ACT 125

COMPANIES ACT 1965 (REVISED - 1973)

PART IV - SHARES, DEBENTURES AND CHARGES

DIVISION 4 - DEBENTURES

Section 74. Qualifications of trustee for debenture holders.

(1) Subject to this section every corporation which offers debentures to the public for subscription or purchase in Malaysia after the commencement of this Act shall make provision in those debentures or in a trust deed relating to those debentures for the appointment of a trustee corporation as trustee for the holders of the debentures. (2) Where a borrowing corporation is required to appoint a trustee for the holders of any debentures in accordance with subsection (1) it shall not allot any of those debentures until the appointment has been made and the trustee corporation has consented to act as trustee. (3) Without leave of the Court, a trustee corporation shall not be appointed, hold office or act as trustee for the holders of debentures of a borrowing corporation if that trustee corporation is— (a) a shareholder who beneficially holds shares in the borrowing corporation; (b) beneficially entitled to moneys owed by the borrowing corporation to it; (c) a corporation that has entered into a guarantee in respect of the principal debt secured by those debentures or in respect of interest thereon; or (d) a corporation that is by virtue of section 6 deemed to be related to— (i) any corporation of a kind referred to in paragraphs (a) to (c); or (ii) the borrowing corporation. (4) Notwithstanding anything contained in subsection (3), that subsection shall not prevent a trustee corporation from being appointed, holding office or acting as trustee for the holders of debentures of a borrowing corporation by reason only that— (a) the borrowing corporation owes to the trustee corporation or to a corporation that is deemed by virtue of section 6 to be related to the trustee corporation any moneys so long as such moneys are— (i) moneys that (not taking into account any moneys referred to in subparagraphs (ii) and (iii)) do not, at the time of the appointment or at any time within a period of three months after the debentures are first offered to the public, exceed one-tenth of the amount of the debentures proposed to be offered to the public within that period and do not, at any time after the expiration of that period, exceed one-tenth of the amount owed by the borrowing corporation to the holders of the debentures; (ii) moneys that are secured by, and only by, a first mortgage over land of the borrowing corporation, or by any debentures issued by the borrowing corporation to the public or by any debentures not issued to the public which are issued pursuant to the same trust deed as that creating other debentures issued at any time by the borrowing corporation to the public or by any debentures to which the trustee corporation, or a corporation that is by virtue of section 6 deemed to be related to the trustee corporation, is not beneficially entitled; or (iii) moneys to which the trustee corporation, or a corporation that is by virtue of section 6 deemed to be related to the trustee corporation, is entitled as trustee for holders of any debentures of the borrowing corporation in accordance with the terms of the debentures or of the relevant trust deed; or (b) the trustee corporation, or a corporation that is deemed by virtue of section 6 to be related to the trustee corporation, is a shareholder of the borrowing corporation in respect of shares that it beneficially holds, so long as the shares in the borrowing corporation beneficially held by the trustee corporation and by all other corporations that are deemed by virtue of section 6 to be related to it, do not carry the right to exercise more than one-twentieth of the voting power at any general meeting of the borrowing corporation. (5) Nothing in subsection (3) shall— (a) affect the operation of any debentures or trust deed issued or executed before the commencement of this Act; or (b) apply to or in relation to the trustee for the holders of any such debentures, unless pursuant to any such debentures or trust deed a further offer of debentures is made to the public after the commencement of this Act. (6) If default is made in complying with this section, the corporation and every officer of the corporation who is in default shall be guilty of an offence against this Act. Penalty: Ten thousand ringgit. Default penalty.