Aug 19 – 3 (13:20 – 14:20)
SOME RECENT
DEVELOPMENTS ON
MALAYSIAN CORPORATE
LAW
Hasani MOHD ALI
Kobe SALAD 2015
Corporate laws
CSR
Company
law
Securities
regulation
Islamic
Markets
Corporate
governance
Insolvency
law
Regulatory framework
• Companies Commission of Malaysia
• Securities Commission of Malaysia
• Bursa Malaysia
• Bank Negara Malaysia
• ++
Company Law
LLP
Companies Act 1965
Limited Liability
Partnership Act 2012
2007
Amendment
New Draft of
Companies Act
Company Law
2007 Amendments
Directors’
duties
•Fiduciary duties
•Business
Judgment Rule
Minority
Shareholders’
Protection
•Derivative action
Audit
Electronics
•Whistleblowing
•disclosure
•Filing
•Meetings
Limited Liability
Partnership
(LLP)
LLP Act 2012
LLP Regulations 2012
General Guidelines For
Registration of Limited
Liability Partnership And
Related Matters
• Limited Liability Partnership (LLP) - a company + a
conventional partnership.
 The LLP business structure - for all lawful business purposes with a
view to make profit.
 professionals such as Lawyers, Chartered Accountants and
Company Secretaries.
 start ups, small and medium enterprises (SMEs)
 Without personal liabilities, personal assets and strict compliance
requirements.
 limited liability to its partners similar to the limited liability enjoyed by
shareholders of a company
 flexibility of internal business regulation through partnership
arrangement similar to a conventional partnership.
 Any debts and obligations of the LLP will be borne by the assets of
the LLP and not that of its partners’.
• An LLP has the legal status of a body corporate – capable of
suing and being sued in its own name, holding assets and
• doing such other acts and things in its name as bodies
corporate may lawfully do and suffer.
• flexibility in terms of its formation, maintenance and termination
• has the necessary dynamics and appeal to be able to compete
domestically and internationally.
• 1
• Strengthening the corporate governance structure in relation to
Company Law
PUBLIC
CONSULTATION ON
THE NEW COMPANIES
BILL
JULY 2013
POLICY STATEMENTS
AND OTHER GUIDING
PRINCIPLES
the affairs of the directorship of a company which include:
 the relationship between the board of directors and shadow
directors;
 clarifying the minimum age for directorship and abolishing the
maximum age for directorship;
 revising the residency requirement for directorship;
 restructuring the rules pertaining to the appointment,
resignation and removal of directors;
 codifying the requirement for remuneration of directors of
public companies to be sanctioned;
 providing members the right to inspect directors’ contract of
service with public companies;
 requiring any payment for loss of office of directors of public
companies to be approved by disinterested members
 clarifying the rules relating to exemption and indemnification of
directors’ and officers’/auditors’ liability; and enhancing the
rules relating to disqualification of directors.
• 2.
• Reinforcing the roles, functions and obligations of the company
secretaries.
• 3.
• Establishment of a mandatory registration regime for practicing
Company Law
PUBLIC
CONSULTATION ON
THE NEW COMPANIES
BILL
JULY 2013
POLICY STATEMENTS
AND OTHER GUIDING
PRINCIPLES
•
•
•
•
•
•
•
•
•
•
•
•
company secretaries.
8.
Integrating the content of the new Companies Act with the
notions and elements of corporate responsibility.
4.
Enhancement of shareholders’ rights and protection through:
Clarifying the application of rules relating to oppression of
members’ rights;
Refining the application of statutory derivative actions; and
Reforming the rules relating to variations of class rights and
preference shareholders
Strengthening and refining procedures on dividend.
5.
Strengthening the corporate governance structure through
refinement of auditors’ role and responsibilities by:
retaining the mandatory requirement for the appointment of
auditor(s) for all types of companies;
introducing a new regime for the appointment of auditors for
private companies in view of the proposal to lift the requirement
for holding annual general meetings;
Company Law
PUBLIC
CONSULTATION ON
THE NEW COMPANIES
BILL
JULY 2013
POLICY STATEMENTS
AND OTHER GUIDING
PRINCIPLES
6. Strengthening the corporate governance structure through
refinement of auditors’ role and responsibilities by:
 retaining the mandatory requirement for the appointment of
auditor(s) for all types of companies;
 introducing a new regime for the appointment of auditors for
private companies in view of the proposal to lift the requirement
for holding annual general meetings;
 enhancing the rules relating to the resignation of auditors;
 relying on industry practice for mandatory audit rotation of audit
firms; and
 granting access to auditors on all communications relating to
any resolutions which the company proposes to pass by way of
the written resolution procedure.
7
• Reaffirming the importance of audited financial statements the
timely disclosure of such information and aligning the company
law provisions with International and Best auditing practices.
8.
• Strengthening good corporate governance practices through
enhancement and refinement of rules pertaining to transactions
involving directors and substantial shareholders in the following
areas:
• rules relating to substantial property transactions and persons
connected with directors or substantial shareholders; and disclosure
principles to avoid conflict of interests.
• 9
• Simplifying, refining and expediting the winding up process by:
• shortening the time taken to wind up a company; introducing
Company Law
PUBLIC
CONSULTATION ON
THE NEW COMPANIES
BILL
JULY 2013
POLICY STATEMENTS
AND OTHER GUIDING
PRINCIPLES
•
•
•
•
•
•
•
•
and defining the parameters for exempt dispositions; refining
the concept of undue preference transactions; preserving the
assets of the company; increasing the threshold for statutory
amount of debts to prevent abuse by creditors;
empowering the Court to terminate winding up proceedings to
ascertain the status of a company;
enhancing the roles of liquidators to facilitate the smooth
process of liquidation;
enhancing the rights of creditors; reaffirming the rules relating
to preferential debts; and providing adequate protection to
employees as unsecured creditors.
10.
Modernising the insolvency law by introducing alternative
corporate rescue mechanisms for companies whose business
are still viable through:
introduction of the concept of judicial management scheme;
and introduction of the concept of corporate voluntary
arrangement.
11
Restructuring the concept of scheme of arrangements between
a company and its creditors.
12. Refining the role of receivers/receiver
• clarifying the status and power of receivers; and introducing new
provisions relating to liability, indemnity and priority over receiver’s
costs.
Company Law
PUBLIC
CONSULTATION ON
THE NEW COMPANIES
BILL
JULY 2013
POLICY STATEMENTS
AND OTHER GUIDING
PRINCIPLES
13. Refining the current system of registration of charges by
improving the procedures and process involved.
14. Modernizing the enforcement regime by:
• introducing the concept of civil and administrative proceedings for
selected types of breaches of the Companies Act alongside criminal
sanctions; criminal sanctions to be imposed against the officers
responsible instead of the company; and refining the rules pertaining
to disqualification of directors.
15. To introduce a comprehensive financial reporting framework
which is in line with the international accounting standards and
accounting practices by:
I.
assessing the relevance of the Ninth Schedule of CA1965
as jurisdictions such as Singapore, Australia and the
United Kingdom have since removed the equivalent of the
schedule from their Companies Act;
II.
aligning inconsistencies between the Ninth Schedule of
CA 1965 vis-à-vis the MASB standards;
III.
reviewing the details to be disclosed in the directors’ report
with respect to the company’s profit and loss for a financial
year; and
IV.
refining the provisions on matters relating to dividends.
Securities
regulation
Capital Market
Masterplan
Capital Market &
Services Act 2007
Securities Commission
Act 1993
Corporate
Governance
Islamic Markets
Audit Oversight
Board
CSR
Money
Laundering and
Anti-terrorism
Act
Mergers &
Acquisitions
• August 2006, the Malaysia International Islamic
Islamic markets
Capital Market
Masterplan 2001
Capital Market
Masterplan 2 2011
Guidelines on the
Offering of Islamic
Securities
Capital Markets and
Services Act 2007
(“CMSA”)
Financial Centre (MIFC) - to promote Malaysia
as the international hub of Islamic finance, and
to strengthen the country’s role as an
intellectual epicentre for Islamic finance.
• The MIFC - a community network of financial
and market regulatory bodies, Government
Ministries and Agencies, financial institutions,
human capital development institutions and
profesional services companies that are
participants in Islamic finance activities.
• the world’s most comprehensive Islamic
financial system which includes Islamic
Banking, Islamic Capital Market, Takaful and
Retakaful, and Islamic Interbank Money
Market.
Islamic markets
Malaysian Securities
Commission's Shariah
Advisory Council (SAC)
screening methodology
• Quantitative
• Compute the contribution of non-
permissible activities and compare with
group revenue and group profit before tax:
• 5% Benchmark
• 20% Benchmark
• Compute the financial ratios (<33%):
• - Debt/Total Assets; and
• - Cash and Cash Equivalent/Total Assets
• Qualitative
• Public perception or image
Islamic markets
Malaysian Securities
Commission's Shariah
Advisory Council (SAC)
screening methodology
•
•
•
•
•
•
•
•
•
•
•
5% benchmark
•Conventional banking
•Conventional insurance
•Gambling
•Liquor and liquor-related activities
•Pork and pork-related activities
•non-halal food and beverages
•Shariah non-compliant entertainment
•Interest income from conventional accounts and instruments
•Tobacco and tobacco-related activities; and
•Any other activities as determined Shariah non-compliant by
the SAC
•
•
•
•
•
•
20% benchmark
•Hotel and resort operations
•Share trading
•Stockbroking business
•Rental received from Shariah non-compliant activities
•Any other activities as determined Shariah non-compliant by
the SAC
• Bursa Suq Al-Sila'
• A Shari’ah compliant commodity trading platform to facilitate Islamic
financing and investment.
Islamic markets
Islamic products and
services
• Shari’ah Compliant Listed Equities
• Listed equities screened by the Shari’ah Advisory Council (SAC) of the
Securities Commission of Malaysia (SC) based on a set of criteria
determined by the SAC.
• Sukuk
• Islamic Securities or Sukuk, denominated in both Malaysian Ringgit and
foreign currencies issued by local and international listed and non-listed
entities, can seek for listing on Bursa Malaysia.
• Effective 2015, unrated Sukuk may be traded subject to the Sukuk
Guidelines
• Removal of mandatory rating requirement in the wholesale bond and
Sukuk markets, effective 1 January 2017
• Islamic Real Estate Trusts (iREITS)
• Collective investment schemes in real estate in which the tenant(s)
operates permissible activities according to Shari’ah principles.
• Shari’ah Compliant Exchange Traded Funds (iETFs)
• Funds traded on Bursa Malaysia which track indices based on stocks
that have been classified as Shari’ah compliant listed equities.
•
Corporate
Governance
Code on Corporate
Governance 2012
Whistleblowing Act 2010
•
first issued in March 2000, later revised in 2007 (2007 Code) to strengthen the roles
and responsibilities of the board of directors, audit committee and the internal audit
function.
•
MCCG 2012 focuses on strengthening
 board structure and composition
 recognising the role of directors as active and responsible fiduciaries.
•
•
They have a duty to be effective stewards and guardians of the company, not just in
setting strategic direction and overseeing the conduct of business, but also in ensuring
that the company conducts itself in compliance with laws and ethical values, and
maintains an effective governance structure to ensure the appropriate management of
risks and level of internal controls.
•
Boards and management - duty to direct their efforts and resources towards the best
interest of the company shareholders & other stakeholders.
•
Disclosure and transparency are essential for informed decision-making. The timely
availability of quality and accurate information including the reporting of financial
performance.
Implementations –
 the Bursa Malaysia Listing Requirements
 changes to the law.
 A company’s own internal codes and procedures
•
• Malaysian Institute of Corporate Governance, Malaysian
Corporate
Governance
Directors Academy, Minority Shareholders Watchdog
Group, Malaysian Institute of Chartered Secretaries and
Administrators, Malaysian Alliance of Corporate Directors
• understand the practicalities, challenges and expectations
of inculcating high standards of corporate governance in
listed companies and
• to ensure the necessary principles and recommendations
of best practices to meet those standards.
• to achieve excellence in corporate governance to underpin
the sustainable growth of the Malaysian capital market.
Audit Oversight
Board
Part IIIA Securities
Commission
(Amendment) Act 2010
Applicable to all auditors
of Public Interest
Entities (PIE) only
AOB Handbook for
Registration
ISQC1 and the MIA ByLaws on Professional
Ethics, Conduct and
Practise
• Functions of AOB - Inspection
• Frequency - Risk-based approach in
regards to frequency of inspection
• Process - Inspection process will be
guided by international best practices
• Power - Inspection officers to have power
to access working papers, books and
accounts and to take down oral or written
information
• Inquiry conducted when there is reason to
believe that provisions of the Act, written
notice or guidelines are breached
• AOB inquiry officers will be conducting
AOB inquiries
• Inquiry officers will be appointed and will
have necessary powers to conduct their
duties
• The Malaysian Code requires a potential offeror or a
Mergers &
Acquisition
Securities Commission
Act 1993
CMSA 2007
Code on Takeovers &
Mergers 2010
Bursa Malaysia Listing
Requirements
potential target company, to make an announcement
on possible offers where there are unusual
movements in the price of shares of the latter.
• The potential offeror is required to announce its
intention to make a takeover offer or otherwise.
However, if the potential offeror denies it is making
an offer for the offeree, it is then prohibited from
making a takeover offer for the same target
company, for a period of six months.
• The Code specifically lists down two additional
categories of persons acting in concert.
 The first category covers a company, the directors of a
company and shareholders of the company as persons
acting in concert if there is an arrangement between them
which restricts the director or the shareholder from making
or accepting a takeover offer, or changing his shareholdings
in the company.
 The second category captures partners of a partnership as
persons acting in concert
• The code also allows for voluntary offers with a
Mergers &
Acquisition
Securities Commission
Act 1993
CMSA 2007
Code on Takeovers &
Mergers 2010
Bursa Malaysia Listing
Requirements
higher acceptance threshold to be carried out. This
means that offerors can make their takeover
conditional upon achieving 90% acceptances, for
example, which would effectively give the offeror
total control over the target company considering
that the laws allow for any party with 90%
acceptances to compulsorily purchase the balance
10% of shares.
• The code widens its jurisdiction to cover foreign
incorporated companies and real estate investment
trusts (REITs) that are listed on Bursa Malaysia and
which were not regulated by the takeover code.
• Bursa Malaysia's listing rules require companies that
are disposing their major assets and liabilities to
secure 75% shareholder approval.
• (changes aimed at raising the shareholder acceptance level
in instances of takeovers using the assets and liabilities
route but do not come under the ambit of the takeover
code.)
• SEVEN CORE AREAS OF CONTRIBUTIONS TO SOCIETY (Silver
book)
CSR CSR
Silver book (GLCs)
Bursa Malaysia
Securities Berhad Main
Market Listing
Requirements
(Listing Requirements)
Sustainability reporting
guide (proposed)
1. Human rights -Supporting internationally proclaimed human rights
2. Employee welfare - Implementing good employment practices for the benefit of
employees
3. Customer service - Meeting customer needs by efficiently supplying goods and
services through exceptional customer service
4. Supplier partnership - Working with business partners and suppliers to adopt
socially responsible Practices.
5. Environmental protection - Protecting the environment by minimising the
environmental impact of business operations, products and services
6. Community involvement - Participating or leading in community development
programmes and providing selected
universal services to under-served or under-developed markets and communities
7. Ethical business behaviour - Promoting good business practices and fair
competition, including working against corruption
Mandatory for listed companies to provide a description of the corporate
responsibility activities or practices undertaken by them. If there are no activities or
practices undertaken in a reported year, the company must provide a statement to
that effect.
There is no reporting requirement for other companies including Small and Medium
Enterprises (SMEs).
THE CORPORATE INSOLVENCY
FRAMEWORK IN MALAYSIA
Receivership
process
Winding up
process
The Corporate
Debt Restructuring
Committee
(CDRC)
Pengurusan
Danaharta
Nasional Berhad
Scheme of
arrangement
Proposal of reform by CLRC
Revised s
176
Judicial
management
CVA
Moratorium period applicable for
existing and proposed rescue mechanisms for Malaysia
Rescue mechanism
I.
Moratorium period
Akta Pengurusan Danaharta
Nasional Berhad 1998
Malaysian Airline System Berhad
(Administration) Act 2015
During the tenure of the appointment of
Special Administrator
12 months and extension may be given for
not more than 12 months.
III.
Scheme of arrangement under s
176 Companies Act 1965
90 days and may be extended based on the
courts’ evaluation of “good reason”.
IV.
Proposed Amendment to s 176
Companies Act 1965
(ARRANGEMENTS AND
RECONSTRUCTIONS)
90 days and may be extended up to 270 days
with strict conditions including approval by
creditors’ representative on the board.
II.
• Thank you