SSM has issued Practice Note No. 8/2024, published on its official website, addressing a common query: Can a society be a member of a company? This clarification is crucial for societies looking to hold shares or be involved in companies incorporated under the Companies Act 2016 (CA 2016), including companies limited by guarantee.
Legal Provisions on Membership in a Company
Under Section 2 of the Companies Act 2016, a “member” is defined as:
- For a company limited by shares – A person whose name appears in the register of members as the holder of shares.
- For a company limited by guarantee – A person whose name is entered in the register of members.
Since a society is not an individual, the question arises whether it qualifies as a “person” under this definition.
How the Law Defines a Society as a Legal Entity
The answer lies in how the law defines “persons” and “societies” in Malaysia:
- Interpretation Act 1948 – Defines “person” as including both corporate and unincorporated bodies, which means societies can be considered persons under Malaysian law.
- Societies Act 1966 (SA 1966) – Defines a society broadly, covering clubs, companies, partnerships, and associations of seven or more persons, regardless of their nature or objectives.
By these definitions, a society qualifies as a legal “person” and, therefore, can become a member of a company.
How a Society Holds Shares in a Company
Under Section 9(a) of the Societies Act 1966, societies are allowed to own movable property, which includes company shares. However, if these shares are not vested in trustees, they are automatically vested in the governing body of the society.
Additionally, Section 9(c) of the SA 1966 allows a society to sue or be sued in the name of:
- A registered public officer appointed for this purpose, or
- An office bearer (if no public officer is registered).
This means that while a society can own company shares, it must act through an agent, such as its public officer or an office bearer.
How Should a Society’s Name Appear in the Register of Members?
When a society becomes a member of a company by purchasing or acquiring shares, it must be represented by an individual in the company’s register of members. The proper format should be:
Example:
“Persatuan Penternak Ikan Air Tawar, Perak (represented by Ali bin Ahmad, President)”
Updating Existing Company Records
For companies that have already registered societies as members without naming a representative, SSM requires them to update their records to include the name of a registered public officer or office bearer in compliance with Section 51 of CA 2016.