Dear valued clients and business partners,
We are pleased to highlight the following legal updates for April 2019.
Click here to down the PDF version: Legal Updates April 2019
CORPORATE/M&A
Bursa Malaysia seeks public feedback on dematerialisation rule amendments
On 15 April 2019, Bursa Malaysia Berhad issued Consultation Paper No. 1/2019 to seek public feedback on the proposed amendments to the Rules of Bursa Malaysia Depository Sendirian Berhad (“Bursa Depository”) and the Main Market and ACE Market Listing Requirements to facilitate listed corporations’ migration towards a “dematerialisation” environment.
“Dematerialisation” represents a scripless environment where there will not be any physical share certificate or other document issued as evidence of title to, or ownership of securities. In a “dematerialisation” environment, the legal ownership of listed securities will be evidenced by the register of members maintained by a listed issuer and the record of depositors maintained by Bursa Depository. The background to the proposed amendments is the current position in the Companies Act 2016 where a company’s register of members is prima facie evidence of shareholders’ legal title in the shares vested in them. Additionally, a company is no longer required to issue a share certificate unless an application has been made by a shareholder or otherwise provided by its constitution.
The proposed key amendments under Consultation Paper No. 1/2019 include, amongst others:
Rules of Bursa Depository
- removing references to scrips, where relevant, and the requirement to deposit a jumbo certificate bearing the name of Bursa Malaysia Depository Nominees Sdn Bhd;
- simplifying the process in relation to the deposit of securities with Bursa Depository by doing away with the prescribed deposit request forms and transfer forms; and
- introducing “transitional provisions” to deal with the existing scrips that are deposited with Bursa Depository where the same will be returned to the respective issuers / company registrars for cancellation.
Listing Requirements
- requiring a listed corporation to include in its constitution, a provision stating that the listed corporation shall not issue, and its member shall not apply for, any certificate evidencing title or ownership in respect of listed securities deposited with Bursa Depository; and
- removing provisions relating to the form and content of share certificates and the requirement to submit specimen share certificates as part of the listing application for Malaysian incorporated listed companies.
The deadline to provide any feedback on the proposed amendments is 24 May 2019.
For further information regarding corporate/M&A matters, please contact our Corporate/M&A Practice Group.
DISPUTE RESOLUTION
CIMB Islamic Bank Berhad v Wellcom Communications (NS) Court of Appeal [2019] 1 LNS 135
This appeal arose from an unprecedented application for stay made by the respondents in the High Court after the High Court dismissed the respondents’ application for a judicial management order pursuant to section 404 of the Companies Act 2016.
There was no judicial precedent to stay an order of dismissal of an originating summons or writ prior to this case. CIMB Bank appealed against the stay order on grounds that the stay was an abuse of process as the stay order allowed a company who had admitted to having an inability to pay its debts to continue with the business, thereby depriving creditors from taking any action. The respondents relied on the case of Ong Koh Hou @ Won Kok Fong v DA Land Sdn Bhd [2018] 1 LNS 827 in making the application for stay.
The appeal was allowed.
Facts
The High Court dismissed the respondents’ application for judicial management. The respondents applied for a stay of the “no order”. The consequence is that the respondents obtained a second bite at the cherry which gave them interim statutory protection by virtue of the moratorium offered by the Companies Act 2016.
The Court of Appeal held that the High Court had failed to appreciate the reason of granting an order for stay and the effect which has caused CIMB Bank to be prejudiced because, as a secured creditor, it was deprived of its rights to recover sums due and payable by the first respondent despite the clear admission of the respondents’ inability to pay their debts. The High Court ought to have dismissed the stay application. DA Land is not a precedent for the proposition to stay the dismissal of originating process.
Malayan Banking Bhd v Gan Bee San & Ors and Anor Appeal; SKS Foam (M) Sdn Bhd (Intervener) Federal Court [2019] 1 CLJ 575
This appeal was before the Federal Court pursuant to Maybank’s appeal against the Court of Appeal’s order to set aside a winding-up order issued by a Deputy Registrar. Leave was granted to Maybank for the following question of law:
“Whether the principle established in Badiaddin Mohd Mahidin v Arab Malaysian Finance Berhad [1998] 1 MLJ 393 confers jurisdiction upon a court to set aside a perfected winding up order for breach of rule 5 of the Companies (Winding-Up) Rules 1972 having regard to the decision in Vijayalakshmi Devi d/o Nadchatiram v Jegadevan s/o Nadchatiram [1995] 2 CLJ 392.”
The question was answered in the affirmative and Maybank’s appeal was dismissed.
Facts
Upon Maybank’s petition for winding up, SKS Foam (M) Sdn Bhd was wound up by an order of Court issued by a Deputy Registrar in 2013. The Court of Appeal held that a winding-up order made by a Deputy Registrar was null and void as it contravened rule 5(1)(a) of the Companies (Winding-Up) Rules 1972 which provides that petitions for winding-up shall be heard before a judge in open court.
The Federal Court discussed the extent of application of the principle enunciated in Badiaddin Mohd Mahidin v Arab Malaysian Finance Berhad [1998] 1 MLJ 393.
That case relates to the court’s inherent jurisdiction to set aside a final order ex debito justitiae if it is proven to be null and void on grounds of illegality or lack of jurisdiction. The contravention must be of a serious nature to justify setting it aside in the interest of justice and not merely on procedural requirements.
The Federal Court held that rule 5(1)(a) is not a mere technicality or rule of practice but it goes to the fundamental question of jurisdiction. Therefore, the winding-up order issued by the Deputy Registrar was within the category of contravention set out in the case of Badiaddin and is null and void for lack of jurisdiction.
Section 243 of the Companies Act 1965 is silent on the power of the court to set aside an irregularly obtained winding-up order made without jurisdiction. The case of Vijayalakshmi Devi d/o Nadchatiram v Jegadevan s/o Nadchatiram [1995] 2 CLJ 392 provides that a winding-up order cannot be discharged or rescinded and the only remedy is a stay.
The Federal Court held that both section 243 and Vijayalakshmi have the effect of removing the court’s inherent jurisdiction to set aside a fundamentally irregular or seriously defective order. This is a proper case for the order of the Deputy Registrar to be set aside in the interest of justice.
For further information regarding dispute resolution matters, please contact our Dispute Resolution Practice Group.
INTELLECTUAL PROPERTY
The Ministry of Domestic Trade and Consumer Affairs tabled the Trade Descriptions (Amendment) Bill 2019 and Trademarks Bill 2019 for their first reading on 9 April 2019.
In the explanatory statement of the Trademarks Bill 2019, the proposed Act seeks to provide for the registration of trademarks in relation to goods and services and to implement the relevant treaties and for other matters connected therewith.
The Trade Descriptions (Amendment) Bill 2019 proposed the deletion of certain sections in the Trade Descriptions Act 2011, which are consequential amendments arising from the enactment of the proposed new Trademarks Act 2019.
The introduction of these two bills aims to facilitate Malaysia’s accession to the Madrid Protocol. The Madrid Protocol is an international system that enables trademark owners to obtain trademark registrations in a wide number of countries by filing a single application. Under the Madrid System, a trademark owner can file a single application to apply for protection in up to 120 countries.
For further information regarding intellectual property law matters, please contact our Intellectual Property Practice Group.
TAX AND REVENUE
Income tax
The Inland Revenue Board of Malaysia (“IRB”) has recently issued a Guideline on Dispute Resolution Proceeding.
The IRB also issued an amended version of the Operational Guidelines No. 1/2018 on Special Program for Voluntary Disclosure on 29 March 2019.
Sales tax
A revised version of the Specific Guide on Sales Tax Deduction Facility (as at 19 April 2019) has been published on the Royal Malaysian Customs Department’s MySST website.
Service tax
The Service Tax (Amendment) Bill 2019 which was tabled in Parliament on 3 April 2019 has been passed by the Dewan Rakyat on 8 April 2019. The objective of this Amendment Bill is to expand the scope of tax under Service Tax Act 2018 to include the widely anticipated “digital tax” or 6% service tax on digital services such as Spotify and Netflix provided by foreign service providers to Malaysian consumers. Once the Amendment Bill becomes law, this digital tax will be implemented with effect from 1 January 2020.
Goods and Services Tax (“GST”)
The following GST Guides have also been published on the Royal Malaysian Customs Department’s MySST website:
- Declaration and Adjustment After 1stSeptember 2018 (as at 19 April 2019);
- Tax Invoice, Debit Note, Credit Note and Retention Payment After 1st September 2018 (as at 19 April 2019).
For further information regarding tax and revenue matters, please contact our Tax and Revenue Practice Group.
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This Alert is issued for the information of the clients of the Firm and covers legal issues in a general way. The contents are not intended to constitute any advice on any specific matter and should not be relied upon as a substitute for detailed legal advice on specific matters or transactions.