terms of issue, not a par value; any excess over the credited amount is share premium under s 75 and is subject to the permitted uses. Redo journal entries for issues at a premium, calls in arrears, and forfeiture. Test yourself by explaining why there is no 'share premium on par value' and where the money sits on the balance sheet.
Approving a distribution or a share buy-back without checking the solvency statement and the capital maintenance tests, or assuming member approval alone makes the payment lawful.
Candidates focus on the procedural resolution and forget that distributions are constrained by profits available for distribution and, for a reduction of capital or buy-back, by the solvency test and the statutory procedure. The exam often gives a balance sheet and asks whether the payment may be made.
What to do instead
Memorise the sequence: identify the type of transaction (dividend, buy-back, capital reduction, financial assistance), identify the source of funds permitted, apply the profits test and the solvency statement requirement, identify the required approvals (board, members, and in some cases court or lodgement), then state the consequences of an unlawful distribution for directors and recipients. Practise with a small balance sheet and a proposed payment.
Describing winding up and corporate rescue as interchangeable, or recommending a scheme of arrangement when the facts call for a creditors' voluntary winding up, judicial management or a compromise under the insolvency provisions.
Candidates learn the procedures as separate lists and never build a decision tree. In a scenario they latch onto the first procedure they remember, without testing the trigger (inability to pay debts, a viable business, a desire to bind dissenting creditors) or the outcome for each stakeholder.
What to do instead
Construct a decision table with rows for members' voluntary winding up, creditors' voluntary winding up, compulsory winding up, judicial management, scheme of arrangement/compromise, and (where relevant) the corporate rescue mechanisms under the Companies Act 2016. For each, record the trigger, who initiates, who controls, the effect on proceedings and contracts, the moratorium, and the exit. Then answer three past-style scenarios by choosing and justifying one route.
Preparing or interpreting financial statements without linking the statutory accounts to the secretary's filing obligations, for example not knowing which statements must accompany the annual return or who must sign them.
Candidates treat accounting as a separate subject and do not connect the financial reporting rules to the lodgement and circulation duties. They also confuse the auditor's report, the directors' report and the statement of financial position, and miss the signing and approval requirements.
What to do instead
For each document in the annual reporting pack, record: who prepares it, who approves it, who signs it, whether it must be audited, and where and when it is lodged or circulated. Then practise reading a simple set of financial statements and extracting the figures a secretary would need (net assets, profits available for distribution, solvency indicators) for use in a capital maintenance or solvency question.
Applying the wrong tax treatment to a common transaction - for example treating a distribution of profits as a dividend exempt in the shareholder's hands regardless of the company's tax position, or ignoring withholding tax and real property gains tax on a disposal.
Candidates learn tax rates in isolation and do not trace the transaction through the system: company-level tax, dividend treatment under the single-tier system, withholding tax on payments to non-residents, and RPGT on real property disposals. They also overlook indirect tax such as service tax and sales tax on the relevant supply.
What to do instead
For each transaction type, write a short flow: who earns, what is the character of the income, which tax applies, who remits, and what is the filing deadline. Cover at minimum: company profits and the single-tier dividend exemption, interest and royalty withholding, RPGT on disposal of real property or shares in a real property company, and the scope of service tax and sales tax. Then apply the flow to three short scenarios.
Answering a contract or partnership question by stating general principles without identifying the parties, the offer and acceptance, the consideration, and the statutory default rules that apply to a partnership or LLP.
Candidates write textbook definitions instead of applying the law to the facts. In partnership and LLP questions they also miss that many rules are default rules which the partnership agreement can displace, and that an LLP is a separate legal entity whose partners have limited liability.
What to do instead
Use an IRAC skeleton for every business law question: issue, rule (with the statutory section or case principle), application to the named parties, conclusion. For partnerships and LLPs, keep a comparison table of formation, legal personality, liability of partners, management, taxation and dissolution. Practise by drafting a partnership agreement clause that displaces a default rule and explaining the effect.
Giving a conclusion on a company law problem without citing the governing provision, or citing a provision that has been repealed or renumbered under the Companies Act 2016.
Candidates rely on memory and older case summaries, and the 2016 Act renumbered and changed many provisions. Marks in these exams are typically allocated to the correct statutory basis as well as the conclusion, so a right answer with the wrong section still loses marks.
What to do instead
Maintain a personal mapping sheet of the provisions you use most (incorporation, constitution, shares and capital, directors' duties, meetings, accounts, winding up) with the current section numbers and a one-line statement of what each does. Before the exam, test yourself by writing the section number next to twenty short propositions. Where a case is the better authority, cite the case and the principle it establishes.