Corporate and Commercial

Earlier this week, the Court of Appeal has answered that question with a clear yes. Provided that the parties have agreed to it.

In this case, Ong Seow Lee, the lender of a friendly loan, sought to recover RM70,000 from Lee Ee Foong, despite having received 50 Litecoins from Lee Ee Foong. The dispute centred on whether the cryptocurrency transfer constituted repayment of the debt, with the lender arguing that Litecoin was not legal tender and therefore could not discharge the loan.

The Court of Appeal unanimously dismissed the appeal and upheld the High Court's decision, holding that the debt had been fully discharged when the lender knowingly accepted the Litecoin as settlement.

Importantly, while the Court stopped short of recognising cryptocurrency as legal tender, it affirmed that digital assets may validly discharge contractual obligations where the parties expressly or impliedly agree to that mode of payment. The key consideration was therefore not the legal status of the asset itself, but the agreement and conduct of the parties.

Two important observations arise:

• The discharge of a debt depends on the agreement and conduct of the parties, rather than the form of the asset used as payment.
• Digital assets, while not recognised as legal tender, may nevertheless constitute valid consideration for contractual purposes.

Although the dispute involved Litecoin, the significance of this decision extends well beyond cryptocurrency. As digital assets continue to evolve from speculative investments into broader commercial and financial applications, courts are increasingly asked to apply established legal principles to new forms of value.

This decision demonstrates that long-established principles of contract law are sufficiently flexible to accommodate digital assets without requiring new legal doctrines or framework.

The takeaway is clear. If parties intend for cryptocurrency or digital assets to settle contractual obligations, that intention should be documented expressly. Key terms such as the type of digital asset, valuation methodology, timing of payment and wallet details should be clearly addressed.

Technology may evolve, but the underlying legal principles remains constant: the courts will generally give effect to what parties have objectively agreed.

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

Introduction

Trust law in Malaysia is governed principally by the Trustee Act 1949 and customary practices. The Malaysian courts will also apply the rules of equity, except where other provisions have been made by written law in Malaysia.

No special form of words is necessary to create a trust so long as that intention is clearly shown or can be inferred. However, the formalities for the declaration of a trust must be complied with in order for the trust to be valid and enforceable. Therefore, the trust must be properly constituted, and the trust property must be properly vested in the trustee. There must also be certainty of intention to create a trust, certainty of subject matter and certainty as to objects of the trust. The terms of the trust must also not infringe the rules against perpetuity and inalienability. A trustee may also be a beneficiary, in which case benefits from the trust property can accrue in his favour to the extent of his beneficial interest under the trust.

There are basically three main types of trust – fixed trusts, discretionary trusts and unit trusts. Different types of trusts can be created to fulfil various purposes, for instance to enable property to be held for people who are mentally handicapped or minors, or to enable the beneficial ownership of property to be kept confidential. A trust can also be created to hold property in succession or to protect the trust property from beneficiaries who are incapable of managing their own affairs. A testamentary trust takes effect after death and must comply with the formal requirements of a valid will, in contrast with an inter vivos trust, which may take effect immediately upon being set up.

Continue reading the full article here.

Zaid Ibrahim & Co contributed to the Lexology Panoramic: Private Equity 2026 (Fund Formation)Malaysia.

Authored by Chief Operating Officer, Chua Wei Min, Partner, Geraldine Oh and Partner (Tax) Kellie Allison Yap, the article offers a detailed overview of essential information regarding Malaysia’s private equity fund formation regime whether through the use of Malaysia vehicles of a Sdn Bhd, LLP or Labuan entities of an LP, LLP. Each with its own pros and cons.

The guide explores, among other, formation, regulation, licensing and registration requirements (CMSL/PEMC), taxation, selling restrictions and investors generally and finally, updates and trends in the vibrant VC/PE space in the last year with a continued forward momentum in 2026.

Read the full article here.

Zaid Ibrahim & Co contributed to the Lexology Panoramic: Private Equity 2026 (Transactions) Malaysia.

Authored by  Chief Operating Officer, Chua Wei Min, Partner, Muhammad Zukhairi Muhammed Salehudin and Associate, Teng Yee Von, the article offers a detailed overview of things to know regarding Malaysia’s private equity transactions.

The guide explores, among other, transactions formalities, rules and practical considerations, debt financing, shareholders' agreement and more.

Read the full article here.

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Introduction

Malaysia has enacted the Cross-Border Insolvency Act 2026 (Act 877) (“Act”), which received Royal Assent on 20 January 2026 and was published in the Gazette on 30 January 2026. The Act will come into operation on a date to be appointed by the Minister charged with responsibility for law by notification in the Gazette.

The Act adopts the principles of the UNCITRAL Model Law on Cross-Border Insolvency dated 30 May1997, representing a significant modernisation of Malaysia's insolvency regime.

Key Objectives

The Act's objectives include fostering cooperation between Malaysian and foreign courts, providing legal certainty for trade and investment, ensuring fair administration of cross-border insolvencies, maximising debtor property value, and facilitating the rescue of financially troubled businesses.

Scope of Application

The Act applies to corporations as defined in the Companies Act 2016 and the Labuan Companies Act 1990, but expressly excludes individuals under the Insolvency Act1967, limited liability partnerships, and registered businesses under various state and federal business licensing statutes.

Notably, the Act contains significant carve-outs for regulated financial institutions. It does not apply to licensed financial institutions, Islamic financial institutions, development financial institutions, member institutions under the Malaysia Deposit Insurance Corporation Act 2011, stock exchanges, derivatives exchanges, clearing houses, central depositories, and various Labuan-licensed entities including Labuan banks, investment banks, insurers, reinsurers, takaful operators, trust companies, and foundations.

Recognition of Foreign Proceedings

The Act defines "foreign proceedings" as collective judicial or administrative proceedings in a foreign State, including interim proceedings, under the law relating to insolvency in which the property and affairs of the debtor are subject to control or supervision by a foreign court, for the purposes of reorganisation or liquidation. This broad definition encompasses a wide range of insolvency-related processes, whether formal court-supervised proceedings or administrative procedures, provided they involve collective creditor participation and supervisory oversight over the debtor's property and affairs. Importantly, interim or provisional proceedings also fall within the definition, enabling foreign representatives to seek recognition even while foreign insolvency proceedings are at an early stage.

A foreign representative may apply directly to the High Court in Malaya or the High Courtin Sabah and Sarawak for recognition of foreign proceedings. Applications for recognition must be accompanied by a certified copy of the decision commencing the foreign proceedings and appointing the foreign representative, or a certificate from the foreign court affirming the existence of the foreign proceedings and the appointment. The High Court is required to determine applications for recognition at the earliest possible time.

Effects of Recognition and Relief

Upon recognition, individual actions concerning the property, rights obligations or liabilities of the debtor is stayed, execution against debtor property is stayed, and the right to dispose of debtor property is suspended. These have the same effect as a winding-up order under Malaysian law.

The Court may also grant discretionary relief upon recognition of any foreign proceedings, including orders staying actions, suspending property disposal rights, directing examination of witnesses, and entrusting property administration to the foreign representative or a Malaysian insolvency office-holder.

Access Rights

Foreign representatives have direct access to Malaysian courts and may appear in person or through an advocate. Foreign creditors have the same rights as Malaysian creditors and cannot be ranked lower than general unsecured creditors solely due to their foreign status, though foreign tax, social security, and superannuation claims may be excluded.

Cooperation with Foreign Courts and Representatives

The Act mandates cooperation between Malaysian courts and insolvency office-holders with their foreign counterparts to the maximum extent possible, including direct communication and information sharing. Cooperation may include coordinating administration of debtor property, implementing agreements on coordination of proceedings, and managing concurrent proceedings.

Concurrent Proceedings

After recognition of foreign main proceedings, Malaysian insolvency proceedings are generally limited to property located in Malaysia. Where concurrent proceedings exist, the Court must ensure consistency between relief granted and Malaysian proceedings and that automatic stays do not apply if foreign main proceedings are recognised after Malaysian proceedings have commenced.

Protection of Creditors and Interested Persons

In granting relief, the Court must ensure adequate protection for creditors (including Malaysian creditors, secured creditors, and hire-purchase parties) and may impose conditions such as requiring security. Transferring property outside Malaysia requires court leave and certification that Malaysian creditors' claims below a prescribed threshold have been satisfied.

Public Policy Exception

The Court retains discretion to refuse any action or relief that would be contrary to the public policy of Malaysia.

Avoidance Actions

Upon recognition of foreign proceedings, a foreign representative has standing to apply to the Court for avoidance actions under relevant provisions of the Companies Act 2016 and the Labuan Companies Act 1990. These include actions relating to preferences, floating charges, and other transactions that may be detrimental to creditors. However, this power does not apply retrospectively to transactions entered into before the Act comes into operation.

Regulatory Restrictions

The Act contains important restrictions where regulatory authorities are involved. Recognition, relief, and cooperation under the Act are not permitted if theywould be prohibited by certain provisions of the Financial Services Act 2013, Islamic Financial Services Act 2013, Malaysia Deposit Insurance Corporation Act 2011, or Capital Markets and Services Act 2007.

The Act also protects the finality of payment and netting arrangements under financial services legislation and the enforceability of netting provisions in qualified financial agreements. Additionally, where regulatory authorities such as Bank Negara Malaysia, the Securities Commission Malaysia, or the Labuan Financial Services Authority have issued specific directions or orders in respect of a person for purposes of financial stability or systemic risk management, recognition and relief under the Act require the prior written approval of the relevant authority.

What This Means for Local Players

Malaysian corporations and insolvency practitioners now have a structured framework for dealing with cross-border insolvencies involving foreign counter parties. Local creditors benefit from explicit statutory protections as the Act mandates that Malaysian courts must ensure their interests are adequately protected before granting relief to foreign representatives, and any transfer of debtor property outside Malaysia requires prior court leave and certification that Malaysian creditors below a prescribed threshold have been satisfied. This offers meaningful safeguards against value leakage in cross-border restructurings.

Malaysian insolvency office-holders are expressly authorised to cooperate and communicate directly with foreign courts and representatives. This legitimises cross-border coordination efforts and should reduce uncertainty when Malaysian proceedings run concurrently with foreign proceedings. However, where concurrent proceedings exist, Malaysian proceedings will generally be limited to assets located in Malaysia, which may constrain the reach of local office-holders in complex group restructurings.

For local financial institutions, the broad carve-outs in the Schedule are significant. Licensed banks, insurers, securities market operators, and other regulated entities remain subject to their sector-specific resolution regimes under the Financial Services Act 2013, Islamic Financial Services Act 2013, and the Malaysia Deposit Insurance Corporation Act 2011, rather than this Act. This preserves regulatory control over systemically important institutions and ensures continuity in how their distress situations are managed.

What This Means for Foreign Investors

Foreign investors and multinational groups with Malaysian subsidiaries or assets now have a clear pathway to seek recognition of foreign insolvency proceedings in Malaysia. The Act grants foreign representatives direct access to the Malaysian High Courts without requiring submission to full local jurisdiction, removing a significant procedural barrier. Applications for recognition must be determined at the earliest possible time.

Once foreign main proceedings are recognised, the Act provides automatic stays on individual creditor actions and executions against the debtor's Malaysian assets, mirroring the effect of a local winding-up order. This is a substantial benefit for foreign insolvency practitioners seeking to preserve asset value and prevent a race to enforcement by local creditors. Foreign representatives may also apply for discretionary relief, including orders entrusting the administration of Malaysian assets to them or examining witnesses and gathering evidence.

Foreign creditors are afforded equal treatment with Malaysian creditors in terms of participation rights and cannot be ranked lower than general unsecured creditors solely by reason of being foreign. However, foreign tax claims, social security claims, and superannuation claims may be excluded from Malaysian proceedings, which investors should factor into recovery expectations.

Critically, cooperation and recognition under the Act may be refused or subject to prior regulatory approval where financial stability concerns are engaged. Foreign investors dealing with Malaysian financial institution counterparties should be aware that the Act's benefits may not extend to situations involving regulated entities or where Bank Negara Malaysia, the Securities Commission, or the Labuan Financial Services Authority has issued specific directions.

Conclusion

The Cross-Border Insolvency Act 2026 aligns Malaysia with international best practices under the UNCITRAL Model Law. Stakeholders should familiarise themselves with the Act and monitor for its commencement date.

Please contact us if you have any questions regarding the Act's implications for your business.

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On 3 October 2025, with robust governmental support and momentum, the Ministry of Finance has successfully gazetted the order and the rules in relation to Pulau 1 of Forest City Special Financial Zone (“Single Family Office Order and Rules”).

While wealthy families have historically chosen specific established tax exempted jurisdictions to establish their generational wealth management family office structures, Malaysia is now well-positioned to compete with these jurisdictions in attracting family office establishments by having specific tax incentives and stamp duty exemptions to attract both Malaysian and foreign families to establish their family offices within the Forest City Special Financial Zone.

To date, 6 families have received conditional approval from the Securities Commission (“SC”), with indicative assets under management (“AUM”) of close to RM400 million.

Single Family Office Incentive Scheme (“Scheme”)

Families intending to set up their family office under this Scheme must establish 2 Malaysian incorporated companies - the Single Family Office Vehicle (“SFOV”) and the Single Family Office Management Company(“SFO MC”).  Both the SFOV and the SFO MC must be wholly owned, directly or indirectly, by one or more individuals, all of whom should be members of a single family. “Single Family” means a family whose members are individuals who are lineal descendants of a single ancestor and includes:

(a)           the spouse;

(b)           the biological child;

(c)           the stepchild; and

(d)           the child adopted in accordance with any written law.

The SFOV is solely for the purpose of holding the assets and investments of the single family, while the SFO MC is for the purpose of managing such assets and investments. The SFO MC is not required to be operating in Pulau 1.

SFOV

A qualifying company may apply for the Scheme to the Minister through the SC from 1 September 2024 to 31 December 2034.

A “qualifying company” is a single family fund company which [1]:

(a)           is incorporated under the Companies Act 2016 and resident in Malaysia;

(b)           is wholly owned, directly or indirectly, by a member of a single family;

(c)           operates in Pulau 1 of Forest City Special Financial Zone; and

(d)           is established solely for the purpose of holding the asset and investment activity for the interest of

                members of a single family.

A “qualifying company” will not be regarded as a qualifying company for the purposes of the Scheme if, it has claimed or been granted other tax incentives under Malaysian law. Specifically, the company will be disqualified if [2]:

(a)           a claim has been made for investment allowance for the service sector under Schedule 7B to the Income

               Tax Act 1967;

(b)           any incentive has been granted under the Promotion of Investments Act 1986;

(c)           an exemption has been granted under paragraph 127(3)(b) or subsection 127(3A) of the Income Tax Act

               1967;

(d)           an incentive scheme has been approved by the Minister under any rules made pursuant to section 154 of

                the Income Tax Act 1967;or

(e)           a claim has been made for deduction under any rules made under section 154 of the Income Tax Act 1967,

                except for:

               (i)           allowances under Schedule 3 to the Income Tax Act 1967;

               (ii)          deductions under the Income Tax (Deduction for Audit Expenditure) Rules 2006; or

               (iii)         deductions under the Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax

                             Filing Fee) Rules 2020.

Upon obtaining SC’s approval for the tax incentives granted pursuant to the Scheme, an approved company shall comply with the conditions imposed by the Minister which shall include the following conditions [3]:

(a)           for each year for the first period of 10 years of assessment, the approved company shall obtain a

                certification from SC that the approved company:

                (i)            has employed at least 2 full-time employees whom one of the employees is a professional

                                investor with a minimum salary of RM10,000;

                (ii)           has not utilised bank deposits for local investment;

                (iii)           at the end of the year of assessment—

                                (A)      has incurred an annual local operating expenditure of not less than RM500,000;

                                (B)      has assets under its management of not less than RM30 million; and

                                (C)      in relation to a local investment, has made an investment of not less than RM10 million or

                                           10% of the assets under its management referred to in subparagraph(a)(iii)(B), whichever is

                                           the lower; and

                (iv)          has not carried on any other business in Malaysia;

(b)           for each year for the following period of 10years of assessment, the approved company shall obtain a

                certification from the SC that the approved company at the end of the year of assessment:

                (i)             has assets under its management of not less than RM50 million;

                (ii)            in relation to a local investment, has made an investment of not less than RM10 million or

                                10% of the assets under its management referred to in subparagraph (b)(i), whichever is greater;

                (iii)           has employed at least 4 full-time employees; and

                (iv)          has incurred an annual local operating expenditure of not less than RM650,000.

(c)            the approved company shall comply with the conditions provided for under section 65B of the Income

                 Tax Act 1967; and

(d)            the approved company shall comply with any guidelines issued by the SC.

Tax incentives under the Forest City Special Financial Zone framework

Pulau 1 was designated as a duty-free island and officially recognised as a “Designated Area” under Malaysia’s Sales Tax and Services Tax regimes, with similar duty-free status as Langkawi, Labuan, and Pangkor.

Effective 1 September 2024, the tax incentives for the SFOV include:

(a)           0% income tax rate for the first period of 10 years of assessment and 0% income tax rate the following

                period of 10 years of assessment by the approved company.[4]

(b)           Full exemption on gains from share disposal from 1 September 2024 to 31 December 2034, subject to

                further conditions.[5]

(c)           Full exemption on income received from any qualifying persons for income received on or before 31

                August 2034, subject to conditions.[6]

(d)           10% of industrial building allowance on the capital expenditure for the construction or purchase of an

                industrial building for Year of Assessment 2024 onwards until 31 December 2034, subject to conditions.[7]

(e)           Deduction up to RM500,000 maximum for certified relocation costs, subject to conditions.[8]

Stamp Duty exemptions under the Forest City Special Financial Zone framework

Apart from tax incentives, transactions and transfers of a qualifying asset executed from 1 September 2024 to 31 December 2034 may qualify for a range of stamp duty exemptions introduced by the Government to encourage investment and the establishment of family offices in the area.

The key stamp duty exemptions are:

(a)           Exemption of stamp duty for transfers of qualifying assets between single family fund companies and

                their related family entities.[9]

(b)           50% remission on loan or financing agreements for eligible individuals[10] and qualifying investors[11]

                purchasing completed residential or commercial units in Pulau 1.

(c)           50% remission on property transfer instruments for eligible individuals[12] and qualifying investors[13]

                purchasing completed residential or commercial units in Pulau 1.

Real Property Gains Tax (“RPGT”) exemptions under the Forest City Special Financial Zone framework

RPGT, a tax imposed on profits arising from the disposal of real property in Malaysia, now offers progressive exemptions for non-citizen and non-permanent resident individuals disposing of property within Pulau 1 of Forest City Special Financial Zone. Effective from 1 September 2024 to 31 July 2034, the Scheme provides for progressive reductions in RPGT rates during the initial years of ownership, culminating in a full exemption after the sixth year, to promote long-term property investment in Pulau 1.[14]

The introduction of the newly implemented Single Family Office Order and Rules marks a significant milestone in Malaysia’s efforts to position itself as a regional hub for wealth management and family office activities. The comprehensive incentives framework under the Forest City Special Financial Zone reflects the Government’s continued commitment to ensuring the success of the Scheme, as evidenced by the growing number of family office applications currently being reviewed by the SC.

Please feel free to reach out to the contributing partners and associates to this alert – Chua Wei Min, Lee Lily @ Lee Eng Cher, Sarah Menon and Coe Tay for further information.

[1] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[2] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[3] Income Tax (SingleFamily Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[4] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[5] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone) (Exemption) Order 2025

[6] Income Tax (Income of Non-Resident Person) (Pulau 1 of Forest City Special Financial Zone)(Exemption) Order 2025

[7] Income Tax (Industrial Building Allowance) (Pulau 1 of Forest City Special Financial Zone) Rules 2025

[8] Income Tax (Deduction of Cost for Relocation of Business) (Pulau 1 of Forest City Special Financial Zone) Rules 2025

[9] Stamp Duty (Single Family Fund Company) (Pulau 1 of Forest City Special Financial Zone)(Exemption) Order 2025

[10] Stamp Duty (Instrument of Loan or Financing Agreement in relation to Individual) (Pulau 1 of Forest City Special Financial Zone) (Remission) Order 2025

[11] Stamp Duty (Instrument of Loan or Financing in relation to Qualifying Person) (Pulau 1 of Forest City Special Financial Zone) (Remission) Order 2025

[12] Stamp Duty (Instrument of Transfer in relation to Individual) (Pulau 1 of Forest City Special Financial Zone)(Remission) Order 2025

[13] Stamp Duty (Instrument of Transfer in relation to Qualifying Person) (Pulau 1 of Forest City Special Financial Zone)(Remission) Order 2025

[14] Real Property Gains Tax (Pulau 1 of Forest City Special Financial Zone) (Exemption) Order 2025

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