company law

Case Update: Malaysian Court Recognises Universal Succession and Transmission of Shares by Operation of Law

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The High Court in its grounds of judgment dated 5 August 2019 in the case of United Renewable Energy Co Ltd v TS Solartech Sdn Bhd. This is the first Malaysian decision to recognise the doctrine of universal succession. The Court gave effect to the transmission of shares by operation of law where there has been a foreign merger. This is a matter where I successfully acted for the applicant company.

The High Court granted a declaration that the foreign merger of the Taiwanese companies in question had carried into effect a transmission of shares held in a Malaysian company by operation of law. Further, the High Court allowed a rectification of the register of members of the Malaysian company to reflect the name of the successor entity.

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Case Update: Priority of Wages under the Employment Act over Debenture Holder Debts

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The High Court issued its grounds of judgment dated 18 July 2019 in the case of Perwaja Steel Sdn Bhd (in receivership) v RHB Bank Berhad & 789 Others. Justice Darryl Goon delivered the decision.

The main issue was whether wages under section 31 of the Employment Act 1955 (Employment Act) would have priority over the debts owed to the debenture holder.

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Beneficial Ownership of Companies: Out of the Shadows

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Recent headlines have carried the news that the Malaysian Anti-Corruption Commission wants to have its own provision on beneficial ownership in the MACC Act 2009 to identify real owners of businesses or properties to further eradicate corruption. This is also against a backdrop of the Panama Papers, and the Paradise Papers.

There is already an existing provision in the Companies Act 2016 (CA 2016) that deals with beneficial ownership. But perhaps, it does not go far enough.

It is important to identify the beneficial owner of a legal entity such as a company, a trust or a partnership. This will ensure tax transparency, and help to fight against tax evasion and financial crimes such as money laundering or terrorism financing. The true controllers of companies will be brought out of the shadows.

I set out some global trends, and I explain the existing Malaysian provision under the Companies Act 2016 (CA 2016) and the possible direction going forward.

[edit: On 8 November 2019, the Companies Commission of Malaysia issued its consultation document on the reporting framework for beneficial ownership. I have since written about it and with my observations over here.]

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Seven Key Changes of the Companies Amendment Bill 2019

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The Companies Amendment Bill 2019 was tabled for First Reading before the Dewan Rakyat (i.e. the House of Representatives) on 8 July 2019.The amendment Bill was passed by the Dewan Rakyat on 10 July 2019 and by the Dewan Negara (i.e. the Senate) on 31 July 2019. [edit: The Companies (Amendment) Act 2019 has since come into force on 15 January 2020 as I have written about here.]

The amendment Bill will make amendments to the Companies Act 2016 (CA 2016). I have since updated this article to take into account the Parliamentary debate of the amendment Bill.

I highlight seven of the more significant amendments. There will be welcome clarification of the effect of section 66 on the execution of what sort of documents, as well as the redemption of preference shares out of capital. But I can see issues relating to the appointment of receivers or receivers and managers after liquidation. There is a severe dilution of the ability to apply for judicial management.

#1: Section 66 to Only to Apply to Specific Types of Documents

I had earlier written about the possible uncertainty of validity of signed documents under section 66 of the CA 2016. Would all documents executed on behalf of the company require at least one director to sign that document? Under the CA 2016, the term document meant a document referred to under the Evidence Act. Continue reading →

Speaking in Kota Kinabalu on Winding Up of Companies on 20 June 2019

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On 20 June 2019, I will be speaking at the Companies Commission of Malaysia Training Academy (COMTRAC) session on Cessation of Companies and Limited Liability Partnerships. This one-day seminar is held in Kota Kinabalu, Sabah. You can still sign up for the seminar, and with the registration fee at RM500 or discounted to RM400 for licensed secretarties, and for members of MAICSA, MIA, the Malaysian Bar, MACS, MICPA, Sabah Law Association and the Advocates Association of Sarawak.

My co-speaker is Puan Norhaslinda Salleh. She is the Head of Insolvency in the Registration Services Division, Companies Commission of Malaysia. Continue reading →

Asset Recovery Asia Conference 2019: How to Choose the Right Legal Route with Limited Information

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On 14 May 2019, I spoke at the Asset Recovery Asia Conference in Singapore. It was organised by Knect365 as part of its Asset Recovery series. I thoroughly enjoyed attending the conference, hearing from other fraud and asset recovery specialists, and meeting new friends.

I shared a panel with other lawyers from different jurisdictions, an investigator and a litigation funder to share our perspectives. The session was on how victims of fraud have to make a decision early on, without all the facts, about which recovery route to go down – litigation or insolvency proceedings. These strategic decisions can have implications on the remainder of the case.  I set out below some of the views I shared on the panel session. Continue reading →