doing business 2008 - malaysia methodology and best practises

8/3/2019 Doing Business 2008 - Malaysia Methodology and Best Practises

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Methodology and Best

Practices

Sylvia Solf

Justin YapKuala Lumpur, MalaysiaOctober 31, 2007


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Doing Busi ness:

10 indic a t ors in 178 economies

2007 2008 2009

Starting a business

Dealing with licenses

Employing workers

Registering property

Getting credit

Protecting investors

Paying taxes

Trading across borders

Enforcing contracts

Closing a business

Update of 2007

Add 3 countries

Reformers Club:

11 case studies

Add Not paying bribes

Add Using

infrastructure

Research program on

regulation and

business opportunities

for women
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Top 30 on t he Ease of Doing Business 2007

1. Singapore 16. Switzerland

2. New Zealand 17. Estonia

3. United States 18. Georgia

4. Hong Kong, China 19. Belgium

5. Denmark 20. Germany

6. United Kingdom 21. Netherlands

7. Canada 22. Latvia

8. Ireland 23. Saudi Arabia

9. Australia 24. Malaysia

10. Iceland 25. Austria

11. Norway 26. Lithuania

12. Japan 27. Mauritius

13. Finland 28. Puerto Rico

14. Sweden 29. Israel

15. Thailand 30. Korea


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Malays ia in the reg ion

Singapore 1Hong Kong, China 4

Japan

12

Thailand 15Malaysia 24

Korea

30

Brunei 78China 83

Vietnam

91

India 120Indonesia 123

Philippines

133

Cambodia 145Lao PDR 164


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Time and Mot ion Ind ica t ors :

How t o lay a be t t e r b r i ck


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Foc us on St eps, T im e and Cost isDoing Bus iness Bas ic Met hodo logy

Cost(%o

fGNIpercapita)

Time(numberofdays)

Starting a business in Madagascar

0

1

2

3

4

5

6

7

8

Register at the GUIDE Apply for license, tax and

statistical IDs

Publish a notice in a daily

newspaper

File forms with the National

Social Security Fund

File for health insurance0%

5%

10%

15%

20%

25%


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A t im e and mot ion s tudy

1.

Follow the entrepreneur from the beginning to the

end of a basic transaction;

2. Record every step of the process, and theassociated time and cost;3. Gather all the relevant laws, regulations, decrees,fee schedules.


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How Malays ia ranks in eac h ind ica t o r

Topic Malaysias Rank Worlds best

Starting a business 74 Australia

Dealing with licenses 105 St. Vincent & the Grenadines

Employing workers 43 United States

Registering property 67 New Zealand

Getting credit 3 United Kingdom

Protecting investors 4 New Zealand

Paying taxes 56 Maldives

Trading across borders 21 Singapore

Enforcing contracts 63 Hong Kong, China

Closing a business 54 Japan

1 St ar t ing a Business
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1. St ar t ing a Business

Malays ia s rank : 74


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All procedures that are required in law or in

practice for an entrepreneur to start up and

formally operate an industrial or

commercial business, including:

Preregistration (name verification, notarization) Registration of the company

Postregistration (social security, tax, company seal)

St ar t ing a bus iness m easures:


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St ar t ing a bus iness: The c om pany

Is a limited liability company;

Operates in Kuala Lumpur and does not engage in foreign trade;

Has 5 owners who are all Malaysian nationals;

Performs general industrial or commercial activities

such as the

production or sale of goods or services to the public (not subject tospecial tax regime and no heavily polluting processes);

Leases its commercial plant and offices and does not own any realestate;

Does not qualify for investment incentives or special benefits;

Has at least 10 and up to 50 employees 1 month after thecommencement of operations, all of them Malaysian nationals;

Has start-up capital of 10 times income per capita at the end of 2006(approx. 183,000 MYR);

Has a turnover of at least 100 times income per capita;

Has a company deed 10 pages long.


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Procedures (number):

any interaction with an external party; Both pre- and post-incorporation procedures that are officially required for an entrepreneur

to legally operate a business are recorded; Both legal and common practice procedures are included; Shortcuts may be considered;

Industry-specific procedures are excluded;

Time (days): Median duration, recorded in calendar days; A procedure has a minimum duration of 1 day;

Procedures may take place simultaneously but cannot begin the same day; If procedure can be accelerated for a cost, the fastest procedure is recorded; Each procedure starts with the first filing of the application or demand, and ends once the

company has received the final document or service requested;

Cost (% of income per capita): Only official feesno bribes or special relationships; recorded as percentage of GNI per capita;

Paid-in capital: Before registration and up to 3 months following registration; measured as percentage of GNI per capita.

St ar t ing a bus iness m easures:

St ar t ing a business in Malays ia:


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St ar t ing a bus iness in Malays ia :

St ar t ing a bus iness in Malays ia:

9 proc edures, 24 days, 18.1% of inc om e per c ap i t a

St ar t ing a bus iness : Top 10 and w hat t hey have in


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1. Australia

2. Canada

3. New Zealand

4. United States

5. Ireland6. United Kingdom

7. Puerto Rico

8. Mauritius

9. Singapore

10. Georgia

Minimum capital requirementnominal or zero

Standardized forms

No courts involved

Online registration

Fixed registration fee

No publication in legal journalrequired

St ar t ing a bus iness : Top 10 and w hat t hey have in

c o m m o n

2. Deal ing w i t h L icenses


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2. Deal ing w i t h L icenses



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All procedures that are required in law orin practice to build a standardized

warehouse, up to the point that theproperty can be used as collateral or

transferred.

Deal ing w i t h l i c enses m easures:

Deal ing w i t h l i censes:


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g

The c onst ruc t ion c ompany (Bu i ldCo)

Is a limited liability company operating in Kuala Lumpur;

Has 5 owners who are all Malaysian nationals;

Is fully licensed and insured to construct buildings;

Leases its commercial plant and offices and does not own any realestate;

Has 20 employees, all Malaysians with the necessary technical andprofessional expertise to obtain construction permits & approvals;

Has at least 1 employee who is a locally registered licensedarchitect;

Has paid all taxes and taken out all insurance necessary to itsbusiness activity (e.g. accident insurance for workers and liabilityinsurance);

Owns the land on which the warehouse is built.


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Deal ing w i t h L ic enses: The w arehouse

Has road access and is located on the edge of Kuala Lumpur, butwithin city limits;

Is 2 stories high and covers an area of 1,300.6 square meters. Eachfloor is 3 meters high;

Is located on a land plot of 929 square meters, which is 100% ownedby the construction company (BuildCo) and is accurately registeredin the cadastre and land registry;

Is a new construction;

Has complete architectural and technical plans and is alreadyinsured;

Will be connected to electricity, water, sewerage and one land phoneline. The connection to each utility network will be 10 meters long;

Will be used for general storage, such as storing books or stationery;

Will include all technical equipment required to make the warehousefully operational.


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Deal ing w i t h l i censes m easures :

Procedures (number) Every interaction with an external party (i.e. municipality, inspectors, utilities);

All procedures legally or in practice required for building a warehouse, including

connecting to electricity, water, sewage and phone services;

Time (days)

Median duration, recorded in calendar days;

A procedure has a minimum duration of 1 day;

Procedures may take place simultaneously but cannot begin the same day;

If procedure can be accelerated for a cost, the fastest procedure is recorded;

Each procedure starts with the first filing of the application or demand, and ends once

the company has received the final document or service requested;

Cost (% of income per capita)

Only official feesno bribes or special relationships;

recorded as percentage of GNI per capita.

Who must approve (and inspect ) a new c onst ruc t ion


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i n K ua la Lumpur?

Planning

Department BuildingDepartment

Telekom

Malaysia

TNB

Public WorksDepartment

Town ServicesDepartment

Drainage &Irrigation

Department

WaterAuthority

Sewerage

ServicesDepartment

Fire & RescueDepartment

EngineeringDepartment

25 procedures

285 days

10% of incomeper capita

Deal ing w i t h L icenses: Top 10 and w hat t hey have in


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c o m m o n

1. St. Vincent and the

Grenadines

2. New Zealand

3. Belize

4. Marshall Islands

5. Singapore

6. Denmark

7. St. Kitts and Nevis

8. Maldives

9. Kenya

10. Micronesia

Few pre-approval proceduresrequired before obtaining abuilding permit

Interaction with one agency toobtain a building permit ratherthan following up with different

offices and agencies

Few inspections of theconstruction site by the

authorities

3. Regis t er ing Propert y


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R i t i t


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All procedures that are required in law orin practice to transfer property title, up to

the point that the property can be used ascollateral or transferred.

Regis t er ing proper t y m easures:

Regist er ing proper t y: Sel ler and buyer

i


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compan ies

Are limited liability companies;

Located on the outskirts of Kuala Lumpur;

Privately owned by Malaysian nationals;

Have 50 employees each, all Malaysian nationals;

Perform general commercial activities.

R i t i t Th t


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Regis t er ing proper t y : The proper t y

Is sold for its market value of 50 times income per capita; Has been fully owned by the seller for the past 10 years;

Is not subject to any mortgage;

Is registered in the cadastre and/or land registry and is not the subject of

any title disputes;

Is located in a commercial zone on the outskirts of Kuala Lumpur, and does

not require rezoning;

Consists of a plot of land measuring 557.4 m on which stands a2-storey warehouse with an area of 929m; the warehouse is 10 years old, ingood condition, and complies with all safety standards;

Will not be subject to renovations or additional building following the

purchase;

Will not be used for special purposes or require special permits;

Has no trees, natural water sources, natural reserves or historical

monuments of any kind; Has no occupants, legal or illegal

Regis ter ing proper t y m easures:


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Regis ter ing proper t y m easures:

Procedures (number)

Every interaction of the seller, or their agent with an external party

(i.e. municipality, inspectors, utilities)

Buyer follows the fastest legal option

Time (days)

Recorded in calendar days

Captures the median duration of each procedure Minimum time for each procedure is 1 day

Cost (% of property value)

Only official fees and taxes

Recorded as a % of property value (which is 50 times income per

capita)

Both costs borne by the buyer and those borne by the seller are

included

Regis t er ing proper t y in Malays ia:5 proc edures 144 days 2 4% of inc om e per c ap i t a


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1. Sale-purchase agreementsent to Stamp Office forstamping (1 day)

2. Memorandum ofTransfer (14A) sent toStamp Office foradjudication of Stamp

Duty (1 day)

3. Inspection andvaluation of theproperty (36 days)

4. Memorandum ofTransfer (14A) sent toStamp Office forstamping (1 day)

5. The transfer isregistered at the LandOffice/Registry (144days)

5 proc edures, 144 days, 2 .4% of inc om e per c ap i t a

Total time to register property: 144 days

Regis t er ing Proper t y : Top 10 and w hat t hey have

i


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i n com m on

1. New Zealand

2. Saudi Arabia

3. Armenia4. Lithuania

5. Slovakia

6. Norway

7. Sweden

8. Iceland9. United Arab Emirates

10. United States

Reduce taxes or fees

Speed procedures in the registry

Computerize procedures and goonline

Combine and reduce procedures

Speed procedures in the court

Liberalize professions like surveyors,valuers and notaries

4. Trading ac ross BordersMalays ia s rank : 21


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Trad ing Across Borders: t he c ase


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Trad ing Across Borders: t he c ase

The business:

Is a limited liability company located in Kuala Lumpur, outside of any

export processing zone or industrial estate with special export or import

privileges;

Is 100% privately owned by Malaysian nationals;

Has 100 or more employees;

Exports more than 10% of its sales;

The goods:

Are not hazardous and does not consist of military items;

Travel in a dry-cargo 20-foot full container;

Do not require refrigeration or any other special environment; Do not require special environmental or other safety standards other than

accepted international standards.

Respondents:

mainly freight forwarders, traders, customs and port authorities

Trad ing ac ross borders measures:


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Trad ing ac ross borders measures:

Documents (number) All documents required to export and import the goods, including:

Bank documents;

Customs clearance and technical control documents;

Port and terminal handling documents;

Transport documents;

Import licenses;

Time (calendar days)

For export, from the packing of goods at the factory to departure from the Port of

Kelang;

For import, from arrival at the Port of Kelang to arrival at the warehouse; Includes inland transport time, but not ocean transport time;

Cost (US dollars)

All official fees for import and export;

Does not include tariffs or trade taxes.

Trad ing ac ross borders in Malaysia


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Trad ing ac ross borders in Malaysia

Export 7 documents

Bill of lading Cargo release

order Certificate of origin Commercial

invoice Customs export

declaration Packing list Technical

standard/healthcertificate

18 days

US$432

Import 7 documents

Bill of lading Cargo release

order Certificate of origin Commercial

invoice Customs import

declaration Packing list Terminal handling

receipts

14 days US$385

Trade docum enta t ion in Ma lays ia and t he t op 10ec onom ies in overa l l ease of do ing business


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ec onom ies in overa l l ease of do ing bus iness

0 1 2 3 4 5 6 7 8

Singapore

N ew Z ealand

United States

H o ng Kong, China

Denmark

United Kingdom

Canada

Ireland

Australia

Iceland

M alaysia

Documents for Export Documents for Import

Number of documents needed for export and import

Trad ing ac ross borders : Top 10 and w hat t hey have inc o m m o n


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c o m m o n

1. Singapore

2. Denmark

3. Hong Kong, China

4. Norway

5. Finland

6. Sweden7. Estonia

8. Israel

9. Panama

10. Germany

Reduce paperwork

Use a single window

Allow shippers to declaretheir manifest online even

prior to arriving in port

Limit physical inspections

5. Paying Tax esMalays ia s rank : 56


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y

Pay ing t ax es: t he c ompany


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y g p y

Is a taxable limited liability company operating in Kuala Lumpur;

Began operations in January 2005, when it purchased all the assets on its balance sheet and hired

all its workers;

Is 100% privately owned by 5 Malaysian nationals;

Has a start-up capital of 102 times income per capita at the end of 2005; Produces ceramic flowerpots and sells them at retail;

Owns 2 plots of land, 1 building, machinery, office equipment, computers and 1 truck, and leases 1

truck;

Does not qualify for investment incentives or benefits;

Does not engage in foreign trade or handle products subject to a

special tax regime;

Has 60 employees (4 managers, 8 assistants and 48 workers), all nationals;

Has a turnover of 1,050 times income per capita; Makes a loss in the first year of operations;

Has a gross pretax margin of 20%;

Distributes 50% of profits as dividends at the end of the second

year;

Sells one of its plots of land at a profit during the second year;

Has annual fuel costs for its trucks equal to twice income per capita;

Pay ing Tax es ind ica t or m easures :


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y g

Mandatory taxes/contributions paid or withheld in the second year of operation (FY 2006)

Payments (number)method and frequency of payment

Number of different taxes/contributions times the frequency of payment for each;

Includes advance payments or withholdings;

Includes consumption tax (sales or value added tax) withheld;

If a tax may be filed electronically and is filed electronically by a majority of businesses, only one

payment is counted, even if payments are more frequent;

If a tax is paid through third parties, only one payment is counted;

If 2 or more taxes or contributions are paid jointly on the same form, only one payment is counted;

Time (hours per year)

Hours per year to prepare, file and pay three major types of taxes:

Corporate income tax;

VAT or sales tax;

Labor taxes;

Preparation time, filing time and payment time;

Total tax rate:

Total amount of taxes payable as a percentage of commercial profits, generally: profit or corporateincome tax; social contributions and labor taxes paid by the employer; property taxes, turnover and

other taxes.

Paying t ax es in Malays ia :35 payment s , 166 hours , 32 .6% t o t a l t ax ra te


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15

35

27

Payments (number per year)

Malaysia Regional Average OECD

Number of tax payments inMalaysia compared with East

Asia Pacific Region and OECD

Pay ing Taxes: Top 10 and w hat t hey have in com m on


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1. Maldives2. Singapore

3. Hong Kong, China

4. United Arab Emirates

5. Oman

6. Ireland7. Saudi Arabia

8. Kuwait

9. New Zealand

10. Kiribati

Online filing

One tax per tax base

Low rates and wide taxbase

Simplify tax administration

Sc or ing Ind ica t ors


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3. Em ploy ing Worker sMalays ia s rank : 43


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Em ploying w orkers : The com pany


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Is a limited liability company;

Operates in Kuala Lumpur;

Is 100% Malaysian-owned;

Operates in the manufacturing sector;

Has 201 employees; Is subject to collective bargaining agreements in

countries where such agreements cover more than

half of the manufacturing sector and apply even tofirms not party to them;

Abides by every law and regulation but does not grant

workers more benefits than what is legally mandated.

Em ploy ing w orkers : The w orker


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Is a non-executive, full-time male employee who hasworked in the same company for 20 years, and is now 42years old;

Earns a salary plus benefits equal to the countrysaverage wage;

Is a lawful citizen who belongs to the same race andreligion as the majority of the countrys population;

Resides in Kuala Lumpur;

Is not a member of a labor union, unless membership ismandatory.

Em ploy ing w orkers m easures :


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1. Rigidity of employment index (0-100), the average of:Difficulty of hiring index (0-100) fixed term contracts, minimum wage

Rigidity of hours index (0-100)

provisions relevant to non-standard work schedules and annualleave

Difficulty of firing index (0-100)

required procedures for redundancy

2.

Firing cost

(weeks of salary)

Notice periods and severance pay for a redundant worker (in weeks

of salary)

plus

3. Non-wage labor cost (% of salary) Labor taxes payable by employer (% of workers wage)

Di f f ic u l t y o f H i r ing Index


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Range Malaysia

Does the law prohibit the use of fixed-term

contracts for permanent tasks (Yes/No)?

0 or 1 0

What is the maximum accumulative duration of

fixed-term contracts?

5 years = 0

3-5 years = 0.5


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Range Malaysia

Is night work restricted? Yes/No No

Is weekend work unrestricted? Yes/No No

Can the workweek consist of 5

days? Yes/No No

Can the workweek exceed 50 hours (including

overtime) for 2 months a year?

Yes/No No

Is a worker automatically entitled to more than 21

working days of paid annual vacation?

Yes/No No

0-100 0

Dif f ic u l t y o f Fi r ing Index


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Range MalaysiaDoes the law prohibit terminating workers because of

economic redundancy?

Yes/No No

Does an employer need to notify a third party to terminate 1

redundant worker?

Yes/No Yes

Does an employer need to notify a third party to terminate 25

redundant workers?

Yes/No Yes

Does an employer need third-party approval to terminate 1

redundant worker?

Yes/No No

Does an employer need third-party approval to terminate 25

redundant workers?

Yes/No No

Does the employer need to consider reassignment or

retraining options before terminating for redundancy?

Yes/No No

Do priority rules apply for redundancy? Yes/No Yes

Do priority rules apply for reemployment? Yes/No No

0-100 30

Fi r ing (i .e . re t renc hm ent ) c ost s : Com par ing Malays iaand t he t op 10 in overa l l ease o f do ing bus iness


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4

0

0

62

0

22

28

24

475

0 10 20 30 40 50 60 70 80

Singapore

New Zealand

United States

Hong Kong, China

Denmark

United Kingdom

Canada

Ireland

AustraliaMalaysia

Firing Costs, expressed inweeks of a workers salary

Em ploy ing Work ers : Top 10 and w hat t hey have inc o m m o n


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1. United States

2. Singapore

3. Marshall Islands

4. Georgia

5. Brunei6. Tonga

7. Maldives

8. Australia

9. Palau

10. Denmark

Fixed-term contracts allowedwithout limit for permanent tasks

Limited restrictions on night-timeor weekly-holiday work

Firing costs do not exceed the

equivalent of two months salary

No third-party approval required todismiss workers and no priority

rules in place

Non-wage labor costs do notexceed 20%

6. Get t ing Credi tMalays ia s rank : 3


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Get t ing c red it i ndica t o rs


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Legal rights index: 10 features of collateral/secured transactions law

Credit information index: 6 features of credit information system

plus

Public credit registry coverage:

Number of individuals and firms

Percentage of adult population

Private credit bureau coverage:

Number of individuals and firmsPercentage of adult population

Credi t in format ion Index


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1. Are data on both firms and individuals distributed? Yes

/ No

2. Are both positive and negative data distributed? Yes

/ No

3. Does the registry distribute credit information fromretailers, trade creditors or utility companies as well

as financial institutions?

Yes / No

4. Are more than 2 years of historical credit information

available for distribution?

Yes

/ No

5. Is data on all loans below 1% of income per capita

distributed?

Yes

/ No

6. Is it guaranteed by law that borrowers can access

their data in the largest credit registry?

Yes

/ No

Credit information index 0 -

6

Answers for Malaysia are in bold. Public Registry Coverage equals 44.5% of

adult population.

Met hodology Legal Right s Index


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1. Does the law allow all natural and legal persons to be party to collateral agreements? Yes

/ No

2. Does the law allow for general descriptions of assets, so that all types of assets can be used

as collateral?

Yes

/ No

3. Does the law allow for general descriptions of debt, so that all types of obligations can be

secured?

Yes

/ No

4. Does a unified registry exist for all security rights in movable property? Yes

/ No

5. Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes /No

6. Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes

/ No

7. During reorganization, are secured creditors' claims exempt from an automatic stay on

enforcement?

Yes

/ No

8. During reorganization, is management's control of the company's assets suspended? Yes

/ No

9. Does the law authorize parties to agree on out of court enforcement? Yes

/ No

10. May parties have recourse to out of court enforcement without restrictions? Yes /No

Legal Rights Index 0-10

Answers for Malaysia are in bold. Malaysias total score is 8.

Get t ing Cred it : Top 10 and w hat t hey have inc o m m o n


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1. United Kingdom

2. Hong Kong, China

3. Australia4. Germany

5. Malaysia

6. New Zealand

7. Canada

8. Israel9. Singapore

10. United States

Record positive and negative credithistory

Gather historical credit information

going back at least 2 years, of bothindividuals and companies

Utilities or retailers as well as banks

provide credit information

Allow all types of assets to be used ascollateral

Unified collateral registry

Out-of-court enforcement of security

rights

7. Pro t ec t ing Invest orsMalays ia s rank : 4


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Protec t ing Invest ors : t he case


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Seller

Co.

Buyer Co. buys trucks from Seller Co.

Mr. James owns 60%of Buyer Co. shares,

sits on its board ofdirectors

Mr. James owns90% of Seller Co.

shares

Mr. James

Buyer Co.

Protec t ing Investors m easures :

Extent of disclosure (0-10)


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Extent of disclosure (0-10)

who approves the transaction what needs to be disclosed, when and to whom

Malaysias score:

10

Extent of director liability (0-10)

available claims against Mr. James and the other directors

what needs to be proven for each claim

what remedies are available if they are found liable Malaysias score:

9

Ease of shareholder suits (0-10)

access to company information for proving the investors case

Malaysias score: 7

Strength of investor protection: average of the three indicesMalaysias score: 8.7

Ex t ent o f Disc losure Index

Score Malaysia


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Score Malaysia

1.

What corporate body can legally approve the transaction? 0-3 3

CEO or managing director alone 0

Board of directors or shareholders; Mr. James may vote 1

Board of directors; Mr. James may not vote 2

Shareholders; Mr. James may not vote 3

2.

Is immediate disclosure to the public, regulator or shareholders

required? 0-2 2

No disclosure is required 0

Disclosure of the transaction but not of the conflict of interest is required 1

Disclosure of the transaction and of the conflict of interest is required 23.

Is disclosure in the annual report required? 0-2 2

Disclosure in the annual report is not required 0

Disclosure of the transaction but not of the conflict of interest is required 1

Disclosure of the transaction and of the conflict of interest is required 2

4.

Must Mr. James disclose to the Board of Directors? 0-2 2

No disclosure is required 0

Disclosure of the conflict of interest is required without any specifics 1

Full disclosure of material facts of the conflict of interest is required 2

5. Must an external body approve the transaction (Yes/No)? 0-1 1

Total 0-10 10

Ex t en t o f Di rec t o r L iabi l i t y Index

Score Malaysia


59/72

1.

Can a shareholder plaintiff hold Mr. James liable for damages? 0-2 2

No, or only for fraud or bad faith 0

Only if Mr. James was negligent or influenced the approval 1

If the transaction is unfair or prejudicial to other shareholders 2

2.

Can a shareholder plaintiff hold the approving body liable for damages? 0-2 2


Only if the approving body was negligent 1

If the transaction is unfair or prejudicial to other shareholders 2

3.

Can a court void the transaction if the plaintiff is successful? 0-2 1


Only if the transaction is oppressive or prejudicial to other shareholders 1

If the transaction is unfair or involves a conflict of interest 2

4.

Does Mr. James pay damages if the plaintiff is successful (Yes/No)? 0-1 1

5.

Does Mr. James pay back profits if the plaintiff is successful (Yes/No)? 0-1 1

6.

Can Mr. James be fined or imprisoned (Yes/No)? 0-1 1

7.

Can minority shareholders sue directly or derivatively for damages? 0-1 1

Only shareholders holding 10% or more of share capital may sue 0 Shareholders holding less than 10% of share capital may sue 1

Total 0-10 9

Ex t ent o f Shareholder Sui t s Index


60/72

Score Malaysia

1.

What range of documents is available to the shareholder during trial? 0-4 4

Information the defendant has indicated he/she will rely on for

defense 1

Information that directly proves specific facts in plaintiffs claim 2

Any information relevant to the subject matter of the claim 3 Any information that may lead to the discovery of relevant information 4

2.

Can the plaintiff examine the defendant and witnesses directly? 0-2 2

No 0

Only if the judge approves the questions beforehand 1

Yes, and the judge does not need to approve the questions beforehand 2

3.

Can the plaintiff obtain categories of relevant documents without identifying

each document (Yes/No)?

0-1 0

4.

Can shareholders with 10% or less of share capital, without filing suit,

request that a government inspector investigate the transaction (Yes/No)?

0-1 0

5.

Can shareholders with 10% or less of share capital inspect transaction

documents before filing suit (Yes/No)?

0-1 0

6.

Is the standard of proof for civil suits lower than for criminal

cases (Yes/No)? 0-1 1

Total 0-10 7

Protec t ing Investors : Top 10 and w hat t hey havein c omm on


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1. New Zealand2. Singapore

3. Hong Kong, China

4. Malaysia

5. Canada

6. Israel7. United States

8. Ireland

9. South Africa

10. United Kingdom

Regulate approval of related-partytransactions;

Require extensive internal and

external disclosure requirementsfor relatedparty transactions;

Facilitate shareholder judicial

redress for damage caused tocompany through self-dealing;

Greater remedies against directors

involved in harmful related-partytransactions;

Open company books for

shareholder inspection.

8. Enforc ing Cont rac t sMalays ia s rank : 63


62/72

Enforc ing c on t rac t s : t he c ase


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The Premise:

Seller and Buyer are two businesses located in Kuala Lumpur.

Seller sells and delivers goods worth 200% of income per capita to Buyer, who

refuses to pay disputing the quality of the goods. Seller sues Buyer in Kuala

Lumpur Sessions Court (Mahkamah Sesyen Kuala Lumpur).

The claim equals 200% of income per capita (approx. 36,700 MYR); Seller attaches Buyers goods prior to obtaining judgment;

Expert opinions are given on the quality of the goods; the parties each call an

expert witness or the judge appoints an independent expert;

Seller wins the case and Buyer does not appeal;

Seller immediately moves to enforce the judgment through a public sale of

Buyers movable assets (e.g. office equipment).

Enforc ing c ont rac t s m easures :


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Procedures

(number):

Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods;

Measures procedures applicable to either civil or common law jurisdictions;

Time

(calendar days)

Service of process; Trial and judgment; Enforcement of judgment through public sale of buyers movable goods; Includes waiting period between actions;

Cost

(% of value of claim)

Court costs + average attorneys fees + enforcement fees

Ease of Enforcing Contracts = Average of Rank on Time, Rank on Cost and Rankon Procedures)

Enforc ing con t rac t s in Ma lays ia


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Procedures (number) 30

Duration (days) 600

Filing and service 60

Trial and judgment 360

Enforcement of judgment 180

Cost (% of claim)* 27.5

Attorney cost (% of claim) 20.2

Court cost (% of claim) 1.1

Enforcement Cost (% of claim) 6.2

Enforc ing cont rac t s : Top 10 and w hat t hey have inc o m m o n


66/72

1. Hong Kong, China2. Luxembourg

3. Latvia

4. Iceland

5. Singapore

6. Austria7. Finland

8. United States

9. Norway

10. Korea

Specialized commercialcourts

Changes to procedural rules

More efficient enforcementof judgments

Introduce out-of-courtenforcement of small or

uncontested claims

9. Closing a BusinessMalays ia s rank : 54


67/72

Closing a b usiness: The business

Is a domestic limited liability company whose major asset is a hotel in downtown


68/72

Kuala Lumpur (approx. 60 rooms);

Has had average annual revenue of 1,000 times income per capita over the past3 years;

Took out a 10-year loan from a domestic bank 5 years ago, using the hotel real

estate as security; Worth more as a going concern than it would be in a piecemeal liquidation

Has a mortgage whose remaining principal is equal to the hotels market value;

The companys founder owns 51% of shares, with no other shareholder holdingmore than 5% of the company;

The hotel has a professional manager, 201 employees, and 50 suppliers;

The bank is the only secured creditor, holding 74% of the outstanding debt;

OWES A LOT OF PEOPLE MONEY:

the bank (mortgage on the hotel property), suppliers, employees, back taxes

and cant pay them.

Clos ing a bus iness m easures:


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Time: How many years does it take to put the company through the

bankruptcy process?

Cost: What percentage of the estate value is spent going throughthe bankruptcy process?

Recovery rate: How many cents on the dollar can claimants

creditors, tax authorities and employees recover from the

insolvent company?

Closing a bus iness:Rec overy ra t es in Ma lays ia and o t her c ount r ies

Closing a business in Malaysia:Ti 2 3


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0

10

20

30

40

50

60

70

8090

100

Japa

n

Australia

HongKon

g

Thaila

nd

Mala

ysia

Chin

a

Indon

esia

India

Time: 2.3 yearsCost: 15% of estate valueRecovery Rate: 38%

Recovery Rate(percent)

93%

79% 79%

42% 38%36%

13% 12%

Clos ing a bus iness: Top 10 and w hat t hey have inc o m m o n


71/72

1. Japan2. Singapore

3. Norway

4. Canada

5. Finland

6. Ireland7. Denmark

8. Netherlands

9. Belgium

10. United Kingdom

Establish creditors committees

Increase creditors priority

ranking

Allow pre-insolvency

proceedings

Reduce time limits

Minimize court involvement

Thank You


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contributor,

please visit

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