Malaysia legislation
Section 27
of LABUAN ISLAMIC FINANCIAL SERVICES AND SECURITIES ACT 2010
Section 27
(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 avail able, by way of Sukuk or otherwise, are sufficient, or are likely to be or become sufficient, to discharge the principal amount of Sukuk as and when it becomes due;
(b)
shall satisfy itself that each prospectus relating to the
Sukuk does not contain any matter which is inconsistent with the terms of the Sukuk 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 covenants, terms and provisions of the Sukuk or the trust deed;
(d)
except where it is satisfied that a breach of the covenants, terms and provisions of the Sukuk or the trust deed would not materially prejudice the security, if any, for the Sukuk or the interests of Sukuk holders, 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 covenants, terms and provisions;
(e)
where the borrowing company or any of its guarantor companies fails, when so required by the trustee, to remedy any breach of the covenants, terms and provisions of the
Sukuk or the trust deed, shall place the matter before a meeting of Sukuk holders, submit such proposal for the protection of their investment as the trustee considers necessary and appropriate and obtain the directions of the holders of the Sukuk in relation thereto; and
(f)
where the borrowing company submits to those Sukuk 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 705
(2)
Where, after due enquiry, a trustee for Sukuk holders 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 insuf ficient to discharge the principal amount of Sukuk as and when it becomes due, the trustee for
Sukuk holders 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 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 Sukuk holders, or the Authority may, and if the borrowing company so requires shall, direct the trustee for Sukuk holders to lodge an application with the Court for an order under subsection (4) and the trustee for Sukuk holders shall apply accordingly.
(3)
Where—
(a)
after due enquiry, a trustee for Sukuk holders at any time is of the opinion that the assets of the borrowing company and of any of its guarantor companies which is or should be available is insufficient, or likely to become insufficient, to discharge the principal amount of Sukuk 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 for Sukuk holders may, and where the borrowing company has requested the trustee for Sukuk holders to do so, the trustee for the holders of Sukuk shall, apply to the Court for an order under subsection (4).
(4)
Where an application is lodged by a trustee for Sukuk holders with the Court under subsection (2) or (3), the Court,
Labuan Islamic Financial Services and Securities 49
after giving the borrowing company an opportunity of being heard, may, by order, do all or any of the following, namely:
(a)
direct the trustee for Sukuk holders to convene a meeting of Sukuk holders for the purpose of placing before them such information relating to their interests, as the trustee for the Sukuk holders 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 Sukuk holders 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 the Sukuk or any part thereof;
or
(e)
give such further directions from time to time as may be necessary to protect the interests of Sukuk holders, 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 for Sukuk holders in making any application to the Authority or the Court, shall have regard to the nature and kind of the security given when the Sukuk were offered pursuant to subsection 13(1), and, if no security was given, shall have regard to the position of Sukuk holders as unsecured creditors of the borrowing company.
Act 705
(7)
A trustee for Sukuk holders may rely upon any certificate, report given or statement made by any advocate, auditor or officer of the borrowing company or guarantor company if the trustee for Sukuk holders has reasonable grounds for believing that such advocate, auditor or officer was competent to give or to make the certificate, report or statement.
Obligations of directors of borrowing company