Aims and Objectives

The Aims and Objectives of the network are:

1. For members to be referred foreign commercial clients who wish to do business in their countries.

2. For members to keep existing commercial clients who need overseas referrals and who will go elsewhere if this resource is not provided.

3. To market member firms as having international commercial expertise and/or international connections.

4. For members to win new commercial clients who seek overseas referrals because the clients´ own lawyers do not have access to such international resources.

5. For members to be able to find out easily about local laws and trading practices abroad.

6. For members to exchange information about developments in areas of the law with cross-border interest ie trade, joint ventures, corporate acquisitions and investments.

7. For members to facilitate trainee exchange schemes.

8. For members to embrace the use of modern technology as a means of communication between members and the wider international business community and for member firms to demonstrate a strong web presence with their own website.

9. For members to meet the LAWorld Code of Practice established by the membership.

10. For members to be part of Regional Desks within LAWorld. There are regional desks in Europe/Middle East, North/Latin America and Asia Pacific. Regional meetings take place regularly and within the Annual Conference.  Reports of meetings are circulated to all members.  These events encourage stronger friendships and collaboration between firms.  

Eligibility for membership

11. Any firm of qualified lawyers anywhere in the world can apply for membership if it meets the membership criteria and there is a vacancy for that location/jurisdiction. LAWorld will accept membership of more than one firm from any one location/jurisdiction, where the LAWorld Committee believes that geographic or population factors would accommodate more than one member, or where existing members are or have become specialised, in which case complementary members may be invited to join.

12. Those who join this network commit themselves to take advantage of internet based technology and use it to improve communication with other members, actual or potential clients and other introductory sources.

Developing the network

The network will endeavour to create awareness amongst all members of other members´ areas of expertise. The nature of such programs will be determined by the members from time to time but include:

13. An Annual Conference, to which all members are expected to attend. This event is held every year in a different part of the world on a rotational basis ie Europe, Asia/Pacific, North and Latin Americas. The 2009 Conference was held in Miami, 2010 Moscow, 2011 Beijing, 2012 Rio de Janeiro, 2013 Zurich and 2014 will be held in Hong Kong.

14. Networking opportunities with other professionals around the world.

15. A web page on the internet within the LAWorld website (www.laworld.com) for each member firm - available for access by all members and prospective clients and linked to members´ own websites.

16. Inclusion within the LAWorld entry in Martindale-Hubbell International Law Directory.

17. LAWorld will support the host firm to organise a business meeting with local referrers and potential clients during Conference, to allow members to meet and mix with potential international referrers and future clients. Invitees may include Trade Organisations/Chamber of Commerce/Enterprise Agency representatives and members, Foreign Embassies representatives etc.  

18. Membership Bulletins can be produced by the Executive Office to provide member information to other members (including client activities and business opportunities). 

19. To coincide with IBA Conferences, LAWorld members can be assisted by the Executive Office to arrange meetings with regional trade associations, chambers of commerce etc whose members may be interested in doing business via the LAWorld member firm.

20. Unique amongst international legal networks, LAWorld members have access to legal and commercial opportunities throughout China, through our associate group of 28 Chinese law firms which cover the country (http://www.chinayln.com/). 

21. A client newsletter, with common international legal news, may be distributed from time to time so that members have a marketing tool to distribute to clients and contacts promoting their extensive international legal credentials.

22. A LAWorld Corporate brochure for clients and introducers will be produced centrally from time to time. 

Fees

23. Each member shall pay the annual membership fee of USD 2,500 

24. A once only joining fee of USD 500 will be paid to contribute towards the expenses associated with a new firm joining our network.

25. The network is an informal association, ie an International Economic Interest Grouping.

26. Members do not normally specialise in just one area of law but rather provide a full range of legal commercial services in order to broadly satisfy clients´ needs.

Management

 27. Members of the Committee are appointed at the annual conference to run the affairs of the network.  A Chair is elected for a term of 2 years. Within the Committee there is a Regional Director for Europe, North and Latin America and Asia/Pacific, all of whom are unpaid.  The Committee has appointed an Executive Director who is responsible for the day-to-day activities and promoting the network.

UPDATED OCTOBER 2013

LAWorld News

RELATED PARTY TRANSACTIONS (RPT): IDENTIFYING THE PROBLEM BEFORE IT HAPPENS

“Related party transactions have been a feature of a number of financial scandals in recent years, many of which have had in common the dominance of the company by a powerful chief executive who was also involved with the related parties.”  

It is prevalent for related party transactions to be part of business because cultural and political forces lead to a relationship-based system in market economies.. Sir David Tweedie’s statement portrays the reality of the situation quite well. Accounting and financial problems often linger and  can worsen throughout the years if there is no good governance in place to underpin and mandate good conduct and good judgment of a company. A good governance practice must include both policy and  processes for managing Related Party Transactions to reduce corporate risk and protect members’ interests.

But where to start? As a basic understanding of the concept, Related Party Transaction is defined as a transaction entered into by a company or its subsidiaries which involve the interest, direct or indirect, of a related party. Related Party refers to director, major shareholder or persons connected with any such director or significant shareholder.

I will illustrate situations where Related Party Transactions may arise and the requirements of which parties need to comply to avoid illegal and void transactions being entered into. I  will then explain via hypothetical situations where related party transactions may happen.  It is important to recognize that not all related party transactions can be anticipated—that is why there must be a process in place to deal with the problem before it is too late to do anything about it.

Here is a not-uncommon scenario.  Company ABC Berhad is a listed company and the Company’s nature of business is property development with core competency in development and raw real estate with development potential. The shareholders of the Company are Company DEF Sdn Bhd (40%), Company GHI Sdn Bhd (30%) and Company JKL Sdn Bhd (30%). The Directors of Company ABC Berhad are Encik Ali, Encik Lim and Encik Ramu. Audited Financial Statements for the Financial Year ended 31 March 2016 shows the net assets of Company ABC Berhad is RM6,000,000.00.

One day Company ABC Berhad decides to develop a new project in and they are looking for a parcel of raw land in Setia Alam, for the project.

Company Director Encik Ali proposes to Company ABC Berhad to acquire a parcel of land in Shah Alam which belongs to his stepson, Encik Saiful.   Encik Ali convinces the other Directors of Company that the land poses real opportunity Company ABC Berhad and Encik Saiful have a discussion on the terms and conditions of the acquisition of the land. They come into an arrangement for consideration price of RM2,000,000.00 for the acquisition of said land.  Is this a related party transaction under Malaysia law?

We need to see whether the parties, Company ABC Berhad and Encik Saiful are legally considered to be related to each other within the concept of Related Party Transaction? Under Section 122A of Companies Act 1965, a person shall be deemed connected with a director if he is a member of that director’s family. Section 122A (2) of Companies Act 1965 has further defined that stepchildren shall be considered to be part of director’s family. In view of this section, Encik Saiful is deemed to be connected/related with Encik Ali, one of the directors Company ABC Berhad.

So how must the Company deal with this problem?  First, Section 132E of Companies Act 1965 provides a company shall not carry any transaction where a person connected with such a director dispose of his non-cash assets of the requisite value to the Company. The transaction shall be void unless the transaction has been approved by resolution of the company at a general meeting. Encik Ali being “related” to the seller, Encik Saiful must also abstain from voting during the Board of Directors meeting.

Second, was the action of acquiring the Land by the Company is a type of transaction that falls within the concept of Related Party Transaction? Since Company ABC Berhad is a listed company, Clause 10.2 (l)(i) of Chapter 10 of the Companies Act provides that the act of acquiring an asset by Company is part of the definition of ‘transaction’ under Related Party Transaction.

Third, we need to ask what is the percentage ratio of the transaction involved, or stated another common way, is it a material transaction? Materiality is calculated from the value of the assets compared to the net assets of Company ABC Berhad. We can refer to the consideration of the transaction or refer to the value stated in the valuation report to establish the value of the Land. If the percentage ratio is calculated to be 0.25% or more, the Company is required to make an announcement of the transaction to Bursa Malaysia Berhad as soon after the terms of transaction have been agreed unless the value of the consideration is less then RM500,000.00 or it is a recurrent Related Party Transaction. If the percentage ratio is 5% or more, the Company is required to (i) announce the transaction to Bursa Malaysia Berhad as soon after the terms of the transaction have been agreed (ii) issue a circular to its shareholders and obtain shareholders’ approval in general meeting and (iii) appoint an independent adviser who is a corporate finance adviser within the meaning of the Security Commission’s Principal Adviser Guidelines before the terms of transaction are agreed upon. If the percentage ratio is more than 25%, in addition to the above requirements, Company ABC Berhad is required to appoint a main adviser, who is a Principal Adviser before the terms of transaction are agreed upon.

But there are additional requirements for many related party transactions.  In our hypothetical, the property developer must  submit to Bursa Malaysia Berhad two (2) copies of the valuation report on the Land concerned and a copy of the valuer’s opinion letter immediately after the Company announces the transaction or at least one month before submitting the draft circular. 

Confusing?  Yes.  Important to understand, very much so!  . There are many possible transactions which could be entered by parties such as disposal and leasing of assets, establishment of joint ventures, the provision of financial assistance,  or any business transaction or arrangement entered into by company or its subsidiaries with a Related Party which can be categorized as potential Chapter 10 Transactions. Each transaction may have a different method in calculating the percentage ratio as per Clause 10.03. 

Related Party Transactions are not totally prohibited in business as long as the interested parties and details of transactions are properly disclosed The time for every company to ensure they are applying the highest possible standards of ethical, moral and legal business conduct is before they enter into these type of transactions.  Hindsight may not save you from a serious legal infraction.  , 

Business leaders the Directors that have a duty  to achieve good and coherent corporate governance in Malaysia. Each company must ensure their employees understand these policies and procedures.  That begins with the proper identification and evaluation of any transaction that might be considered a Related Party Transaction under the  the Companies Act 1965 and related laws.  A legal advisor is a necessity in this evaluation.  If you need one, or don’t know if you need one, do not hesitate  to call me.  

Najwa Aqilah Mansor

Associate

Mohamed Ridza & Co.

Tel: +603- 20924822

Email: najwa@ridzalaw.com.my

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