Malaysia’s laws are mainly a combination of Commonwealth-based common law and codified law. Whilst Malaysia consists of 13 states and three federal territories, the federal constitution is the paramount law of the land and clearly demarcates the boundaries between federal and state power. As such, the respective states have the authority to legislate their own laws only in certain fields. Nevertheless, laws related to commerce operate almost uniformly across states. The only significant difference pertains to land law, where the East Malaysian states, Sabah and Sarawak, have wider autonomy than other states and have enacted separate land laws. The court structure consists of the superior courts, namely the Federal Court, Court of Appeal, High Court of Malaysia and the High Court in Sabah and Sarawak, and subordinate courts (sessions and magistrates).
Malaysia aims to set up an attractive and stable market in which businesses and investors can thrive, and new laws in the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA) were created towards this end. The FSA regulates financial institutions and provides oversight of the money and foreign exchange markets, while the IFSA provides for the supervision and regulation of Islamic financial institutions and the Islamic money market. Further, the Central Bank of Malaysia Act 2009 was amended in February 2013 to allow Central Bank intervention to avert financial risk and contribute to the resilience of the financial system.
The Limited Liability Partnership Act 2012 (LLPA) created a new entity through which business can be conducted and permits limited liability partnerships and such foreign partnerships to operate in Malaysia subject to regulation.
To protect consumers, the Personal Data Protection Act 2010 (PDPA) treads the delicate balance between privacy and the utilisation of personal data by another. While the PDPA was passed in 2010, it was only implemented on November 15, 2013. This law seeks to protect sensitive personal data of data subjects from being abused by those parties that process data. Under the PDPA, the express consent of data subjects must be obtained for data users to collect, record, hold, store or share data with third parties. Data users had until February 15, 2014 to register under the PDPA.
With an ageing population, the Minimum Retirement Age Act 2012, which came into force on the July 1, 2013, has standardised the minimum retirement age to 60. This is in consonance with the minimum retirement age of neighbouring ASEAN countries. It is expected that this would lead to a shift towards more experienced employees. Employers should consider reviewing their long-term workforce planning. With the amendments to the Legal Profession Act 1976 now in force, foreign law firms and foreign lawyers will now be permitted to practise in West Malaysia. However, the market will remain heavily regulated, with foreign firms allowed only in designated sectors.
Reforms are anticipated with corporate regulation. A proposed Companies Bill and an Insolvency Bill are currently being studied to replace the existing laws. It is anticipated that the Companies Bill will simplify procedures and introduce stricter rules for accountability. The removal of red tape is an exciting prospect. Among the proposals are: easing of the incorporation processes, removing the mandatory requirement of having an annual general meeting (simplify decision-making), implementing corporate rescue mechanisms and enforcing mandatory audit requirements for the accounts of all firms. A stand-alone Interest Schemes Bill is also being mooted. Interest schemes are currently governed under the Companies Act 1965. This separation is specifically designed to regulate interest schemes, which are constantly expanding and evolving, and to provide more certainty on this alternative mode of fund raising.
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