Kindness, Inc.

Setting up a Foundation for purpose and charity

Inside the Tatev Monastery, Armenia. Copyright Kerk Boon Leng 2016
Power of Purpose
Capitalism the old school way is crushed and crumbling under the existential weight of covid. To many people now the idea of running a company to do good is not only morally right, it makes pretty good business sense.
Some call them purpose foundation, others refer to them as social enterprise, or steward-ownership business, these entities are often real companies running viable and profitable business. Contrary to common belief and the news about their misuse for tax, these companies do not survive on donations and are not always run as charities.
As a matter of fact, these purpose-driven companies are usually set up and run by hired staff and experienced professionals. They generate income but the money they make are channeled towards specific objects and altruistic causes.
Company Limited By Guarantee (CLBG) 
The advantage of setting up a Limited Liability Company is that it can be used to create wealth while shielding its owner from personal liabilities including the risks of bankruptcy. Although this corporate model has served capitalism well, it also created the messy world today of unfair societies, broken communities and damaged natural environment.
There are two kinds of Limited Liability Companies: the ones limited by share capital and those that are limited by guarantee. Companies limited by guarantee (CLBG) are the entities primarily used for non- profit or purpose organisations that require a status of a legal entity.
CLBG does not have shareholders but instead have members who will each guarantee to pay for the liabilities of the company up to an amount (typically RM100) specified in the articles of the Constitution in the event of its insolvency or winding up.
Perpetual Succession
CLBG is created by incorporation under the Companies Act. As a corporation, it is a separate legal person in law. It is unaffected by the death or departure of any member but continues in existence no matter how many changes in its membership.
Membership
SSM (Suruhanjaya Syarikat Malaysia), Malaysia’s Registrar of Companies, has a sample constitution to follow. The sample is just a guide. You are allowed to amend and modify the membership criteria and admission procedures based on your requirements to suit the CLBG’s objectives.
For example: the membership can be restricted to clan members or those with certain family name or to the descendants of a named benefactor. It can also be restricted to, for example certain classes of persons such as employees of companies or armed forces personnel serving in a specific regiment, war or period.
Similarly, membership classes can be tailored to suit the requirements, such as honorary, ordinary or special membership with special voting rights or veto powers over matters similar to the way MOF exercises control over its GLCs with rights to nominate or appoint Board members.
In some family CLBGs, there are permanent Board of Trustees or Governing Trustees to ensure that the founding family maintains control over objectives and direction of the CLBG.
How many members in CLBG? It depends, there is really no optimum number of members. The decision on how many members to have is left to the promoters to make and set the tone depending on their intentions and foresight.
As there is no share capital in a CLBG, each member has one vote depending on what is written in the constitution relating to membership and rights. Bearing in mind, the more members there are, the harder it is to have control.
Some CLBGs give the chairman the right to co-opt and appoint Trustees onto the Board so that he has sufficient support to maintain control. This will also allow the chairman to carry out duties instead of being bogged down continuously with in fighting at the Board level.
Berhad or Yayasan?
Source: SSM
The table above shows the difference between CLBGs with the word “Berhad” to its name and those without. Some CLBGs prefer to call themselves Yayasan or Foundation instead of using “Berhad”(Limited). To do this, they are required to first apply to the Minister of Domestic Trade and Industry for approval to drop “Berhad”.
The approval process can previously take up to 3 months, now it is maybe longer. The main condition to dropping “Berhad” is the requirement and written commitment from a party supporting the CLBG to donate at least RM1 million together with a forecast income and expenditure accounts for two years.
Alternatively, the CLBG can be incorporated with the word “Berhad” to its name and then later apply to change it to Foundation.
Name and Object Clause
This part is arguably the most important stage in the process of incorporating a CLBG. Careful consideration must be given to select a proper name for the CLBG and to describe in detail its objects.
The CV and biodata of the Promoters and the first Board of Trustees must be carefully prepared. Other important information include:
(a) the reasons why a CLBG is registered instead of an association under the Societies Act;
(b) will the CLBG be related to or associated with any existing associations or societies?;
(c) whether any of the Promoters have previously registered any society or association with the Registrar of Societies
No Payment to Members and Trustees
Although a CLBG is allowed to invest to earn money, run a profitable business and also receive donations, it is not allowed to use them to pay any fee, salary or benefit to its directors or Trustees. But CLBG is allowed to reimburse these volunteers for their out-of-pocket and traveling expenses.
As a legal entity with a purpose, a CLBG is free to employ full-time staff and pay them market salaries and other competitive remunerations.
CLBG has no share capital so Members do not hold any shares. Therefore, a CLBG is prohibited by its Constitution and the Companies Act 2016 from paying any dividend or share of profits to Members. All income and profit must be used towards the foundation’s purpose and objects as stated in its Constitution.

Lee Wee Hee, (ACIS), Director, CIS Secretarial Services Sdn Bhd and Kerk Boon Leng , Partner, Kerk & Partners, Advocates and Solicitors

Electricity and its Discontents

Nikola Tesla, the inventor of modern electricity

 
‘The price of monopoly is upon every occasion the highest which can be got…The one upon every occasion the highest which can be squeezed out of the buyers, or which, it is supposed, they will consent to give…”
 
Adam Smith, The Wealth of Nations (1776)

 

Tenaga Nasional Berhad or TNB, once called National Electricity Board (NEB) is the country’s biggest and sole supplier of electricity. 

As a government-gifted monopoly backed by parliament-made laws protective of its economic interests, TNB has over the years grown profitable, powerful and technologically advanced. Recently the public’s acceptance of TNB as a necessary behemoth has turned into open hostility and even disdain as more consumers have come out accusing TNB of overcharging and high-handedness.

Consumers who find their home or factory power supplies cut and court actions taken against them by TNB for stealing electricity through meter tampering are especially unhappy and aggrieved. 

These consumers are slapped with debilitating (and sometimes multiple) court summonses by TNB. The claims for such “loss of revenue” are usually punitive and sometimes for sums of money far exceeding what most consumers are capable of benefitting from their alleged transgression.

A consumer when sued by TNB for meter tampering is like a soccer team that enters a match with a pre-existing 1-0 score at kick-off in favour of the rival.

Much of the apparent unfairness is due to the way the courts have interpreted the abstruse provisions of the Electricity Supply Act 1990 – a statute specially enacted for the benefit of TNB’s privatization.

Recently the judicial tide seems to be turning in favor of consumer rights over the unrestrained free hands of corporate monopoly.

In a first ever decision, the Court of Appeal in Putrajaya stunningly slashed TNB’s claim against a customer for tampering with the power meters in its plastic making factory in Johor Bahru.***

TNB’s claim for RM1.1 million of loss revenue from tampering was dramatically reduced by the court to just RM28,000 – a reduction of over 97% !

The appeal court’s panel of three learned judges unanimously sent a strong signal that TNB can no longer simply claim any unreasonably huge amount it wants from the consumer based on the previous logic of the courts that a thief who has stolen has no right to question but, as punishment, must merely accept whatever amount the victim has estimated to be his loss.

Now the Court of Appeal says TNB to be sure can still claim the lost income from meter tampering by using an estimate but this estimate must not only be fair and reasonable. It must also be mathematically calculable and capable of standing in the face of the facts.

Lim Yew Yi , LLB (Malaya), Advocate and Solicitor

*** The case of Tan Kwee Siang v Tenaga Nasional Berhad, decision of the Court of Appeal was delivered on 23 May 2019. Kerk & Partners acted for the appellant Tan Kwee Siang. The case is at the time of this article unreported

Finding fairness

Philanthrophy on Petaling Street on Chinese New Year’s Eve. Copyright Kerk Boon Leng 2017  

Measured by gini index, Malaysia is now Asia’s most unequal society ( more than even famously unfair countries like India and China). 

The latest model BMWs you spotted in BSC, non-halal 12-course dinners and the lavish lifestyles of denizens of Damansara are an alien world apart from the majority of citizens in the Klang Valley : families of despatch riders, supermarket cashiers and lowly paid government servants returning home to their squalid flats with many large mouths to feed. 

Ever since moving into KL’s urban space in increasing numbers in the 1960s and 1970s the Malays (unlike the crowd-loving Chinese and Indians) have never felt totally at home in the city. 

Cut off from the security and support of their kins and kinds in the Kampongs the Malays suffer from what the French sociologists termed Anomie and what Germans called Angst. 

Poverty, cultural disconnect, urban tension and the mental walls imposed by a Government-sponsored religion are potent ingredients for an incendiary social cocktail.

Understanding their pain and our compassion and kindness to one another is what our country needs now.

Caring for our poor, dispossessed and hungry no matter what race they are or what God they believe in is what truly matters. This is what will hopefully one day make Malaysia fair, multicultural and more equal.

Lately Malaysians have been spiraling into a vicious quarrel about whether this country should finally sign up to its United Nations obligations under The International Convention on the Elimination of All Forms of Racial Discrimination (ICERD). Bizarrely but not so surprisingly, Malaysia along with North Korea and Myanmar are the only noteworthy nations left in the world that haven’t signed. 

ICERD is just another aspirational announcement by governments around the world to each other on their lofty intentions about vague and vogueish subjects like world peace, stopping climate change and freeing Palestine. These are not things for us common folks to worry about or fight each other for.

Plainly in such times of mass pain, hunger and ignorance, ICERD is absurd.

Kerk Boon Leng