Malaysia legislation
Section 22
Section 22
(a)
shall exercise reasonable diligence to ascertain whether or not the assets of the borrowing company and each of its guarantor companies, which are or may be available by way of securities or otherwise, are sufficient, or are likely to be or become sufficient, to discharge the principal debt as and when it becomes due;
(b)
shall satisfy itself that each prospectus relating to the debentures does not contain any matter which is inconsistent with the terms of the debentures or with the relevant trust deed;
(c)
shall exercise reasonable diligence to ascertain whether or not the borrowing company and each of its guarantor companies have committed any breach of the terms, provisions or covenants of the debentures or the trust deed;
(d)
except where it is satisfied that a breach of the terms, provisions or covenants of the debentures or the trust deed would not materially prejudice the security, if any, for the debentures or the interests of the holders of the debentures, shall take all steps and do all such things as it is empowered to do to cause the borrowing company and any of its guarantor companies to remedy any breach of those terms, provisions or covenants;
(e)
where the borrowing company or any of its guarantor companies fails, when so required by the trustee, to remedy any breach of the terms, provisions or covenants of the debentures or the trust deed, shall place the matter before a meeting of holders of the debentures, submit such proposal for the protection of their investment as the trustee considers necessary and appropriate and obtain the directions of the holders in relation thereto; and
(f)
where the borrowing company submits to those holders a compromise or arrangement, shall give them a statement explaining the effect of the compromise or arrangement and, if it thinks fit, recommend to them an appropriate course of action to be taken by them in relation thereto.
Act 704
(2)
Where, after due enquiry, a trustee for the holders of debentures at any time is of the opinion that the assets of a borrowing company and of any of its guarantor companies which are or should be available, whether by way of security or otherwise, are insufficient or likely to become insufficient to discharge the principal debt as and when it becomes due, the trustee may lodge an application in the specified form with the Authority for a direction under this subsection and the Authority may, on such application, after giving the borrowing company an opportunity for making representations in relation to the application, by direction in writing served on the borrowing company at its registered office in Labuan, impose such restrictions on the activities of the borrowing company, including restrictions on advertising for deposit or loans and on borrowing by the borrowing company, as the Authority thinks necessary for the protection of the interests of the holders of the debentures, or the Authority may, and if the borrowing company so requires shall, direct the trustee to lodge an application with the Court for an order under subsection (4)
and the trustee shall apply accordingly.
(3)
Where—
(a)
after due enquiry, a trustee for the holders of debentures at any time is of the opinion that the assets of the borrowing company and of any of its guarantor companies which are or should be available are insufficient, or likely to become insufficient, to discharge the principal debt as and when it becomes due; or
(b)
the borrowing company has contravened or failed to comply with a direction by the Authority under subsection (2), the trustee may, and where the borrowing company has requested the trustee to do so, the trustee shall, apply to the Court for an order under subsection (4).
(4)
Where an application is lodged by a trustee with the Court under subsection (2) or (3), the Court, after giving the borrowing company an opportunity of being heard, may, by order, do all or any of the following things, namely—
(a)
direct the trustee to convene a meeting of the holders of the debentures for the purpose of placing before them such information relating to their interests as the trustee
Labuan Financial Services and Securities 47
considers necessary or appropriate and for the purpose of obtaining their directions in relation thereto, and give such directions in relation to the conduct of the meeting as the Court thinks fit;
(b)
stay all or any actions or proceedings before any Court by or against the borrowing company;
(c)
restrain the payment of any monies by the borrowing company to the holders of debentures of the borrowing company or to any class of such holders;
(d)
appoint a receiver of such of the property as constitutes the security, if any, for debentures or any part thereof;
or
(e)
give such further directions from time to time as may be necessary to protect the interests of the holders of debentures, the members of the borrowing company or any of its guarantor companies or the public, but in making any such order the Court shall have regard to the rights of all creditors of the borrowing company.
(5)
The Court may vary or rescind any order made under subsection (4) as it thinks fit.
(6)
A trustee in making any application to the Authority or the
Court shall have regard to the nature and kind of the security given when the debentures were offered under subsection 8(1), and, if no security was given, shall have regard to the position of the holders of the debentures as unsecured creditors of the borrowing company.
(7)
A trustee may rely upon any certificate or report given or statement made by any advocate, auditor or officer of the borrowing company or guarantor company if it has reasonable grounds for believing that such advocate, auditor or officer was competent to give or make the certificate, report or statement.
(8)
This section shall not apply to an offer or invitation of securities under subsection 8(5).
Act 704
Obligations of directors of borrowing company