Resources

Zaid Ibrahim & Co contributed to the Legal 500 Country Comparative Guide 2025 on Malaysia Private Equity.

Authored by Director, Chua Wei Min and Partner Muhammad Zukhairi, the guide offers a detailed overview of Malaysia’s private equity laws and regulations through a country-specific Q&A.

The guide explores key insights, including the proportion of transactions involving financial sponsors as buyers or sellers over the last 24 months, differences in M&A transaction terms when acquiring from trade sellers versus financial sponsor-backed companies, and more.

As 2025 starts off with major geopolitical changes in the world and Malaysia takes the Chair for ASEAN, there are exciting developments in Malaysia that will impact businesses and FDI. We would like to update our clients on the major legislative updates to look out for particularly in the tax and energy space, as well as new opportunities in the state of Johor through the Johor-Singapore Special Economic Zone, a recap on the National Semiconductor Strategy and the focus on private equity.

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On 15 November 2024, Bank Negara Malaysia (“BNM”) announced an important liberalisation of Malaysian’s foreign exchange control rules for Multilateral Development Banks (“MDBs”) and Qualified Non-resident Development Financial Institutions (“DFIs”). MDBs are financial institutions whose membership consists of sovereign states while DFIs are financial institutions established (usually by governments) to support the development of a nation.

The liberalisation allows MDBs and DFIs to:

• issue ringgit-denominated debt securities for use in Malaysia; and
• provide ringgit financing to resident entities in Malaysia

Amendments to BNM’s Foreign Exchange Notices

BNM’s Foreign Exchange Notice Nos. 2 and 5 have been amended to facilitate the foreign exchange control liberalisations.

The amendments are aimed at facilitating participation by MDBs and DFIs in the Ringgit debt market and financing of investments in key growth areas in Malaysia.

Impact of Foreign Exchange Control Liberalisations

BNM has traditionally regulated the Ringgit debt markets by limiting the ability to lend in Ringgit primarily to 50+ licensed onshore banks, investment banks and development financial institutions in Malaysia.

With the easing of the foreign exchange rules, international MDBs and Qualified DFIs can now borrow in Ringgit by issuing Ringgit debt securities (both conventional bonds and Islamic sukuks) in any amount. This gives another avenue for MDBs and Qualified DFIs to source for Ringgit liquidity, which may be used by such financing institutions to provide Malaysian customers financing facilities denominated in Ringgit, without BNM’s prior approval.

This liberalisation allows MDBs and Qualified DFIs to tap Malaysia’s robust Ringgit bond and sukuk market to raise Ringgit financing with Malaysia’s Islamic securities market being the largest globally. Additionally, it opens up another avenue of Ringgit financing for Malaysian residents, potentially  benefitting major infrastructure projects in Malaysia through the availability of Ringgit financing from international financiers for domestic projects.

If you have any questions or require any additional information, please contact  Loo Tatt King or the partner you usually deal with in Zaid Ibrahim & Co.

This alert is for general information only and is not a substitute for legal advice.

On 1 April 2024, we welcomed the introduction of amendments to the Companies Act2016 (“CA 2016”) on beneficial owners (i.e its definition, duty to disclose, annual return requirements, etc.). Subsequently, in a bid to improve transparency and accountability within limited liability partnerships (“LLP”), the Limited Liability Partnership (Amendment) Act 2024 (“LLPAA 2024”) was gazetted on 17 October 2024, though it has yet to come into force.

The LLPAA 2024 introduces several amendments to the Limited Liability Partnership Act 2012 (“LLPA 2012”) including time for compliance with the requirements under the LLPA 2012 (new section 70A), substitution of section 76 of the LLPA 2012 to include electronic means as way of service of documents, and a new section 76A on publication or advertisement on the website of the Companies Commission of Malaysia (“CCM”).

This article will be focusing on two pertinent amendments to the LLPA 2012 — ­­­­­the introduction to the beneficial ownership reporting and disclosure framework (introduced as a new Part IIIA) and the concept of corporate voluntary arrangement and judicial management of LLPs (new sections 49A and 49B).

Introduction to Beneficial Ownership Reporting and Disclosure

The LLPAA 2024 has introduced a new Part IIIA to govern beneficial ownership reporting and disclosure framework of LLPs.

It sets out the definition of beneficial owner and grants the registrar of the CCM (“Registrar”) the power to issue guidelines on identifying beneficial owner of LLPs. In line with this, CCM has issued a consultation on the proposed guideline for the reporting framework for beneficial ownership of LLPs. This consultation, together with case studies and illustrations, relatively similar to the approach taken for the beneficial ownership reporting under the CA 2016, contains step by step approach for the application of the new Part IIIA. It covers proposed scopes of reporting, entry points of the beneficial ownership information and criteria to determine beneficial owners. However, do note that this is still a consultation document and has yet to be enforced or finalised by CCM.

Further, Part IIIA provides a list of details that must be included in the register of beneficial owners. These can be found in section 20B(1) which states:

LLPs are obligated to require any partners to disclose if they are the beneficial owner. If they are not, then to indicate persons (whether by name or other particulars to make identification easy) who are beneficial owners. LLP has 14 days from the date the information is received to record the information in the register of beneficial owners (section 20C(4) of the LLPA 2012).

Additionally, a beneficial owner is to notify the LLP if there are any changes to their particulars, including when they cease to be a beneficial owner. The date and particulars of the cessation must be notified as soon as practicable (section 20D(3) of the LLPA 2012).

LLPs that are already subjected to similar reporting obligations may be exempted from their obligations under Part IIIA by the domestic trade minister. The exemption maybe subjected to such terms imposed by the Minister. Failure to abide by the requirements in Part IIA, LLPs and every partner and compliance officer can be liable for the following:

• Section 20B: Fine not exceeding RM 20,000. If the offence continues, a further fine not exceeding RM 500 for each day.
• Section 20C (1)-(6): Commits an offence.
• Section 20D: Any person who contravenes this section commits an offence.

Corporate voluntary arrangement and judicial management

In addition to the introduction of the beneficial ownership framework, the LLPAA 2024 introduces the concept of corporate voluntary arrangement and judicial management. Section 49A of the LLPA 2012 provides that Division 8 of Part III (in so far as they relate to a company limited by shares and except for sections 395 and 403 and paragraph 1 of the Eight Schedule) of the CA 2016 and the Companies (Corporate Rescue Mechanism) Rules 2018 shall apply to the voluntary arrangement and judicial management of an LLP. Nonetheless, this is subject to such modifications and adaptations as may be necessary.

Moreover, Section 49B imposes that an insolvency related clause in any contract for the supply of essential goods and services shall not be exercised against LLPs. However, it is pertinent to note that section 49B(2) provides an avenue to a supplier who wishes to exercise his rights pursuant to an insolvency related clause in a contract. They must inform the LLP of their intention in writing at least 30days before exercising their rights and taking any action.  

Section 49B shall not prevent a supplier from exercising his other rights, including right to payment for essential goods and services provided to an LLP, under a contract for supply of essential goods and services. The newly inserted Fourth Schedule provides a list of the essential goods and services that is covered.

In conclusion, the recent amendments introduced in the LLPAA 2024 marks a promising shift towards improved governance and accountability in LLPs. With these new frameworks and future guidelines, stakeholders have the opportunity to enhance cooperate governance and embed greater transparency in their reporting practices.

If you have any questions or require any additional information, please contact Chan Xian Ai, or the Zaid Ibrahim & Co partner you usually deal with. This article was prepared with the assistance of Ellesya Myra Faredz, Associate at Zaid Ibrahim & Co.

This article examines the preservation and protection of traditional knowledge of indigenous communities in Malaysia and the role of international treaties and local legislation in deterring biopiracy and unfair exploitation of traditional knowledge.

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In late September 2024, Malaysia saw significant developments in its environmental sector when the Ministry of Natural Resources and Environmental Sustainability (“NRES”) announced the new national policy on climate change (“NPCC 2.0”). A consultation paper (“Consultation Paper”) for a national climate change bill (“NCCBill”) followed soon after, inviting public opinion and input for Malaysia’s climate change act.

The release of both documents was long awaited and arguably overdue, given that Malaysia’s last climate change policy (“NPCC 1.0”) was released almost 15 years ago. Since 2019, both the Pakatan Harapan and Perikatan Nasional administrations have made various announcement about an upcoming climate change act.

What does NPCC 2.0 contain and how does it differ from NPCC 1.0? What does Malaysia’s climate change act aim to achieve and how does it compare against climate change legislation in other jurisdictions? Most importantly, how does the NPCC 2.0 affect Malaysia and Malaysians? Amin Abdul Majid and Cheng Yen of Zaid Ibrahim & Co.’s Infrastructure, Energy and Utilities Practice Group briefly explore these important questions.

National Policy on Climate Change 2.0

NPCC 2.0 is a formidable instrument, more than double the length of NPCC 1.0 and similarly extensive in reach.

NPCC 2.0 was released in the context of Malaysia having recently gone through various extreme climate events, including suffering RM7.9 billion losses from floods, while on the other hand, increasing greenhouse gases emissions by more than 30% since 2005. In the light of these sobering statistics, NPCC 2.0 pushes for and authorises the development of regulatory instruments for Malaysia’s climate related strategies, to help put things right.

NPCC 2.0 attempts to do this through its four guiding principles:

• upholding the principle of “common but differentiated responsibilities” which lies at the heart of the Paris Agreement;
• ensuring a just and equitable transition;
• adopting a whole of society and nation approach; and
• forming integrated and multi-sectoral solutions to address climate mitigation and adaptation.

The first principle was one that we had already seen in NPCC 1.0, but the other guiding principles in NPCC 2.0 displays a more serious commitment to our national climate agenda and international obligations.

There are five strategic thrusts arising from the guiding principles, and they are depicted below.

Interestingly, unlike the earlier NPCC 1.0, NPCC 2.0 contains what appears to be deliverables for the Malaysian Government, termed ‘catalytic initiatives’ under each Strategic Thrust, which are intended to boost Malaysia’s climate actions. They are as follows:

There are no fixed timelines for each of these catalytic initiatives and it would appear that they can all be implemented concurrently. This will allow Malaysia to adopt what is commonly known in climate change circles as the “all of the above” approach for climate action.      

In summary, the NPCC 2.0 is a promising development for Malaysia and has the potential to encourage initiatives and investments in the many areas and activities that it covers. As one example, and which we discuss in more detail below, the prospective climate change act can facilitate the collection of reliable data, leading to the strengthening of confidence in our climate research, our proposed climate actions and direction of travel. The focus on carbon pricing and carbon markets in NPCC 2.0 also means that the business community and investors can anticipate active developments in this area, most likely following the path that led to Malaysia’s voluntary carbon market and our responses to the European Union’s Carbon Border Adjustment Mechanism.

A final point that should be mentioned is that Malaysia would benefit from learning our lessons from NPCC1.0 and assessing how it fared, and how the new policy can do better. It is not insignificant that the NPCC 1.0 sets out important principles, strategic thrusts and key actions, yet did not appear to consistently guide Malaysia’s development of climate strategies. In fact, the NPCC 1.0 received no specific mention in Parliament when climate-related legislation such as the Renewable Energy Act, Sustainable Energy Development Authority Act and Energy Efficiency and Conservation Act were debated and passed. It would be advisable for NRES to investigate the reasons for this and come up with improvements to better facilitate the successful implementation of NPCC 2.0, upon which so much of our environment and wellbeing depends.    

National Climate Change Bill

In 2019 and 2020, the Malaysian Government announced that a national climate change framework was being drafted and a climate change act for Malaysia was imminent. Working on these announcements, and given that no legislation was in fact introduced, in 2021 our Infrastructure, Energy and Utilities Practice Group attempted to envisage what the important legislation would prescribe, and an article was published with the aim to facilitate discussion.

Our article expressed expectations and hope that the legislation would at least contain a definite emissions target; the concept and application of accountability to achieve such target; the establishment of an institution to assist the Malaysian Government to obtain independent advice on climate change; and regulations on an emissions trading scheme or system. Looking at the Consultation Paper issued by NRES in early October 2024, it appears that the NCC Bill will have these and more.

One can gather from the Consultation Paper that the NCC Bill would have the following sections and provisions:

Of these proposed provisions, the following subject matters are of special interest:

• the formulation and implementation of national targets, with clear benchmarks for emission reductions sustainable practices;
• the establishment of a regulatory entity to administer, implement and enforce the legislation;
• the mandating of data and information requirements through the development of a national integrated climate data repository;
• the establishment and regulation of carbon trading and an emission trading scheme (“ETS”); and
• the establishment of a national registry for climate change.

On the subject matter of national targets, it is encouraging that the Government intends to prescribe that the NRES Minister will regularly set targets, consistent with Malaysia’s obligations to submit Nationally Determined Contributions under Article 4, Paragraph 2 of the Paris Agreement. Unlike legislation in other jurisdictions, such as the United Kingdom and Denmark, the responsibility of the Minister does not appear to extend to bearing responsibility for the targets set. It seems also that the important commitment to come up with targets that are progressively better has been omitted – making it possible that Malaysia’s targets at some point may be less ambitious than the previously declared aspiration. This is also rather disappointing, considering the need to introduce and implement the catalytic initiatives discussed above.

The proposed sections on data and a national registry in the NCC Bill are commendable, not least in facilitating the collection of reliable data that will enable repeatable research and analyses. Malaysia already has considerable expertise in data collection as demonstrated in the databases hosted by the Department of Statistics, the Energy Commission and National Hydraulic Research Institute of Malaysia, to name a few. The intended mandating of data input is likely to improve this process, especially if contributions from all agencies and States can be secured on a regular basis. It is possible too that the data required for the implementation of the eventual Climate Change Act will need to focus on carbon emissions, measurements and monitoring; some of which are new areas for Malaysia. It should be noted that other jurisdictions may not have this component in their climate change legislation, but this is often because countries such as New Zealand, the Philippines and the state of Victoria in Australia already have legislation relating to access to information and data.

In as far as carbon trading and the ETS are concerned, the Malaysian Government’s intent to introduce carbon taxes have been made clear in the recent Budget speech in October. Malaysia must therefore implement carbon taxes and other related initiatives in accordance with best practices. This includes adopting a phased approach to allow for refinements, as has been the practice in Singapore. Singapore’s Government seta carbon tax of S$5/tCO₂e for the first five years from 2019 to 2023 to provide a transitional period for emitters to adjust. To support its net zero target, Singapore raised its carbon tax to S$25/tCO₂e with effect from 2024. It will be raised to S$45/tCO₂e in 2026 and 2027,with a view to reaching S$50-80/tCO₂e by 2030. This phased approach has given the Singapore Government more time to socialise the new fiscal measure, making it more palatable.

One general observation is that the NCC Bill, as currently proposed, will facilitate our collective achievement of international climate commitments. But this may not be enough to address other interplaying issues that arise from climate change. From the information that can be gleaned from the Consultation Paper, there is a focus on greenhouse gases, carbon emissions and credits but the NCC Bill could perhaps benefit from more directly addressing other matters raised in the new NPCC, such as utilising climate action to catalyse economic growth and climate justice.

As mentioned in the NPCC 2.0, the transition to a low carbon economy and climate resilient development must be careful and responsible, taking into account and being empathetic towards the livelihoods of Malaysians, particularly vulnerable groups. Since we wrote on the potential climate change legislation for Malaysia, the country has seen the introduction of various relevant policies such as the Renewable Energy Roadmap, the National Energy Transition Roadmap and the National Industrial Masterplan which focuses on a just transition, but it is unclear if and how these national plans will be facilitated by the NCC Bill.

Furthermore, we have noticed that civil society organisations have highlighted that the Bill focuses more on mitigation when adaptation and loss and damage should also be prioritised. Delay in paying attention to these areas can lead to poor upholding of climate justice in Malaysia.

The NCC Bill could be more robust from a climate justice perspective by introducing provisions to empower the Minister to prescribe regulations on adaptation and loss and damage and give national plans on these areas the force of law. Such regulations could, for instance, provide for funding to be given to local governments to enable them to implement necessary changes to adapt to loss and damage.

The regulations could also create mechanisms to enable vulnerable communities who have been impacted to have their say on measures to address loss and damage. Inspiration could be taken from other countries, for example:

• Japan’s Climate Change Adaptation Act 2018 allows authorities to take effective adaptation measures in various fields based on reliable scientific information. It also requires municipalities to establish local climate change adaptation plans.
• Philippines’ Climate Change Act 2009 expressly requires local government units to formulate local climate change action plans in accordance with the Local Government Code, the Framework and National Climate Change Action Plan of Philippines and treat adaptation as one of the irregular functions.

Conclusion

The recent release of the NPCC2.0 and the NCC Bill are very much welcome developments in Malaysia. However, in as far as the NCC Bill is concerned, there are a few aspects that can be improved. It is encouraging that NRES has opened an avenue for feedback, giving the public more than one month to provide their inputs. It is hoped that this opportunity of input and feedback created by NRES can be fully utilised. Given the complexities of a seminal legislation such as a climate change act, stakeholders including civil societies must be given sufficient time to provide their views.

If you have any questions or require any additional information, please contact  Amin Abdul Majid or the partner you usually deal with in Zaid Ibrahim & Co. This article was prepared with the assistance of Cheng Yen, Associate at Zaid Ibrahim & Co.

This alert is for general information only and is not a substitute for legal advice.

‍Introduction

Following the LIBOR scandal in 2012, many countries and financial centers have taken steps to transition their benchmark interest rates from Interbank Offered Rates (IBOR) to more objective Risk-Free Rates (RFR). IBOR rates are generally set by a rate setting body, to which financial institutions would submit the interest rates which such financial institutions have agreed (or theoretically agree) to lend to one another, for collation, setting and publication by the rate setting body.

Generally, RFR are set based on data on interest rates that are transacted in an open and liquid financial market, derived from actual financing and derivatives transactions. For such reason, RFR are generally seen to be more robust, more reflective of the actual market, and less susceptible to manipulation.

BNM Discussion Paper on KLIBOR Transition

On 27 September 2024, Bank Negara Malaysia (BNM) issued a Discussion Paper on the proposed full transition from the Kuala Lumpur Interbank Offered Rate (KLIBOR) to the Malaysian Overnight Rate (MYOR) and Malaysian Islamic Overnight Rate (MYOR-i), and the cessation of KLIBOR.

The issuance of the Discussion Paper marks the first public concrete step taken by BNM to transition Malaysia’s interest rate benchmark from KLIBOR, which has been the benchmark for Malaysian interbank lending rates since 1987, to MYOR/MYOR-i, which promises to be a more robust benchmark. MYOR is the volume-weighted average rate of unsecured overnight Ringgit interbank transactions. It was introduced by BNM in 2021 and has been quoted in parallel with KLIBOR since its introduction.

The transition from KLIBOR to MYOR/MYOR-i mirrors developments which have been taking place over the past decade in major financial centers around the world, such as:

• In the United Kingdom, LIBOR has ceased to be used since 2023. Banks have largely transitioned to RFR such as the Secured Overnight Financing Rate (SOFR) and Sterling Overnight Index Average (SONIA).
• In the United States, LIBOR has ceased to be used since 2023 and the main US Dollar interest rate benchmark is now the SOFR.
• In Singapore, the Singapore Interbank Offered Rate (SIBOR) will be discontinued by 31 December 2024 and be taken over by the Singapore Overnight Rate Average (SORA).

Proposed Timeline for KLIBOR Transition – a 3-year Roadmap

The Discussion Paper proposes a 3-year roadmap, to allow ample opportunity for Malaysian market participants to prepare for and support the transition to new financial products referencing MYOR/MYOR-i, with actual cessation of KLIBOR in 2028.

During the 3-year transition, market participants who continue to enter into KLIBOR transactions should draft appropriate transition provisions and fallback positions into their contracts, to take into account the impending cessation of KLIBOR.

Legacy KLIBOR Transactions and Contracts

Legacy contracts are transactions and contracts that reference an KLIBOR which extend past the KLIBOR cessation date. Effective management of these transactions and contracts are crucial to mitigate market disruption in the event of KLIBOR’s cessation.

The Discussion Paper sets out two main approaches to address legacy transactions and contracts:

• Active transition – where the parties actively amend legacy contracts to switch the reference away from KLIBOR to MYOR/MYOR-i ahead on the cessation date.
• Fallback provisions – where parties find difficulty in implementing active transitions, fallback provisions may be incorporated into legacy contracts. Fallback provisions govern scenarios where an IBOR has permanently ceased. Generally, fallback provisions specify the trigger event, the replacement rate and the adjustments needed to address the structural difference between the replacement rate and the IBOR. Fallback provisions will only apply following the actual cessation of an IBOR.

Feedback Deadlines

Market participants may submit feedback on the Discussion Paper to BNM electronically, by no later than 27 October 2024, using the hyperlinks set out in the Discussion Paper, which may be accessed here.

Conclusion

Sufficient and timely efforts by market participants are crucial to manage the risks of the transition from KLIBOR to LIBOR.

Malaysia has the advantage of observing IBOR transition processes in other jurisdictions such as the United Kingdom, United States, Singapore, Hong Kong and Japan. Hopefully, this will ease the transition process as many of the issues would have been fleshed out and dealt with in those jurisdictions.

The KLIBOR transition process will not only involve banks and financial institutions, but also their customers and borrowers. It is expected that the banks and financial institutions would normally take the lead in the transition process, but customers and borrowers (especially those that have large financing facilities and derivatives transactions pegged to KLIBOR) will have vital roles to play as well.

Based on the experience from other jurisdictions, these are the general steps which market participants have to go through when faced with a potential cessation of KLIBOR:

1. Understand the regulatory changes and their impact on outstanding financing and derivatives contracts and transactions;
2. Review all outstanding financing and derivatives contracts and determine the best way to transition from KLIBOR;
3. Formulate an implementation plan to amend all outstanding KLIBOR-denominated contracts and transactions;
4. Identify the group companies and entities which would be affected by the implementation plan;
5. Identify the counterparties to such contracts and transactions;
6. Negotiate the revised contracts and transactions with the identified counterparties; and
7. Identify, amend and upgrade (where necessary) all affected systems and processes, which may include IT, accounting, compliance and other systems and processes.

There would also be tax, accounting and legal issues to consider. Early involvement of the market participant’s lawyers and legal departments in the KLIBOR transition process would be critical in preventing disputes, by ensuring all terms are clear and compliant with regulatory standards.

If you have any questions or require any additional information, please contact  Loo Tatt King or the partner you usually deal with in Zaid Ibrahim & Co.

This alert is for general information only and is not a substitute for legal advice.

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Introduction

Foreclosure is a legal mechanism through which a lender (“Chargee”) attempts to recover the balance of a loan from the owner of the land (“Chargor”) who has defaulted by forcing the sale of the asset used as collateral, typically real estate. In Malaysia, the foreclosure process is a critical component of debt recovery, particularly incases involving secured loans. The process is governed by a stringent legal framework that ensures the protection of both the Chargee’s and the Chargor’s rights. This article delves into the intricacies of foreclosure proceedings in Malaysia, outlining the legal framework, procedural steps, the Chargor’s rights, challenges, and recent developments in the industry.

Legal Framework Governing Foreclosure in Malaysia

Foreclosure in Malaysia is primarily regulated by the National Land Code 1965 (“NLC”). The NLC prescribes the procedures and legal requirements that must be followed when a Chargee seeks to foreclose on a property. Malaysian law mandates that the Chargee obtain an Order for Sale before proceeding with the foreclosure. This legal requirement ensures that the foreclosure process is conducted under judicial oversight, providing a safeguard against arbitrary or unjust actions by the Chargee.

An application for an Order for Sale can be made either to the High Court or the Land Office, depending on the type of land title. For land held under a Registry title, the application must be made to the High Court, while for land under a Land Office title, the application must be made to the Land Office.

The Foreclosure Process in Malaysia for Land Titles Held under Registry Title

Chargor’s Rights and Defenses

Chargors are afforded several rights and defenses in foreclosure proceedings. One of the most critical rights is the Right of Redemption, which allows the Chargor to prevent the foreclosure by paying off the outstanding debt before the sale. This right provides the Chargor with an opportunity to retain their property if they can secure the necessary funds.

Chargor may also challenge the foreclosure on the ground that there is an existence of a Cause to the Contrary, such as proving exceptions to indefeasibility under sections 340(2), (3), and (4) of the NLC, or alleging that the Chargee failed to comply with procedural requirements — e.g., disputing the validity of the Notice of Default, or arguing that the grant of the Order for Sale would be contrary to some rule of law or equity.

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Challenges in Foreclosure Proceedings

Despite the structured legal framework, foreclosure proceedings in Malaysia are not without challenges. Delays in the legal process are common, particularly if the Chargor raises multiple defenses or if there are disputes over the property’s valuation. These delays can prolong the uncertainty and financial strain on both parties.

The auction process can also pose challenges, especially if the property attracts low bids or if there is limited buyer interest. This scenario may result in the property being sold below its market value, which can be detrimental to the Chargor and insufficient for the Chargee to recover the full debt.

Recent Developments

1.      A Speedy Departure – Thameez Nisha Hasseem v Maybank Allied Bank Bhd [2023] 5 CLJ 874

Conventionally, actions filed in court are bound by the Limitation Act 1953. However, the issue of whether foreclosure is an “action” coming within the Limitation Act 1953 was recently clarified by the Federal Court.

In 2020, the Federal Court in CIMB Bank Bhd v Sivadevi Sivalingam [2020] 2 CLJ 151 decided in the majority that applying for an Order for Sale within the act of foreclosure is not considered an “action”, thus having liberty over the 12 year limit stated in section 21(1) of the Limitation Act 1953. This was supported by the preceding case of Kandiah Peter v Public Bank Bhd [1994] 4 CLJ 332, which stated that a Chargee merely “enforces their rights” by exercising their statutory remedy against the Chargor in default – i.e., not an “action”.

Just three years later, however, the Federal Court then departed from that decision. In 2023, the Federal Court ruled in Thameez Nisha Hasseem v Maybank Allied Bank Bhd that the act of foreclosure is in fact an “action” when read in conjunction with the NLC, the Rules of Court 2012, and the Courts of Judicature Act 1964, hence being bound by the Limitation Act 1953, wherein no action can be enforced after 12 years from the date of the first payment default.

2.      How Fatal is Fatal? – MIDF Amanah Investment Bank Bhd v Vahana Offshore (M) Sdn Bhd  [2024] CLJU 31

In January 2024, the Plaintiff in MIDF Amanah Investment Bank Bhd v Vahana Offshore (M) Sdn Bhd failed to exhibit the NLC charge in its affidavit in support of its application for an Order for Sale. The key issue was whether it is possible for the Plaintiff to still be granted the Order for Sale despite this technical error which most would consider fatal.

As per Order 83 Rule 3 of the Rules of Court 2012, the Affidavit in support of the Originating Summons “shall comply with the following provisions of the rules”, one of the rules being “the Affidavit shall exhibit a copy of this charge”. The Defendant challenged the application on, inter alia, this ground of failure to exhibit the charge.

The Plaintiff then asserted that the requirements under Order 83 can be waived under Order 1A and Order 2 Rule 1 Rules of Court 2012. This was as it was a genuine oversight wherein the charge was mentioned in the affidavit although it was inadvertently not exhibited and even the Defendant had already acknowledged the charge. Moreover, the Plaintiff had also filed an amended affidavit, quelling the error.

In the High Court, Leong Wai Hong JC ruled in favour of the Plaintiff, highlighting that no prejudice was caused to the Defendant with the exclusion of exhibiting the NLC charge at first instance, suggesting that non-compliance of Order 83 may not necessary be fatal to the entire claim.

However, it is to be noted that the decision of the High Court has since been overturned by the Court of Appeal, suggesting a possible contrary view that compliance with Order 83 is indeed crucial. The grounds of judgment of the Court of Appeal, which has yet to be made available, remains much anticipated to provide clarity on the issue at hand.

Conclusion

When dealing with foreclosures in Malaysia, the NLC sets out the procedural and legal requirements to be followed. When applying for an Order for Sale it has to be clarified that the Order is bound by the 12 year limit stipulated in the Limitation Act 1953, while non-compliance of Order 83 could very well be fatal to an application for Order for Sale.

The law aims to bring a measure of certainty and fairness to legal matters, despite its imperfections. In the case of foreclosure proceedings, it would be prudent to carefully comply with the procedures as have been laid out by the laws.

If you have any questions or require any additional information, please contact Chuah Jo-Shua, Foo Lyn Min, or the partner you usually deal with at Zaid Ibrahim & Co. This article was prepared with the assistance of Leim Ivan.

This article is for general information only and is not a substitute for legal advice.

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