Review of Co-op Laws in Malaysia (1997)

----------------------------------------------------------------------
This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
----------------------------------------------------------------------

Part II - Review of Country Laws in Malaysia (1997)

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.114-119)

Malaysia
********

Earlier attempts to promote co-operatives in Federal Malay states
which included Singapore did not find much response by the British
Officialdom or the plantation community even though some studies
were made about the Indian and Burmese co-operatives and their
relevance to Malaya. The Federal legislative council passed the first
co-operative societies act in 1922 based on the Indian Co-operative
Societies Act of 1912. The Co-operative Act of 1922 was replaced by
the co-operative societies ordinance of 1948 regulating all types of
co-operatives which has been amended/replaced many times. The
last being in 1993 which has again been amended in 1995.

However, since the enactment of Farmers Organisation Authority
Act 1973 the Director General under this act has been made registrar
and assumed legal authority over all agro-based co-operative societies
along with farmers associations. The Co-operative Societies Act
(AKTA KOPERASI) 1993 has in all 96 articles divided into 10 parts.

Part I : Preliminary
-----------------------
This part deals with definitions and Registrar General and his functions.

The definitions include ICA co-operative principles, definition of
dividend and patronage rebate. It also defines a `Subsidiary' as
subsidiary of a registered society means a company, as defined in
the companies act 1965,  in which such registered society controls the
composition of the Board of Directors of more than half of the voting
power or holds more than half of the issued share capital and include a
subsidiary, as defined in that act, of such a company.

The Registrar General along with being a registering and revoking
authority for co-operatives is also to encourage the establishment
and development of cooperatives in all sectors of economy and help
co-operatives to increase the economy. An important provision in the
act under article 3 (5) is that the Registrar General shall be a body
corporate who can sue or be sued and enter into contracts.

Part II : Registration
------------------------
Under article 6 minimum membership for a primary co-operative
is 100 individuals and for secondary co-operative minimum of 2
co-operatives. While no time limit has been prescribed for registration,
an appeal against refusal to registrar can be made within 60 days. 

Part III : Duties and Privileges of Registered Societies
-----------------------------------------------------------------
Under article 19 "no registered society shall form, own, acquire or
hold a society a subsidiary without the prior approval of the
Registrar-General."

Article 20 provides compulsory sale of produce through society by
members as provided in the bye-laws and in case of default can be asked
to pay liquidated damages.

Under an amendment in 1995 in article 18, the Registrar-General has
been authorised to issue directions for compulsory amendment in
bye-laws in case of ambiguity in bye-laws or in his opinion an
amendment is necessary or desirable in the interest of the society. 

Part IV : Rights and Liabilities of Members
----------------------------------------------------
Article 30 allows one member one vote in case of primaries, and as per
the bye-laws in case of secondary co-operative. In case of primary, proxy
vote is not allowed but in case of secondary co-operatives under article
31 proxy is allowed. 

Part V : Organisation and Management
-----------------------------------------------
Under Article 42 the Board shall consist of not less than six and not
more than 15 members and the internal audit committees shall
consist of not less than three  and not more than six members.

For election to the Board, the person should have been a member
of the society for a minimum period of two years. This does not apply
to a society of less than 100 members and a school cooperative. Under
article 46 remuneration of Board and audit committee members have
to be within the limit fixed by the General Meeting. The members of
the board of subsidiary shall not accept remuneration without the
approval of the co-operative he represents.

Under article 63 the auditor has to inform the society as also to the
Registrar General in case of any irregularity disclosed during the
audit inspection.

Part VIII : Inspection, Enquiry, Dissolution and Disputes
--------------------------------------------------------------------
Under article 60 the Registrar-General may consequent upon an
inspection under article 64 or audit under section 60 hold an enquiry
and inform the findings to the society as also suggest any action called
for to remedy the defects within a time limit.

Further under article 69 (i) the Registrar-General may, after considering
the facts disclosed in an inquiry under section 66 and if he deems it
necessary in the interest of the registered society so to do, by order:

a. suspend all or any of the activities of the registered society,
        for such period as he shall specify;

b. suspend or dissolve the Board of the registered society; or

c.      freeze the bank accounts of the registered society to prevent
        losses or misuse of funds.

Notwithstanding the foregoing provisions of this section, the Registrar
General may by order remove any officer of the registered society if it
is in the interest of the registered society for him so to do, but no person
shall be so removed without giving him an opportunity to be heard; and
any vacancy created by such removal shall be filled in the manner
provided in the bye-laws of the society.

Under article 70, if an officer of a registered society has been removed
by order of the Registrar-General under the provision of sub-section 69
(6), such officer shall thereafter not be eligible to be appointed as a
member of the Board or any committee of the registered society or be
re-employed by that or any other registered society, as the case may be,
for a period of five years from the date of such removal. 

While dealing with the dissolution of a co-operative the Registrar-General
can revoke the registration of a co-operative under article 71 or 72 and the
liquidation proceedings follow thereafter. Under article 75(8) surplus
funds after liquidation have to be invested with the Trustee Act 1949
and the net income has to be credited to the co-operative central fund to
be administrated by the Registrar-General in accordance with the
regulations. A new provision as article 71 A has been added to the act
in 1995 for dissolution of a co-operative which wants to convert itself
into company under the Companies Act of 1965. 

Article 80 gives powers to the Registrar-General to surcharge any
official found guilty of breach of trust and similar offences. 

Article 82 provides settlement of disputes by arbitration. 

Article 83 also provides establishment of a tribunal to hear and decide
disputes under article 82 (i), (ii).

In case any question of law is raised under article 84 it can be referred
to the High Court for opinion. 

Part IX  : Miscellaneous
-----------------------------
This part provides for amalgamation, division and transfer of assets
and liabilities under article 85. 

Article 86 provides subjects/matters for making regulations by the
Minister. 

Under Article 93 Registrar-General is empowered to compound offences
on payment of money which shall not exceed 50% of the maximum of the
fine to which the person would have been liable where he deems it fit and
proper to do so.

In 1973 a separate law in the name of Farmers Organisation Act 1973 has
been passed. Section 32 of this act provides: 

They shall not be registered after the commencement of this Act. 

a. Any Farmers Association under the Farmers Association Act
        of 1967 
b. Any co-operative society under the co-operative society
        ordinance 1948 of Malaya, the co-operative societies ordinance
        1958 of Sabah and co-operative societies ordinance of Sarawak,
        one of whose principal objects or main functions is emerged with
        agricultural production, agricultural credit, marketing or processing
        or any such commercial and trading venture. 

Further under article 34 (b) the Director-General of the Farmers
Organisation Authority shall in respect of agro-based co-operative
societies and farmers associations be deemed to be the Registrar of
such co-operative societies and Farmers Association.

Since the enactment of this act, agro-based associations/cooperatives
are governed by this act and not by the cooperative societies act.

The contents and provisions of this act are not much different from
co-operative act except that it does not talk of co-operative principles
or definitions of co-operative or even of a farmers organisation. 

It has only 35 articles compared to 96 in the co-operative act and is
comparatively simpler.

..