Firm Profile > Azmi & Associates > Kuala Lumpur, Malaysia
Azmi & Associates Offices
14TH FLOOR, MENARA KECK SENG
203 JALAN BUKIT BINTANG
55100 KUALA LUMPUR
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Azmi & Associates > The Legal 500 Rankings
Corporate and M&A Tier 3
The corporate and M&A team at Azmi & Associates is instructed by a range of local and international companies and government-owned entities in transactions, and recently assisted Groupe Lactalis on its acquisition of Nestle’s Chilled Dairy Business. Practice head Azmi Mohd Ali has a breadth of experience across a full range of corporate transactions.
Islamic finance Tier 3
Azmi & Associates is instructed in a range of debt or equity financing work with experience both advising on transactions and developing Islamic finance structures. Ahmad Lutfi Abdull Mutalip heads the practice which includes Ahmad Syahir Yahya, who has particular experience developing common Islamic banking documentation based on the Shariah concepts of Murabahah, Tawarruq, Musyarakah, Bai’ Sarf and Ijarah.
Labour and employment Tier 3
The employment and industrial relations team at Azmi & Associates is instructed to advise on labour law aspects of corporate transactions and commercial and contractual matters as well representing clients in negotiations of collective agreements and employer/employee disputes. Melinda Marie D’Angelus has experience in advising trade unions and employers in contentious and non-contentious matters.
Real estate and construction Tier 3
The real estate practice at Azmi & Associates has experience advising corporates and real estate sector clients on transactions. Practice head Zuhaidi Mohd Shahari has particular experience in advising international clients on projects and real estate transactions in Malaysia.
Shipping Tier 3
The admiralty and shipping practice at Azmi & Associates advises clients on a range of issues from ship registration, vessel finance and marine insurance to ship arrest, collisions, cargo claims and other shipping-associated disputes. Practice head Philip Teoh is a name to note for contentious and non-contentious shipping, insurance and international trade matters.
Banking and finance Tier 4
Azmi & Associates' banking and finance team counts domestic and international financial institutions, as well as corproate borrowers, among its clients. Ahmad Lutfi Abdull Mutalip, whose experience includes advising on private debt securities, syndicated financing, structured & project financing, heads up the practice.
Azmi & Associates > Firm Profile
The firm: Azmi & Associates is a fully fledged Malaysian corporate and commercial law firm which has been actively involved in undertaking various legal assignments, including those involving mergers and acquisitions, oil and gas, energy, capital and debt markets, banking and finance transactions (both Islamic and conventional), intellectual property, civil litigation, alternative dispute resolution, corporate conveyancing, compliance, aviation, shipping, maritime, logistics, employment and labour, restructuring and insolvency.
Clients range from small and medium enterprise companies to public listed companies and foreign multinationals. The firm is now in its second decade of service – having grown from 11 lawyers to its current strength of 70 lawyers, comprising 17 partners and 53 associates and assisted by an additional 15 trainee lawyers and 80 qualified and trained support personnel.
The firm is headquartered in Kuala Lumpur and has branch offices in Johor Bahru and Singapore. The firm has expanded to include a China desk, comprising bilingual Mandarin-proficient lawyers. The team is diverse, multi lingual, internationally trained with a modern outlook and proactive approach.
Azmi & Associates’ global reach is further enhanced by its other international alliances, among which is the TerraLex network comprising 17,000 lawyers across more than 100 jurisdictions, Asean Plus Group and First Law International.
The strong support of clients for the innovative work and responsive service of the firm’s commercially savvy lawyers has earned the firm accolades and global recognitions on international legal directory listings and publications, such as Asian Legal Business, The Legal 500, Chambers Global and IFLR1000. The firm is ranked as the eighth largest law firm in Malaysia.
Areas of practice: Azmi & Associates’ starting point is the commercial goals set for each project.
The firm’s pragmatic and outcome-focused lawyers combine strong technical legal skills and sound industry experience with a commercial and innovative approach to clients’ business needs. The firm works closely with clients to assist in all legal aspects of projects, from simple transactions to large, complex development projects.
The firm understands issues from all perspectives, having advised and worked with major private and public sector clients across a wide range of business focuses. Among its significant clients are: developers, construction companies; leading financial institutions and firms, banks and lenders; investors and property agents; major multinational corporations; federal, state and local government bodies.
Azmi & Associates offers deep sector-specific knowledge and a wealth of experience to its clients, in the most cost-effective manner. By providing clients with lawyers equipped with great depth and breadth of industry experience, the firm is able to deliver seamless services quickly and efficiently while focusing on key commercial aspects of the deal and communicating effectively with clients.
Key areas of practice: mergers and acquisitions, Islamic banking, financial services and banking, capital and debt markets, venture capital/private equity, litigation and alternative dispute resolution, inbound and outbound investments, intellectual property, information technology, communication and media, data protection, pharmaceutical/life sciences, energy/renewable energy, oil and gas, mining and natural resources, real estate and property-related ventures, infrastructure, projects and concessions, construction, fundraising and debt restructuring, competition law, project finance, insurance, international trade, admiralty and shipping, transportation and logistics, employment and labour, industrial relations, wealth management/succession planning, trust/endowment, compliance, China-related works, aviation, anti-trust.
|Foreign investment||Dato' Azmi Mohd Ali|
|Foreign investment||Sharizan bin Sarif|
|Foreign investment||Justin Dominic Wong|
|Antitrust and competition||Mohd Rasheed Khan|
|Aviation||Norhisham Abd Bahrin|
|Aviation||Ahmed Ezzedin bin Mohammed|
|Banking and finance||Ahmad Lutfi bin Abdull Mutalip|
|Banking and finance||Farhah Hayati Mamat|
|Capital markets||Serina Abdul Samad|
|Capital markets||Moo Eng Thing|
|Compliance/regulatory||Norhisham Abd Bahrin|
|Islamic finance||Ahmad Lutfi Abdull Mutalip|
|Islamic finance||Farhah Hayati Mamat|
|Islamic finance||Ahmad Syahir Yahya|
|Employment and industrial relations||Melinda Marie D'Angelus|
|Employment and industrial relations||Mohd Rasheed Khan|
|Energy and natural resources||Mohd Rasheed Khan|
|Energy and natural resources||Dato' Azmi Mohd Ali|
|Shipping/insurance||Melinda Marie D'Angelus|
|Intellectual property||Khairul Fazli Abdul Kadir|
|Intellectual property||Azarith Sofia Aziz|
|Arbitration||Azlan bin Sulaiman|
|Arbitration||Raja Ahmad Mohzanuddin Shah|
|Corporate/M&A||Dato' Azmi Mohd Ali|
|Corporate/M&A||Rosinah Mohd Salleh|
|Litigation and dispute resolution||Raja Ahmad Mohzanuddin Shah|
|Litigation and dispute resolution||Abu Daud Abd Rahim|
|Mr Mohd. Shah Hashim||Mohd Shah has extensive experience in legal and commercial transactions affecting the…||View Profile|
Staff FiguresNumber of lawyers : 70
LanguagesBengali Cantonese English Hindi Malay Mandarin Tamil
MembershipsTerralex Network ASEANPlus Group First Law International
OtherContacts : Dato' Azmi Mohd Ali (senior partner; email@example.com) Contacts : Ahmad Lutfi Abdull Mutalip (managing partner; firstname.lastname@example.org)
Client: Ingress Group of Companies
Testimonial: “The relationship between Ingress Group of Companies and Azmi & Associates can be traced back to as early as 2001. Despite the modest set-up, Dato Azmi managed to provide in-depth advisory services and documentations on corporate issues. With his experience and knowledge coupled with a reliable due diligence team, Ingress Group managed to acquire a foreign company without much hassle and the transaction was completed within the agreed time line. This marked the start of beneficial relationship between Ingress and the Firm. Dato Azmi has proven until now that he is easily accessible even with short notices. The quality of advices given and the legal opinions rendered has been, until now, remain the key factor that distinguishes the Firm from other legal firms in Malaysia. Being a member of TerraLex, cross border transactions have become much easier for Ingress where legal or regulatory issues of foreign jurisdiction are adequately addressed in a timely manner. The virtues and traits of the Firm during its early set up have been successfully inculcated to the current partners and lawyers of the Firm. These merits have been the key considerations for Ingress to keep engaging the Firm to be its main legal advisor.”
Client: Abu Bakar Isa Ramat, Vice President/Chief Counsel
Company: Global Ventures Holdings Berhad
Testimonial: “My team and I have had the pleasure of collaborating with Dato Azmi and his team over a number of corporate and commercial transactions these past years. I have discerned that Dato Azmi is a lawyer with deep experience in a broad range of practice areas including joint ventures, project finance, mergers and acquisitions with strategic approaches which are critical to effectively and efficiently handle the many nuances of large and complex transactions. He also leads a very strong team that is focused on client outcomes and has an excellent understanding of M&A market dynamics locally and abroad. The legal advice and support provided by them were always well considered, balanced, pragmatic and unambiguous, based on their wealth of experience in dealing with a broad range of clients and transactions. I applaud the legal firms client-centric approach and responsiveness, and I find that they are easy to deal with whilst adhering to their fee agreement with us. I would highly recommend Messrs. Azmi & Associates for corporate and commercial works”
Press Releases18th November 2020
Azmi & Associates is pleased to announce the appointment of Mahadi Abdullah as the Firm’s Oil & Gas Industry Advisor with effect from 9 November 2020. His appointment is in line with the Firm’s strategic decision to build up our Oil & Gas Practice Group.
13th November 2020 Azmi & Associates is pleased to announce the appointment of Mohd Zam Mustaman as its new Senior Associate cum Senior Advisor for the Johor Bahru office. Mohd Zam has immense experience in the corporate and legal sector. Mohd Zam graduated with LL.B (Hons.) from the University of Wales at Cardiff in 1989 and was called to the Malaysian Bar and admitted to the roll of Advocates and Solicitors in 1993. He is also registered as a Licensed Company Secretary (LS 0009020-2006).
29th January 2019
Azmi & Associates is pleased to announce the promotion and hiring across the firm of fourteen (14) lawyers as mentioned below, five (5) to Senior Associate 1, eight (8) to Senior Associate 2 and one (1) admission as an Associate, with effect from 7th January 2019, as a part of the firm’s recognition and appreciation of the efforts, growth and development of its members.
4th January 2019 Azmi & Associates is pleased to announce the appointment of Sharifah Sazita Syed Hamzah as its new partner of the Firm’s Infrastructure, PPP and Project Finance (IPPF) Practice Group, in line with the Firm’s growth strategy and continued expansion.
22nd November 2018
Azmi & Associates is pleased to announce that it is the first law firm in Malaysia to have been granted a licence by the Bar Council of Malaysia to employ Pierre Brochet as Foreign Qualified Lawyer. Pierre is qualified to practice as a Solicitor of the Senior Courts of England and Wales and as an Avocat before the French (Paris) Bar.
Legal Developments26th November 2020
1.1 While the verdict of Dato’ Seri Najib Razak’s (“DSNR”) criminal trial on various charges relating to SRC International was handed down in the last week of July 2020, tax professionals are looking at the tax recovery action against the former Malaysian Premier.
26th November 2020 PART 1: INTRODUCTION In addressing the impact and aftermath of the COVID-19 pandemic in Malaysia, the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Bill 2020 (“the COVID-19 Bill”) was tabled for its first reading on the 12th August 2020 and was passed by the Dewan Rakyat (House of Representatives) of Malaysia on the 25th August 2020. Subsequently on 22nd September 2020, the COVID-19 Bill was finally passed by the Dewan Negara (Senate). On 23rd October 2020, it received Royal Assent and is now fully effective.
26th November 2020 PART 1: INTRODUCTION The Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) has been amended to introduce corporate liability provision for bribery and corruption under section 17A of the MACC Act, which came into effect on 1st June 2020. Prior to the introduction of section 17A, the MACC Act had only primarily focused on the prosecution of natural persons who were involved in corruption. However, with this latest introduction, the MACC is now able to directly impose corporate liability on commercial organisations including public and private limited companies whose employees or associated persons are involved in corrupted practices and dishonest commercial misconducts.
25th November 2020
Virtual general meetings are gaining wider acceptance in many parts of the world in light of the COVID-19 pandemic where more listed companies have begun conducting meetings virtually.
25th November 2020
Online trade transaction, or in its current and commonly-used term, e-commerce, broadly refers to commercial activity conducted with the aid of electronic devices. E-commerce generally refers to electronic business transactions or trades which are wholly or partially conducted over the internet.1 As e-commerce grows and becomes a more viable and, to a certain extent, safer medium of shopping/trading, it is an industry that requires a strong regulatory framework in order to ensure, among others, accountability and consumer protection. This article intends to explore the legislative framework surrounding e-commerce in Malaysia and the extent to which it regulates online businesses and protects consumers’ interests.
25th November 2020
Malaysia’s tax season is back with businesses preparing to file their income tax returns. As such, there’s no better time for a refresher course on how to lower your chargeable income. Generally, you are only taxed for the profit that you or your business earns.
25th November 2020
The Future Today
The digital marketplace has steadily grown in popularity over the last couple of years. As of January 2020, Malaysia's 6% digital service tax was implemented to levy taxes on popular online services like Netflix and Spotify. However, the “new normal” arising from the outbreak of COVID-19 has driven more transactions online and there is plenty of untapped revenue to be taxed. The Malaysian e-commerce market is projected to reach US$4.46 billion (approximately RM18.7 billion) in 2020 and revenue is expected to show an annual growth rate of 16.0% by 2024.
25th November 2020
In light of the Conditional Movement Control Order (‘CMCO’) government offices, including the Inland Revenue Board (‘IRB’ or ‘the Revenue’) are beginning to resume operations. It’s only a matter of time before the taxman comes knocking. If you are dissatisfied with Notices of Assessment or Additional Assessment served upon you, the law provides a number of ways to dispute them.
25th November 2020
A business entity in Malaysia is subject to the Income Tax Act 1967 (‘ITA 1967’) to pay taxes for any income generated through its operations. Pursuant to section 2 of the ITA 1967, most business entities are generally taxable given the wide definition of a taxable person. Nevertheless, Malaysia offers tax exemptions to a certain number of entities which are not for profit in character such as companies limited by guarantee, foundations and non-profit organisations.
25th November 2020
With the recent announcement from Boustead Holdings Bhd that it had file a suit against its former managements for negligence; breach of fiduciary duties under the Companies Act 1965 and is seeking a sum of £6.4 million (RM35.37 million current value)1, this article will provide an insight as to directors’ duties and principle of exercise of business judgement by exploring the Federal Court case of Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd and another appeal  2 MLJ 177 (“Petra”).
25th November 2020
Legislative Framework of Occupational Safety and Health in Malaysia
The legislative structure of occupational safety and health in Malaysia is governed by the Constitution. The main legislations the Occupational Safety and Health Act 1994 (“OSHA 1994”), the Factories and Machinery Act 1967 (“FMA 1967”) and the Petroleum (Safety Measures) Act 1984. This article will focus on the legislations in relation to safety and health at work and initiatives taken by the Government to reduce the occupational accidents in Malaysia.
25th November 2020
On 30th July 2020, the Securities Commission Malaysia (“SC”) issued new Guidelines on Conduct of Directors of Listed Corporations and Their Subsidiaries (“Guidelines”) to strengthen board governance and oversight in listed issuers and their subsidiaries.
23rd November 2020
In an effort to pave the way towards a more sustainable and green future, the Government of Malaysia (“Government”) in 2018 announced a target for the country to increase renewable energy in its energy generation mix to twenty percent (20%) by the year 2025. In carrying out this agenda, one of the key renewable energy sources focused on by the Government is solar energy. In this article, we explore the regulatory framework and the developments surrounding the solar energy industry in Malaysia.
The main statutory legislations that govern the renewable energy sector in Malaysia are as follows:
- Electricity Supply Act 1990 which regulates, amongst others, the electricity supply industry;
- Energy Commission Act 2001 which provides for the establishment of the Energy Commission of Malaysia;
- Renewable Energy Act 2011 which provides for the establishment and implementation of a special tariff system to catalyse the generation of renewable energy and to provide for related matters; and
- Sustainable Energy Development Authority Act 2011 ("SEDA Act") which provides for the establishment of the Sustainable Energy Development Authority Malaysia and to provide for its functions and powers and for related matters.
The authorities and bodies involved in the regulation of the renewable energy industry in Malaysia are:
- Ministry of Science, Technology and Innovation ("MOSTI") - Following the 14th General Election, the entire component of MOSTI, the energy and green technology components of the Ministry of Energy, Green Technology and Water ("KeTTHA") and the related components of Environment and Climate Change from the Ministry of Natural Resources and Environment ("NRE") were restructured and formed the Ministry of Energy, Science, Technology, Environment & Climate Change ("MESTECC"). Following the formation of the new Cabinet on 9th March 2020, MESTECC has been restructured and its name has been changed to MOSTI.
- Energy Commission of Malaysia ("EC") - EC is a statutory body responsible for regulating the energy sector in Peninsular Malaysia and Sabah with powers to regulate the energy supply activities in Malaysia.
- Sustainable Energy Development Authority Malaysia ("SEDA") - SEDA is a statutory body established pursuant to the SEDA Act. SEDA's functions include promoting and implementing national policy objectives for renewable energy and promoting, facilitating and developing sustainable energy.
Renewable Energy Policies
The main government policies driving the growth of the renewable energy sector are:
- National Renewable Energy Policy ("National RE Policy") - The National RE Policy was approved by the Cabinet in 2010 with the objectives of increasing the renewable energy contribution in the generation mix, facilitating growth of the renewable energy industry, ensuring reasonable renewable energy generation costs, conserving the environment for future generation and enhancing awareness on the role and importance of renewable energy.1
- Malaysia Energy Supply Industry 2.0 ("MESI 2.0") - In September 2019, the Cabinet approved MESI 2.0, a 10-year masterplan to transform and liberalise the energy sector. MESI 2.0 sets out to increase industry efficiency in the industry, to future-proof key processes, regulations and structure in the industry, and to empower consumers by democratising and decentralising the electricity supply industry.2 Some of the key planned reforms include doing away with Power Purchase Agreements ("PPAs") which offer guaranteed capacity and energy payments, issuing future PPAs via capacity auction and a quota of combined 100MW for renewable energy plants to sell electricity directly to consumers.
- Renewable Energy Transition Roadmap ("RETR") 2035 - RETR 2035 is a strategic roadmap developed by SEDA along with industry stakeholders which outlines, amongst others, the strategies and action plans to support and achieve the key renewable energy policies and targets in Malaysia.3 The roadmap will form part of Malaysia's 12th Malaysian Plan (2021-2025).4
Fiscal Incentives in Relation to Solar in Malaysia
With the object of promoting green technology, the Government had during the announcement of Budget 2014 introduced Green Technology Tax Incentives for the purchase and use of green technology which includes solar power and energy from the year assessment 2013 until 31st December 2020.
Further, in the announcement of the Budget 2020, the Government announced the extension of the Green Technology Tax Incentives until 2023 and introduced income tax exemption of up to seventy percent (70%) for a period of up to ten (10) years for companies which undertake solar leasing activities5. The incentives related to solar energy are respectively described below.
Green Investment Tax Allowance (GITA) for Assets
Applicable to companies that acquire qualifying green technology assets listed under the MyHIJAU Directory, the GITA for Assets incentive provides investment tax allowance for one hundred percent (100%) of qualifying capital expenditure incurred on green technology asset from the year of assessment 2013 (date on which the first qualifying capital expenditure incurred must not be earlier than 25th October 2013) until the year of assessment 2023. Under this incentive, the allowance can be offset against seventy percent (70%) of statutory income of the company(ies) in the year of assessment and the unutilised allowances can be carried forward until they are fully absorbed.6
Green Investment Tax Allowance (GITA) for Projects
The GITA for Projects is applicable to companies carrying out qualifying green technology projects for their business or for self-consumption. It provides one hundred percent (100%) income tax allowance on qualifying capital expenditure for a project from the year of assessment from the year of assessment 2013 (date on which the first qualifying capital expenditure incurred is not earlier than 25 October 2013) until 2023.
Similar to the GITA for Assets, the allowance can be offset against seventy percent (70%) of the statutory income in the year of assessment and any unutilized allowance can be carried forward until they are fully absorbed. However, projects which have been approved with Feed-in-Tariff ("FiT") for solar by SEDA are not eligible for GITA for Projects.7
Green Income Tax Exemption (GITE) for Services
Green Income Tax Exemption is granted to qualifying companies which provides green technology services which have been verified by GreenTech Malaysia and listed under the MyHIJAU Directory. The list of activities which qualify as green technology services include services related to renewable energy project such as system design and feasibility study, advisory and consultancy, testing and commissioning of renewable energy.8
This incentive provides for income tax exemption of one hundred percent (100%) of statutory income for the year assessment from the date the application was received by the Malaysian Investment Development Authority ("MIDA") until 2023. Note that applications made from 1st January 2020 will be eligible for income tax exemption of seventy percent (70%) of the statutory income for the year of assessment.
Green Income Tax Exemption (Solar Leasing)
This is a new incentive introduced through Budget 2020. It provides for a seventy percent (70%) income tax exemption of the statutory income of the company for the year of assessment for applications received by MIDA from 1st January 2020. This income tax exemption is applicable for a period of up to ten (10) years for companies undertaking solar leasing activities.
Green Technology Financing Scheme 2.0
In addition to the abovementioned tax incentives, the Ministry of Finance had, with the recommendation proposed by MESTECC, agreed to introduce the Green Technology Financing Scheme 2.0 ("GTFS 2.0"). The GTFS 2.0 is an enhanced version of the Green Technology Financing Scheme ("GTFS") which was first introduced back in 2010 to encourage the supply and usage of green technologies.
The GTFS offers financial aid to producers of green technology, users of green technology and Energy Services Companies ("ESCOs"). The Scheme is made available until 31 December 2020 or upon reaching a total financing/funding approval amount of RM2.0 billion. Further, the GTFS 2.0 scheme offers rebate of two percent (2%) per annum on interest and/or profit rate for the first seven (7) years for each financing with sixty percent (60%) government guarantee on green technology cost.
The financing amount and tenure for the respective eligible parties are as follows:
|Parties||Financing Amount (RM)||Financing Tenure|
|Producer of Green Technology||RM100 million per each group of company||Up to 15 years|
|User of Green Technology||RM50 million per each group of company||Up to 10 years|
|ESCOs||RM25 million per each group of company||Up to 5 years|
Solar Energy Programmes in Malaysia
There are various programmes and incentives introduced to promote solar energy in Malaysia. The details of each programme are elaborated below.
National Solar Photovoltaic Monitoring System ("PVMS")
First launched by SEDA in 2018, the PVMS is a real-time monitoring system of the performance and reliability of key components such as PV modules and inverters of grid-connected solar photovoltaic (PV) systems in Malaysia. The data and information derived from the PVMS also allows for the identification and analysis of any technical problems related to PV systems.9 From the valuable data extracted from PVMS, informative reports and analysis could be produced which are available upon subscription. The types of reports available for purchase are summary of energy generation, plant performance, meteorological data and irradiation data.10
PV system owners can voluntarily participate in this programme and monitor their own PV systems - PVMS devices will be installed, the cost of which will be borne by SEDA subject to fund availability, and PV owners will have full access to the PVMS webportal displaying the real-time and historical data of their PV systems.
Supply Agreement for Renewable Energy ("SARE") Programme
SARE is a tripartite agreement entered into between customer, investor/owner and the distribution licensee i.e. Tenaga Nasional Berhad ("TNB") aimed at increasing the accessibility and affordability of adopting solar PV systems by customers. Under SARE programme, the investor/owner leases the solar PV system to the customer whilst the solar energy purchase by the customer will be billed by TNB. In this arrangement, TNB's assumes the role of a contracting and billing agent. Customers pay a leasing fee to the investor/owner via TNB and in return, consumers do not have to pay the upfront cost to install the solar PV systems which makes investing in solar PV systems more affordable for customers. SARE supports and covers PPAs and Solar Leasing arrangements. To participate in the SARE programme, the investor/owner must be registered with SEDA.
Large Scale Solar ("LSS")
In an effort to reduce the Levelized Cost of Energy ("LCOE") for the development of large scale solar PV ("LSSPV") plants, the LSS, a competitive bidding programme, was introduced in 2016. The LSS programme is implemented by the EC who would invite bidders to submit their bids to build, own and operate LSSPV plants. The shortlisted bidders will subsequently enter into PPAs with TNB or Sabah Electricity Sdn Bhd ("SESB").
The bidding for the third and latest LSS round was opened in 2019 for the development of LSSPV Plants in Peninsular Malaysia for commercial operation in 2021. The third LSS round had one hundred and twelve (112) bidders offering an export capacity ranging from 5MW to 100MW.11 The announcement of the shortlisted bidders saw EC awarding a total of slightly less than 500MW in capacity to five (5) bidders which include foreign solar developers from Germany and France in consortium with local companies.
According to EC's requirements, participants intending to participate in LSS must be a local company with a Malaysian equity interest of at least fifty-one percent (51%) or a consortium of legal entities consisting of at least one local company and which has Malaysian equity interest in the consortium of at least fifty-one percent (51%). This effectively restricts foreign equity shareholding of a participant to forty-nine percent (49%).12
Feed-in Tariff ("FiT") for Solar Photovoltaic
FiT is a scheme which obliges the Distribution Licensees to buy the electricity produced from renewable resources (i.e. biomass, biogass, small hydropower and solar photovoltaic) from Feed-in Approval Holders at a prescribed FiT rate and for a specific period. Distribution Licensees ("DLs") refer to companies holding the licence to distribute electricity in Malaysia such as TNB, SESB and NUR Power Sdn Bhd ("NUR") while Feed-in Approval Holders ("FIAHs") refer to an individual or company who holds a feed-in approval certificate issued by SEDA and entitled to sell renewable energy at the FiT rate.
Through the FIT scheme, the FIAHs are entitled to various benefits such as the generation tariff payment where the producer of the electricity will be paid for the electricity produced, export tariff payment where the producer will be paid for the electricity generated and other incentives offered under the green technology and/or renewable energy programmes. The Feed-in Tariff for Solar Photovoltaic which was introduced in 2011 is however closed for registration since 2016 and the Net Energy Metering mechanism was introduced to replace the FiT for Solar Photovoltaic.
Net Energy Metering ("NEM")
NEM is a scheme whereby the energy produced from the solar PV installed will first be consumed by the consumer for his own consumption and any excess energy produced will be exported to the grid and sold to the Distribution Licensees at the prevailing displaced cost prescribed by the EC and the credit received can be rolled over for a maximum of twenty-four (24) months and net-off at the prevailing displaced cost.
Effective 1st January 2019, the displaced cost is replaced by a "one-on-one" offset basis whereby every 1kWh of exported to the grid will be offset against 1kWh consumed from the grid to manifest the true net energy metering concept ("NEM 2.0") and improve the return of investment of solar PV under the NEM. NEM is available in Peninsular Malaysia and Sabah. However, the New NEM Scheme is only applicable to TNB's customers in Peninsular Malaysia.
Generally, consumers who are registered with TNB in Peninsular Malaysia and SESB in Sabah and the Federal Territory of Labuan are eligible to apply for NEM. There is no equity restriction for any companies wishing to undertake the NEM scheme and the scheme is applicable to all domestic, commercial, industrial and agricultural sectors.13 The eligible consumers may participate in NEM through financing and third party ownership, subject to the mutual agreement between the NEM consumer and the investor.
The capacity limits for the PV system installed are as follows14:
|Sectors||Maximum Capacity of the PV System|
|Domestic/ Residential (single phase system)||12kW|
|Domestic/ Residential (three (3) phase system)||72kW|
|Commercial, Industrial and Agricultural||75% of Maximum Demand of the consumer's current installation: (a) based on the past 1 year average of the recorded Maximum Demand of the consumer's installation; or (b) the declared Maximum Demand for consumers with less than 1 year.|
A quota of 500 MW has been allocated for NEM for the period of 2016 to 2020. According to the SEDA Malaysia's 2019 Report Card issued on 4th January 2020, SEDA has approved a total of cumulative NEM programme quota of 108MW as at end of November 2019. This portrays a growth of 7.8 times increment of approved NEM quota as compared to the previous three years and is believed to be largely contributed by the NEM 2.0 programme. The Cumulative NEM approved from 2016 to 2019 is as tabulated below:
|Year||NEM Quota Approved by SEDA (MW)|
Peer-to-Peer Solar Energy Trading ("P2P")
Introduced by SEDA in 2019, the P2P energy trading programme provides a platform for producers of solar PV power ("prosumers") to sell excess power generated by them to other consumers through a retailer/grid operator (i.e. TNB), at a rate competitive to the retailer's tariff. The participating consumers under this programme would have the option of purchasing solar electricity either from the P2P or from the retailer. Under this programme, the grid operator is compensated with grid fee while the retailer operating the energy trading platform is compensated with retailer's fee.
The P2P energy trading programme is in line with the new MESI 2.0 initiative which aims at empowering customers with choices, encouraging more solar PV prosumers and enhancing customer experience through digital innovation. One can become a prosumer so long as he is a NEM holder registered with SEDA Malaysia and holds a generation license for system capacity of more than 72kW with the Energy Commission.
To test the viability of the P2P energy trading project, SEDA had in late 2019 launched the first pilot run for the P2P energy trading project for electricity across TNB's grid under the RETR 2035. Through a collaboration with Australia's Power Ledger Pty Ltd, the eight (8) month pilot which uses blockchain technology will run in two phases. The alpha phase which will commence for a period of two (2) months will test the technical operability of the programme while the beta phase which will run for a period of (6) months will witness the conclusion of commercial transactions under the P2P programme as the same will be enabled among solar prosumers and electricity consumers.
The P2P programme operates based on energy arbitrage opportunities and SEDA has recommended for a maximum arbitrage opportunity of ten percent (10%) as the margin. Based on the TNB tariff, it costs an average of 35.5sen for a prosumer to generate one kilo watt hour of energy and the prosumer is allowed to sell the energy at 39.05 sen per kWh. The consumer will bear the cost for purchasing the energy from the prosumer and the sandbox network charges of 6.3 sen per kWh. In light of the above, the P2P programme provides for a win-win situation for both the prosumer and consumer whereby the prosumer will earn a profit of 10% from selling the energy and the consumer will experience an eleven percent (11%) savings on the costs. By purchasing energy from a prosumer, the consumer will only have to bear a total cost of 45.35 sen per kWh instead of 50.9 sen per kWh as set by the TNB tariff.
Solar energy is a great alternative energy source which is the cleanest and most abundant renewable energy source available. Thanks to the various incentives and cost-reducing stimulus introduced in respect of solar and/or renewable energy, Malaysia has in the recent years witnessed the rise in the solar energy industry with growing investor confidence. However, we still have a long way before achieving the twenty percent (20%) targeted use of renewable energy in our generation mix by 2025. Although the current trend seems to be positive, continuous efforts must be made to boost the renewable energy sector in Malaysia.
2 Energy Commission, Energy Malaysia, Volume 17 (2018) Page 9
3 Energy Commission, Energy Malaysia, Volume 18 (2019), Page 16
5 Budget 2020 Speech, Driving Growth and Equitable Outcomes Towards, Shared Prosperity, Paragraph 67, Page 25
6 Ibid., Paragraph 4.1, Page 12
7 Ibid., Paragraph 5.2, Page 23
8 Ibid., Paragraph 6.2, Page 29
9 SEDA, About PVMS <https://pvms.seda.gov.my/pvportal/about/> accessed 9 April 2020
10 SEDA, PV Portal, Types of Reports <https://pvms.seda.gov.my/pvportal/purchase-report/> accessed 9 April 2020
11 Energy Commission, Submission of Bids - Large Scale Solar (LSS) Photovoltaic Plant <https://www.st.gov.my/contents/2019/LSS/Bid-Price-Opening-Final_26-August-2019.pdf>
12 Energy Commission, Guidelines on Large Scale Solar Photovoltaic Plant For Connection to Electricity Network, Page 6
13 Energy Commission, Guidelines for Solar Photovoltaic Installation on Net Energy Metering Scheme Paragraph 10, Page 7 .
14 Ibid., Paragraphs 19 and 20, Pages 8 to 9
Prepared by: Fozi Addina Mohamad Fozi & Shazana Abd Hapiz
23rd November 2020
The International Labour Organization (“ILO”) Forced Labour Convention (No. 29) defines forced labour as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily”. According to ILO, various indicators can be used to determine whether a situation constitutes forced labour e.g. restrictions on workers’ freedom of movement, withholding of wages or identity documents, physical or sexual violence, threats and intimidation or fraudulent debt from which workers cannot escape.1 This article will give a brief overview of the legislative and regulatory environment relating to forced labour in different countries, especially in the context of business operations and supply chains.
23rd November 2020
Section 42 of the Income Tax Act (“ITA 1967”) allows businesses to lower their tax burdens by claiming allowances for capital expenditures incurred for the purpose of business – the Initial Allowance (“IA”)1 and Annual Allowance (“AA”)2 are perhaps the most widely applied of such allowances.
23rd November 2020 The New Normal: CMCO 5 On 1st of May 2020, Prime Minister Tan Sri Muhyiddin Yassin announced the implementation of the Conditional Movement Control Order ("CMCO"), with the aim of restarting a large portion of the economic sector following the Movement Control Order ("MCO"). This was subsequently gazetted under the Prevention and Control of Infectious Diseases Act 1988 ("PCIDA"). Beginning 4th of May 2020, companies/businesses from almost all sectors of the economy are allowed to operate subject to conditions under the CMCO.
23rd November 2020 Introduction With the rapid development of technology and the widespread usage of the Internet over the last decade, anyone can have access to almost anything including the personal information of others. Today, the usage of the Internet is no longer confined to connecting people and conducting research, but it has become a platform for many to store information and advertise themselves and their businesses.
17th November 2020
The COVID-19 pandemic still rages unabated in April 2020, ravaging and affecting lives, businesses, individuals and industries worldwide in many ways that will change the world forever1. The International Labour Organization predicts that as many as 25 million jobs worldwide could be wiped out by a worldwide recession brought about by the pandemic2.
In many countries, governments imposed "lockdown" to restrict the movements of its citizens and to control the rapid spread of the pandemic. The lockdown was implemented throughout the countries in South East Asia countries in stages:
(a) Malaysia: The Malaysia Government announced a national lockdown on Mar 18, 2020, by issuing the Movement of Control Order (Restricted Movement) initially until 31st Mar 2020, but extended to 14th Apr 20203. Specific exceptions have been given to transportation and some other essential service sectors4.
(b) Indonesia: The Indonesia Government on 15th March 2020 formed the National Disaster Relieve Agency (BPNP) and declared National Disaster - Non-Natural situation until 29th May 2020 and request all citizen to work, study and pray from home with all government official work from home effectively5.
(c) Singapore: On 3rd April 2020, Singapore announced ‘circuit breaking' measures an euphemism for lockdown6. Earlier measures implemented included trade measures such as7 the Maritime and Port Authority of Singapore has started temperature screening at all sea checkpoints, including ferry and cruise terminals, PSA terminals and Jurong Port for inbound travellers. It has also taken additional precautionary measures such as prohibiting shore leave for personnel in Chinese ports, mandatory temperature checks, keeping a log of crew movements and restricting staff travel to China, among others8.
(d) Thailand: Thailand's lockdown operates until 30 April 20209.
(e) Philippines: President Rodrigo Duterte's lockdown came five weeks after the first case was discovered, and the declaration of a State of Emergency on March 25, bestowed on him extraordinary powers10.
As the pandemic raged worldwide, the plight of the passengers and crew on board Cruise Ships and the Cruise Industry came into stark focus.
The Cruise Ships, with large numbers of passengers and crew and emphasis on communal dining and group activities, became incubators of the COVID-19 virus and infections on ships like the Diamond Princess with over 600 infections have been described as floating nightmares11.
The Diamond Princess operated by Princess Cruise Lines departed from Yokohama on 4 February 2020 for a round trip cruise. On 20 January 2020, an 80-year-old passenger from Hong Kong, embarked in Yokohama, and disembarked in Hong Kong on 25 January. On 1 February, six days after leaving the ship, he visited a Hong Kong hospital, where he tested positive for COVID-19.
The ship was due to depart Yokohama for its next cruise on 4 February, but announced a delay the same day to allow Japanese authorities to screen and test passengers and crew still on board. On 4 February, the authorities announced positive test results for SARS-CoV-2 for ten people on board, the cancellation of the cruise, and that the ship was entering quarantine, affecting a total of 3,700 passengers and crew. By late March it was stated that 712 of 3,711 people on the Diamond Princess, or 19.2% had been infected by COVID-1912.
From 15 March 2020, Australia banned cruise ships arriving from foreign ports. However, exemptions were granted to allow four ships, already en route to Australia, to dock and disembark its passengers. On 19 March 2020, the Ruby Princess, which was one of the four ships given the exemption, docked in Sydney, after a cruise to New Zealand. The cruise ship was forced to return to Sydney early after a passenger reported a respiratory problem, but when disembarking passengers were not told that anyone on board presented any symptoms during the voyage.
Many countries in Southeast Asia banned the Cruise Ships from disembarking their passengers for fear of importing the virus through infected passengers and crew13. The Cruise Ships are often registered under Flags of Convenience e.g. Panama, the Bahamas and other countries chosen for their low wages, cheap fees and lenient health and safety regulations, and, more often than not, non existent tax regimes14.
At the time of writing there are still cruise ships with passengers and crew infected by COVID-19 seeking safe harbor. These ships often find difficulty to find countries and ports willing to receive them to disembark passengers15. Even the disembarking of passengers and crew from the infected vessels could not proceed without problem16. Each country can set conditions for entry into their Ports and many have denied entry to these ships seeking safe harbor. Many of the ships disembarked their passengers at Port Everglades, Florida after arduous attempts to call and disembark elsewhere17.
These incidents involving Cruise Ships pose the question whether the Cruise Industry can survive or recover from the effects of the pandemic18.
Many countries have responded to the pandemic by imposing lockdown or restricted movement. Retailers and manufacturers fail to pick up their cargo and containers because their warehouses are full or closed due to not being deemed essential service providers. Some ports remain open but have reduced workforce which exacerbate the cargo congestion. This causes disruption of the supply chain including movement of essential goods and foodstuffs19. The cargo and containers lying uncollected at the ports creating congestion and takes up space and capacity and hinders capacity for incoming cargo and containers20.
Some Ports have taken the precaution to declare ‘force majeure' to pre-empt claims and legal liability21. The closure of Ports and Port congestion have caused disruptions in the supply chain and import and exports.
The pandemic has exposed the fragility of the global supply chains and brought into acute focus the shortages of critical medical components needed in the fight against the pandemic22.
Wuhan and China in general were important manufacturing bases for manufacturing of key components for companies like Apple23. The pandemic lockdown and measures taken stopped manufacturing of crucial component items and disruption of supply chain24. When the manufacturing Countries ravaged by the pandemic find it hard to provide adequate medical care due to shortages of critical medical equipment such as ventilators, protective masks and other gear25. This has caused the rise of infections and spread of the COVID-19 virus.
In the US which is now one of the Centres of the pandemic, President Trump has asked American manufacturers to manufacture ventilators to make up the acute shortages faced by the American hospitals26.
The U.S. shortage has multiple causes, including problems with the global supply chain. Before this pandemic, for instance, China produced approximately half the world's face masks. As the infection spread across China, their exports came to a halt. Now, as the infection spreads globally and transmission in China slows, China is shipping masks to other countries as part of goodwill packages. The United States has not been a major recipient27.
The Philippines, China, India, Indonesia are among the biggest suppliers of crew members. According to one report, the pandemic has caused some 40,000 Indian crew serving on merchant and cruise ships to be stranded worldwide28.
Airline and port restrictions in most of these countries have made it nearly impossible for crew members to get home if the governments do not make special arrangements. Even if a ship reaches an open port, the crew members may still be out of luck because most international air traffic is grounded29.
The safe repatriation of the crew from the vessels will require the joint efforts of the governmental agencies, the crew manning agency and the owners30.
The Insurance implications arise from the disruption of shipping, logistics due to the pandemic.
Cargo owners, importers, risk managers and insurers need to monitor closely: (a) Accumulation of Cargo; (b) Delay; (c) Delay Clause; (d) Demurrage Charges; (e) Deviation; (f) Force Majeure; and (g) Interruptions in Transit.
The insurance implications of the disruption include31: -
(a) Cargo and stock throughput - expected limited workforce being available at all key points of the supply chain will reduce capacity to distribute and handle goods. Cargo is also envisaged to be held for a longer duration at ports and for storage locations to see a volume increase whilst stocks await their next destination.
(b) These areas raise the limitations of cover of the normal marine cover:
- Delay – although many will want to keep their cargo moving to prevent any obstacles on trading, delay during the ordinary course of transit or whilst the goods are in storage could soon be inevitable. Most cargo and stock throughput policies exclude loss or damage solely caused by delay.
- Additional costs/charges – hold-ups or re-routing goods to an alternative destination due to government prohibition will incur an additional cost. Although these costs are usually sub-limited, the additional forwarding costs clause; or similar, will provide extra financial support should you experience added expenses on top of the usual outgoings.
- Vulnerable goods – perishable items such as pharmaceutical products and food produce operate on a stringent and well-monitored time schedule. The normal cover for marine insurance does not cater to the characteristics of these cargo, as insurance cover is excluded by the exclusions of inherent vice and delay, both will operate when ports are congested and cargo clearance are delayed in the current pandemic outbreak.
The disruption caused by pandemic has legal effects.
The cargo owner who charters vessels to ports to load or to discharge cargo is required to nominate a ‘safe port' i.e. a port which the vessel can safely call at, conduct cargo operations and safely leave32. When the intended port is closed, the cargo owner/charterer would be obliged to nominate an alternative port. This is often not possible as there will not be any alternative destination the cargo can be discharged at.
If the cargo is non-essential cargo, it cannot be moved to the ports during a national lockdown. This may result in the Vessel arriving at the Port and finding no cargo to be shipped, causing incurring of costly demurrage.
Before the Vessel can take on cargo, the Vessel must be cleared by the health authorities of the port, a process of obtaining ‘free pratique', i.e. that the Vessel is free of infectious disease33. In the pandemic affected countries the process of vetting the crew may take time and this delay will fall on the shipowner, rather than on the Charterer.
The effects of the pandemic may possibly be covered in the Force Majeure Clauses in some contracts but these are not uniform and will not be always be available. The disruptive effects of the pandemic will cause losses and the result in the most part will be to determine who will bear or share these losses.
While these legal issues and disputes do not immediately arise, they will certainly surface once the countries recover from the immediate effects of the pandemic.----------
1. See How the Coronavirus is reshaping Asia's borders, business and trade https://asia.nikkei.com/Spotlight/Cover-Story/How-the-coronavirus-is-reshaping-Asia-s-borders-business-and-trade
2. See Jobs Destroyed Worldwide as Coronavirus Sparks Recession: https://www.bloomberg.com/news/articles/2020-04-03/jobs-destroyed-worldwide-as-coronavirus-sparks-recession
3. Under the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. Specific exceptions have been given to transportation and some other essential service sectors see: https://www.straitstimes.com/asia/se-asia/coronavirus-malaysia-seeks-to-clear-congested-ports-to-move-essentials-amid-curbs
7. Stefania Plama, "How Singapore Waged War On Coronavirus," The Financial Times, March 2020. https://www.ft.com/content/ca4e0db0-6aaa-11ea-800d-da70cff6e4d3
9. https://www.channelnewsasia.com/news/commentary/coronavirus-lockdown-malaysia-philippines-thailand-indonesia-sea-12589898; the lockdown had caught the migrant workforce unprepared and stranded see: https://www.aljazeera.com/news/2020/03/coronavirus-lockdown-leaves-migrant-workers-stranded-thailand-200328060111830.html
10. https://www.channelnewsasia.com/news/commentary/coronavirus-lockdown-malaysia-philippines-thailand-indonesia-sea-12589898' ;see also : https://edition.cnn.com/2020/03/17/asia/coronavirus-covid-19-update-intl-hnk/index.html
12. See McFall-Johnsen, Morgan (28 February 2020). "How the 'failed' quarantine of the Diamond Princess cruise ship started with 10 coronavirus cases and ended with more than 700". Business Insider.
13. See : https://www.thestar.com.my/news/nation/2020/03/08/malaysia-bans-cruise-ships . In the case of the Holland America Line Cruise Ship Westerdam, the Cruise Vessel allowed to call and disembark in Cambodia, there is evidence of evidence of infection in passengers who disembarked see: https://www.cnbc.com/2020/02/22/malaysia-says-american-coronavirus-case-now-tests-negative-for-virus.html
14. See Bridie Nolan writing on the case of the Ruby Princess https://www.linkedin.com/pulse/save-our-souls-catastrophe-cruising-under-flag-bridie-nolan/?trackingId=fPiSuASRD1A9LFDc7iQEfA%3D%3D
15. See Costa Fortuna, accepted by Singapore after rejected by Thailand and Malaysia: https://www.thesundaily.my/world/singapore-to-allow-ship-barred-by-malaysia-and-thailand-to-dock-AF2106002 ,
16. In the case of MS Amadea Phoenix Resen, only European crew was allowed to disembark at its port of registry at Bremerhaven : https://www.thestar.com.my/news/nation/2020/04/04/msian-duo-not-allowed-to-disembark-at-ships-port
17. As many as 120 ships carrying some 120,000 passengers were allowed to disembark, see Maritime Executive Report: https://www.maritime-executive.com/article/250-000-cruise-passengers-disembarked-in-u-s
18.See the Video Feature, Can Cruise Lines recover from Coronavirus? https://youtu.be/uDiR4Qm4O-w
19. See the disruption at the Philippines Ports see: https://www.scmp.com/week-asia/economics/article/3078166/coronavirus-philippines-cargo-containers-packed-food-pile-ports; also https://www.bloomberg.com/news/articles/2020-03-30/lockdown-leaves-thousands-of-containers-piling-up-in-manila-port
20. See the Federal Maritime Commission to address port congestion : https://www.thompsonhine.com/publications/fmc-to-address-covid-19-port-congestion-by-engaging-industry-stakeholders; directive by Malaysia's Ministry of Transport see : https://www.thestar.com.my/news/nation/2020/03/28/container-congestion-at-ports-being-eased-off; also https://www.thestar.com.my/news/nation/2020/04/03/dr-wee-freight-forwarders-hauliers-given-another-four-days-to-move-essential-goods
21. Standard P & I Club has usefully collated the Indian Position and these notices : https://www.standard-club.com/risk-management/knowledge-centre/news-and-commentary/2020/03/news-indian-ports-declare-force-majeure-due-to-the-covid-19-outbreak.aspx
22. See : https://www.weforum.org/agenda/2020/03/covid-19-coronavirus-lessons-past-supply-chain-disruptions/ ; On the factors needed for the recovery of the Supply Chain see : https://www.greenbiz.com/article/what-it-will-take-china-rebuild-global-supply-chain-resilience-after-covid-19
23. The manufacturing of components of IPhone were disrupted by the Wuhan Virus lockdown. This and the earlier imposition of tariffs on China manufactured goods due to trade war has caused manufacturers like Apple to consider moving their supply chain to other countries or to move back manufacturing to home countries see: https://www.businessinsider.my/wuhan-coronavirus-apple-reliance-china-iphone-production-foxconn-supply-chain-2020-2?r=US&IR=T
25. See The New England Journal of Medicine Report: https://www.nejm.org/doi/full/10.1056/NEJMp2006141 ; also World Economic Forum : https://www.weforum.org/agenda/2020/04/covid-19-ventilator-shortage-manufacturing-solution/
27. See The New England Journal of Medicine Report: https://www.nejm.org/doi/full/10.1056/NEJMp2006141
28. The Economic Times 5 April 2020 : https://economictimes.indiatimes.com/news/politics-and-nation/about-40000-indian-seafarers-stranded-across-globe-on-account-of-lockdown-maritime-bodies/articleshow/74991612.cms?from=mdr
29. New York Times 25 March 2020 : https://www.nytimes.com/2020/03/25/world/europe/coronavirus-ship-crews-trapped.html
30. As in the case of the coordinated repatriation of the Philippines crew see Inquirer Net 5 April 2020: https://globalnation.inquirer.net/186493/nearly-1000-stranded-filipino-cruise-ship-workers-arrive-in-ph-dfa; see also https://gulfnews.com/uae/coronavirus-philippine-embassy-to-send-stranded-filipino-seafarers-back-1.70788463
31. Alert: The Impact of COVID-19 on Marine Insurance at https://www.aon.com/getmedia/0c251378-6888-4df1-82d1-062e3c11cdde/COVID-19-Impact-on-Marine-Cargo-Insurance-March-2020.aspx
33. See eg the Port Regulations of the Maritime and Port Authority of Singapore Circular No 11 of 2014 : https://www.mpa.gov.sg/web/wcm/connect/www/9755aabc-24b7-410a-9706-975f44675953/pc14-11.pdf?MOD=AJPERES
Prepared by: Philip Teoh
17th November 2020 Introduction
The COVID-19 pandemic is creating significant health, social and economic challenges worldwide. The impact of this outbreak has raised many concerns in Malaysia especially for Small and Medium-sized Enterprises ("SMEs") as there is a real risk of insolvency since business is limited due to the closure of premises during the Movement Control Order imposed by the Malaysian Government. It is vital to ensure the sustainability of SMEs as they play an important role in the development and growth of the Malaysian economy.
In light of the recently announced Economic Stimulus Package as well the Second Stimulus Package, steps were introduced to further alleviate the burden of this pandemic on SMEs. The initiatives taken by the Malaysian Government, among others, are as follows: -
(a) Special Relief Fund in the form of working capital;
(b) Wage Subsidy Programme to employers for the period of three (3) months to retain their employees earning RM4,000.00 and below;
(c) Restructuring and rescheduling of employer's contributions for Employees Provident Fund;
(d) Suspension of income tax payments for a period of 3 months;
(e) An automatic 6-month loan repayment moratorium; and
(f) Tax waiver/discount to assist SMEs with their cash flow issues.
Although a comprehensive package has been introduced by the Government to assist SMEs cope with the crisis, however, SMEs may require a more in-depth survival kit to sustain their businesses in the aftermath of this outbreak in order to avoid facing insolvency proceedings by their creditors.
Corporate Rescue Mechanisms
The Companies Act 2016 ("CA 2016") provides Corporate Rescue Mechanisms in Part 3, Division 8, to rehabilitate the business and finances of distressed companies in order to avoid liquidation, namely, Corporate Voluntary Arrangement and Judicial Management.
A. Corporate Voluntary Arrangement ("CVA")
The CVA mechanism provides an option for companies to enter into a restructuring agreement with its creditors. This mechanism is encouraged for companies that prefer minimal Court intervention as it is cost-effective and time-saving. However, Section 395 of the CA 2016 provides that this mechanism is only limited to private companies with no secured debt. This would mean that the CVA mechanism is not an option for SMEs who have loans which carries a charge over its property.
CVA requires the company to appoint a Nominee, who is a qualified insolvency practitioner to assess the company's statement of affairs. The Nominee will then give his opinion on whether the proposed voluntary arrangement has a reasonable prospect of being approved and implemented, whether the company is likely to have sufficient funds available during the moratorium period and whether meetings should be held to consider the proposal.
Although the Court is not involved in this mechanism, but an interested company is required to file forms and documents in Court after they receive a positive opinion from the Nominee. Upon filing of the application and relevant documents, the company enjoys 28 days of automatic moratorium which can be further extended for a total of 32 days (maximum period of 60 days in total).
The CVA mechanism requires more than 50% of members' approval and the approval of 75% in value of creditors present and voting, wherein the said meeting must be done within the period of 28 days of the moratorium. Once the proposal is approved, it is binding on all the creditors and its members, regardless of their vote.
B. Judicial Management ("JM")
The JM mechanism is supervised by the Court and essentially places the management of the company's business, affairs and property into the hands of an appointed ‘Judicial Manager'. The Judicial Manager has the responsibility to prepare a potentially successful restructuring scheme for the financially distressed company.
JM is available to companies who are insolvent or facing insolvency. However, this rescue mechanism is not applicable to a company which is subject to the Capital Markets and Services Act 2007, otherwise known as public listed companies, as provided in Section 403 of the CA 2016.
In order to successfully obtain a JM order, the Court must be satisfied that the scheme presented assures there are viable prospects of rehabilitating the company's finances and operations and that the interests of the creditors are met. Upon filing of the JM application in Court, an automatic moratorium takes place on all legal proceedings filed against the company.
If the JM order is granted, the said order shall remain in force for a period of six (6) months and further extended for another six (6) months. The Judicial Manager then has to put forward statement of proposals to the company creditors within 60 days or a longer period as allowed by the Court.
The proposal requires the consent of 75% of the total creditors present and voting at the creditors meeting. If the proposed plan has been approved, it becomes binding on all the creditors, whether or not they have voted in favour of the proposal. If it is rejected by the creditors, the Court may discharge the JM order and revert the original status of the company.
SMEs will benefit from using this rescue mechanism because every party involved is safeguarded. Employers do not have to wind up their company, employees are able to keep their jobs and receive their salaries and creditors are able to recover their debt from the company.
Other Available Options
One of the other available options is a pre-bankruptcy rescue mechanism, otherwise known as a ‘voluntary arrangement' which is an option for the owner of the small business to rearrange his debts with his creditors before he becomes bankrupt. This is pursuant to the Insolvency Act 1967 ("IA 1967"). However, Section 2B of the IA 1967 provides that this arrangement is not applicable to an undischarged bankrupt and a limited liability partnership.
In order for the debtor to initiate this mechanism, he must appoint a Nominee to supervise the implementation of the arrangement and must apply to the Court for an interim order. If satisfied, the debtor shall use the order as a moratorium against all legal proceedings, including bankruptcy proceeding. The interim order is valid for a period of 90 days only from the date of the order and shall not be extended.
This mechanism still requires the creditors to approve the debtor's proposal for a voluntary arrangement during the 90 days period and if the proposal is rejected by the creditors, the Court may set aside the interim order.
Another option available to SMEs is to restructure the companies by way of Scheme of Arrangement (SOA) based on section 366 of the CA 2016, which is a Court facilitated process. The Court may appoint an approved liquidator to assess the genuineness of the scheme proposed by the company. Similar to the other mechanisms, it requires 75% approval from the creditors and members of the company. Subject to meeting all the requirements for an order, a Court order restraining the creditors from taking any legal proceedings can be obtained while the proposal is being discussed.
SMEs and other companies may also opt the platform provided by Bank Negara Malaysia, known as Corporate Debt Restructuring Committee, wherein the Committee will assist the company to enter into a debt restructuring agreement or any other debt resolutions with its financier (but not with other creditors), without having to proceed with legal proceedings against the company.
With a rise in the number of SMEs seeking government assistance to stay afloat amidst the outbreak, the demand for more legal solutions to address SMEs cash flow issues has increased. We hope the abovementioned options would benefit and assist SMEs during this difficult time and please reach out to the team if there is any way we can assist on this.
Prepared by: Melinda Marie D'Angelus, Hanani Hayati Mohd Adhan & Dimetria Rinesha Samuel
13th November 2020 1. Introduction 1.1 While the verdict of Dato’ Seri Najib Razak’s (“DSNR”) criminal trial on various charges relating to SRC International was handed down in the last week of July 2020, tax professionals are looking at the tax recovery action against the former Malaysian Premier.
12th November 2020
Malaysians were frustrated about the news on several individuals' failure to disclose vital information related to COVID-19 to the relevant authorities during medical examinations.
12th November 2020
The IHS Markit Malaysia Manufacturing Purchasing Managers' Index - a performance indicator of the manufacturing sector - dropped to 48.4 in March 2020 from 48.5 in February 2020, reflecting a decline in the performance of Malaysia's manufacturing sector.1 The COVID-19 global pandemic has placed companies in the manufacturing industry in a precarious position, with government restrictions causing disruptions to operations and the supply chain ecosystem. In this article, we talk about how to navigate the legal risk arising from such disruptions.
12th November 2020 Introduction On 11 March 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak as a pandemic. Until today, COVID-19 has affected 203 countries and territories around the world and 2 international conveyances (Diamond Princess cruise ship and MS Zaandam cruise ship). In order to stop the spread of COVID-19 virus, a nationwide movement control order has been implemented in Malaysia effective from March 18 to April 14. Notably, not only the government of each country has set up protection measures, many pharmaceutical companies and research laboratories around the world are working at full tilt on vaccine clinical trials. If these clinical trials are successful in other countries, Malaysia may consider to import vaccine from other country(ies) to treat its patients. This article will solely focus on the legal requirements and procedures of vaccine importation into Malaysia.
12th November 2020 The world is reeling from the on-going effects of the COVID-19 pandemic with the consequential effects of lockdowns and restricted movements choking businesses and economic activities. All of these are likely to have a major impact on target companies and their businesses with more counterparties to the target companies looking to suspend, terminate or even cancel contractual commitments, orders and funding arrangements which pose major challenges to Sellers and Buyers looking to sell, acquire or complete M&A transactions.
12th November 2020
In October 2019, research and consultancy firm Oxford Economics expected the number of mergers and acquisitions (M&A) transactions in Malaysia to increase up to 221 deals in 2020, from an expected 218 deals in 2019. It was also observed and anticipated that Malaysia may be a beneficiary of the change in supply chains arising from the trade tensions between the US and China due to Malaysia's open trading economy.
12th November 2020
On 16 March 2020, the Prime Minister of Malaysia, had announced the imposition of a fourteen (14) days movement control order ("MCO") from 18 March to 31 March 2020 nationwide to curb the spread of the COVID-19 infection in Malaysia.1 Subsequently on 25 March 2020, the Prime Minister further announced that the MCO is to be extended to 14 April 2020.2 This MCO is enforced under the Control and Prevention of Infectious Diseases Act 1988 and the Police Act 1967, and encompasses, among others, the closure of all government and private premises except those involved in essential services (water, electricity, energy, telecommunications, post, transportation, irrigation, oil, gas fuel, lubricants, broadcasting, finance, banking, health, pharmacy, fire prevention, prisons, ports, airports, security, defense, cleaning, food supply & retail).
12th November 2020 Introduction In an effort to pave the way towards a more sustainable and green future, the Government of Malaysia (“Government”) in 2018 announced a target for the country to increase renewable energy in its energy generation mix to twenty percent (20%) by the year 2025. In carrying out this agenda, one of the key renewable energy sources focused on by the Government is solar energy. In this article, we explore the regulatory framework and the developments surrounding the solar energy industry in Malaysia.
11th November 2020 The coronavirus disease, COVID-19, has taken the world by storm when the outbreak was first discovered in December 2019. In roughly 4 months, COVID-19 has affected almost all countries and territories in the world including Malaysia which is now under a Restriction of Movement Order (“RMO”) until 14 April 2020, following the recent spike in COVID-19 cases in the nation.
11th November 2020 At the time of writing, Malaysia is entering the second phase of lockdown due to the widespread pandemic of COVID-19. Embattled Malaysian Prime Minister Tan Sri Muhyiddin Yasin announced the Restricted Movement Order from 18 March 2020 until 14 April 2020 (“COVID-19 Lockdown Order”). It may be further extended too.
COVID-19: Rescheduling or Restructuring of Financing/Loan Facilities with Banking & Financial Institutions9th November 2020 Introduction
The current global economic continues to reel from uncertainties over the worsening coronavirus (COVID-19) outbreak. Amidst severity of COVID-19 pandemic in Malaysia, many banking and financial institutions in Malaysia have expanded assistance for their customers to help them ride out the adverse economic effect. The assistance is necessary as many businesses are severely affected especially after the Government of Malaysia (“Government”) has imposed the Movement Control Order (“MCO”) starting from 18 March 2020 until 31 March 2020 (subject to any further extension period by the Government).
9th November 2020
Tesco PLC ("Tesco") recently announced that it has agreed to sell its businesses in Thailand and Malaysia to Charoen Pokphand (CP) Group entities for a value of USD10.6 billion ("Tesco deal"). However, the Tesco deal in Thailand can only be completed once it has obtained prior clearance from the Trade Competition Commission ("Commission"), Thailand's competition authority tasked with enforcing the provisions of the Trade Competition Act (2017) ("TCA").
9th November 2020
The COVID-19 Pandemic ("the Pandemic") still rages unabated in April 2020, affecting lives, businesses, individuals and industries worldwide.
9th November 2020 Introduction In the first quarter of 2020, we have witnessed an unprecedented catastrophe that strikes the global economy. The whole nation is now suffering from COVID-19 pandemic which has taken lives of thousands across the world. This great trepidation that is afflicting all of humankind has simply caused an economic downturn for businesses specifically on small and medium-sized enterprises (“SMEs”) and micro businesses/entrepreneurs. Due to this pandemic attack, the Malaysian government via Bank Negara Malaysia (“BNM”) has introduced some bold measures to help, among others, the SMEs and individuals to cushion the aftermath impact of COVID-19 outbreak and in the light of Movement Control Order (“MCO”) that has been imposed from 18 March 2020 until 14 April 2020.
5th November 2020
The world of work is being profoundly affected by the global virus pandemic. In addition to the threat to public health, the economic and social disruption threatens the long-term livelihoods and wellbeing of millions. This unprecedented event has led several business owners to make the critical decision of laying off employees in an effort to ensure sustenance of the business. Low-income workers in the formal and informal sectors are the most vulnerable in this economic shock. In light of the COVID-19 outbreak followed by the implementation of the MCO by the government, employers are now faced with a massive challenge to strike a balance between sustaining the business and providing employees with security of tenure.
5th November 2020 In the survey conducted by 500 Startups, a global venture capital firm, on the members of the startup investor community, majority of investors suggested that COVID-19 will have a negative or somewhat negative impact on early-stage investment activity in 2020. Most of the investors also believe that the impact could last between one and two years.
5th November 2020
In recent years, the Malaysian Government has attempted to enhance the utilisation of renewable energy (“RE”) which aims to conserve the non-renewable sources from being depleted and to ensure the sustainability of energy supply. RE is included in the Fifth Fuel Policy which was implemented under the 8th and 9th Malaysia Plan as the fifth component along with hydro, coal, gas and oil.1 Currently, the recognised sources of RE in Malaysia are biogas, biomass, small hydropower and solar photo-voltaic (“PV”).2 Unlike the aforementioned RE, wind energy has yet to be approved as a source of the nation’s RE, as will be elaborated further below.
5th November 2020
The sudden and deadly COVID-19 pandemic has led to lockdowns across the globe in an effort to stymy the spread of the virus. The unfortunate side effect of this necessary life-saving measure is a near standstill of business activity within affected countries. This article will look at Malaysian tax relief efforts and consider what else might be done to lessen the effects of the impending global recession.
5th November 2020
Shortly after the announcement of the PRIHATIN stimulus package worth RM250 billion, the Government announced today that additional measures will be taken to help Malaysian Small and Medium Enterprises (‘SMEs') cope with the economic effects of the COVID-19 pandemic and Movement Control Order (‘MCO'). The additional measures are as follows: -
5th November 2020
On 10 April 2020, the Government of Malaysia decided to extend the Movement Control Order ("MCO") by another 14-days to 28 April 2020. This is the second extension to the MCO, which was originally imposed for a two-week period from 18 March 2020 to 31 March 2020, and was extended to 14 April 2020.1
5th November 2020
In light of the coronavirus pandemic, millions of people around the globe had been forced to work from home. The use of video conferencing tools such as Zoom and Skype has increased significantly as both businesses and individuals relied on the platform to conduct meetings. In the past few months, the daily users of video conferencing tools such as Zoom surged from 10 million in December 2019 to 200 million in March 20201.
5th November 2020
As the world struggles to combat the COVID-19 (Coronavirus) pandemic, employers around the globe are allowed to collect personal data of employees such as their travel history to prevent the spread of the virus at the workplace. In Malaysia, the Ministry of Human Resources has issued a Frequently Asked Questions (FAQ'S) on Movement Control1 on 24 March 2020. Under the FAQ's, the employers in the essential service sectors are required to provide a body temperature monitoring device and take a daily recording of their employees' body temperature.
3rd November 2020
On 11 March 2020, coronavirus (“COVID-19”) was officially declared a pandemic by the World Health Organisation (“WHO”).1 COVID-19 has, since December 2019, infected more than 167 countries and over 203,000 individuals worldwide. The wide spread of COVID-19 has caused global alarm and in the effort to minimize the threat of this pandemic, many countries have advocated and promoted social distancing. We have also witnessed a few countries announcing and imposing “lockdown” to impede the spreading of COVID-19.
3rd November 2020 The recent outbreak of the novel coronavirus, Covid-19, has put much of the world at a standstill, with new cases reported by the day and the death toll rising rapidly. Unsurprisingly, the support services industry, especially the travel, tourism, and hospitality sectors, are a few of the industries which are severely impacted by the Covid-19 outbreak.