November 26, 2016
It was proposed that Dormant Companies and Small Companies will no longer need to prepare audited financial statements once the New Companies Act, 2016 replaced the Companies Act, 1967.
It is a good news in terms of cost saving for companies that yet to start their business activities and for companies that remain small in sales turnover and its overall business activities.
1. Dormant means inactive or a Company that has no business transactions. Dormant company will be exempted from having to appoint an auditor if
i. the Company has been dormant since its incorporation; or
ii. the Company has been dormant for 3 consecutive financial years
Nevertheless, a shareholder of the Dormant Company who holds at least 5% of the issued paid-up capital of the Company can insist to carry out an
audit of the financial statements.
2. A Company will be categorised as small company if it meets at least 2 of the 3 criteria listed below for the period of 2 consecutive financial years immediately before the financial year under review;
i. revenue does not exceeds RM300,000 for each financial year.
ii. total assets does not exceeds RM500,000 for each financial year.
iii. not having more than 5 employees.
Based on circulars from Malaysian Institute of Accountants (MIA) to its members, MIA reiterated SSM/CCM's stand to exempt dormant companies.
In addition, MIA supports on limiting the proposal to ONLY dormant companies.
We will update the above, once we received final conclusion on the proposal.
Thank you for reading.