Board of directors
(1) The business and affairs of a prescribed institution shall be managed under the direction and oversight of its board of directors, subject to this Act and any other written law which may be applicable to the prescribed institution.
(2) Without prejudice to the generality of subsection (1), the board of directors shall—
(a) ensure that the strategies pursued by the prescribed institution are consistent with its constituent documents and any specification made by the Bank pursuant to subsection 28(1), and that the prescribed institution has the capacity and capability to manage such strategies;
(b) set and oversee the implementation of business and risk objectives and strategies, and in doing so, shall have regard to the long term viability of the prescribed institution and reasonable standards of fair dealing;
(c) ensure and oversee the effective design and implementation of sound internal controls, compliance and risk management systems commensurate with the nature, scale and complexity of the business and structure of the prescribed institution;
(d) oversee the performance of the senior management in managing the business and affairs of the prescribed institution;
(e) ensure that there is a reliable and transparent financial reporting process within the prescribed institution; and
(f) promote timely and effective communications between the prescribed institution and the Bank on matters affecting or that may affect the safety and soundness of the prescribed institution.
(3) In carrying out its functions and duties under this section, the board of directors of a prescribed institution shall have regard to the interests of the customers and depositors of the prescribed institution.
Duties of directors
(1) A director of a prescribed institution shall at all times—
(a) act in good faith in the best interests of the prescribed institution;
(b) exercise reasonable care, skill and diligence with—
(i) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and
(ii) any additional knowledge, skill and experience which the director has;
(c) only exercise powers conferred on him for the purposes for which such powers are conferred;
(d) exercise sound and independent judgment; and
(e) comply with any standards specified by the Bank which are applicable to a director.
(2) Subsection (1) has effect in addition to, and not in derogation of, any written law or rule of law relating to the duty or liability of a director.
(3) Any director who contravenes paragraph (1)(c) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.
Appointment of Chief Executive Officer and directors
(1) Except with prior written approval of the *Minister, no prescribed institution shall appoint or reappoint any person as its Chief Executive Officer or director.
(2) The prescribed institution shall only submit an application for approval under subsection (1) after seeking and obtaining the Bank’s verification that the person has complied with the criteria set out in the First Schedule.
(3) No prescribed institution shall appoint or reappoint any person as its Chief Executive Officer or director and no person shall accept any appointment or reappointment as a Chief Executive Officer or director of a prescribed institution, unless such person has been verified by the Bank as having complied with the criteria set out in the First Schedule.
(4) A prescribed institution shall notify the Bank of the appointment or reappointment of its Chief Executive Officer or directors within fourteen days from the date of the appointment or reappointment, as the case may be.
Compliance with criteria in First Schedule
A chairman, director, Chief Executive Officer or senior officer of a prescribed institution shall at all times comply with the criteria set out in the First Schedule.
* NOTE—For application to Bank Kerjasama Rakyat Malaysia Berhad, substitute the word “Minister” for the words “Minister charged with the responsibility for co-operative development”—see the Development Financial Institutions (Bank Kerjasama Rakyat Malaysia Berhad) (Modification) Order 2016 [P.U. (A) 15/2016] w.e.f. 31.01.2016.
Disqualification of Chief Executive Officer and director
(1) No prescribed institution shall appoint a person and no person shall accept appointment as a Chief Executive Officer or director of a prescribed institution—
(a) if he is a bankrupt or has compounded with his creditors, whether in or outside Malaysia;
(b) without prejudice to paragraph (c), if a charge for a criminal offence relating to dishonesty, fraud or violence under any written law punishable with imprisonment for one year or more, whether by itself, or in lieu of, or in addition to, a fine, has been proved against him in any court in or outside Malaysia;
(c) if a charge for any offence under this Act has been proved against him;
(d) if there has been made against him any order of detention, supervision, restricted residence, banishment or deportation, or if there has been imposed on him any form of restriction or supervision, by bond or otherwise, under any law relating to prevention of crime, or preventive detention for the prevention of crime or drug trafficking, or restricted residence, or banishment or immigration; or
(e) if he has been a director of, or directly concerned in the management of, any corporation which is being or has been wound up by a court or other authority competent to do so in or outside Malaysia.
(2) (Deleted by Act A1502).
Cessation of office
(1) Where—
(a) a Chief Executive Officer or director of a prescribed institution becomes disqualified by virtue of subsection 7(1); or
(b) a chairman, director, Chief Executive Officer or senior officer of a prescribed institution no longer complies with any of the criteria set out in the First Schedule,
he shall immediately cease to hold office and cease to act in such capacity.
(1A) The prescribed institution shall immediately—
(a) in the case of paragraph (1)(a), terminate the appointment of such Chief Executive Officer or director; or
(b) in the case of paragraph (1)(b), remove the chairman, director, Chief Executive Officer or senior officer from such office.
(1B) Notwithstanding anything contained in any contract of service or any other agreement relating to his appointment, such Chief Executive Officer or director terminated under paragraph (1A)(a) shall not be entitled to claim any compensation for such termination.
(2) Subject to section 123B and notwithstanding subsections (1) and (1A), the Bank, with the concurrence of the Minister, may direct the prescribed institution—
(a) to terminate the appointment of the Chief Executive Officer or director who becomes disqualified by virtue of subsection 7(1); or
(b) to remove the Chief Executive Officer or director who no longer complies with any of the criteria as set out in the First Schedule,
and the prescribed institution shall comply with such direction to terminate the appointment of that person in such capacity or remove that person from such office, as the case may be, and notwithstanding
anything contained in any contract of service or any other agreement relating to his appointment, the Chief Executive Officer or director terminated under paragraph (a) shall not be entitled to claim any compensation for such termination.
(3) During the pendency of any criminal proceedings in any court for any offence referred to in paragraph 7(1)(b) or (c) against any person who is a Chief Executive Officer or director of a prescribed institution, such person shall not act in such capacity, or hold any other office, or act in any other capacity, in that prescribed institution, or in any manner, whether directly or indirectly, be concerned with, or take part or engage in, any activity, affairs or business of, or in relation to, that prescribed institution, except as may be authorized by the Bank, and subject to such conditions as the Bank may impose.
(4) (Deleted by Act A1502).
(5) For the purpose of subsection (3), criminal proceedings referred to in that subsection shall be deemed to be pending from the date that the accused person is first charged in court for the offence until the date of the final conclusion of the proceedings, whether in the court of original jurisdiction or, in the event of any appeal by any party, in the court of final appellate jurisdiction.
Exemption from disqualification
(1) A person who is disqualified by virtue of paragraph 7(1)(e) may, with the written consent of the prescribed institution in which he is holding office or is to be appointed, apply to the Bank in writing to exempt him from that paragraph, and, the Bank may, with the concurrence of the Minister, grant such exemption, subject to such conditions as the Bank considers fit to impose.
(2) The person applying for an exemption under subsection (1) and the prescribed institution in which he is holding office or is to be appointed shall submit such particulars and information as the Bank may specify.
Notice of cessation of office
(1) A prescribed institution shall notify the Bank in writing of the fact that a person has ceased to be its chairman, director, Chief Executive Officer or senior officer and the reasons for it within fourteen days from the date of the cessation.
(2) (Deleted by Act A1502).
Disclosure of interest
(1) A director of a prescribed institution who has an interest, directly or indirectly, in a transaction or arrangement with the prescribed institution, or in any matter being or about to be considered by the prescribed institution, shall, as soon as practicable, disclose to the board of directors of the prescribed institution the nature and extent of his interest.
(2) (Deleted by Act A1502).
(3) The secretary to the board shall record in the board’s minutes the disclosure referred to in subsection (1).
(4) (Deleted by Act A1502).
(5) Whether or not a disclosure under subsection (1) has been made, the director shall, in relation to that transaction, arrangement or matter—
(a) refrain from taking part or from being present in any deliberation or decision of the board; and
(b) be disregarded for the purpose of constituting a quorum of the board.
(6) (Deleted by Act A1502).
(7) No act or proceedings of the board shall be invalidated on the ground that any member of the board has contravened the provisions of this section.
Acquisition of interest in shares
(1) Unless the Minister otherwise approves, no person shall acquire, together with any interests in the shares of a prescribed institution which are already held by him, or by him and by persons acting in concert with him, an aggregate interest in shares of five per cent or more of the shares of that prescribed institution, or such other percentage as the Minister may prescribe.
(2) No person who has obtained an approval of the Minister under subsection (1) shall acquire any further interest in the shares of such prescribed institution without obtaining the approval of the Minister and subsection (1) shall apply to an application for approval under this subsection.
(3) Any person who contravenes subsection (1) or (2) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.
Report of acquisition to the Bank
(1) Where it comes to the knowledge of a prescribed institution that any acquisition as is referred to in subsection 12(1) has been effected or is about to be effected in respect of itself, the prescribed institution shall report it to the Bank within thirty days from the date the prescribed institution becomes aware of such acquisition.
(2) (Deleted by Act A1502).
Change in control, amalgamation and merger
(1) Unless the Minister otherwise approves, no person shall—
(a) subject to subsection 12(1), take control of a prescribed institution or its holding company; or
(b) amalgamate or merge with any prescribed institution.
(2) Any person who contravenes subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.
Transfer of business
(1) Unless the Minister otherwise approves, a prescribed institution shall not sell, dispose of, or transfer the whole or any part of its business, including all property derived from, or used in or for the purpose of such business.
(2) Any prescribed institution that contravenes subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.
Application to High Court for transfer of business
(1) A prescribed institution transferring its business under paragraph 14(1)(b) or subsection 15(1) to another person may make a joint application to the High Court by way of an ex parte originating summons for all or any of the following orders:
(a) the date on and from which the transfer shall take effect, being a date earlier or later than the date of the application;
(b) the vesting of any property held by the prescribed institution, either alone or jointly with any other person, in the other person either alone or, as the case may be, jointly with any other person, on and from the transfer date, in the
same capacity, upon the trusts, and with and subject to the powers, provisions and liabilities, respectively;
(c) for any existing instrument, whether in the form of a deed, will or otherwise, or order of any court, under or by virtue of which any property became vested in the prescribed institution, to be construed and to have effect as if for any reference to the prescribed institution there were substituted a reference to the other person;
(d) for any existing agreement to which the prescribed institution was a party to have effect as if the other person had been a party instead of that prescribed institution;
(e) for any account between the prescribed institution and any of its customers to become an account between the other person and the customer and such account to be deemed for all purposes to be a single continuing account;
(f) for any existing instruction, order, direction, mandate, power of attorney, authority, undertaking or consent, whether or not in relation to an account, given to the prescribed institution, either alone or jointly with another person, to have effect, in respect of anything due to be done, as if given to the other person either alone or, as the case may be, jointly with such other person;
(g) for any negotiable instrument or order for payment of money drawn on, or given to, or accepted or endorsed by, the prescribed institution or payable at the place of business of that prescribed institution, whether so drawn, given, accepted or endorsed before, on, or after, the transfer date, to have the same effect on and from the transfer date, as if it had been drawn on, or given to, or accepted or endorsed by, the other person or were payable at the place of business of the other person;
(h) for the custody of any document, goods or thing held by the prescribed institution as bailee immediately before the
transfer date to pass to the other person and the rights and obligations of the prescribed institution under any contract of bailment relating to any such document, goods or thing to be transferred to the other person;
(i) for any collateral held immediately before the transfer date by the prescribed institution, or by a nominee of, or trustee for, the prescribed institution, as collateral for the payment or discharge of any liability of any person, to be held by the other person or, as the case may be, to be held by that nominee or trustee as the nominee of, or trustee for, the other person, and to the extent of those liabilities, be available to the other person as collateral for the payment or discharge of those liabilities and where any such collateral extends to future advances or future liabilities, to be held by, and to be available to, the other person as collateral for future advances by, and future liabilities to, the other person in the same manner in all respects as future advances by, or future liabilities to, that prescribed institution were collateralised immediately before the transfer date;
(j) where any right or liability of the prescribed institution is transferred to the other person, for the other person to have the same rights, powers and remedies and in particular the same rights and powers as to the taking or resisting of legal proceedings or the making or resisting of applications to any authority for ascertaining, protecting or enforcing that right or resisting that liability as if it had at all times been a right or liability of the other person, including those rights or liabilities in respect of any legal proceedings or applications to any authority pending immediately before the transfer date by or against that prescribed institution;
(k) for any judgment or award obtained by or against the prescribed institution and not fully satisfied before the transfer date to be enforceable by or, as the case may be, against the other person; and
(l) for all such incidental, consequential and supplemental orders as are necessary to secure that the transfer shall be fully and effectively carried out.
(2) On the hearing of an application under subsection (1), the High Court may grant an order in the terms applied for, or with such modification as the Court deems just or proper in the circumstances of the case.
(3) Where the order of the High Court under subsection (1) provides for the transfer of any business vested in or held by the prescribed institution, either alone or jointly with any other person, then, by virtue of the order, that business shall, on and from the transfer date, become vested in or held by the other person either alone or, as the case may be, jointly with such other person, and the order shall have effect according to its terms notwithstanding anything in any law or in any rule of law, and shall be binding on any person affected by it, regardless that the person so affected is not a party to the proceedings under this section or any other related proceedings, or had no notice of the proceedings under this section or of other related proceedings.
(4) The order of the High Court made under subsection (1) shall, subject to the directions of the High Court, be published by the person acquiring the business in not less than two daily newspapers published in Malaysia and approved by the Bank, one of which shall be in the national language and the other in the English language.
(5) The prescribed institution shall lodge, within thirty days of the making of the order of the High Court under subsection (1), an authenticated copy of such order together with an authenticated copy of the agreement or arrangement for the transfer approved by the Minister under subsection 19(5), and an authenticated copy of the Minister’s approval, with—
(a) the Registrar of Companies or Registrar General of Cooperative Societies, as the case may be; and
(b) the appropriate authority, if any, concerned with the registration or recording of dealings in any movable property, or any interest in movable property, transferred pursuant to the order.
(6) (Deleted by Act A1502).
(7) An order of the High Court under subsection (1) may relate to any property or business of the prescribed institution outside Malaysia and, if it so relates, effect may be given to it either in accordance with any reciprocal arrangements relating to enforcement of judgments that may exist between Malaysia and the country, territory or place outside Malaysia in which such property or business is, or where there are no such arrangements, in accordance with the law applicable in such country, territory or place.
Transfer of immovable property
Where an order of the High Court under subsection 16(2) vests any alienated land or any share or interest in any alienated land in another person—
(a) the High Court shall, where such alienated land is in Peninsular Malaysia, pursuant to subsection 420(2) of the National Land Code [Act 56/65], cause a copy of the order to be served on the Registrar of Titles or the Land Administrator, as the case may be, immediately after the making of the order so that the Registrar of Titles or the Land Administrator, as the case may be, gives effect to the provisions of subsections 420(2), (3) and (4) of the Code;
(b) where such alienated land is in Sabah, the transferee shall, as soon as practicable after the order has been made, present an authenticated copy of such order to the Registrar for the registration of the vesting of the alienated land or of the share or interest in alienated land as provided under the Land Ordinance of Sabah [Sabah Cap. 68];
(c) where such alienated land is in Sarawak, the transferee shall, as soon as practicable after the order has been made, produce an authenticated copy of such order to the Registrar for the registration of the vesting of the alienated land or of the share or interest in alienated land as provided under section 171 of the Land Code of Sarawak [Sarawak Cap. 81]; or
(d) where such alienated land is in the Federal Territory of Labuan, the transferee shall, as soon as practicable after the order has been made, produce an authenticated copy of such order to the Registrar for the registration of the vesting of the alienated land or of the share or interest in alienated land as provided under subsection 114(2) of the Land Ordinance of Sabah as modified by the Federal Territory of Labuan (Modification of Land Ordinance) Order 1984 [P.U. (A) 291/1984].
Own shares or shares of holding company as collateral
(1) Unless the Bank otherwise approves in writing, no person shall grant a financing facility to any person against the collateral of the shares or property of a prescribed institution or its holding company if the shares or property to be provided as collateral for the proposed financing facility, by itself, or together with any other shares or property of that prescribed institution already held as collateral for any other financing facilities given by him, would constitute five per cent or more of the shares or property of that prescribed institution or its holding company.
(2) Unless the Bank otherwise approves, no prescribed institution shall grant any financing facility, or enter into any other transaction, against the collateral of its own shares or property or the shares or property of its holding company.
(3) Any person who contravenes subsection (1) or any prescribed institution that contravenes subsection (2) commits an offence and shall on conviction be liable to imprisonment for a term not
exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.
Application to the Bank
(1) Any application for the Minister’s approval under subsection 12(1), 14(1) or 15(1) shall be made to the Bank together with such information and documents as the Bank may specify.
(2) Where any information or document required by the Bank is not provided within the time specified or any extended time granted by the Bank, the application shall, without prejudice to a fresh application being made, be deemed to be withdrawn.
(3) The Bank shall consider the application under subsection (1) and make a recommendation to the Minister whether the application should be approved or refused.
(4) A recommendation to approve an application shall not be made if the Bank is satisfied that it would be contrary to the public interest to do so.
(5) Upon receiving an application and the recommendation of the Bank under this section, the Minister may approve the application with or without any modification or condition, or refuse the application.
(6) Any person who fails to comply with any modification or condition imposed by the Minister under subsection (5) commits an offence and shall on conviction be liable to a fine not exceeding ten million ringgit.
(7) Where the Minister refuses an application, the Bank shall notify the applicant in writing of the refusal.
(8) A person who submits or provides any information or document under subsection (1) which he knows, or has reason to
believe, to be false or misleading commits an offence and shall on conviction be liable to a fine not exceeding ten million ringgit.
Defence relating to contravention
It shall be a defence to a charge for an offence relating to contraventions under section 12, 13, 14, 15 or 18 for the accused to prove that he had no knowledge of the acts, omissions, facts or circumstances constituting the contravention, provided he had reported the contravention to the Bank within seven days of becoming aware of those acts, omissions, facts or circumstances which constituted such contravention.
Effect of contravention
(1) Where the Bank is satisfied that any person has contravened subsection 12(1) regardless as to whether or not there is any prosecution of any person for such contravention, the Bank may make a preliminary order in writing—
(a) prohibiting the transfer of, or the carrying out of the agreement to transfer, such shares or, in the case of unissued shares, prohibiting the transfer of, or the carrying out of the agreement to transfer, the right to be issued with them;
(b) prohibiting the exercise of any voting rights in respect of such shares;
(c) prohibiting the issue of any further shares in right of such shares or in pursuance of any offer made to their holder; or
(d) except in a liquidation, prohibiting the payment of any sums due from the prescribed institution on such shares, whether in respect of capital or otherwise.
(2) Any person who fails to comply with an order under subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.
(3) Where the Bank is satisfied that any person has contravened subsection 18(1), the Bank may make a preliminary order in writing prohibiting the exercise of any rights under any collateral, or right to transfer any shares or property constituting such collateral regardless as to whether or not there is any prosecution of the person for such contravention.
(4) Any person who fails to comply with an order under subsection (3) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.
(5) Any transaction, including any agreement or arrangement in relation to any shares, or interest in shares, or security, which is in contravention of a preliminary order, or an order confirmed under subsection 23(1), or of any direction of the Bank under subsection 24(1), shall be void and of no effect.
(6) A person is not entitled to be given an opportunity to be heard before the Bank makes a preliminary order under subsection (1) against him or which affects him in any manner.
Preliminary order by the Bank
(1) A preliminary order under section 21 shall be served on the defaulting person as soon as practicable, and may be publicised in such manner as the Bank deems fit, if, in the opinion of the Bank, it needs to be publicised.
(2) A preliminary order shall be binding on—
(a) the defaulting person;
(b) any person for the time being holding any shares to which such order applies; and
(c) any other person specified in the order or to whom the order is directed.
(3) Any person holding any shares to which a preliminary order applies shall within seven days of its service on the defaulting person, or such longer period as the Bank may allow, surrender such shares to the Bank.
(4) Any person who contravenes subsection (3) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.
(5) Any defaulting person against whom a preliminary order has been made, or any other person prejudicially affected by such order, may, within fourteen days of the service of the order on the defaulting person, make representations in writing to the Bank applying for a revocation of the order on the ground that he had not contravened the provisions in relation to which the order was made, or for a modification of the order on the ground that it would be just and proper to modify it for reasons to be set out in the representations.
Confirmation of preliminary order
(1) The Bank may, after considering the representations made under subsection 22(5), either confirm the preliminary order, or revoke it, or vary it in such manner as it deems fit.
(2) Where the Bank confirms a preliminary order, it may dispose of the shares surrendered to it under subsection 22(3) to such person and to such extent as the Bank may determine.
(3) The proceeds of the disposal of the shares under subsection (2) shall be paid into the High Court, and any person claiming to be beneficially entitled to the whole or any part of such
proceeds may, within thirty days of such payment into the High Court, apply to a judge of the High Court in chambers for payment out of the proceeds to him.
Direction to give effect to order
(1) The Bank may direct the directors or officers of the prescribed institution to give effect to a preliminary order of the Bank under subsection 22(1) or an order of the Bank confirmed under subsection 23(1), or to take such action as may be incidental, ancillary or consequential to such order.
(2) Any person who fails to comply with the direction under subsection (1) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding one year or to a fine not exceeding five million ringgit or to both.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
