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Recent amendments to the Solicitors Remuneration Order 2023 (“SRO 2023”), which came into effect on 15 July 2023, apply to transactions involving non-contentious matters such as the sale and purchase of movable and immovable properties, financing and tenancies. It effectively revokes the Solicitors Remuneration Order 2005 (“SRO 2005”).
The increase in legal fees has caused some concern amongst industry stakeholders, however the National House Buyers Association (“HBA”) issued a statement on 21 July 2023 stating that the increase of scale fees is in tandem with the times, and while many people are facing challenging times, professionals and lawyers are equally affected. HBA also added that as the increase in legal fees is reasonable and not significant when compared against the property value or loan amount. It is not expected to cause a domino effect towards the rising cost of living or house prices.
It is not all an increase, however, as the SRO 2023 also charges a lower legal fee of between 25% and up to 50% for properties governed under the Housing Development (Control and Licensing) Act 1966 (“HDA"), i.e. bought directly from housing developers.
Below is a comparison table for the changes to the legal fees for sale and transfer (non-HDA):
The comparison of the changes to the legal fees for HDA transactions:
There is technically no hike for HDA transactions however. Fees have been lowered by 50% for properties of which the consideration or adjudicated value is more than RM1,000,000. This will ease the burden of home-buyers, considering the fact that it is not uncommon nowadays for properties to be priced at more than RM1,000,000, especially in high-development urban areas.
The fees for leases and tenancies have also increased. However, with the proposed ‘Residential Tenancy Act’ in the works, a standard tenancy template may be drawn up, hence the involvement of lawyers may be reduced. Nevertheless, the table below highlights the changes of the legal fees for leases and tenancies:
The fees for financing have also increased. However, for properties under HDA where the loan value is above RM1,000,000, the discount under SRO 2023 (50%) is actually higher than the discount available under SRO 2005 (as amended in 2017) (35%). The table below highlights the changes of the legal fees for financing, discharge of charge and deed of assignment:
Professional Fees for Charges, Debenture and Other Security or Financing Documents
Professional Fees for Discharge of Charge
Professional Fees for Deed of Reassignment
The last revision of the Solicitors Remuneration Order was almost six years ago. The increase can be considered reasonable taking into consideration the higher costs of operations for lawyers. In its press release dated 24 July 2023, the Malaysian Bar stands firmly behind the increase of scale fees chargeable for non-contentious matters under the SRO 2023. They are also of the view that it must ensure that the integrity of lawyers and the ecosystem for lawyers in non-contentious transactional matters are insulated and protected so that the quality of lawyers remains at its highest level and consumers are not short-changed by the professional advice they receive. Likewise, lawyers are prohibited from overcharging, and that is the public interest aspect to the scale fee structure, which acts to protect against overcharging.
If you have any questions or require any additional information, please contact Angeline Cheah, Patricia Chia, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.
Recent Changes under the Solicitors Remuneration Order 2023
The concept of ethics is well entrenched as part of corporate governance within business institution. In Malaysia, practical application of ethics can be seen in the various codes of ethics for industries and sectors, and from government initiatives. However, there is no streamlined application of ethics across national, corporate and individual levels.
In this article, Tan Sri Dr Nik Norzrul Thani, Mohamad Izahar Mohamad Izham, and Liya Saffura Ab. Rashid will delve into the importance of promoting ethical practices within Malaysia’s corporate landscape and review current application of ethical practices. They will also discuss the idea of establishing a “Centre of Ethics” in Malaysia to create a conducive environment for ethics to grow, and play an integral part in transforming the country.
The Case for the Establishment of a Centre Of Ethics in Malaysia
With the passing of a property owner, a grant of representation is required in order to deal with the property. If the property owner is a foreigner and a grant of representation has been obtained in their country of domicile, a letter of representation would first need to be recognised by the Malaysian courts before it can be enforced. This process is known as resealing letters of representation. This article will delve into the process of resealing letters of representation in Malaysia.
The resealing process in Malaysia
The law relating to resealing grant of representation can be found in Part IV of the Probate and Administration Act 1959. Section 52 allows the Malaysian High Courts to reseal both the grant of probate and the letter of administration granted by the court of probate of any Commonwealth country. This means that if the deceased’s family has already obtained a letter of representation in the country of domicile and wishes to deal with the deceased’s assets in Malaysia, they merely need to reseal the representation letter. They do not need to go through the process of applying for a grant of probate or administration in Malaysia, provided that they have already obtained a grant in a Commonwealth country.
It is important to note that in a resealing application the power of the Malaysian courts to reseal a letter of representation is discretionary. The High Court may not allow such application if it appears that the deceased was not, at the time of his death, domiciled within the jurisdiction of the court from which the grant is issued.[1] In determining whether such seal should be affixed on a grant of probate or letter of administration, the court may require any evidence it thinks fit to determine the domicile of the deceased person.[2]
In an application to reseal a letter of representation, while it may be common for convenience’s sake to sign a power of attorney to allow the appointed solicitors to deal with the necessary procedures, the petition for the resealing application must be filed in the executor’s name notwithstanding the existence of any power of attorney.[3] The solicitors appointed may affirm the affidavit verifying the petition on behalf of the executor, but the petitioner must still be the executor.[4]
In relation to the rights and obligations of the executor, the representative will only acquire the rights and obligations of a lawful executor or administrator on the date when the foreign grant of representation is resealed by the court, not from the date of the original grant.[5] This is important to determine when the representative shall have the right to institute a suit on behalf of the estate of the deceased.[6]
Another matter to note is that where a grant of letter of administration is concerned, similar to a fresh application for letter of administration, a security by way of bond for the administration of the estates must be placed with the courts before the court could affix the seal on such letter of administration.[7]
Letter of representation from non-Commonwealth countries
It is also prudent to note that the Malaysian law does not recognise letters of representation obtained from a non-Commonwealth country. While there are no laws explicitly stating this, it can be inferred from the Probate and Administration Act 1959 which states that the Malaysian High Court will recognise letters of representation made in Commonwealth countries and therefore will reseal them.[8]
It is more of a general principle as the rationale behind this is due to the reciprocal arrangement with other Commonwealth countries to recognise and enforce their grants of probates. This can also be seen in the UK by way of the Colonial Probates Act Application Order 1965 which lists all Commonwealth countries that are allowed to reseal their grants of probates in the UK.[9]
In order to administer the deceased’s properties in Malaysia, the representative must apply for a fresh grant of probate or letter of administration in Malaysia. This application is more time consuming than resealing the letter of representation.[10] However, in such a situation where the letter of representation was obtained in a non-Commonwealth country, a fresh grant or letter of representation will be the only option.
Without a valid grant of probate or letter of administration, it would be legally impossible to deal with any of the deceased’s assets in Malaysia. All relevant authorities require a letter of representation recognized by the Malaysian Court in order to allow a purported representative to deal with the property.
Conclusion
It can be said when resealing letters of representation, there are two processes to follow depending on where the grant of probate and letter of administration were granted. If it were granted by probate courts in Commonwealth countries, then under the Probate and Administration Act 1959, the High Courts have the discretion to reseal the grant of probate and letter of administration. For non-Commonwealth countries, a fresh grant of probate or letter of administration in Malaysia would be needed in order to deal with the deceased’s assets in Malaysia.
If you have any questions or require any additional information, please contact Jeyakuhan Jeyasingam or the partner you usually deal with at Zaid Ibrahim & Co (in association with KPMG Law). This article was prepared with the assistance of Nurul Izzah Isa, a Trainee Associate in Zaid Ibrahim & Co.
This article is for general information only and is not a substitute for legal advice.
[1] Section 52(a) Probate and Administration Act 1959.
[2] Section 52(b) Probate and Administration Act 1959.
[3] Re Azhar Azizan Harun (As the Absolute Representative of Eleanor Dulcie Robinson) (1998) 7 MLJ 89.
[4] Ibid.
[5] Chung Kok Yeang v Public Prosecutor (1941) 1 MLJ 163.
[6] Issar Singh Son of Bhola Singh & Anor v Samund Singh Son of Mayiah (1941) 1 MLJ 28.
[7] Section 35 Probate and Administration Act 1959.
[8] Section 52 Probate and Administration Act 1959.
[9] Schedule 1 Colonial Probates Act Application Order 1965
[10] Application to reseal a letter of representation takes approximately 2-3 months, while an application for a fresh grant would take an estimated period of 4-6 months.
Resealing Letters of Representation in Malaysia
Released by the Asian Business Law Institute (ABLI) with support from its parent organization Singapore Academy of Law, the Contract Laws of Asia – Limitations of Liability is the fourth full-fledged publication under ABLI’s Contracts Project which aims to produce a set of standard-form contract terms where risks are relatively evenly allocated and which can be valid in a majority of Asian jurisdictions. The first turn of the Model Clauses is published here.
This fully-cited, 99-page publication considers 12 jurisdictions and governing laws that are high priorities for parties contracting across borders in the Asia Pacific, and focuses on:
- Operation of exclusion and limitation of liability clauses in contracts in select common law jurisdictions, such as their requirements, restrictions (at common law and by statute, where applicable) and interpretation, whether non-contractual wrongs can be excluded and limited, etc.; and
- Operation of exclusion and limitation of liability clauses in contracts in select civil law and hybrid jurisdictions, such as whether different standards apply to specific types of contracts or under specialized laws.
Lee Lily @ Lee Eng Cher, Partner, authored the chapter for Malaysia in the publication.
The publication is available here. In addition to this publication and the Model Clauses, the team has also contributed to earlier publications on indemnity clauses and liquidated damages and penalty clause under this project.
Zaid Ibrahim & Co contributes as authors to Contract Laws of Asia – Limitations of Liability publication
The Malaysia Competition Commission (MyCC) is conducting an online public consultation to obtain feedback on the proposed integration of Competition Impact Assessment (CIA) into Regulatory Impact Analysis (RIA). The aim of the consultation is to oversee the integration of CIA into RIA and its importance to the rule making process. This ensures that new regulations issued (or review of existing regulations) comply with competition law and are in line with Good Regulatory Practice (GRP). The consultation is to allow stakeholders to understand the framework of CIA and obtain feedback to better understand the needs, concerns and perspectives of regulators.
The “Consultation Session for the Proposed Integration of Competition Impact Assessment (CIA) into Regulatory Impact Analysis (RIA)” is available both in English and Bahasa Malaysia.
In addition to submitting general feedback, there is also a survey titled “Survey for Consultation Session for the Proposed Integration of Competition Impact Assessment (CIA) into Regulatory Impact Analysis (RIA)” available both in English and Bahasa Malaysia.
What is Regulatory Impact Analysis (RIA)?
Regulatory Impact Analysis or “RIA” is the process of systematically analysing and communicating the impacts of proposed regulations or review of existing regulations. The essential characteristic of RIA is its informed and evidence-based decision-making for regulatory intervention through analysis of problems and solution options, stakeholder consultation, a cost-benefit analysis, and implementation strategy.
What is Competition Impact Assessment (CIA)?
Competition Impact Assessment or “CIA” is the process of examining the competition effects of laws and regulations to ensure that they are pro-competitive. This integration process intends to show the regulators the methodology that can be adopted to examine the laws and regulations.
CIA is important to ensure that the laws and regulations do not bring unnecessary restraints to competition and help find alternatives that could still achieve the same objectives the regulators had intended to gain.
CIA Integration into RIA
It is important to note that CIA is already an existing component under the RIA framework as provided under the National Policy on Good Regulatory Practice (NPGRP). It is only a matter of putting into effect this requirement after over a decade of Good Regulatory Practice (GRP) implementation in Malaysia.
To support the integration, MyCC has developed a comprehensive toolkit comprising three main components:
- Part I: CIA Framework;
- Part II: CIA Checklist (for the initial screening process); and
- Part III: CIA Guideline (to assist regulators in preparing CIA).
Part I: CIA Framework
The current RIA process currently entails three stages:
- Stage 1: Digital Regulatory Notification (DRN)
- Stage 2: Initial Assessment Stage
- Stage 3: Final Assessment Stage
To incorporate CIA, the current three-stage process will remain but there will be some changes in each stage, as illustrated below.
Part II: CIA Checklist
The CIA Checklist is a set of four main questions each with sub-questions to assist regulators in identifying potential competition concerns early in the policy development process i.e. during Stage 1: Digital Regulatory Notification (DRN).
In the event that the CIA Checklist is triggered i.e. the questions are answered in the affirmative, further investigation of the anti-competitive practices would be required in Stage 2: Initial Assessment Stage.
Part III: CIA Guideline
The CIA Guideline is a detailed technical document on competition assessment which contains key questions to be considered when performing CIA. The CIA Guideline includes requirements that needs to be fulfilled by regulators when the CIA Checklist is triggered.
These requirements are to be undertaken during Stage 2: Initial Assessment Stage and specifically apply for Element 3: Options and Element 4:Impact Analysis of the RIA process.
The consultation is open from 13 June 2023 until 21 July 2023.
For more details on the consultation document, including the survey and feedback submission, please visit Malaysia Productivity Corporation’s Unified Public Consultation (UPC) portal here.
MyCC conducts public consultation on proposed integration of Competition Impact Assessment (CIA) into Regulatory Impact Analysis (RIA)
On 30 September 2022, the Malaysian Government ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), becoming the 9th out of 11 countries to ratify the agreement. One of the key components of the CPTPP is, Chapter 25 titled ‘Regulatory Coherence’ which among others, promotes Good Regulatory Practices adoption across member countries. Our Partner and Head of the Government Advisory Practice, Mohamad Izahar Mohamad Izham will explore these requirements that are required to be adopted into domestic policy and regulation, and the potential impact on our GRP framework.
Good Regulatory Practices in Free Trade Agreements – Insight into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
Global Growth of Sustainable Finance
The World Investment Report 2022, released by the United Nations Conference on Trade and Development (“UNCTAD”), has shown strong growth in sustainable finance in global capital markets. UNCTAD estimates that the value of sustainability-themed investment products in global financial markets amounted to USD5.2 trillion in 2021, up 63% from 2020. These products include (i) sustainable funds and (ii) sustainable bonds, including green, social and mixed-sustainability bonds. The number of sustainable funds reached 5,932 by the end of 2021, up 61% from 2020. The total assets under management (AUM) of these funds reached a record USD2.7 trillion, an increase of 53% from the previous year (figure 1). [1]
Strong growth in sustainable finance is primarily driven by stock exchanges and other market operators, by integrating ESG considerations in market infrastructure. The regional exchanges across the ASEAN region, through the ASEAN Capital Markets Forum [3] (“ACMF”), have also collaborated to push the sustainable finance agenda across the region.
National initiatives under the SRI Roadmap
On a national level, the Securities Commission Malaysia (“SC”) has undertaken various initiatives to support the development of a holistic sustainable and responsible investment ecosystem under the Sustainable and Responsible Investment Roadmap for the Malaysian Capital Market (SRI Roadmap). These include the release of the Sustainable and Responsible Investment-linked (SRI-linked) Sukuk Framework [4] and the expansion of the SRI Sukuk and Bond Grant Scheme to include issuances under the SRI-Linked Sukuk Framework and the ASEAN Sustainability-Linked Bond Standards. [5]
Revised Guidelines on Sustainable and Responsible Investment Funds
On 17 February 2023 the SC revised its Guidelines on Sustainable and Responsible Investment Funds (“the Guidelines”) following the introduction of the ASEAN Sustainable and Responsible Fund Standards. This is timely given that a total of 58 Sustainable and Responsible Investment Funds with RM7.05 billion net asset value were offered in Malaysia as at 31 December 2022. [6]
The revised Guidelines has been rearranged and consists of three parts, namely:
- Part A: Sustainable and Responsible Investment (“SRI”) Fund;
- Part B: ASEAN Sustainable and Responsible Fund Standards [7] (“ASEAN SRF Standards”); and
- Part C: Application to Qualify as an SRI Fund and an ASEAN Sustainable and Responsible Fund.
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Lastly, it is worth noting that a tax exemption on the statutory income derived from fund management services of managing a fund in accordance with the Guidelines is made available under the Income Tax (Exemption) (No.5) Order 2018 and Income Tax (Exemption) (No.5) Order 2021. [19] Chapter 5 of the Guidelines set out the qualifying conditions for a tax exemption in relation to managing an SRI Fund.
Commentary
The revision to the Guidelines results in the expansion of the pool of funds that may be eligible to qualify as an SRI Fund. Further, the standardisation of the ASEAN SRF Standards would also enable fund managers to tap into a regional pool of investors (not just at national level). With this widening pool of sustainable funds on a regional level, we are hopeful that this would meet the increasing demands for sustainable funds from investors in general. This in turn would lead to a stronger growth in the sustainable finance products space in the equity capital market, hopefully matching the strong growth of sustainable bonds.
This article was authored by Andreanna Ten. If you have any questions or require any additional information, please contact the Zaid Ibrahim & Co. (in association with KPMG Law) partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.
[1] Please see UNCTAD, “Chapter IV Capital Markets and Sustainable Finance” in World Investment Report 2022 (9 June 2022) at <https://unctad.org/system/files/official-document/wir2022_ch04_en.pdf>for further details.
[2] Source: UNCTAD (based on Morningstar Data). UNCTAD, “Chapter IV Capital Markets and Sustainable Finance” in World Investment Report 2022 (9 June 2022) at<https://unctad.org/system/files/official-document/wir2022_ch04_en.pdf>.
[3] The ASEAN Capital Markets Forum (“ACMF”) is a forum which comprises capital market regulators from ASEAN countries whose primary task is to promote greater integration and connectivity of regional capital markets.
[4] Please refer to our article on the Introduction of Sustainable and Responsible Investment (SRI)-Linked Sukuk Framework.
[5] Please see Securities Commission Malaysia, ‘Driving Greater Growth in Sustainable and Responsible Investment - Enabling a More Relevant, Efficient and Diversified Market’ for further details.
[6] Securities Commission Malaysia, ‘Driving Greater Growth in Sustainable and Responsible Investment - Enabling a More Relevant, Efficient and Diversified Market’.
[7] The ASEAN SRF Standards aims to provide the minimum disclosure and reporting requirements that can be consistently applied to collective investment schemes (“CIS”) that seek to qualify under the ASEAN SRF Standards, considering the rise of CIS with ESG investment focus and the need for a comparable, uniform and transparent disclosure of information to mitigate the risk of greenwashing. Please see ASEAN Sustainable and Responsible Fund Standards for further details on the ASEAN SRF Standards.
[8] Paragraphs 3.01(a) and 3.03(b) of the Guidelines.
[9] Paragraphs 3.04 and 3.05 of the Guidelines.
[10] Such strategies include ESG integration, ethical and faith-based investing, impact investing, negative screening, positive screening, thematic investments, and any other ESG-related strategies, as may be authorised by the SC. Please see guidance to paragraph 3.08 of the Guidelines for further guidance on such strategies.
[11] Paragraph 3.08 of the Guidelines.
[12] Paragraph 3.09 of the Guidelines.
[13] Paragraphs 4.03 and 4.04 of the Guidelines.
[14] Paragraph 4.05 of the Guidelines.
[15] Paragraphs 4.06 and 4.07 of the Guidelines.
[16] Paragraphs 4.08 to 4.16 of the Guidelines.
[17] Paragraphs 4.17 to 4.20 of the Guidelines.
[18] Paragraph 7.07 of the Guidelines.
[19] Appendix I, the Guidelines.
Malaysia revises its Guidelines on Sustainable and Responsible Investment Funds
In recent years, the Malaysian government has taken various initiatives to revamp insolvency laws with the goal of assisting the public to cope with financial difficulties arising from the Covid-19 pandemic.
With the amendment to the Insolvency Act in 2020, the bankruptcy threshold in Malaysia is currently set at RM100,000, which was raised from the original RM50,000. This was the second increase of the bankruptcy threshold within the span of a few years, with the previous increase from RM30,000 to RM50,000 in 2017.
As it stands today, a creditor may not file for bankruptcy action against a debtor if the amount of the debt is less than RM100,000.
Automatic and faster discharge of bankruptcy?
Bankruptcy is a serious matter and has grave implications on the bankrupt individual. A discharge, in essence, is a reset button, releasing the bankrupt from his debts to allow him to start afresh.
During the Budget 2023 Presentation, Prime Minister Datuk Seri Anwar Ibrahim announced that the government is looking to further revamp the Insolvency Act 1967 to ensure that individuals who are bankrupt could be discharged more quickly.
Among the immediate initiatives to be implemented would be individuals, whose bankruptcy cases are of a debt of less than RM50,000 (small-scale debt), could be discharged by the Director General of Insolvency’s Certificate with effect from 1 March 2023.
The Guidelines, issued by the Malaysian Department of Insolvency, for the discharge of bankruptcy with small-scale debts are summarised in the table below:
For more detailed information, please refer to the Malaysia Department of Insolvency.
The proposed amendments to the Insolvency Act 1967, which is expected to be tabled in the next parliamentary sitting in May-June 2023, if passed, would further ease the process of discharge of bankrupts. Among the amendments proposed are:
- the setting of time limits for the filing of Proof of Debt Forms by Creditors (section 42 and Schedule C of Insolvency Act 1967) to avoid the issue of late filing which could make it difficult to discharge bankrupt individuals;
- to make improvements to the automatic discharge provisions under section 33C of Insolvency Act 1967 so that bankrupt individuals can be discharged from bankruptcy in a shorter period or automatically;
- to make improvements to section 42 and Schedule C of Insolvency Act 1967 by abolishing the obligation to hold the first meeting of creditors so that the bankruptcy administration can continue immediately; and
- to add category of cases that can be discharged using the Director General of Insolvency’s Certificate, for example, bankrupt individuals aged 70 and above, for bankrupt individuals who are incapacitated because they have been diagnosed as mentally ill under the Mental Health Act 2001.
If you have any questions or require any additional information, please contact Khoo Kay Ping, Chuah Jo-Shua, Chong Siau Fong, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.