Malaysian Turkistan Travel Sdn. Bhd was founded under 40% ownership to MTSB and 60% to TGS. The established company hence was considered as a Joint venture company and a subsidiary of MTSB. However, in order to recognize MTT as a joint venture company, both the parties should invest equally in-terms of money, time and effort to build on the original concept (Joint Venture). MTSB also considers MTT as its subsidiary company, although its share is less than 50 % percent and its authority to control decisions and make policy is insignificant. Therefore, MTT cannot get the title as a subsidiary of MTSB unless it possesses half the share and obtains influencing power in MTT. (Subsidiary) Recommendation MTT seems to follow associate company format rather than Joint Venture Company. Hence, MTSB and TGS could reassess the MOU and divide shares equally to recognize MTT as a joint venture and subsidiary company. Consequently, it would give more power to MTSB in decision making and control irregularities.
2. MOU and MOA interchange
Memorandum of Understanding between MTSB and GTS lacks many crucial contents that are supposed to be in proper MOU such as general rules and policies, requirements and responsibilities of parties involved, etc. In contract, it defines the prospect of business collaboration, objectives, liabilities to be shared, etc. Hence, the presented MOU of MTT is more into Memorandum of Association as it governs relationship between the company and outside. (Memorandum of Association)
Recommendation MTSB and GTS should understand the concept of MOU and include requirements and responsibilities of both party and it should be contractually bounded through Articles of Association or Memorandum of Agreement. The presented MOU could be converted to MOA as it serves more in defining business prospect than explaining obligation of parties involved.
3. Share Capital not in Balance Sheet
The Share capital or Paid up Capital contributed by MTSB and GTS is not mentioned in Projected Balance Sheet and this error might have occurred because of relationship based transaction between the involved parties. The Board member of TGS, Mr. Omar Yatim met his father Yatim Nor, an Executive Director of MTSB to form a joint venture company MTT. Hence, the family relation between the parties who founded MTT could be the reason for not mentioning total share value of RM. 2,358,935.00.
Recommendation To project the proper and accurate financial transaction, MTT should include its paid up capital in contributed capital. It should also establish accounting committee to arrange, collect and record financial transaction for future use.
4. RM 2 Company to RM. 250,000.00
The RM2 Company is the company with RM2 as paid up capital. Any RM2 company indicated that the company is not financially strong, the founder of the company or the founding directors only contribute RM2 to form the company.
MTT increased its paid up capital from RM 2 to RM 250,000 after few months of commencement. This rapid increase in capital could be the hoax amount to gain the confidence of shareholders and government authorities as there was no audited accounts neither issued to the shareholders nor filing made with the Companies Commission of Malaysia.
Recommendation The relationship based transaction between MTSB and GTS should be avoided effectively and the parties involved in the reformation of MTT must not have family or any kind of relationship that would influence the contract. The MTT should also maintain proper accounting procedures and record evidences to support every financial transaction.
B Joint Venture. (n.d.). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Joint_venture Memorandum of Association. (n.d.). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Memorandum_of_association Subsidiary. (n.d.). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Subsidiary ibliography
http://www.youtube.com/watch?v=47yv7yMMggQ http://teochiewkia2010.blogspot.com/2010/02/rm2-company.html http://en.wikipedia.org/wiki/Memorandum_of_agreement http://www.youtube.com/watch?v=drB1ZscutB0 Subsidiary. (n.d.). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Subsidiary