Employment Law Update
The Federal Court in Crystal Crown Hotel & Resort Sdn Bhd v Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia, considered the construction of minimum wage legislation in respect of its impact on the employees of hotels, and determined the following points:
“Minimum wage” is to be construed without derogation of other entitlements and benefits of workmen. Accordingly, “basic wages” is to exclude any other kind of cash emolument payable to the employee for work done.
“Service charges” in that instance, formed part of the terms of employment and cannot be unilaterally varied. Separately, service charges did not belong to the Hotel, but are held on trust by the Hotel, for eligible employees.
Hotels are therefore not entitled to utilise part or all of the service charge to satisfy their statutory obligations to pay the minimum wage.
Author: Hsian Siong Yong
MM2H Programme - Update
The Malaysian Government recently announced the reinstatement of the MM2H Programme with new requirements to be implemented with regards to the MM2H Programme, to take effect from October 2021.
Key new requirements include:
Must be in the country for a minimum of 90 days (cumulative) in a calendar year. There was previously no requirement of minimum stay needed.
Are now required to have a minimum monthly offshore income of RM40,000 (up from RM10,000).
Must have their fixed deposit amount increased from RM150,000 (for MM2H holders over-50s) and RM300,000 (for younger MM2H holders) to a minimum of RM1 million, where up to 50% of the savings can be withdrawn for the purchase of property, health and children’s education.
Proof of liquid assets has increased from RM500,000 to RM1.5 million.
The tenure of the renewable multiple-entry visa has been reduced to 5 years from 10 years.
The renewal fees and processing fees have been increased significantly.
As these are to have retrospective application, many existing MM2H foreign citizens may no longer be able to meet the requirements. This will also impact on the competitiveness of the programme compared to those of regional neighbours.
These changes have received critical responses, which has led the Malaysian Home Ministry to indicate that they are prepared to revisit these new requirements.
Authors: Hsian Siong Yong & Amberly Wong
STAMP DUTY EXEMPTION FOR LOANS FOR SMEs
Pursuant to Stamp Duty (Exemption) (No.10) Order 2021, certain loan and financing agreements obtained by small and medium enterprises ("SMEs") are, on application, to be exempt from stamp duty.
The exemption relates to:
Instruments for facilities pursuant to letters of offers issued for the period from 1 January 2021 to 31 December 2021
Loans or Facilities approved by Bank Negara Malaysia's Fund for SMEs characterised as:
All Economic Sectors Facilities
SMES Automation and Digitalisation Facilities
Eligible SMEs are as follows:
Manufacturing Sector: Sale turnover not exceeding RM50m or full-time employees not exceeding 200 workers
Services and Other Sectors: Sales turnover not exceeding RM20m or full-time employees not exceeding 75 workers
The exemption from stamp duty is a welcome measure which will go towards reducing the cost of doing business. The question will be how this will impact loans or facilities for which stamp duty has already been paid. Will a refund be available for such instruments?
Authors: Hsian Siong Yong & Amberly Wong
STAMP DUTY EXEMPTION - RESTRUCTURING OF LOANS
Pursuant to Stamp Duty (Exemption) (No.11) Order 2021, any instrument of loan and financing, relating to the restructuring or rescheduling of a loan or financing, executed between 1 July 2021 and 31 December 2021, is on application, to be exempt from stamp duty.
The exemption is subject to the following terms and conditions:
Instruments for the existing loan or financing have been duly stamped
Instrument relating to the restructuring or rescheduling does not contain the element of additional value to the original amount of the loan or financing
Interest or profit accrued from the restructured or rescheduled payments is not considered as an element of additional value.
"Restructuring or rescheduling" is defined to mean "any modification... to existing repayment terms and conditions... pursuant to a concession provided by the financial institution due to the inability of the borrower or customer to comply with the existing repayment schedule consequent to deteriorating financial conditions.
The exemption from stamp duty will go towards reducing the cost of doing business.
Author: Hsian Siong Yong
- BUMIPUTERA EQUITY REQUIREMENTS
The Malaysian Ministry of Finance ("MoF") had purportedly issued a letter in January 2021 stating that all Customs related licences, such as for freight forwarders / customs agents, will be required to comply with Bumiputera equity requirements by the end of 2021. This requirement will also apply to majority Malaysian-owned companies with international integrated logistics services ("IILS") status. The exact percentage of Bumiputera equity required was however not provided.
Majority foreign-owned IILS providers and publicly listed entities on Bursa Malaysia are exempt from the equity requirement.
The Federation of Malaysian Freight Forwarders ("FMFF") had written to the International Trade and Industry Minister to seek clarification and assistance, given the imminent implementation of the equity requirement.
There has been significant resistance and objections from various quarters against this requirement, as its implementation is seen to be unconstitutional as well as being punitive to existing owners of logistics / freight forwarding companies which are owned by non-Bumiputeras.
MoF in response to such queries and objections, has agreed to extend the period for compliance with the Bumiputera equity requirement, to December 2022. The Government has also noted that they will have the Bumiputera Agenda Steering Unit ("TERAJU") study the requirement.
The response has unfortunately not addressed the concerns that the implementation of such requirement will be unconstitutional but that it will not achieve the purpose of increasing Bumiputera participation in the sector. Clarity of policies implemented, will also be important to ensure the confidence of both foreign and Malaysian participants in the industry.
Given the potential widespread impact on the industry as a whole, and the impact more generally on the confidence of foreign investors with regards to Malaysia, it is hoped that the Malaysian Government will reconsider implementation of the requirement, taking heed of input from all quarters and where necessary, find other means of assisting Bumiputeras to increase their participation in the sector.
Authors: Hsian Siong Yong & Xiang Yen Foo
OPENING PANDORA'S BOX
- BENEFICIAL OWNERSHIP REPORTING IN MALAYSIA
The Companies Commission of Malaysia ("CCM") has issued Guidelines for the Reporting Framework for Beneficial Ownership ("Guidelines") in an effort to ensure that the business entities registered or operating in or from Malaysia are protected from the threat of being misused to carry out illicit activities and to identify the individuals behind business entities.
The Guidelines which apply to all companies and limited liability partnerships (save where specifically exempted), set down the obligations for business entities to self-regulate for compliance. The current obligation, given it is now still the Transitional Period (which commenced from 1 March 2020), is for business entities to obtain, keep & update the beneficial ownership ("BO") information at the entity level. The Enforcement Date has yet to be finalised, but once that has been determined, that will be known as the Post Transitional Period, where the business entities will be required also notify the Registrar of Companies of the BO information.
The obligations are imposed on the business entities, directors and partners, members as well as non-members, and company secretaries and compliance officers. At present, the companies and compliance officers are collecting the BO information on an annual basis to complete the requirements for filing of annual returns or the annual declarations.
Given the potential high penalties for non-compliance, which include, fines, imprisonment or both, business entities, directors, partners and members should be mindful to meet the obligations imposed by the Guidelines. Care should however be taken, particularly for businesses who have specific equity requirements for purposes of obtaining licences or structuring their investments, as it is unclear at this juncture, whether the BO information reported to the CCM, will be made publicly available.
Where in doubt, you may wish to seek advice accordingly. For a more detailed discussion on the obligations, please see the attached pdf.
Authors: Hsian Siong Yong & Xiang Yen Foo
ANTI-CORRUPTION: S17A MACCA
YOU ARE LIABLE FOR YOUR EMPLOYEES AND REPRESENTATIVES ACTIONS!!!
s17A of the Malaysian Anti-Corruption Commission ("MACC") Act 2009 ("MACCA"), which has been in force since June 2020, provides that Commercial Organisations ("CO") and senior management can be deemed to have committed an offence if:
a "person associated" to the CO, corruptly gives, agreed to give, promises or offers to any person any gratification, where for the benefit of that person or another person; and
such misconduct was with intent to obtain business or an advantage for the CO.
The offence carries a very severe penalty - which includes a hefty fine, or imprisonment, or both.
For purposes of mitigating this risk to the CO and senior management, they are able to avail themselves of a defence, if they have implemented adequate procedures to prevent persons associated from undertaking misconduct. With respect to senior management, they would have a defence if they can prove:
that the misconduct was committed without their consent or connivance; and
that due diligence or control measures had been exercised to prevent the misconduct.
Malaysia's Governance, Integrity and Anti-Corruption Centre published guidelines that set out what procedures are required in order to adequately prevent the occurrence of corrupt practices. The guidelines set out 5 principles recommended as reference points for anti-corruption policies, procedures and controls, being:
Top Level Management Commitment
Undertake Control Measures
Systematic Review, Monitoring and Enforcement
Training and Communication
It is clear that the MACC is stepping up enforcement, with the first case having been brought recently against an offshore vessel support company, with the company and a former director being charged with bribery.
If your organisation has certain processes or procedures in place to deal with corruption, it may be useful to review those processes or procedures. If however, you have yet to put in place processes and procedures to deal with corruption, it would be prudent to consider implementing a system accordingly.
For a more detailed discussion, please see the attached pdf.
Authors: Hsian Siong Yong & Li Qi Yip
MALAYSIA: BUDGET 2022
Key Highlights for Real Property Players
The Malaysian Budget 2022 ("Budget") was tabled on 29 October 2021.
We set down some Key Highlights from the Budget which impact the Real Property space for reference:
Real Property Gains Tax
Real Property Gains Tax for disposal in the 6th year and onwards for Malaysian citizens, permanent residents and persons other than companies, to be reduced to 0%
Tax Deductions for renovations and refurbishment to comply with relevant SOP requirements, such as
ventilation and customer seating extended to 31 December 2022
Companies registered under Safe@Work allowed further tax deductions
Landlords' Tax Relief
Tax deduction on reduction of rental on business premises of at least 30% extended to 30 June 2022
Tourism Tax and Entertainment Duty exemption from payment and collection until 31 December 2022
Accumulated Business Losses
Business Losses may be carried forward for 10 years
Stamp Duty Exemptions
Stamp duty exemptions on instruments for restructuring and rescheduling of loans and in respect of M&A prroved by the Ministry of Entrepreneur Development and Cooperatives extended to 31 December 2022
The above is not meant to set out all potential issues which Real Property players may face, but only selected key issues gleamed from the announcement. For more details, please see the attached pdf or the actual Budget announcement.
Author: Hsian Siong Yong
FLOODS IN WEST MALAYSIA: HAVE YOU BEEN AFFECTED?
The unprecedented heavy rainfall during 17 and 18 December had caused significant damage and destruction in West Malaysia, impacting the livelihood of many and also the operations, facilities and goods and stock of many business owners. Significant disruptions have also occurred to business operations.
Below are Key Legal Considerations which business owners may wish to consider when assessing their rights and liabilities arising from the floods:
Parties to consider their rights and obligations under their existing tenancy agreements
Tenancy Agreements / Leases - Right to Terminate
In general, it is unlikely that the consequences of the flooding would result in a right to terminate an existing tenancy / lease, but Parties may wish to review their damages clause to better understand their rights
Service providers providing services for warehousing have general obligations to keep goods safe. Subject to force majeure clauses, an affected Party may wish to consider whether it may have a right to make a claim based on the terms of their existing contract
An occupier of a premise will need to consider its obligations and liabilities arising from the damage to the property. This may include keeping the premise safe from an occupational and safety perspective as well.
Affected Parties will need to consider the extent of their coverage under their insurance policies, taking note of any obligations for early notification to the Insurers
Business owners will also need to assess their obligations to their employees
Efforts should be made to record the extent of any damage, to ensure appropriate evidence is available in the case of any disputes in the future
The above points seek to point out issues for consideration by business owners in looking to address the impact from the damage to the business.
The article is joint written with M. K. Chen & Leong.
For more details, please see the attached pdf.
Hsian Siong Yong / Li Qi Yip
Mian Kuang Chen