Companies Act 2016 - Substantial Value

Section 223(3)
In the case of any company other than a company to which subsection (2) applies, an undertaking or property shall be considered to be of a substantial value and a portion of the company's undertaking or property shall be considered to be a substantial portion if:-

(a) its value exceed twenty-five per centum (25%) of the total assets of the company;

Property cost - RM8,500,000
Total assets - RM350,988,462
Total assets = Non current assets + Current assets
Result is 2.42% of the total assets of the company, which is lower than 25%.

(b) the net profits, after deducting all charges except taxation and excluding extraordinary items, attributed to it amounts to more than twenty-five per centum (25%) of the total net profit of the company; or

Property cost - RM8,500,000
Profit before tax - RM650,000
Result is 1,307.69% of the total assets of the company, which is higher than 25%.

(c) its value exceeds twenty-five per centum (25%) of the issued share capital of the company,

Property cost - RM8,500,000
Issued share capital - RM60,000,000
Result is 14.17% of the total assets of the company, which is lower than 25%.

whichever is the highest

From the calculation above shows that the company doesn't pass the test under subsection (b), therefore the purchase of property of RM8,500,000 is substantial value to the company.



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