Islamic Financial Services Act 2013 · s 218

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218.
Priority of payments in winding up of licensed takaful operator
(1) In the winding up of a licensed takaful operator, the assets of a takaful fund for any class or description of takaful business established under section 90 shall be applied to meet the liabilities to takaful participants or proper claimants in respect of that takaful fund and such liabilities shall have priority over all unsecured liabilities of that takaful fund including any qard or other forms of financial support referred to in section 95, other than any tax set out in paragraph 292(1)(f) of the Companies Act 1965 which is attributable to the takaful fund.
(2) In the winding up of a licensed takaful operator—
(a) where the assets of a takaful fund managed by a licensed takaful operator is in surplus, after payment has been made to meet its liabilities under subsection (1), such surplus

*NOTE—The Companies Act 1965 [Act 125] has since been repealed by the Companies Act 2016
[Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777.

190
assets of the takaful fund shall be applied in the following order:
(i) first, to meet the liabilities of other takaful funds managed by the licensed takaful operator which are deficient and if for this purpose there are two or more takaful funds which are—
(A) in surplus, such surpluses shall be applied in proportion to the surplus in each takaful fund to meet the liabilities of the takaful fund which is deficient; or
(B) in deficit, the surplus shall be applied in proportion to the amounts of the deficiencies to meet the liabilities of the takaful funds which are deficient; and
(ii) second, any other purposes as may be prescribed by the Bank;
(b) any deficiency in the assets of a takaful fund to meet its liabilities under subsection (1) will be met—
(i) first, as provided in paragraph (a), by the surplus assets of other takaful funds; and
(ii) if such surplus assets are insufficient to meet those liabilities then the balance of such liabilities shall be met by the surplus assets of the shareholders’ fund after payment has been made to meet the shareholders’ fund’s liabilities under subsection (3);
or
(c) pursuant to subparagraph (2)(b)(ii), where the assets of the shareholders’ fund is in surplus, the surplus assets shall be applied to meet the liabilities of any takaful fund which is in deficit, and if the surplus assets are applied to meet the liabilities of two or more takaful funds the assets of which are in deficit, they shall be applied proportionately to the amount of the deficiencies.

Islamic Financial Services                              191
(3) In the winding up of a licensed takaful operator, the assets of its shareholders’ fund shall be applied to meet the liabilities to takaful participants to the extent that it is attributable to the shareholders’ fund and such liabilities shall have priority over all unsecured liabilities of that licensed takaful operator, other than preferential debts set out in subsection 292(1) of the *Companies Act 1965 and the debts due and claims owing to the Government under section 10 of the Government
Proceedings Act 1956 [Act 359].
(4) Without limiting the generality of subsections (1), (2) and (3), where the Bank under section 90 has specified that a licensed takaful operator which is a foreign institution shall establish and maintain separate takaful funds for its Malaysian takaful certificate, in the winding up of the licensed takaful operator, the assets of—
(a) such takaful fund shall be applied to meet the liabilities of the fund;
(b) the shareholders’ fund shall be applied to meet the liabilities to takaful participants in respect of the Malaysian takaful certificate to the extent that it is attributable to the shareholders’ fund; and
(c) with effect from the date of the winding up of the licensed takaful operator, shall not be sold, removed, dissipated, alienated, transferred, assigned, encumbered, distributed or otherwise dealt with in any manner whatsoever without the prior written approval of the Bank.
(5) Notwithstanding anything to the contrary in section 340 of the
*Companies Act 1965 or the winding up order for a licensed takaful operator which is a foreign institution, the provisions of this section shall prevail and have full force and effect.
(6) Any person who contravenes paragraph (4)(c) commits an offence and shall, on conviction, be liable to imprisonment for a term

*NOTE—The Companies Act 1965 [Act 125] has since been repealed by the Companies Act 2016
[Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777.

192
not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.
General provisions in relation to actions taken by Bank

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s 218Priority of payments in winding up of licensed takaful operator

(1)

In the winding up of a licensed takaful operator, the assets of a takaful fund for any class or description of takaful business established under section 90 shall be applied to meet the liabilities to takaful participants or proper claimants in respect of that takaful fund and such liabilities shall have priority over all unsecured liabilities of that takaful fund including any qard or other forms of financial support referred to in section 95, other than any tax set out in paragraph 292(1)(f) of the Companies Act 1965 which is attributable to the takaful fund.

(2)

In the winding up of a licensed takaful operator—

(a)

where the assets of a takaful fund managed by a licensed takaful operator is in surplus, after payment has been made to meet its liabilities under subsection (1), such surplus

*NOTE—The Companies Act 1965 [Act 125] has since been repealed by the Companies Act 2016

[Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777.

190

assets of the takaful fund shall be applied in the following order:

(i)

first, to meet the liabilities of other takaful funds managed by the licensed takaful operator which are deficient and if for this purpose there are two or more takaful funds which are—

(A)

in surplus, such surpluses shall be applied in proportion to the surplus in each takaful fund to meet the liabilities of the takaful fund which is deficient; or

(B)

in deficit, the surplus shall be applied in proportion to the amounts of the deficiencies to meet the liabilities of the takaful funds which are deficient; and

(ii)

second, any other purposes as may be prescribed by the Bank;

(b)

any deficiency in the assets of a takaful fund to meet its liabilities under subsection (1) will be met—

(i)

first, as provided in paragraph (a), by the surplus assets of other takaful funds; and

(ii)

if such surplus assets are insufficient to meet those liabilities then the balance of such liabilities shall be met by the surplus assets of the shareholders’ fund after payment has been made to meet the shareholders’ fund’s liabilities under subsection (3);

(c)

pursuant to subparagraph (2)(b)(ii), where the assets of the shareholders’ fund is in surplus, the surplus assets shall be applied to meet the liabilities of any takaful fund which is in deficit, and if the surplus assets are applied to meet the liabilities of two or more takaful funds the assets of which are in deficit, they shall be applied proportionately to the amount of the deficiencies.

Islamic Financial Services 191

(3)

In the winding up of a licensed takaful operator, the assets of its shareholders’ fund shall be applied to meet the liabilities to takaful participants to the extent that it is attributable to the shareholders’ fund and such liabilities shall have priority over all unsecured liabilities of that licensed takaful operator, other than preferential debts set out in subsection 292(1) of the *Companies Act 1965 and the debts due and claims owing to the Government under section 10 of the Government

Proceedings Act 1956 [Act 359].

(4)

Without limiting the generality of subsections (1), (2) and (3), where the Bank under section 90 has specified that a licensed takaful operator which is a foreign institution shall establish and maintain separate takaful funds for its Malaysian takaful certificate, in the winding up of the licensed takaful operator, the assets of—

(a)

such takaful fund shall be applied to meet the liabilities of the fund;

(b)

the shareholders’ fund shall be applied to meet the liabilities to takaful participants in respect of the Malaysian takaful certificate to the extent that it is attributable to the shareholders’ fund; and

(c)

with effect from the date of the winding up of the licensed takaful operator, shall not be sold, removed, dissipated, alienated, transferred, assigned, encumbered, distributed or otherwise dealt with in any manner whatsoever without the prior written approval of the Bank.

(5)

Notwithstanding anything to the contrary in section 340 of the

*Companies Act 1965 or the winding up order for a licensed takaful operator which is a foreign institution, the provisions of this section shall prevail and have full force and effect.

(6)

Any person who contravenes paragraph (4)(c) commits an offence and shall, on conviction, be liable to imprisonment for a term

*NOTE—The Companies Act 1965 [Act 125] has since been repealed by the Companies Act 2016

[Act 777] which comes into operation on 31 January 2017–see subsection 620(1) of Act 777.

192

not exceeding ten years or to a fine not exceeding fifty million ringgit or to both.

General provisions in relation to actions taken by Bank