ACT 125
COMPANIES ACT 1965 (REVISED - 1973)
PART IV - SHARES, DEBENTURES AND CHARGES
DIVISION 1 - PROSPECTUSES

 
Section 38. As to invitations to the public to lend money to or to deposit money with a corporation.
 
Section 38. As to invitations to the public to lend money to or to deposit money with a corporation. (COMPANIES ACT 1965 (REVISED - 1973) - ACT 125) (1) An invitation to the public to deposit money with or lend money to a corporation or proposed corporation shall not be issued, circulated or distributed by the corporation or by any other person unless—

    (a) a prospectus in relation to the invitation has been registered by the Registrar;

    (b) the prospectus contains an undertaking by the corporation that it will within two months after the acceptance of any money as a deposit or loan from any person in response to the invitation issue to that person a document which acknowledges or evidences or constitutes an acknowledgement of the indebtedness of the corporation in respect of that deposit or loan; and

    (c) the document is described or referred to in the prospectus and in any other document whether constituting or relating to the invitation as—

      (i) an unsecured note or an unsecured deposit note;

      (ii) a mortgage debenture or certificate of mortgage debenture stock; or

      (iii) a debenture or certificate of debenture stock,

in accordance with this section.

(1A) For the purposes of this Division any corporation which accepts or agrees to accept from any person any money on deposit or loan shall be deemed to make an invitation to the public to deposit money with or lend money to the corporation or proposed corporation.

(1B) Notwithstanding subsection (1A) a corporation is not required to issue a prospectus if—

    (a) it is not, at any one time, under a liability (whether or not such liability is present or future) to repay any money accepted by it on deposit or loan from more than ten persons; or

    (b) any money accepted by it on deposit or loan is fully guaranteed by the Government.

    (c) (Deleted by Act A949).

(2) Where pursuant to an invitation referred to in subsection (1) a corporation has accepted from any person any money as a deposit or loan the corporation shall within two months after the acceptance of the money issue to that person a document which—

    (a) acknowledges or evidences or constitutes anacknowledgement of the indebtedness of the corporation in respect of that deposit or loan; and

    (b) complies with the other requirements of this section.

(3) The document shall be described or referred to in the prospectus and in any other document whether constituting or relating to the invitation and in the document itself as an unsecured note or an unsecured deposit note unless pursuant to subsection (4) or (5) it is and may be otherwise described.

(4) The document may be described or referred to in the prospectus or in such other document or in the document itself as a mortgage debenture or certificate of mortgage debenture stock if, and only if, there is included in the prospectus the statements and the valuation referred to in paragraph 32 of the Fifth Schedule.

(5) The document may be described or referred to in the prospectus or in such other document or in the document itself as a debenture or certificate of debenture stock if, and only if—

    (a) pursuant to subsection (4) it may be (but is not) described or referred to in that prospectus or document as a mortgage debenture or certificate of mortgage debenture stock; or

    (b) there is included in the prospectus the statement and the summary referred to in paragraph 33 of the Fifth Schedule.

(6) Nothing in this section shall apply to a prescribed corporation and nothing in this Act shall require a prospectus to be issued in connection with any invitation to the public to deposit money with a prescribed corporation.

(7) In this section "prescribed corporation" means—

    (a) a banking corporation; or

    (b) a corporation or a corporation of a class which, on the recommendation of Bank Negara Malaysia, has been declared by the Minister charged with the responsibility for finance by notice in the Gazette to be a prescribed corporation for the purposes of this section.

(8) The Minister charged with the responsibility for finance may, by notice published in the Gazette—

    (a) specify terms and conditions subject to which subsection (6) shall have effect in relation to a corporation specified in paragraph (7)(b); or

    (b) vary or revoke any declaration or specification made under this section.

(9) Every corporation or other person that contravenes or fails to comply with this section and every officer of a corporation who is in default shall be guilty of an offence against this Act.

Penalty: Imprisonment for five years or one hundred thousand ringgit or both.

(10) The provisions of this section relating to the description of any document acknowledging or evidencing or intended to acknowledge or evidence the indebtedness of a corporation shall apply to and in relation to every such document issued after the commencement of this Act notwithstanding anything in any existing debenture or trust deed and any such document issued after the commencement of this Act may be described in accordance with the requirements of this section notwithstanding anything in any such existing debenture or trust deed.

(11) For the purposes of this section a document issued by a borrowing corporation certifying that a person named therein is in respect of any deposit with or loan to the corporation the registered holder of a specified number or value—

    (a) of unsecured notes or unsecured deposit notes;

    (b) of mortgage debentures or mortgage debenture stock; or

    (c) of debentures or debenture stock,

issued by the corporation upon or subject to the terms and conditions contained in a trust deed referred to or identified in the certificate, shall be deemed to be a document evidencing the indebtedness of that corporation in respect of that deposit or loan.