I often receive questions from young entrepreneurs on how to prepare for company’s financials for compliance purpose. Today, I am going to share the guide on how to prepare your company’s financials in order to comply with the Malaysian Companies Act, 2016.
A company, the directors and managers of the company shall keep all the accounting and records (a) to sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance sheets and any documents required to be attached thereto to be prepared; and (b) in order to enable the accounting and records to be conveniently and properly audited.
Section 245(1) of the Companies Act, 2016
Keep all financials documents
From the day your business commences, you should keep all your company’s financials documents (invoices, payment vouchers, bank statements etc) in order. This is for easy tracking and budget planning for your business as well as for easy preparation of your company’s management accounts.
why do you need accounting service?
A company, the directors and managers of the company shall cause appropriate entries to be made in the accounting and other records within sixty (60) days of the completion of the transactions to which the entries relate.
Section 245(2) of the Companies Act, 2016
Therefore, it’s always advisable to have an accountant for your company, either hired/freelance/virtual. We understand that a lot of companies will easily neglect the accounting part, simply because they are too busy with their sales and daily business operations. However, it’s important to keep your company financials up to-date from time to time. This is because with a monthly financials update, you can know the financial position of your company and from there can draw a plan and budget for the following months. If you’re not the expert in preparing these financial accounts, you should have one or outsource it!
time frame to prepare the financial statements
Next, as a director, you’re responsible to fix the company’s financial year end and appoint auditors (even tax agent too) for the company. Once the financial year end is fixed, say 31 Dec of every year, then you have to make sure the management accounts (trial balance, profit and loss statements, cash flow statements and general ledgers etc) are prepared up to 31 Dec of that year. These management accounts have to be ready and pass to the auditors for audit purpose.
The directors of every company is required to prepare financial statements within eighteen (18) months from the date of its incorporation and subsequently, within six (6) months of its financial year end.
Section 248 of the Companies Act, 2016
duty to circulate the financial statements
Every company has the duty to send a copy of the audited financial statements for each financial year to every member of the company, within six (6) months from the financial year end (applicable to private limited companies) – Section 257 & 258 of the Companies Act, 2016
company secretary to make sure compliance
Your Company Secretary should always remind the directors on the important dates. They will get ready the documents for you to circulate to all members accordingly. Also, the audited financial statements are required to be submitted to the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) by the Company Secretary. Failing to do so, the company and the directors upon conviction, will be liable to a fine not exceeding fifty thousand ringgit and, in the case of a continuing offence, to a further fine not exceeding one thousand ringgit for each day during which the offence continues after conviction.
Sounds like too much hassles and worried for being not compliant?
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