Power to issue Sukuk
Open ↗(1) Subject to this Chapter and to the terms and conditions of its memorandum and articles, a Labuan company shall have the power to issue Sukuk on such terms and conditions as it thinks fit and in particular, but without limiting the generality of the foregoing, may issue the following:
(a) a Sukuk constituting a charge on any or all of the assets of the company;
(b) a Sukuk which may be converted into shares in the company; or
(c) a secured Sukuk.
(2) The amounts payable under any Sukuk, whether sealed or signed on behalf of the company, shall be a specialty debt of the company, and where the Sukuk is issued by a branch of a company, it shall be located at that branch.
(3) The Minister may make regulations—
(a) restricting the right of a Labuan company or any particular class of Labuan companies to issue Sukuk which may be converted into shares;
(b) prescribing the terms and conditions or the event or events upon which conversion shall or may take place.
Trustee for Sukuk holders
Open ↗(1) Every Labuan company which offers Sukuk pursuant to subsection 13(1) shall make provision in such Sukuk, or in a trust deed relating to such Sukuk, for the appointment of a Labuan trust company as a trustee for Sukuk holders.
(2) A borrowing company shall not allot any Sukuk until such time as a Labuan trust company has been appointed as a trustee for Sukuk holders.
(3) The Authority may approve any other person to act as a trustee together with the Labuan trust company for Sukuk holders.
(4) A borrowing company and every officer of the borrowing company who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding one million ringgit or to imprisonment for a term not exceeding three years or to both.
Exemptions and indemnifications of trustee for Sukuk holders from liability
Open ↗(1) Subject to this section, a term, provision or covenant of a Sukuk or a trust deed of a term of contract with Sukuk holders secured by a trust deed shall be void in so far as the term, provision or covenant, as the case may be, would have the effect of—
(a) exempting a trustee for Sukuk holders from liability for contravention of any provisions of this Part or for breach of trust or failure to show the degree of care and diligence required of it as a trustee;
(b) indemnifying a trustee for Sukuk holders against liability for contravention of any provisions of this Part or for breach of trust or for failure to show the degree of care and diligence required of it as a trustee,
unless the term, provision or covenant—
(A) releases the trustee from liability for anything done or omitted to be done before the release is given; or
(B) enables a meeting of Sukuk holders to approve the release of a trustee from liability for anything done or omitted to be done before the release is given.
(2) For the purpose of paragraph (1)(B)—
(a) a release is approved if the Sukuk holders who vote for the resolution hold seventy-five per centum of the nominal value of the Sukuk held by all the Sukuk holders who attend the meeting and vote on the resolution; and
(b) a Sukuk holder attends the meeting and votes on the resolution if—
(i) such Sukuk holder attends the meeting in person and votes on the resolution; or
(ii) if proxies are permitted, the Sukuk holder is represented at the meeting by a proxy and the proxy votes on the resolution.
Duties of trustee for Sukuk holders
Open ↗(1) A trustee for Sukuk holders—
(a) shall exercise reasonable diligence to ascertain whether or not the assets of the borrowing company and each of its guarantor companies, which are or may be available, by way of Sukuk or otherwise, are sufficient, or are likely to be or become sufficient, to discharge the principal amount of Sukuk as and when it becomes due;
(b) shall satisfy itself that each prospectus relating to the Sukuk does not contain any matter which is inconsistent with the terms of the Sukuk or with the relevant trust deed;
(c) shall exercise reasonable diligence to ascertain whether or not the borrowing company and each of its guarantor companies have committed any breach of the covenants, terms and provisions of the Sukuk or the trust deed;
(d) except where it is satisfied that a breach of the covenants, terms and provisions of the Sukuk or the trust deed would not materially prejudice the security, if any, for the Sukuk or the interests of Sukuk holders, shall take all steps and do all such things as it is empowered to do to cause the borrowing company and any of its guarantor companies to remedy any breach of those covenants, terms and provisions;
(e) where the borrowing company or any of its guarantor companies fails, when so required by the trustee, to remedy any breach of the covenants, terms and provisions of the Sukuk or the trust deed, shall place the matter before a meeting of Sukuk holders, submit such proposal for the protection of their investment as the trustee considers necessary and appropriate and obtain the directions of the holders of the Sukuk in relation thereto; and
(f) where the borrowing company submits to those Sukuk holders a compromise or arrangement, shall give them a statement explaining the effect of the compromise or arrangement and, if it thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto.
(2) Where, after due enquiry, a trustee for Sukuk holders at any time is of the opinion that the assets of a borrowing company and of any of its guarantor companies which are or should be available, whether by way of security or otherwise, are insufficient or likely to become insufficient to discharge the principal amount of Sukuk as and when it becomes due, the trustee for Sukuk holders may lodge an application in the specified form with the Authority for a direction under this subsection and the Authority may, on such application, after giving the borrowing company an opportunity for making representations in relation to the application, by direction in writing served on the borrowing company at its registered office in Labuan, impose such restrictions
on activities of the borrowing company, including restrictions on advertising for deposit or loans and on borrowing by the borrowing company, as the Authority thinks necessary for the protection of the interests of Sukuk holders, or the Authority may, and if the borrowing company so requires shall, direct the trustee for Sukuk holders to lodge an application with the Court for an order under subsection (4) and the trustee for Sukuk holders shall apply accordingly.
(3) Where—
(a) after due enquiry, a trustee for Sukuk holders at any time is of the opinion that the assets of the borrowing company and of any of its guarantor companies which is or should be available is insufficient, or likely to become insufficient, to discharge the principal amount of Sukuk as and when it becomes due; or
(b) the borrowing company has contravened or failed to comply with a direction by the Authority under subsection (2),
the trustee for Sukuk holders may, and where the borrowing company has requested the trustee for Sukuk holders to do so, the trustee for the holders of Sukuk shall, apply to the Court for an order under subsection (4).
(4) Where an application is lodged by a trustee for Sukuk holders with the Court under subsection (2) or (3), the Court, after giving the borrowing company an opportunity of being heard, may, by order, do all or any of the following, namely:
(a) direct the trustee for Sukuk holders to convene a meeting of Sukuk holders for the purpose of placing before them such information relating to their interests, as the trustee for the Sukuk holders considers necessary or appropriate and for the purpose of obtaining their directions in relation thereto, and give such directions in relation to the conduct of the meeting as the Court thinks fit;
(b) stay all or any actions or proceedings before any Court by or against the borrowing company;
(c) restrain the payment of any monies by the borrowing company to Sukuk holders of the borrowing company or to any class of such holders;
(d) appoint a receiver of such of the property as constitutes the security, if any, for the Sukuk or any part thereof; or
(e) give such further directions from time to time as may be necessary to protect the interests of Sukuk holders, the members of the borrowing company or any of its guarantor companies or the public, but in making any such order, the Court shall have regard to the rights of all creditors of the borrowing company.
(5) The Court may vary or rescind any order made under subsection (4) as it thinks fit.
(6) A trustee for Sukuk holders in making any application to the Authority or the Court, shall have regard to the nature and kind of the security given when the Sukuk were offered pursuant to subsection 13(1), and, if no security was given, shall have regard to the position of Sukuk holders as unsecured creditors of the borrowing company.
(7) A trustee for Sukuk holders may rely upon any certificate, report given or statement made by any advocate, auditor or officer of the borrowing company or guarantor company if the trustee for Sukuk holders has reasonable grounds for believing that such advocate, auditor or officer was competent to give or to make the certificate, report or statement.
Obligations of directors of borrowing company
Open ↗(1) The directors of the borrowing company shall—
(a) at the end of a period not exceeding three months ending on a day—
(i) such day being the later of the date of the relevant prospectus, if applicable; or
(ii) such day being the date in which the Sukuk is issued pursuant to the trust deed which the trustee for Sukuk holders of the borrowing company is required to notify to the borrowing company in writing; and
(b) at the end of each succeeding period thereafter, being a period of three months or such shorter time as the trustee for Sukuk holders may, in any special circumstances, allow,
prepare a report that relates to that period and complies with the requirements of subsection (3) and, within thirty days after the end of each such period, lodge a copy of the report relating to that period with the Authority and with the trustee for Sukuk holders.
(2) Any person who contravenes subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.
(3) The report referred to in subsection (1) shall be signed by not less than two of the directors on behalf of all of them and shall set out in detail any matters adversely affecting the security or the interests of Sukuk holders and, without affecting the generality of the foregoing, shall state—
(a) whether or not the limitations on the amount that the borrowing company may borrow have been exceeded;
(b) whether or not the borrowing company and each of its guarantor companies have observed and performed all the covenants and provisions binding upon them respectively by or pursuant to the Sukuk or any trust deed;
(c) whether or not any event has happened which has caused or could cause the Sukuk or any provisions of the relevant trust deed to become enforceable and, if so, particulars of that event;
(d) whether or not any circumstances affecting the borrowing company, its subsidiaries or its guarantor companies or any of them have occurred which materially affect any security or charge created by the Sukuk or any trust deed and, if so, particulars of those circumstances;
(e) whether or not there has been any substantial change in the nature of the business of the borrowing company or any of its subsidiaries or any of its guarantor companies since the Sukuk were first issued pursuant to subsection 13(1) which has not previously been reported upon as required by this section and, if so, particulars of that change; and
(f) where the borrowing company has deposited money with, or lent money to, or assumed any liability of, a corporation which pursuant to section 4 of the Labuan Companies Act 1990 is deemed to be related to the borrowing company, particulars of—
(i) the total amount so deposited or lent and the extent of any liabilities so assumed during the period covered by the report; and
(ii) the total amount owing to the borrowing company in respect of money so deposited or lent and the extent of any liabilities so assumed as at the end of the period covered by the report,
distinguishing between deposits, loans and assumptions of liability which are secured and those which are unsecured, but not including any deposit with or loan to or any liability assumed on behalf of a corporation if that corporation has guaranteed the payment of the Sukuk of the borrowing company and has secured the guarantee by a charge over its assets in favour of the trustee for Sukuk holders of the borrowing company.
(4) Where there is a trustee for any Sukuk holders issued by a borrowing company, the borrowing company and each guarantor company which has guaranteed the payment of the monies raised by the issue of those Sukuk shall, within twenty-one days after the creation of the charge, furnish the trustee for Sukuk holders on behalf of Sukuk holders, whether or not any demand therefor by it has been made, with particulars in writing of any charge created by the corporation or the guarantor company, as the case may require, and when the amount to be advanced upon the security of the charge is indeterminate within seven days after the advance with particulars of the amount or amounts in fact
advanced, but where any such advances are merged in a current account with bankers or trade creditors, it shall be sufficient for particulars of the net amount outstanding in respect of any such advances to be furnished every three months.
(5) The directors of every borrowing company which has issued Sukuk pursuant to subsection 13(1), not including the issue of Sukuk under subsection 13(5), and of every guarantor company which has guaranteed the repayment of the monies raised by the issue of such Sukuk shall, at some date not later than nine months after the expiration of each financial year of the borrowing company or the guarantor company, cause to be made out and lodged with the Authority and with the trustee for Sukuk holders a profit and loss account together with a detailed statement of outstanding liability under such Sukuk for the period from the end of that financial year until the expiration of six months after the end of that financial year and a balance sheet as at the end of the period to which the profit and loss account relates.
(6) Where any guarantor company, being a company which is incorporated in any state or territory nominated for the purposes of this section by the Minister, has lodged with the appropriate authority in any such nominated state or territory a profit and loss account and balance sheet for the relevant period, that shall be sufficient compliance with the requirements of subsection (5) if, with the consent of the trustee for Sukuk holders, there is lodged with the Authority and the trustee for Sukuk holders, certified copies of the profit and loss account and balance sheet so lodged.
(7) Where the directors of a borrowing company do not lodge with the trustee for Sukuk holders a report as required by subsection (1), or where the directors of a borrowing company or of its guarantor companies do not lodge with the Authority and the trustee for Sukuk holders the profit and loss account, detailed statement and balance sheet as required by subsection (5) within the time specified, the trustee for Sukuk holders shall, as soon as possible, lodge notice of that fact with the Authority.
(8) Any person who contravenes subsection (5) commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.
Obligation of guarantor company to furnish information
Open ↗(1) For the purpose of the preparation of a report which, by this Act, is required to be signed by or on behalf of the directors of a borrowing company or any of them, that borrowing company may, by notice in writing, require any of its guarantor companies to fur nish it with any information relating to that guarantor company which, by this Act, is required to be contained in that report, and that guarantor company shall furnish the borrowing company with that information before such date, being a date not later than fourteen days after the notice is given, as may be specified in that behalf in the notice.
(2) A guarantor company or every officer of that company which fails to comply with the requirement contained in a notice given pursuant to subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.
Monies to be immediately payable on certain events
Open ↗(1) Where in any prospectus issued in connection with an offer or invitation pursuant to subsection 13(1) to subscribe for or to purchase Sukuk of a Labuan company there is a statement as to any particular purpose or project for which the monies received by the borrowing company in response to the offer or invitation are to be applied, the borrowing company shall from time to time make reports to the trustee for Sukuk holders of the borrowing company as to the progress that has been made towards achieving such purpose or completing such project.
(2) Where it appears to a trustee for Sukuk holders to which a report is furnished by a borrowing company that such purpose or project has not been achieved or completed within the time stated in the prospectus within which the purpose or project is to be achieved or completed or, where no such time was stated, then within a reasonable time, the trustee for Sukuk holders may, and, if in its opinion it is necessary for the protection of the interests of Sukuk holders, the trustee for the Sukuk holders shall, give notice in writing to the borrowing company requiring it to pay the monies so received by the borrowing company and, within one month after such notice is given, lodge with the Authority a copy of such notice.
(3) A trustee for Sukuk holders shall not give a notice pursuant to subsection (2) if it is satisfied that—
(a) the purpose or project has been substantially achieved or completed;
(b) the interests of the Sukuk holders have not been materially prejudiced by the failure to achieve or complete the purpose or project within the time stated in the prospectus or within a reasonable time; or
(c) the failure to achieve or complete the purpose or project was due to circumstances, other than shortage of funds, beyond the control of the borrowing company that could not reasonably have been foreseen by that borrowing company at the time that the prospectus was issued.
Retention of over-subscriptions in Sukuk issues
Open ↗(1) A borrowing company shall not accept or retain subscriptions to a Sukuk issue in excess of the amount of the issue as disclosed in the prospectus unless the borrowing 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 regulations, where a borrowing company specifies in a prospectus relating to a Sukuk issue that it reserves the right to accept or retain over-subscriptions—
(a) the borrowing 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 borrowing 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 borrowing company would be if over-subscriptions to the limit specified in the prospectus were accepted or retained.
(3) Any borrowing company who contravenes this section commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.
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).
