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Bank Negara Malaysia (“BNM”) (Central Bank of Malaysia) has recently proposed standards and guidelines for sell and buy back agreements (“SBBA”) and collateralized commodity murabahah (“CCM”) transactions used as Islamic financial instruments in the Islamic Interbank Money Market (“IIMM”).  

BNM’s exposure draft of 2 October 2023 sets out these proposals. Industry players have been asked to provide feedback by 31 October 2023, after which BNM will formalize a policy document on 1 January 2024.

The objectives of the policy document are to:

1. outline the scope of the SBBA and CCM transactions;
2. provide the regulatory requirements and BNM’s expectations for such transactions;
3. promote sound risk management practices for the conduct of such transactions; and
4. ensure compliance with Shariah principles.

Policy document will supersede previous guidance notes on SBBA

When it comes into effect, the policy document will supersede the Guidance Notes on Sell and Buy Back Agreement (“Guidance Notes”), previously issued on 28 June 2013.

The Guidance Notes provided best practices governing the conduct of the SBBA transaction. The SBBA, which is akin to the conventional repurchase (“Repo”) agreement, was modified to comply with Shariah principles and approved by the Shariah Advisory Council of BNM as an Islamic financial instrument.

A Repo agreement is guided by the Repurchase Agreement Transactions Policy Document issued by BNM in 2019. The policy document defines a Repo as a transaction which involves the sale of securities with a simultaneous agreement to repurchase them on a future date and at a higher price. The repurchase price consists of the original price plus an interest rate on the cash leg of the transaction.

In the SBBA, there are two distinct contracts which are concluded at two separate times, namely, the sale of securities in the first contract and the repurchase of the securities in the second contract. In addition, there is no stipulated condition to repurchase the securities by the seller in the first contract. The Wa’d or promise to repurchase and/or to sell the securities in the SBBA overcomes the inter-conditionality issue in the Repo, as the promise is only made upon the conclusion of the first contract.

The SBBA is thus the answer to a Shariah compliant repurchase agreement.

Policy document will enhance features and provide clarity in SBBA

The proposed policy document enhances the features of the existing SBBA transaction, namely by providing clarity to its definition and transaction sequence as follows:

The element of promise or Wa’d in the SBBA arrangement prevents inter-conditionality between the sale and purchase transactions entered by the SBBA buyer and SBBA seller.

Key differences between the policy document and previous guidance notes

The key difference between the policy document and the Guidance Notes is the introduction of CCM as an alternative Islamic financial instrument for the IIMM. The CCM is an arrangement based on the Shariah principle of murabahah where a CCM pledgor buys commodity from a CCM pledgee on deferred payment terms. The CCM pledgor then pledges Shariah compliant securities as collateral for the deferred payment obligation under the murabahah contract.

Other salient differences between the Guidance Notes and the policy documents are set out below:

Conclusion

In 2014, the International Islamic Financial Market issued a Master Collateralized Murabahah Agreement (“MCMA”) which is a standard template used as an alternative to the Repo. The MCMA is based on the Shariah principles of murabahah and rahn and aims to address the issues and diversity in practices around the buying and selling of securities by the same counterparties at a future date.

Since then, international banking institutions, especially in the United Arab Emirates, have used the MCMA as a liquidity management tool.

Therefore, the introduction of CCM in this proposed BNM’s policy document may be more appealing to banking institutions that are less favourable towards the SBBA.

If you have any questions or require any additional information, please contact Lily Adelina Hashim, Raihan Naseeha Rafidi, or the Zaid Ibrahim & Co partner you usually deal with.

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

In our previous article, we discussed the initiatives implemented by the Government to ease the process of discharge of bankrupts. This included the conditions and procedures for discharging bankrupts with small-scale debts, as well as proposed amendments to the Insolvency Act 1967aimed at enhancing the provisions for discharge of bankrupt and the administration of a bankrupt’s estate. 

The recent enactment of the Insolvency (Amendment) Act 2023 has now come into effect, implementing the proposed amendments.  

Below, we summarize the key amendments to Malaysian insolvency law.

Additional categories of bankrupt individuals eligible for discharge

Prior to the amendment, the discharge of a bankrupt under section 33A was at the discretion of the Director General of Insolvency (DGI), with a minimum waiting period of five years from the bankruptcy order and subject to section 33B, which allowed creditors to object to the discharge. However, the recent amendment expands section 33B(2A) of the Insolvency Act to include two additional categories where creditors are not permitted to object to the discharge, namely:

1. a bankrupt who is incapable of managing himself and his affairs due to any mental disorder, as certified by a psychiatrist from any government hospital;
2. a bankrupt aged seventy years and above and in the opinion of the DGI, is incapable of contributing to the administration of his estate.

Streamlined discharge process & enhanced powers for the DGI

The Amendment Act revises section 33C governing the automatic discharge of bankrupts. Previously, a bankrupt will be automatically discharged after three years if they fulfilled specific criteria, such as reaching the targeted contribution towards their provable debt and complying with obligations related to rendering an account of money and property.

Post-amendment, the financial capability of the bankrupt is taken into consideration, and the conditions for automatic discharge under section 33C are eased. The requirement to achieve the targeted contribution towards the provable debt is replaced with the obligation to pay a sum determined by the DGI for estate administration purposes, provided that the bankrupt has fulfilled his or her obligations under the Act.

In this regard, the Amendment Act introduces the suspension of automatic discharge for up to two years if the bankrupt fails to fulfil his or her obligations. The DGI is granted the power to suspend automatic discharge for a maximum of two years if the debtor does not meet his or her obligations. Additionally, the DGI may request further information regarding the debtor's income, expected income, and properties. The suspension, as per the newly inserted section 33C(1)(b), takes effect when the DGI serves a notice to creditors who filed a proof of debt within six months before the original three-year mark.

Furthermore, in line with the ‘second chance policy’, the amendments to sections 33C and 33B(2A) are applied retrospectively to cover individuals who had been declared bankrupt before the passing of this Amendment Act.

Adoption of remote communication technology and electronic communications

To align with the judiciary's transition to remote hearings, and in line with the insertion of section 15A of Court of Judicature Act 1964, the Act has been amended to accommodate remote communication technology in the administration of bankruptcy in Malaysia.

Communication pertaining to insolvency matters, including service of notices under the amended section 130 of the Insolvency Act, 1967, may now be carried out by electronic means, where consent has been obtained to do so.

It is also pertinent to note that, prior to the amendment, the Act only allowed the DGI to hold a meeting at such a place which the DGI considers to be convenient for the majority of the creditors.  Now, meetings of creditors under amended Schedule A of the Insolvency Act may be conducted through remote communication technology, among others, video link, video conferences, or any other electronic means of communication.

Dispensation of the mandatory requirement of holding the first meeting of creditors

Previously, section 15 of the Act made it mandatory for the first meeting of creditors to be held as soon as may be after a bankruptcy order is made. The meeting is confined to consider proposals for the composition or arrangement and the mode of dealing with the bankrupt’s property.

Post-amendment, the mandatory nature of the first meeting of creditors has been replaced with a discretionary power of the DGI. Nonetheless, the purpose of the section is maintained with the additional scope of any other purpose as prescribed by the Minister. The Amendment Act also replaced all references to the “first meeting of creditors” in the Insolvency Act 1967 with “meeting of creditors”.

Thus, pursuant to the Amendment Act, a meeting of creditors is no longer mandatory and will only take place upon request or when deemed necessary.

Other amendments

In addition to the above, the Amendment Act also introduces changes related to summary administration in cases where the debt is small. To provide greater flexibility in bankruptcy administration, certain monetary amounts specified in the Insolvency Act 1967 have been replaced with amounts to be prescribed by the Minister. This allows for adjustments based on prevailing economic conditions and circumstances without the need for legislative amendments.

For more information, please refer to the Insolvency (Amendment) Act 2023 and Insolvency (Amendment) Rules 2023.

Conclusion

The newly enacted amendments establish a more effective and inclusive bankruptcy administration system, aligning with the government's commitment to help bankrupt individuals secure a fresh financial start. While many are still grappling with their prior financial missteps, the enforcement of these amendments brings some relief. It is hoped that the government’s initiative to fostering bankruptcy administration will ultimately contribute to the nation’s economic development.

If you have any questions or require any additional information, please contact Khoo Kay Ping, Chuah Jo-Shua, or the Zaid Ibrahim & Co  partner you usually deal with. This article was prepared with the assistance of Chong Siau Fong, a Senior Associate at Zaid Ibrahim & Co.

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

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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 partner you usually deal with.

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

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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. 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.

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[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.

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.

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.

Source:  Consultation for the Proposed Integration of Competition Impact Assessment (CIA) intoRegulatory Impact Analysis (RIA)

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.

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]
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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.

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 partner you usually deal with.

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

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[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.

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:

1. 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;
2. 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;
3. 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
4. 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 partner you usually deal with.

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

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