A charitable foundation can be formed by incorporating a company limited by guarantee (CLBG).
A CLBG is a public company incorporated with the principal liability of its members limited by the constitution to such amount as the members undertake to contribute to the assets of the company if the company is wound up.
Activities of a CLBG must be in line with the specified objects. A CLBG may only hold any land or property if it is issued with a license by the Ministry of Domestic Trade, Cooperatives and Consumerism (Minister).
There are two types of CLBG: (a) CLBG without the word "Berhad" or "Bhd"; and (b) CLBG with the word "Berhad" or "Bhd".
A CLBG may be incorporated by lodging an application to the Registrar together with a constitution.
Requirement of Founder or Director
A founder or director of a CLBG must be a person who is fit and proper and is not disqualified under the CA 2016.
For the purposes of determining whether a person is fit and proper, the Registrar may:
(a) consider the experience, qualification and competency of the founder or director which would assist him in carrying out his duties as director of the CLBG;
(b) consider the reputation, character and integrity of the founder or director;
(c) conduct a security vetting on the potential founder or director,
and a safety filter (security vetting) for the potential founder or director shall be conducted by the Royal Malaysian Police and/or other agencies.
Requirement as to Constitution
Unlike any other company, a CLBG is required to have a constitution with, among others, the following requirements:
(a) the name of the company;
(b) the objects of the company;
(c) the capacity, rights, powers and privileges of the company;
(d) the amount up to which the member undertakes to contribute to the assets of the company in the event of it being wound up;
(e) the full names, addresses and occupations of the subscribers; and
(f) a statement that the subscribers are desirous of being formed into a company in pursuance of the constitution.
A CLBG shall submit its constitution to the Registrar upon an application for incorporation.
The CLBG may adopt the model constitution prepared by the Registrar.
Licence to Omit the Word “Berhad” or “Bhd”
A CLBG may apply to the Minister for a licence to omit the word “Berhad” or the abbreviation “Bhd” from its name. However, any CLBG intending to use the words “Yayasan” or “Foundation” must omit the word “Berhad” or “Bhd” from its name.
Omitting the Word ”Berhad” or ”Bhd” at the End of the Existing CLBG
A CLBG which had been incorporated for a period of three (3) years may also apply to omit the word “Berhad” or “Bhd”.
The basis to support the approval of omitting the word ”Berhad” or ”Bhd” is that the CLBG must have a fund amounting to RM1 million cash. The CLBG is required to get all of the cash which has been pledged by potential contributors within six (6) months after it is established.
A CLBG with the word “Berhad” or “Bhd” could omit the said word subject to the approval of the Minister and the terms and conditions of licence.
The CLBG must provide an information with comments on the financial position at least for the last three (3) years and the latest financial statements for the period of three (3) years, audited and presented at the annual general meeting.
Lodgement of Application for the Minister's Approval to Omit the Word “Berhad” or the Abbreviation “Bhd” from a CLBG’s Name
(i) For new incorporation of a CLBG; or
(ii) From an existing CLBG
Documents to be Enclosed
1. Application letter
Contents of the application letter:
· Justification and purpose for:
ü Using the word ‘Yayasan / Foundation / Institute’.
ü Omission of the word Berhad / Bhd.
· Reasons for incorporating the CLBG under CA 2016 and not under the Societies Act 1966.
· State two categories of the CLBG based on the objects under section 45(1) CA 2016.
2. Explanation and justification by the promoter for the use of the proposed name. Any supporting letter from any government agency for the use of the proposed name (if applicable).
3. Detailed activities to be carried out.
4. Statutory Declaration by the promoter and proposed director confirming whether such an application has been made under the Societies Act 1966. If yes, to provide the supporting documents.
5. A copy of Application for Availability of Names and Reservation under Section 27(1)(4) Companies Act 2016.
6. A draft copy of Constitution.
7. A copy of IC / passport of the promoter and proposed director.
8. Biodata, qualification and experience in charitable activities for each proposed director and promoter.
9. A letter of consent to act as a promoter from each promoter.
10. A letter of consent to act as a director from each director.
11. Information on the contributor/donor confirming the financial contribution of RM1 million to be made within 6 months from the date of incorporation. A contributor can be either an individual or a company. The respective procedure is below.
(a) Individual who acts as a contributor / donor
The supporting documents are:
A Statutory Declaration by the individual contributor and the amount that the contributor has agreed to contribute; and
The latest bank statement OR fixed deposit receipt.
(b) Company which acts as a contributor / donor
The supporting documents are:
A resolution by the company the contents of which should among others include the amount that the company has agreed to contribute;
Latest bank statement of the company; and
Latest Audited Financial Statement of the company.
12. For new CLBG incorporation, an estimated/forecasted income and expenditure for a period of 2 years from the establishment of the CLBG. Estimated income and expenditure statement should show the contribution from the donor.
13. For existing CLBG which intends to omit the word Berhad / Bhd, the CLBG must provide its Audited Financial Statements for the last 3 years which have been laid at its annual general meeting.
A payment of RM700 as the required fee for:
Using a gazetted word
Omission of the word Berhad/Bhd
Perusal of the Constitution
A payment of RM400 as the required fee for:
·Omission of the word Berhad/Bhd
·Perusal of the Constitution
Amendment of Constitution
Prior approval from the Registrar must be obtained to amend the constitution of a CLBG.
The Registrar may require a CLBG to submit a segmental reporting together with its financial statements.
A CLBG must ensure that none of its members or directors uses the company or its financial resources to conduct any form of political or unlawful activities. In conducting its activities, it must ensure that it does not depart from the objects for which it was established for.
Other General Requirements
Unless prior approval has been obtained from the Registrar, a CLBG:
(a) is prohibited to appoint new directors;
(b) is prohibited from paying any fees, salaries, fixed allowances or any benefits to its directors;
(c) must use the profits and other income for the purposes stated in the objects of the company;
(d) is prohibited to solicit any contribution or donation or make any money collection from the public;
(e) is prohibited from incorporating or holding any subsidiary (save for CLBG with the word Berhad incorporated prior to 31 January 2017 where its existing Constitution does not contain similar restriction); and
(f) is required to comply at all times with all the provisions set forth in the constitution, other than the conditions mentioned above.
Application to Hold, Dispose or Charge Land or Property
A CLBG shall not hold, acquire, charge, mortgage, sell, lease or dispose, a land or property unless a licence has been obtained from the Minister.
A CLBG shall hold, acquire, charge, mortgage, sell, lease or dispose the land or property subject to the approval of the Minister and the terms and conditions of licence.
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