Changing from Unlimited Companies to Limited Companies

Changing from Unlimited Companies to Limited Companies

Unlimited companies are the companies which are incorporated on the principle of not having any limits on the liability of the members. This means that if an unlimited company is wound up, the members may be liable for the company’s debts with no limits on the liability. On the other hand, there are two types of limited companies, which are companies limited by shares and companies limited by guarantee. Companies limited by shares can be divided into two different forms too, which are private limited companies (Sdn Bhd) and public limited companies (Bhd) (Also see The Differences Between a Limited Company and a Private Limited Company).

If you have the intention of starting your own business, apart from thinking about the goods and services you offer, your target customers, the location of your business, and other aspects, choosing the right business entity for your company is crucial too. If you need help on this, you may engage a company registration service in Johor Bahru and let the experts help you on this matter.

When it comes to the forms of business entities, you may wonder whether you can change the form after you have incorporated the company (Also see Tips for Company Incorporation). The answer to this question is yes. According to the Companies Act 2016, an unlimited company can be converted to a limited company. Also, public companies can change themselves to private companies, and private companies can convert to public companies too. In this article, we will focus on the first case, that is to change from an unlimited company to a limited company.

If an unlimited company wants to change itself to a limited company, it needs to pass a special resolution, that is, to get at least 75% of the votes from the shareholders that shows their support on this matter. Also, it needs to lodge a notice for conversion with the Registrar, as well as state a proper alteration to its name.

When the unlimited company lodge the notice for conversion to the Registrar, the Registrar should make the change to or the endorsements in the register. This is for it to record the conversion. Besides, it should issue a notice of conversion to the company and cancel the company’s certificate of incorporation or notice of registration depending on the situation.

As soon as the Registrar issues the notice of conversion, it may inform the company that it is dispensed from submitting any document that it has submitted during or after its incorporation as an unlimited company. The conversion comes into force when the notice of conversion is issued. If the company has a constitution, it should change it according to the terms of resolution.

The company’s conversion should not bring any impact on its identity, obligations or rights (Also see What is Meant by the Term “Company”). Also, the conversion should not cause any legal proceedings made by the company or those that are against the company to be defective. Any legal proceedings that the unlimited company starts or continues using or those that act on the company before it converts to a limited company should not have any impact on its name or capacity after the conversion.

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