The revised framework on take-overs and mergers
The Securities Commission Malaysia (“SCM”) has issued a revised Malaysian Code on Take-overs and Mergers 2016 (“Code”) and introduced a rule book called the Rules on Take-overs, Mergers and Compulsory Acquisitions 2016 (“Rules”).
The Code and the Rules came into operation on 15 August 2016. The Code revokes the Malaysian Code on Take-overs and Mergers 2010 (“Previous Code”). However, the Previous Code shall still apply to all take-over and merger transactions which commenced or were undertaken before 15 August 2016.
The Code sets out the general principles that shall be observed and complied with by all persons (including advisers) engaged in any take-over or merger transaction. The Rules stipulate operational and conduct requirements in relation to take-overs, mergers and compulsory acquisitions. According to the SCM’s press release on 15 August 2016, the enhancements under the Rules seek to ensure that the take-over framework will be facilitative to commercial realities while ensuring appropriate shareholder protection. These include subjecting sizeable unlisted public companies (those with more than 50 shareholders and net assets of RM15 million or more) to the Code, removing the limitation that take-over schemes can only be initiated by parties holding over 50% equity interest and providing clear guidance on required conduct during a take-over offer.
The Code and the Rules apply to take-overs and mergers (howsoever effected, including by means of a trust scheme, a scheme of arrangement, compromise, amalgamation or selective capital reduction and repayment) of:
- any listed corporation;
- any unlisted public company with more than 50 shareholders and net assets of RM15 million or more;
- a business trust listed in Malaysia; and
- a real estate investment trust listed in Malaysia.
The Code can be found at: www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/tom/160815/pub_20160812_PUB356.pdf.
The Rules can be found at: www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/tom/160815/tom_rules_160815_complete.pdf.
Date: 15 August 2016
Source: Securities Commission Malaysia
Issuing Authority: Securities Commission Malaysia
Bank Negara Malaysia’s enhanced corporate governance standards for financial institutions
Bank Negara Malaysia or the Central Bank of Malaysia (“BNM”) had, on 3 August 2016, issued a policy document on “Corporate Governance” which is applicable to banks, investment banks, Islamic banks, insurers, takaful operators and financial holding companies of such licensed persons in Malaysia.
The policy document sets out BNM’s expectations for financial institutions to have in place effective corporate governance arrangements consistent with the long-term viability of a financial institution.
Key changes introduced in the standards include:
- strengthened requirements on board composition, including a requirement for boards to have a majority of independent directors;
- enhanced expectations for the board and its committees, including a requirement to approve and maintain credible recovery and resolution plans under conditions of stress;
- an expectation for boards to set a tenure limit for independent directors which should not generally exceed nine years;
- requirements for financial institutions to adopt a code of ethics that promotes ethical, prudent and professional behaviour, supported by a transparent whistleblowing policy;
- expanded requirements on remuneration arrangements which promote a sound risk culture and are aligned with prudent risk-taking; and
- strengthened expectations for effective group-wide governance arrangements.
Other standards also covered include the key responsibilities of board and senior management, board and senior management appointments and removals, conduct of board meetings, board evaluations and development and directors’ conflicts of interest.
The requirements set out in the policy document are divided into two (2) categories: those which must be complied with and where non-compliance may result in enforcement action; and those which are encouraged to be adopted. BNM expects financial institutions to implement the minimum standards set out in the policy document.
The policy document came into effect on 3 August 2016. Nonetheless, financial institutions have until 3 August 2019 or 3 August 2021, as the case may be, to comply with certain requirements regarding the composition of their board of directors and the remuneration of certain individuals within the financial institution.
The Corporate Governance policy document can be found at: www.bnm.gov.my/guidelines/01_banking/04_prudential_stds/CorporateGovernance_Aug2016.pdf.
Date: 3 August 2016
Source: Bank Negara Malaysia
Issuing Authority: Bank Negara Malaysia
Bank Negara Malaysia’s policy document on shareholder suitability
Bank Negara Malaysia or the Central Bank of Malaysia (“BNM”) had, on 18 August 2016, issued a policy document on “Shareholder Suitability” which is applicable to all shareholders holding an aggregate interest of 5% or more in the shares of a licensed person regulated by BNM. The licensed persons include banks, Islamic banks, international Islamic banks, insurance companies, takaful operators, international takaful operators and investment banks in Malaysia.
According to BNM, the policy document aims to ensure that shareholders of licensed persons are persons of integrity, good reputation and sound financial position in order to minimise risks that could threaten the safety and soundness of the licensed person.
The shareholder suitability requirements set out in the policy document are divided into two (2) categories:
- those which must be complied with and where non-compliance may result in enforcement action. For example:
- A shareholder must not exercise its influence in a manner that undermines the safety and soundness of the licensed person or conflicts or could conflict with the effective oversight of the licensed person’s group.
- those which are encouraged to be adopted. For example:
- A shareholder should observe the principles of sound corporate governance, particularly those espoused under BNM’s corporate governance framework and corporate governance codes issued by other bodies such as Bursa Malaysia and the Securities Commission Malaysia.
Among the main amendments to the Employees Provident Fund Act which came into effect on 1August 2016 are as follows:
- A member of the fund can now elect to have all his funds in his account to be managed according to the principles of Shariah
- In order to ensure that the funds are managed under Shariah principles a Shariah Advisory Committee would be established
- Any contribution by a member after he attains the age of 55 years may only be withdrawn when the member attains the age of 60 years
Business immigration update
Passport validity
Passport must have at least 12 months validity during endorsement stage.
Parties Affected
All foreign nationals applying for Visit Pass (Professional) and Employment Pass Category I, II and III.
| Category |
Basic Monthly Salary |
Duration of Employment |
| I |
More than or equivalent to RM5,000.00 |
More than 2 years |
| II |
More than or equivalent to RM5,000.00 |
Less than 2 years |
| III |
Between RM2,500.00 to RM4999.99 |
1 year or less |
All accompanying family members of Employment Pass Category I and II who are eligible for Dependant’s Pass and/or Long-term Visit Pass (Social).
Precautionary measure!
Foreign nationals must ensure that passports have sufficient validity and renew their passports prior to applying for the work permit.
Consequences for failure to comply!
Work permit applications cannot be submitted.
Approval letter and reference visa
Foreign nationals must ensure that their work permit applications have been approved before entering Malaysia. Approval letters must be carried along when entering Malaysia.
Foreign nationals who require visa to enter Malaysia for any purposes including employment ie Chinese, Indian, Bangladeshi, Pakistani, etc, must apply and collect their Reference Visa (Single Entry Visa) from the Malaysian mission abroad before entering Malaysia.
Parties affected
All foreign nationals applying for Visit Pass (Professional) and Employment Pass Category I, II and III.
All accompanying family members of Employment Pass Category I and II who are eligible for Dependant’s Pass and/or Long-term Visit Pass (Social).
Precautionary measure!
Foreign nationals must ensure that work permit applications are approved before booking their flight tickets to enter Malaysia. They must also carry along approval letters and a copy of the employment/offer letter at the point of entry into Malaysia ie at the airport.
Consequences for failure to comply!
Passports will not be accepted by the immigration authorities for endorsement once work permit applications have been approved.
Foreign nationals who are already in Malaysia when the work permit applications have been approved are required to leave Malaysia and re-enter Malaysia again with the approval letter.
For foreign nationals who require visa to enter Malaysia, they must go back to their home country to obtain their Reference Visa (Single Entry Visa) before entering Malaysia.
Issuance of Expatriate Information Card (i-KAD)
i-KADs are no longer issued for dependants. Only Employment Pass holders and Resident Pass-Talent (RP-T) holders are eligible for i-KADs.
Parties affected
All accompanying family members who hold Dependant’s Pass.
Conversion of pass/work permit to Employment Pass Category III
Exit Malaysia
Foreign nationals who are changing work permits from one category to another are required to exit Malaysia and collect their Reference Visa before entering Malaysia for the next stage of endorsement. This is only applicable for the scenarios below:
- Change of one employer from Employment Pass Category III to another employer also under the classification of Employment Pass Category III;
- Fourth year of Employment Pass Category III for either renewal or change of position;
- From Dependent’s Pass to Employment Pass Category III;
- From Student Pass to Employment Pass Category III;
- From Visit Pass (Professional) to Employment Pass Category III.
Cooling-off Period of three months
- Change of one employer from Employment Pass Category III to another employer also under the classification of Employment Pass Category III;
- Fourth year of Employment Pass Category III for either renewal or change of position;
- Conversion of Temporary Employment Pass (PLKS) to any Employment Pass Category I, II or III.
Conversion of Visit Pass (Professional) with 12 months duration to any Employment Pass Category I, II or III.
Parties affected
All foreign nationals who are categorised as Employment Pass Category III holders.
Only applicable for foreign nationals under the employment of companies that have Mutimedia Super Corridor ("MSC") status or companies that are classified as Information and communications technology ("ICT") under the purview of Malaysia Digital Economy Corporation ("MDEC").
Precautionary measure!
Foreign nationals should make the necessary arrangements to leave Malaysia on or before the expiry of their current pass.
Foreign nationals should ensure that their current pass is cancelled before they depart Malaysia.
When serving the three months cooling-off period, foreign nationals are not allowed to enter Malaysia even for social visits.
Consequences for failure to comply!
The new application may be rejected or put on hold until the requirements above are fulfilled.
Limitations for Employment Pass Category III
Renewal is only allowed twice. In the event the Employment Pass Category III holder still receives a basic monthly salary below RM5,000.00 when his/her Employment Pass is due for third renewal, the foreign national must leave Malaysia and observe a three-month cooling-off period.
Parties affected
All Foreign nationals who are categorised as Employment Pass Category III holders.
Precautionary measure!
Foreign nationals should make the necessary arrangements to leave Malaysia on or before the expiry of their current pass.
When serving the three-month cooling-off period, foreign nationals are not allowed to enter Malaysia even for social visits.
Consequences for failure to comply!
The application may be rejected or put on hold until the requirements above are fulfilled.
Change of employer
Release letter is compulsory.
Parties Affected
All foreign nationals who are changing employers in Malaysia.
Precautionary measure!
Foreign nationals should ensure that the current company is willing to provide an original signed release letter.
Consequences for failure to comply!
Foreign nationals are required to leave Malaysia and wait until their work permit application is approved before entering Malaysia.
New born baby
Child born in Malaysia who has obtained a passport after six months from the date of birth must obtain a Special Pass from the Enforcement Unit of the Immigration Department headquarters in Putrajaya before the endorsement of a Dependent’s Pass.
Parties Affected
All foreign babies born in Malaysia.
Precautionary measure!
The foreign parents of the baby born in Malaysia should apply for a passport for the baby and the Dependant’s Pass within six months from the date of birth.
Consequences for failure to comply!
The new born baby is not allowed to travel out of Malaysia until a Special Pass or Dependant’s Pass, whichever is applicable, is endorsed in the passport.
Renewal of Visit Pass (Social)
Children above 18 years old/parents/parents-in-law
A confirmation letter from the home country’s embassy in Malaysia is mandatory. The confirmation letter must state his/her latest status for eg single, unemployed or under custodian of Employment Pass holder.
Common law wife
A confirmation letter from the home country’s embassy in Malaysia stating the relationship with the Employment Pass holder is mandatory.
Parties affected
All children above 18 years old, parents, parents-in-law and common law wife.
Precautionary measure!
Foreign nationals are to ensure that the above documents are obtained before the renewal application is submitted.
Consequences for failure to comply!
Special Pass application must be submitted to avoid overstaying in Malaysia.
The application may be put on hold until the requirements above are fulfilled.
For further information regarding immigration law matters, please contact
Suganthi Singam
suganthi@shearndelamore.com
TAX LAW & REVENUE
INCOME TAX
The Inland Revenue Board of Malaysia (IRB) has recently issued the following operational guidelines:
- Tax Clearance Letter Application For Companies, Limited Liability Partnership (LLP) And Labuan Entities (Labuan Companies & Labuan LLP) — issued on 31 July 2016; and
- Tawaran Pengurangan Penalti Dan Penghapusan Kenaikan Cukai (in Malay language only) — amended on 5 August 2016.
The IRB has also recently issued two new public rulings on:
- Tax Incentives For Child Care Centre And Kindergarten Operators (Public Ruling No. 4/2016) — issued on 9 August 2016;
- Tax Incentives For Employers Who Provide Child Care Centres (Public Ruling No. 5/2016) — issued on 22 August 2016; and
- Group Relief For Companies (Public Ruling No. 6/2016) — issued on 22 August 2016.
GOODS AND SERVICES TAX (GST)
The revised versions of the following Industry and Specific Guides have been published on the Royal Malaysian Customs Department’s GST website:
- Transitional Rules (revised as at 3 August 2016);
- Export (revised as at 12 August 2016);
- Gaming (revised as at 12 August 2016); and
- Insurance and Takaful (revised as at 19 August 2016).
For further information regarding tax and revenue law matters, please contact
Goh Ka Im
kgoh@shearndelamore.com
Anand Raj
anand@shearndelamore.com
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