Labuan Companies Act 1990 Part IV — Shares, debentures and charges

DIVISION 1• PROSPECTUSES

s 28

(1) No person shall— Restriction on inviting (a) issue an invitation to the public to deposit money from menic. with or lend money to an offshore company or a foreign offshore company; or (b) issue an invitation, or distribute forms of application, to the public to subscribe for shares or debentures in an offshore company or a foreign offshore company, otherwise than in accordance with this Part. -= Invitation to public. IPt. IV, S. 28-29] (2) Any reference in this Act to an invitation or offer to the public shall be construed as including an invitation or offer which is not addressed exclusively to a restricted circle of persons. (3) For the purposes of subsection (2), an invitation or offer to the public shall not be considered to be addressed to a restricted circle of persons unless— (a) the invitation or offer is addressed to an identifiable category of persons to whom it is directly communicated by the person making the invitation or the offer or by his appointed agent; or (b) the members of that category are the only persons who may accept the offer and they are in possession of sufficient information to be able to make a reasonable evaluation of the invitation or offer; and the number of persons to whom the invitation or offer is communicated does not exceed twenty.

s 29

(1) Any offshore company or foreign offshore company which, or any officer, director, agent or any other person on behalf of the company who— (a) issues an invitation or distributes forms of application to the public or to any member of the public to subscribe for shares or debentures in the company; OI (b) issues an invitation to the public or to any member of the public to deposit money with or lend money to the company, shall be guilty of an offence against this Act, unless- (c) the Registrar has given his prior written consent to the issuing of that invitation or the distribution of those forms of application to the public; and (d) that invitation or the distribution of forms of application to the public is made in accordance with this Part. ringgit or both. : : [Pt. IV, S. 29-31] (2)iNo invitation to subscribe for shares or debentures, or % 44986 to deposit money with or lend money to an offshore company •#/AA988 or a foreign offshore company, shall be made to residents of Malaysia,/and any persen-who contravenes the provisions of 1 AA 817 this subsection shall be guilty of an offence against this Act. ringgit or both

s 30

(1) Subject to section 32(1) and to subsection (2) of Requirement this section, a person shall not issue, circulate or distribute formsor any form of application for shares in or debentures of an offshore company or a toreign offshore company unless the for shares form is issued, circulated or distributed together with a with or debentures prospectus a copy of which has been registered by the Registrar. prospectus. (2) Subsection (1) shall not apply if the form of application is issued, circulated or distributed in connection with shares or debentures which are not offered to the public. • (3) An offshore company shall not, without the approval of a special resolution, vary the terms of a contract referred to in the prospectus, unless the variation is made subject to the approval of a special resolution. (4) Any person who contravenes the provisions of this subsection shall be guilty of an offence against this Act. ringgit or both.

s 31

(1) An invitation to the public to deposit money with Invitations or lend money to an offshore company or a foreign offshore to public to company shall not be issued, circulated or distributed by the to or deposit company or by any other person unless— (a) a prospectus in relation to the invitation has been company or a foreign registered by the Registrar; company. (b) the prospectus contains an undertaking by the company that it will, within two months after the acceptance of any money as a deposit or loan from any person in response to the invitation, issue to that person a document which acknowledges, evidences or constitutes an acknowledgement of the indebtedness of the company in respect of that deposit or loan; and [Pt. IV, S. 31] (c) the document is described or referred to in the prospectus and in any other document, whether constituting or relating to the invitation, as— (i) an unsecured note or an unsecured deposit note; (ii) a mortgage debenture or certificate of mortgage debenture stock; or (iii) a debenture or certificate of debenture stock, in accordance with this section. (2) For the purposes of this Division, any offshore company or foreign offshore company which accepts or agrees to accept from any person any money on deposit or loan shall be deemed to make an invitation to the public to deposit money with or lend money to the company or proposed company. (3) Notwithstanding subsection (2), an offshore company or a foreign offshore company is not required to issue a prospectus if it is not, at any one time, under a liability (whether or not such liability is present or future) to repay any money accepted by it on deposit or loan from more than twenty persons. (4) Where, pursuant to an invitation referred to in subsection (1), an offshore company or a foreign offshore company has accepted from any person any money as a deposit or loan, the company shall, within two months after the acceptance of the money, issue to that person a document which— (a) acknowledges, evidences or constitutes an acknowledgement of the indebtedness of the company in respect of that deposit or loan ; and (b) complies with the description contained in the prospectus and with the regulations and contains on its face a statement that it is a document of that description. (5) Nothing in this section shall apply to a prescribed company and nothing in this Act shall require a prospectus to be issued in connection with any invitation to the public to deposit money with a prescribed company. : : [Pt. IV, S. 31-33] (6) The Minister may, by notice published in the Gazette, Subs- AA 817 declare an offshore company or a foreign ottshore company or a trust company to be a prescribeg company for the purposes of this section. (7) Any person who contravenes or fails to comply with any of the provisions of this section and any officer of an offshore company or a foreign offshore company who is in default, shall be guilty of an offence against this Act. ringgit or both. (8) For the purposes of this section, a document issued by a borrowing company certifying that a person named therein in respect of any deposit with or loan to the company is the registered holder of a specified number or value— (a) of unsecured notes or unsecured deposit notes; (b) of mortgage debentures or certificates of mortgage debenture stock; or (c) of debentures or certificates of debenture stock, issued by the company upon or subject to the terms and conditions contained in a trust deed referred to or identified in the certificate, shall be deemed to be a document evidencing the indebtedness of that company in respect of that deposit or Ioan.

s 32

(1) Until regulations relating to the issue of pros- Approval of pectuses have been made, no prospectus shall be issued Registrar, or unless it has been approved as to its form and content by with the Registrar. regulations, as regards (2) Upon regulations relating to the issue of pros- prospectuses. pectuses being made, a prospectus shall be issued only in accordance with the provisions of such regulations.

s 33

(1) No advertisement offering, or calling attention to an Advertiseoffer or intended offer of, shares in or debentures of an, ments. offshore company or a foreign offshore company or proposed offshore company to the public for subscription or purchase shall be published in Labuan or elsewhere until it has been approved by the Registrar; and every such advertisement must contain the advice that Malaysian residents are disqualified from accepting the offer. Retention of oversubcriptions in debenture issues. Registration prospectus. IPt. IV, S. 33-351 • Act 441 (2) Application for approval of an advertisement shall be lodged with the Registrar together with a copy of the advertisement verified in such manner as the Registrar directs.. (3) Any person who publishes or causes to be published in Labuan or elsewhere an advertisement without the prior approval of the Registrar in breach of the provisions of subsection (1) shall be guilty of an offence against this Act. Penalty: Ten thousand ringgit.

s 34

(1) An offshore company shall not accept or retain subscriptions to a debenture issue in excess of the amount of the issue as disclosed in the prospectus unless the company has specified in the prospectus— (a) that it expressly reserves the right to accept or retain over-subscriptions; and (b) a limit on the amount of the over-subscription that may be accepted or retained. (2) Subject to any regulation, where an offshore company specifies in a prospectus relating to a debenture issue that it reserves the right to accept or retain over- subscriptions— (a) the company shall not make, authorize or permit any statement or reference as to the asset-backing for the issue to be made or contained in any prospectus relating to the issue, other than a statement or reference to the total assets and the total liabilities of the company and of its guarantor company (if any); and (b) the prospectus shall contain a statement or reference as to what the total assets and total liabilities of the company would be if over-subscriptions to the limit specified in the prospectus were accepted orretained.

s 35

(1) A prospectus shall not be issued, circulated or distributed by any person unless a copy thereof has first been registered by the Registrar. : [Pt. IV, S. 35-36] (2) 'The Registrar shall notregister a copy of any prospectus if it contains any statement or matter which is in his opinion misleading in the form and context in which it is included and unless— (a) a copy signed by every director and by every person who is named therein as a proposed director of the company or by his agent authorized in writing is lodged with the Registrar on or before the date of its issue; (b) the prospectus appears to comply with the requirements of this Act and the regulations or the Registrar is satisfied that any departure from the requirements of this Act or the regulations by such prospectus is justified and is unlikely to mislead a person investing on the faith of its content; and (c) there is lodged with the Registrar a copy, verified as prescribed, of any consent required by section 37 to the issue of the prospectus and any material contract referred to in the prospectus or, in the case.of such a contract not reduced into writing, a memorandum giving full particulars thereof, verified as prescribed. (3). If a prospectus is issued without a copy thereof having been so registered, the offshore company or foreign offshore company and every person who is knowingly a party to the issue of the prospectus shall be guilty of an offence against this Act. ringgit or both

s 36

(1) Where an offshore company or a foreign offshore company allots or agrees to allot to any person any shares or debentures of the company with a view to all or any of them being offered for sale to the public, the offer to the public shall be made through a trust company and any document by which the offer for sale to the public is made shall for all purposes be deemed to be a prospectus issued by the company, and all written laws and rules of law as to the contents of prospectuses and as to liability in respect of advertisements and statements and non-disclosures in prospectuses, or otherwise relating to prospectuses, shall apply and have Corer oring [Pt. IV, S. 36] effect accordingly as if the shares or debentures had been offered to the public and as if persons accepting the offer in respect of any shares or debentures were subscribers therefor but without prejudice to the liability (if any) of the persons by whom the offer is made in respect of statements or nondisclosures in the document or otherwise. (2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, shares or debentures was made by an offshore company or a foreign offshore company with a view to the shares or debentures being offered for sale to the public if it is shown- (a) that an offer of the shares or debentures or any of them for sale to the public was made within six months after the allotment or agreement to allot; or (b) that at the date when the offer of the shares or debentures or of any of them for sale to the public was made, the whole consideration to be received by the company in respect of the shares or debentures had not been so received. (3) The requirements of this Division as to prospectuses shall have effect as though the persons making an offer to which this section relates were persons named in a prospectus as directors of an offshore company or a foreign offshore company. (4) In addition to complying with the other requirements of this Division, the document making the offer shall state (a) the net amount of the consideration received or to be received by the offshore company or foreign offshore company making the offer in respect of the shares or debentures to which the offer relates; and (b) the place and time at which the contract under which the shares or debentures have been or are to be allotted may be inspected. (5) Where an offer to which this section relates is made by an offshore company or a foreign offshore company, it shall be sufficient if the document referred to in subsection (1) is : [Pt. IV, S. 36-38] signed on behalf of the company by two directors of the company and any such director may sign by his agent authorized in writing.

s 37

(1) A prospectus inviting subscription for or purchase Expert's of shares in or debentures of an offshore company or a cssueott foreign offshore company and including a statement ponspictus purporting to be made by an expert or to be based on a statement made by an expert shall not be issued unless—- y hin (a) he has given and has not, before the delivery of a copy of the prospectus for registration, withdrawn his written consent to the issue thereof with the statement included in the form and context in which it is included; and (b) there appears in the prospectus a statement that he has given and not withdrawn his consent. (2) If ariy prospectus is issued by an offshore company or a foreign offshore company in contravention of this section, the company and every person who is knowingly a party to the issue thereof shall be guilty of an offence against this Act. ringgit or both.

s 38

(1) Subject to this section, each of the following persons Civil shall be liable to pay compensation to all persons who liability for mis-statement subscribe for or purchase any shares or debentures in an in prospectus. offshore company or a foreign offshore company on the faith of a prospectus for any loss or damage sustained by reason of an untrue statement therein, or by reason of the wilful non-disclosure therein of any matter of which he had knowledge and which he knew to be material, that is so to say every person who (a) is a director of the company at the time of issue of the prospectus; (b) authorized or caused himself to be named and is named in the prospectus as a director or as having agreed to become a director either immediately or after an interval of time; [Pt. IV, S. 38] (c) is a promoter of the company; or . (d) authorized or caused the issué of the prospectus. (2) Notwithstanding anything in subsection (1), where the consent of an expert is required to the issue of a prospectus and he has given that consent, he shall not by reason only thereof be liable as a person who has authorized or caused the issue of the prospectus except in respect of an untrue statement purporting to be made by him as an expert, and the inclusion in the prospectus of a name of a person as a trustee for debenture-holders, auditor, banker, barrister, advocate or solicitor or stock or share broker shall not for that reason alone be construed as an authorization by such person for the issue of the prospectus. (3) No person shall be so liable if he proves- (a) that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; (b) that the prospectus was issued without his knowledge or consent and he gave reasonable public notice thereof forthwith after he became aware of its issue; (C) that after the issue of the prospectus and before allotment or sale thereunder he, on becoming aware of any untrue statement therein, withdrew his consent and gave reasonable public notice of the withdrawal and of the reason therefor; or (d) that— (i) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment or sale of the shares or debentures believe, that the statement was true; (ii) as regards every untrue statement purporting to be a statement made by an expert or to be based on a statement made by an expert or contained in what purports to be a copy of or : : [Pt. IV, S. 38] extract from a report or valuation of an expert, it fairly represented the statement, or was a correct and fair copy of an extract from the report or valuation, and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the expert making the statement was competent to make it and that that expert had given the consent required by section 37 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the person's knowledge, before any allotment or sale thereunder; and (iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was a correct and fair representation of the statement or copy of or extract from the document. (4) Subsection (3) shall not apply in the case of a person liable, by reason of his having given a consent required of him by section 37, as a person who has authorized or caused the issue of the prospectus in respect of an untrue statement purporting to have been made by him as an expert. (5) A person who apart from this subsection would under subsection (1) be liable, by reason of his having given a consent required of him by section 37, as a person who has authorized the issue of a prospectus in respect of an untrue statement purporting to be made by him as an expert shall not be so liable if he proves— (a) that, having given his consent under section 37 to the issue of the prospectus, he withdrew it in writing before a copy of the prospectus was lodged with the Registrar; (b) that, after a copy of the prospectus was lodged with the Registrar and before allotment or sale thereunder, he on becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public notice of the withdrawal and the reasons therefor; or [Pt. IV, S. 38-39] Criminal liability for mis-statement in prospectus. (c) that he was competent to make the statement and that he had reasonable ground to believe and did up to the time of the allotment or sale of the shares or debentures believe that the statement was true. (6) Where- (a) a prospectus contains the name of a person as a lirector of an offshore company or a foreign offshore company, or as having agreed to become a director and he has not consented to become a director, or has withdrawn his consent before the issue of the prospectus, and has not authorized or consented to the issue thereof; or (b) the consent of a person is required under section 37 to the issue of the prospectus and he either has not given that consent or has withdrawn it before the issue of the prospectus; the directors of the company except any without whose knowledge or consent the prospectus was issued, and any other person who authorized or caused the issue of the prospectus, shall be liable to indemnify the person so named or whose consent was so required against all damages, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or of the inclusion therein of a statement purporting to be made by him as an expert, or in defending himself against any action or legal proceeding brought against him in respect thereof.

s 39

(1) Where in any prospectus, or in any advertisement of the kind referred to in section 33 (1), there is an untrue statement or wilful non-disclosure, any person who authorized or caused the issue of the prospectus or advertisement shall be guilty of an offence against this Act unless he proves that the statement or non-disclosure was immaterial or that he had reasonable ground for believing and did, up to the time of the issue of the prospectus, believe that the statement was true or that the non-disclosure was immaterial. ringgit or both. : [Pt. IV, S. 39-40] (2) A person shall not be deemed to have authorized or caused the issue of a prospectus by reason only of his having given the consent required by this Division to the inclusion therein of a statement purporting to be made by him as an expert.

s 40

(1) No allotment shall be made of any shares of an offshore company offered to the public unless the sharés have been offered to the public through a trust company. (2) A trust company shall be the agent of an offshore company which has offered shares to the public through the trust company to receive applications for allotment of the shares and shall be so described in the prospectus. (3) All moneys payable on application for the shares in an offshore company shall be paid to the trust company acting as an agent for the offshore company, and pending receipt by the trust company of the amount of the minimum subscription, it shallhold all moneys received by it upon trust for the applicant, and if the amount of the minimum subscription is not received by the trust company within the time stated in the prospectus, the trust company shall, subject to any right under the terms of the prospectus to deduct any costs and charges owing to it or to the Registrar in connection with the prospectus oi the offer or his acting as a broker in the matter, return the application moneys or such proportion thereof as remains after making deductions (if any) in accordance with the terms of the prospectus to the applicants pro rata based on the respective amounts paid by them. (4) Upon receipt by a trust company acting as agent for an offshore company of the amount of the minimum subscription on behalf of the company the trust company shall, subject to its right to deduct from such moneys its proper remuneration and disbursement, hold such moneys and any further application moneys as agent for the company. Trust as agent in public offer. Prohibition Gfllotment Application moneys to be held in trust until allotment. [Pt. IV, S. 41-42]

s 41

(1) No allotment shall be made of any shares of an offshore company offered to the public unless (a) the minimum subscription has been subscribed; and (b) the sum payable on application for the shares so subscribed has been received by the company, but if a cheque for the sum payable has been received by the company, the sum shall be deemed not to have been received by the company until the cheque is paid by the bank on which it is drawn. (2) The minimum subscription shall be— (a) calculated on the nominal value of each share, and where the shares are issued at a premium, on the nominal value of, and the amount of the premium payable on, each share; and. (b) reckoned exclusively of any amount payable otherwise than in cash. (3) The amount payable on application on each share offered to the public shall not be less than five per centum of the nominal amount of the share or of the issue price, as the case may be. (4) Any condition requiring or binding any applicant for shares to waive compliance with any requirement of this section shall be void 5) No offshore company shall allot, and no officer o promoter of an offshore company or a proposed offshore company shall authorize or permit to be allotted, shares or debentures to the public on the basis of a prospectus after the expiration of four months from the issue of the prospectus. ringgit or both.

s 42

(1) Subject to section 40 (3) and (4) and section 41 (1), all application and othermoneys paid priorto allotment by any applicant on account of shares or debentures offered to the public by an offshore company shall, until the allotment of such shares or debentures, be held upon trust for the applicant and such moneys shall be paid into and kept in a separate trust account, pending allotment, at a commercial bank approved by the Registrar in writing. : : : [Pt. IV, S. 42-44] :(2) If default is made in complying with this section, every officer of the company who is in default and who knowingly and wilfully authorizes or permits the default shall be guilty of an offence against this Act. ringgit or both. DIVISION 3- SHARES

s 43

(1) Where an offshore company makes any allotment of Return of its shares, the company shall, within one month thereafter, lodge with the Registrar a return of the allotment stating-— (a) the number of shares comprised in the allotment and the amount paid for such shares; (b) the date of the allotment; (c) the amount (if any) deemed to be paid, or due and payable, on the allotment of each share; 'd) where the capital of the company is divided int hares of different classes, the class of shares t which each share in the allotment belongs; and (e) the full name and address of each of the allottees and the number and class of shares allotted to him. (2) If default is made in complying with this section, every officer of the offshore company who is in default shall be guilty of an offence against this Act. Penalty: One thousand ringgit. Default penalty.

s 44

An offshore company may— (a) make arrangements, on the issue of shares, for varying the amounts and times of payment of calls as between shareholders; (b) accept from any member the whole or any part of the amount remaining unpaid on any shares although no part of that amount has been called up; and (c) pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others. Calls. • Reserve lability Share remiun ccount [Pt. IV, S. 45-46]

s 45

An offshore company may, by special resolution, determine that any portion of its uncalled share capital shall not be capable of being called up except in the event of the company being wound up, butno such resolution shall prejudice the rights acquired by any person before the passing of the resolution.

s 46

(1) Where an offshore company which is not licensed pursuant to the provisions of the Offshore Banking Act 1990 issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account to be called the "share premium account", and the provisions of this Act relating to the reduction of the share capital of an offshore company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company. (2) Where assets are acquired by the issue of shares of an offshore company and no consideration is recorded, the assets so acquired shall be valued, and if the value of the assets is more than the par value of such shares, the difference between the par value of the shares and the value of the assets so acquired shall be transferred to the share premium account. (3) The share premium account may, notwithstanding anything contained in subsection (1), bie applied by the offshore company— (a) in paying up unissued shares to be issued to members of the company as fully paid bonus shares; (b) in writing off— (i) the preliminary expenses of the company; or (ii) the expenses of, or the commission paid or discount allowed on, any issue of shares in, or debentures of, the company; or (c) in providing for the premium payable on redemption of debentures or redeemable preference shares. : i : [Pt. IV, S. 46-48] (4) Where shares are issued for a consideration other than cash under subsection (2), the shares shall not be alloted until- (a) the undertaking constituting the consideration has been performed; or (b) the assets constituting the consideration have been transferred to the company; and assets shall be considered as transferred to a company— (i) in the case of goods, when the ownership or property therein passes to the company or when they are delivered to it; (ii) in the case of negotiable instruments, when the company becomes entitled to enforce all the rights embodied in them in its own name without the concurrence of any other person; (iii) in any other case, when the ownership or lesser rights agreed to be vested in the company are legally vested in it.

s 47

(1) An offshore company shall have power to issue the powerto number of shares stated in its memorandum, which may be issue shares, and voting divided into one or more classes, with such designations, rights. preferences, limitations and relative rights as shall be stated or provided for in the articles, and all prices and values given in respect of shares shall be expressed in a currency other than Malaysian currency. (2) The articles may limit or deny voting rights of, or provide special voting rights for, the 'shares of any class or the shares within any class to any extent not inconsistent with the provisions of this Act or the regulations.

s 48

(1) An offshore company may provide financial Dealing by assistance, whether directly or indirectly, for the purpose of or company in in connection with the purchase of its own shares or the shares its own of any of its subsidiaries or of its holding company— shares, etc. (a) in the ordinary course of its business, if the lending of money is part of the ordinary business of the offshore company; [Pt. IV, S. 48] (b) where the transaction has been approved by a special resolution of the company, and the directors have certified to the meeting, in writing, to the effect that there are no reasonable grounds for believing that- (i) the company is, or would after giving the financial assistance be, insolvent; or (ii) the realisable value of the company's assets, excluding the amount of any financial assistance in the form of a loan and in the form of assets pledged or encumbered to secure a guarantee, would, after giving the financial assistance or loan, be less than the aggregate of the company's liabilities and stated capital; OI (c) to employees (other than an employee who is also a director) of the company or of any of its subsidiaries or of its holding company. (2) An offshore company may purchase, take, receive or otherwise acquire, hold, own, pledge, transfer or otherwise dispose of its own shares, or the shares of any of its subsidiaries or of its holding company, but the purchases thereof, whether direct or indirect, shall be made only to the extent of unreserved and unrestricted earned surplus available therefor; and if the articles so provide, or with the affirmative votes of the holders of at least three-fourths of all shares entitled to vote thereon, to the extent of unreserved and unrestricted capital surplus available therefor. (3) Notwithstanding subsection (2), provided that there are no reasonable grounds for believing that the company is, ot would after the payment be, insolvent or that the realisable value of the company's assets would, after the payment, be less than the aggregate of its liabilities and stated capital, an offshore company may purchase or otherwise acquire its own shares for the purposes of— (a) eliminating fractional shares; (b) paying dissenting shareholders entitled to payment for their shares under the provisions of this Act or the regulations; or : *7. [Pt. IV, S. 48-50] (c) effecting, subject to this Act, the retirement of its redeemable shares by redemption or by purchase at a price not exceeding the redemption price. of cancellation shall be lodged with the Registrar within thirty days from the date of cancellation.