Financial Services

Transition from LIBOR

In this article, Krystle Lui Shu Lin reports on the transition from LIBOR rates to risk-free rates.

Introduction

The Financial Conduct Authority (“FCA”) in the United Kingdom announced in 2017 that it would no longer be necessary to persuade or compel banks to submit the rates required to calculate LIBOR after 31 December 2021

What is IBOR/LIBOR?

Interbank Offered Rates (“IBORs”) are benchmark interest rates which represent the average rate at which banks are willing to borrow wholesale unsecured funds. The London Interbank Offered Rate (“LIBOR”) is the most widely used interest rate benchmark in the world. It is often referenced in, amongst others, derivative, bond and loan documentation. It also serves as a gauge of market expectation regarding central bank interest rates, liquidity premiums in the money markets and, during periods of stress, as an indicator of the health of the banking system¹.

LIBOR is administered by ICE Benchmark Administration (“IBA”) and calculated based on submission of rates provided by a panel of 20 banks. The rates are submitted to, and used by, IBA for the overall LIBOR index calculation.

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Corporate/M&A

The Malaysian Code on Corporate Governance 2021

In this article, Teo Eu John examines amendments to the Malaysian Code on Corporate Governance.

Introduction

The Securities Commission Malaysia (“SC”) has published a revised version of the 2017 Malaysian Code on Corporate Governance (“2017 MCCG”), which is effective from 28 April 2021 (“2021 MCCG”). The first batch of companies to report on their adoption of the 2021 MCCG practices will be those with financial years ending 31 December 2021¹.

The 2021 MCCG is a set of corporate governance best practices for companies to adopt. While the 2021 MCCG is applicable to listed companies, certain practices are only applicable to Large Companies². Non-listed entities are also encouraged to adopt the practices in the 2021 MCCG.

The 2021 MCCG adopts the “apply or explain an alternative” approach. Listed companies are required to disclose the application of each practice set out in the 2021 MCCG in their Corporate Governance Report and announce the same together with the annual report³.

If the board finds that it is unable to implement any of the 2021 MCCG practices, alternative practices may be adopted to meet the Intended Outcome of the 2021 MCCG by providing an explanation for the departure and disclose the alternative practice it has adopted⁴. Large Companies that depart from any of the practices are required to identify and disclose a reasonable timeframe for the adoption of the practices⁵.

The 2021 MCCG introduces new best practices and guidance to strengthen the corporate governance culture of listed companies and to encourage the adoption of best practices which have relatively lower levels of adoption⁶.

The 2021 MCCG also introduces new best practices that emphasise the need for collective action by boards and senior management to address the urgent need for companies to manage environmental, social and governance (“ESG”) risks and opportunities and global commitment and acceleration of efforts to transition towards a net-zero economy⁷.

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Intellectual Property

Goodwill in a Name

A case note by Pravind Chandra.

Introduction

On 20 May 2021, the Federal Court delivered its decision in a passing off case, Mohammad Hafiz Bin Hamidun v Kamdar Sdn Berhad . The Court had granted leave for two questions raised by the appellant/plaintiff, of which the first question was:

“In a common law claim for passing off where two (2) entities may be entitled to claim goodwill, who has the locus standi to commence an action in passing off as the owner of such goodwill?”

Brief facts

The appellant/plaintiff, Mohammad Hafiz Hamidun (“Hafiz”), is a popular traditional music singer and song composer. In addition to his career in the music industry, he is also in the business of selling fabrics such as Baju Melayu and other traditional costumes, both online and in boutiques, through his company named Haje Sdn Bhd (“HSB”). The respondent/defendant, Kamdar Sdn Bhd (“Kamdar”), is also in the business of selling fabrics with many stores located throughout various parts of Malaysia.

In 2017, Hafiz became aware that Kamdar was selling goods bearing the label “Hafiz Hamidun”. Dissatisfied that Kamdar was using a label which was Hafiz’s own name and an unregistered trademark for his own line of fabrics, Hafiz sent a cease and desist letter to Kamdar.

Kamdar, despite not replying to the letter, replaced the “Hafiz Hamidun” label with “Afiz Amidun”. Aggrieved, Hafiz filed a suit for common law passing off at the High Court in the same year, upon which the Kamdar ceased usage of the replaced version of the label as well.

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Tax & Revenue

Agro-Mod Industries Sdn Bhd v Goods and Services Tax Appeal Tribunal and Director General of Customs

A case note by Jeevitha Thurai Rathnam.

Introduction

Recently, the Court of Appeal ruled in Agro-Mod Industries Sdn Bhd v Goods and Services Tax Appeal Tribunal and Director General of Customsⁱⁱⁱ on the issue of whether the goods and services tax (“GST”) was chargeable on the sale of agricultural land under a contract entered into before GST was implemented with effect from 1 April 2015 (“Effective Date”).

Facts of the Case

On 1 August 2013, the purchaser, Mydin Wholesale Cash & Carry Sdn Bhd (“Mydin”), and the vendor, Agro-Mod Industries Sdn Bhd (“Agro-Mod”), entered into an agreement (“Contract”) for the sale of a piece of vacant agricultural land (“Land”). Payment of the 10% deposit by Mydin and delivery of the executed memorandum of transfer (“MOT”) by Agro-Mod occurred in 2013.

The Land was acquired by Mydin for the purpose of building a hypermarket. As such, the status of the Land, originally agricultural land, had to be converted to commercial land prior to its transfer to Mydin. This was one of the conditions precedent for the sale of the Land. The Agreement became unconditional in October 2014 when all conditions precedent, including conversion of the Land to commercial status, were met.

Owing to Mydin’s delay, the balance of the purchase price (“Balance Purchase Price”) was not paid within the agreed timeline, which had been scheduled for January 2015. As such, the Contract could not be completed prior to the Effective Date as originally intended. The Balance Purchase Price was only paid by Mydin five months later during which GST had already been implemented. Likewise, vacant possession of the Land was delivered to Mydin after GST was implemented.

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Employment & Administrative Law

Case Update on the Acceptance of Covert Recording as Evidence in an Employment Dispute

A case note by Jamie Goh Moon Hoong

Introduction

In the Industrial Court Award of Kavitha Chakravarthy v Malayan Banking Berhad¹, the Industrial Court allowed a secret recording to be admitted as evidence as it was relevant for the Court to determine the facts in dispute between the parties.

Facts

The claimant, Kavitha Chakravarthy (“Kavitha”), was employed by Malayan Banking Berhad (“Bank”) as an Executive, Data & System Analytics from Risk Management. In April 2019, the Bank received a complaint that Kavitha had allegedly raised her voice at her Line Manager whilst making disparaging, derogatory, degrading as well as threatening remarks with vulgar words.

This led to her Line Manager initiating a Conversation Log in the MyHR2U System to capture/document their discussion where Kavitha was briefed on her responsibilities to adhere to the “Business As Usual” schedule, additional project (global rates book) and annual leave planning.

To determine the veracity of the matter, the Bank commenced investigations into the alleged misconduct. The Bank’s investigations revealed that Kavitha had indeed hurled disparaging, derogatory, degrading as well as threatening remarks with vulgar words at her Line Manager in the presence of her colleagues.

During the first investigative interview, Kavitha denied uttering any vulgar words or the word “F***” at her Line Manager. However, Kavitha subsequently admitted that she uttered the vulgar words at her Line Manager when the recording of the conversation between her and her Line Manager was played back to her during the second investigative interview.

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Dispute Resolution

Clarity on Show Cause Notice(s) Prior To Party- Initiated Committal Proceedings

A case note by Sharon Jessy.

Introduction

On 18 February 2021, the Federal Court delivered its decision in Tan Poh Lee v Tan Boon Thien¹. The Federal Court had previously granted leave on 18 August 2020 for two questions raised by the Appellant (translated verbatim from Bahasa Malaysia):

• Whether the true interpretation of Order 52 Rule 2B, Rules of Court 2012, is that prior Notice to Show Cause is required to be given to the proposed contemnor before the filing of an ex parte application for leave pursuant to Order 52 Rule 3, Rules of Court 2012 (“First Leave Question”).
• Whether based on the true interpretation Order 52 Rule 2B, Rules of Court 2012, the notice to show cause referred to in Order 52 Rule 2B, Rules of Court 2012 means documents referring to that in Order 52 Rule 4(3), Rules of Court 2012 (“Second Leave Question”).

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