Labuan Offshores Trusts Act 1996 · Updated to 1 Dec 2011 · Part II · Creation and Recognition of Labuan Trusts
11. Fraudulent Labuan trust or disposition
Official textFrom Laws of Malaysia Online, unchanged
Where it is proved beyond reasonable doubt, the onus of which is on the claiming creditor, that a Labuan trust created or registered in Labuan, or property disposed of to such a Labuan trust—
Labuan trust
―Labuan trust‖ has the meaning assigned to it under subsection 8(1);
was so created or registered or disposed of by or on behalf of the settlor with principal intent to defraud that creditor of the settlor; and
did, at the time such creation or registration or disposition took place, render the settlor, insolvent or without property by which that creditor’s claim, if successful, could have been satisfied, then such creation, registration or disposition shall not be void or voidable and the Labuan trust shall be liable to satisfy the creditor’s claim out of the property which but for the creation, registration or disposition would have been available to satisfy the creditor’s claim and such liability shall only be to the extent of the interest that the settlor had in the property prior to the creation, registration or disposition, and any accumulation to the property, if any, subsequent thereto.
For the purpose of subsection (1), in determining whether a
Labuan trust created or registered or a disposition has rendered the settlor insolvent or without property by which a creditor’s claim, if successful, may be satisfied, regard shall be had to the fair market value of the settlor’s property (not being property of or relating to the trust), at the time immediately after such creation, registration or disposition, and in the event that the fair market value of such property exceeded the value of the creditor’s claim, at that time, after the creation, registration or disposition, then the Labuan trust so created or registered or the disposition shall for the purposes of this
trust
―trust‖ includes the trust property and the rights, powers, duties, interests, relationships and obligations under a trust;
Act be deemed not to have been so created or registered, or the property disposed of, with principal intent to defraud the creditor.
property
―property‖ includes— (a) property of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible, however acquired; or (b) legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in, such property, including bank cheques, money orders, shares, securities, bonds, bank drafts and letters of credit;
Labuan Trusts 21
A Labuan trust created or registered in Labuan and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor—
settlor
―settlor‖ means a person who makes a trust and includes a person who provides trust property or makes a testamentary disposition on Labuan Trusts 11 trust or to a trust, but does not include a person who contributes to a unit trust;
if its creation or registration, or the disposition, takes place after the expiration of two years from the date that creditor’s cause of action accrued; or
if its creation or registration, or the disposition, takes place before the expiration of two years from the date that creditor’s cause of action accrued and that creditor fails to commence such action before the expiration of one year from the date of such creation or registration, or disposition.
A Labuan trust created or registered in Labuan and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor if the creation or registration, or the disposition of property, took place before that creditor’s cause of action against the settlor accrued or had arisen.
A settlor shall not have imputed to him an intent to defraud a creditor solely by reason that the settlor—
has created or registered a Labuan trust or has disposed of property to such trust within two years from the date of that creditor’s cause of action accruing; or
is a beneficiary.
Where a Labuan trust is liable to satisfy a creditor’s claim in the manner provided for in subsection (1) but is unable to do so by reason of the fact that the property has been disposed of, other than to a bona fide purchaser for value, then any such disposition shall be void.
Where the settlor of a Labuan trust is a resident, this section shall apply only in so far as it is consistent with any written law for the time being in force in Malaysia.
resident
―resident‖ means any person— (a) who is a citizen or permanent resident of Malaysia; or (b) who has established a place of business and is operating in Malaysia, other than— (i) a Labuan company or a foreign Labuan company incorporated or registered under the Labuan Companies Act 1990; (ii) a Labuan foundation established under the Labuan Foundations Act 2010; and (iii) a partnership registered under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, and includes a person who is declared to be a resident pursuant to section 43 of the Exchange Control Act 1953;
For the purposes of this section, the date of the cause of action accruing shall be—
22 Laws of Malaysia ACT 554
Malaysia
―Malaysia‖ means the territories of the Federation of Malaysia, the territorial waters of Malaysia and the sea-bed and subsoil of the Labuan Trusts 9 territorial waters, and includes any area extending beyond the limits of the territorial waters of Malaysia, and the sea-bed and subsoil of any such area, which has been or may hereafter be designated under the laws of Malaysia and in accordance with international law as an area over which Malaysia has sovereign rights for the purposes of exploring and exploiting the natural resources, whether living or non-living;
the date of that act or omission which shall be relied upon to either partly or wholly establish the cause of action; and if there is more than one act or the omission is a continuing one, the date of the first act or the date on which the omission first occurred, as the case may be;
and
in the case of an action upon a judgement, the date of that act or omission, or where there is more than one act or the omission is a continuing one, the date of the first act or the date on which the omission first occurred, as the case may be, which gave rise to the judgement itself.
In this section, the term ―creditor‖ includes any person who alleges a cause of action.
person
―person‖ includes a corporation, a partnership, a body of persons, corporate or unincorporated, and a corporation sole;
Terms defined in s 2
beneficiary
Defined · s 2―beneficiary‖ means a person entitled to benefit under a trust or in whose favour a discretion to distribute property held in trust may be exercised;
Labuan trust
Defined · s 2―Labuan trust‖ has the meaning assigned to it under subsection 8(1);
Malaysia
Defined · s 2―Malaysia‖ means the territories of the Federation of Malaysia, the territorial waters of Malaysia and the sea-bed and subsoil of the Labuan Trusts 9 territorial waters, and includes any area extending beyond the limits of the territorial waters of Malaysia, and the sea-bed and subsoil of any such area, which has been or may hereafter be designated under the laws of Malaysia and in accordance with international law as an area over which Malaysia has sovereign rights for the purposes of exploring and exploiting the natural resources, whether living or non-living;
person
Defined · s 2―person‖ includes a corporation, a partnership, a body of persons, corporate or unincorporated, and a corporation sole;
property
Defined · s 2―property‖ includes— (a) property of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible, however acquired; or (b) legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in, such property, including bank cheques, money orders, shares, securities, bonds, bank drafts and letters of credit;
resident
Defined · s 2―resident‖ means any person— (a) who is a citizen or permanent resident of Malaysia; or (b) who has established a place of business and is operating in Malaysia, other than— (i) a Labuan company or a foreign Labuan company incorporated or registered under the Labuan Companies Act 1990; (ii) a Labuan foundation established under the Labuan Foundations Act 2010; and (iii) a partnership registered under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, and includes a person who is declared to be a resident pursuant to section 43 of the Exchange Control Act 1953;
settlor
Defined · s 2―settlor‖ means a person who makes a trust and includes a person who provides trust property or makes a testamentary disposition on Labuan Trusts 11 trust or to a trust, but does not include a person who contributes to a unit trust;
trust
Defined · s 2―trust‖ includes the trust property and the rights, powers, duties, interests, relationships and obligations under a trust;
Part III
Beneficiaries of Labuan Trusts
Part IV
Trustees of Labuan Trusts
Part V