In forceAmendedUpdated to 6 Oct 2023Read it in Bahasa Malaysia

Contents

Act of Parliament · Updated to 6 Oct 2023 · 9 parts

Development Financial Institutions Act 2002

Feedback & supportRegulation and supervision of development financial institutions

Long title

An Act to make provisions for the regulation and supervision of development financial institutions and for matters connected therewith.

In force · Updated to 6 Oct 2023

Part I

Preliminary

Official textFrom Laws of Malaysia Online, unchanged

s 1Short title and commencement

(1)

This Act may be cited as the Development Financial

Institutions Act 2002.

(2)

This Act comes into operation on a date to be appointed by the

Minister by notification in the Gazette.

s 2Application

(1)

This Act shall apply to such development financial institutions as may be prescribed by the Minister by order published in the Gazette.

(2)

For the avoidance of doubt, the Minister may, by order published in the Gazette, on the recommendation of the Bank, provide

that all or any part of the provisions of this Act shall not apply in respect of any development financial institution, or shall apply with such modifications as may be set out in the order and such modifications must be consistent with the intent and purpose of this

Act.

s 3Interpretation

(1)

In this Act, unless the context otherwise requires—

“child” includes an illegitimate child, a step-child and a child adopted under any written law of Malaysia or of any place outside

Malaysia, or under any custom recognised by a class of persons in or outside Malaysia;

“member”, in relation to an institution which is—

(a)

a corporation, means a shareholder; and

(b)

a partnership, means a partner;

“statutory body” means any authority or body, whether corporate or unincorporate, established, appointed or constituted by any written law, but does not include any local authority;

“Bank” means the Central Bank of Malaysia established under the

*Central Bank of Malaysia Act 2009 [Act 701];

“related”, in relation to a corporation, means related within the meaning of section 6 of the **Companies Act 1965 [Act 125];

“books” includes any register or other record of information and any accounts or accounting records, however compiled, recorded or stored;

*NOTE—The Central Bank of Malaysia Act 2009 [Act 701] has repealed the Central Bank of Malaysia

Act 1958 [Act 519] which comes into operation on 25 November 2009–see section 99 of Act 701.

**NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777]

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

Development Financial Institutions 15

“collateral” includes a mortgage or charge (whether legal or equitable), debenture, bill of exchange, promissory note, guarantee, lien or pledge (whether actual or constructive), hypothecation, indemnity, undertaking or other means of securing payment or discharge of a debt or liability (whether present or future, or whether vested or contingent);

“specify” means specify in writing by way of standards or any other forms;

“prescribe” means prescribed by order published in the Gazette;

“document” has the same meaning as in the Evidence Act l950 [Act 56];

“constituent documents”, in relation to an institution, means the statute, charter, memorandum of association and articles of association, rules and by-laws, partnership agreement, or other instrument, under or by which the institution is established and its governing and administrative structure and the scope of its functions, business, powers and duties are set out, whether contained in one or more documents;

“Governor” and “Deputy Governor” mean the Governor and Deputy

Governor of the Bank respectively;

“property” means any movable or immovable property, whether tangible or intangible and includes—

(a)

any right, interest, title, claim, chose in action, power or privilege, whether present or future, or whether vested or contingent, in relation to any property, or which is otherwise of value;

(b)

any conveyance executed for conveying, assigning, appointing, surrendering, or otherwise transferring or disposing of immovable property of which the person executing the conveyance is the proprietor or has possession or in which he is entitled to a contingent right, either for the whole interest or for any less interest;

(c)

any security, including any stock, share, debenture and fund;

(d)

any negotiable instrument, including any bank note, bearer note, Treasury bill, dividend warrant, bill of exchange, promissory note, cheque and negotiable certificate of deposit; or

(e)

any mortgage or charge, whether legal or equitable, guarantee, lien or pledge, whether actual or constructive, letter of hypothecation, trust receipt, indemnity, undertaking or other means of securing payment or discharge of a debt or liability, whether present or future, or whether vested or contingent;

“individual” means a natural person;

“development financial institution” means an institution which carries on any activity, whether for profit or otherwise, with or without any Government funding, with the purpose of promoting development in the industrial, agricultural, commercial or other economic sector, including the provision of capital or other financing facility; and for the purposes of this definition, “development” includes the commencement of any new industrial, agricultural, commercial or other economic venture or the expansion or improvement of any such existing venture;

“prescribed institution” means a development financial institution which is prescribed by the Minister under subsection 2(1);

“Shariah committee” means the Shariah committee established under section 33F;

“approved company auditor” has the same meaning as in the

*Companies Act 1965;

“financing facility” means—

*NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777]

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

Development Financial Institutions 17

(a)

an advance, loan or other facility, in whatever form or by whatever name called, by which the customer has access, directly or indirectly, to the funds of the prescribed institution and includes a financing facility which is made in accordance with Shariah; and

(b)

the giving of a guarantee, credit insurance or takaful cover in relation to a financing facility;

“interest in a share” means a legal or equitable interest in a share;

“Government” means the Federal Government, or any State

Government, any local authority, or any other authority or body, whether corporate or unincorporate, established, appointed or constituted by any written law;

“Chief Executive Officer”, in relation to an institution, means an individual, who either individually or jointly with one or more other persons, is responsible, subject to the authority of the directors, for the conduct of the business and the administration of the institution;

“computer” has the same meaning as in the Evidence Act 1950;

“client” includes a customer;

“trust fund” means any fund established under section 43;

“liabilities” includes debts, duties and obligations of every kind, whether present or future, or whether vested or contingent;

“Shariah Advisory Council” means the Shariah Advisory Council established under the Central Bank of Malaysia Act 2009 [Act 701];

“Minister” means the Minister for the time being charged with the responsibility for finance;

“person” includes an individual, any corporation, statutory body, local authority, society, trade union, co-operative society, partnership

and any other body, organization, association or group of persons, whether corporate or unincorporate;

“computer output” means a statement or representation, whether in written, printed, pictorial, film, graphical, acoustic or other form—

(a)

produced by a computer;

(b)

displayed on the screen of a computer; or

(c)

accurately translated from a statement or representation so produced;

“officer”, in relation to an institution, means any of its employees and includes its Chief Executive Officer;

“senior officer”, in relation to a prescribed institution, means a person, other than the Chief Executive Officer or a director, having authority and responsibility for planning, directing or controlling the activities of a prescribed institution including the chief operating officer, members of decision-making committees and other persons performing key functions such as risk management, compliance, internal audit or other functions as may be specified by the Bank under section 41, but shall not include a member of a Shariah committee;

“office” includes the principal place of business, a branch, an agency, a mobile place of business, a place of business set up and maintained for a limited period only, an electronic terminal and any other place of business;

“stakeholder”, in relation to a prescribed institution, means the

Government or any person who provides funding or any other assistance to the prescribed institution, or its members, customers, depositors, policy owners or creditors, as the case may be;

“director” includes any person who occupies the position of a director, and includes a person in accordance with whose directions and instructions the directors or officers are accustomed to act and an

Development Financial Institutions 19

alternate or substitute director, and without prejudice to the foregoing, in the case of—

(a)

a co-operative society, means a member of the board, or other governing body, of the co-operative society;

(b)

a statutory body, means a member of the board, committee, council or other governing body of the statutory body;

(c)

a partnership, means a partner;

(d)

a sole proprietorship, means the sole proprietor; and

(e)

any other body, association or group of persons, whether corporate or unincorporate, means a person having the direction and control of the management of its business or affairs;

“controller”, in relation to an institution, means a person who—

(a)

has an interest in more than fifty per cent of the shares of the institution;

(b)

has the power to appoint or cause to be appointed a majority of the directors of the institution;

(c)

has the power to make or cause to be made decisions in respect of the business or administration of the institution, and to give effect to such decisions or cause them to be given effect to; or

(d)

in accordance with whose directions, instructions or wishes the directors, chief executive officer or senior officers of the institution are accustomed or under obligation, whether formal or informal, to act, and the word “control” shall be construed accordingly;

“chairman”, in relation to a prescribed institution, means chairman of the board of directors;

“corporation” has the same meaning as in the *Companies Act 1965;

“agreement” means an agreement whether formal or informal, oral or written, express or implied;

“arrangement” means an arrangement whether formal or informal, oral or written, express or implied;

“business” means any activity carried on for the purpose of gain or profit and includes all property derived from, or used in, or for the purpose of, carrying on such activity and all rights and liabilities arising from such activity;

“premises” includes any land, building, structure or place;

“relative”, in relation to an individual, subject to subsection (1A), means—

(a)

the spouse of the individual;

(b)

the brother or sister of the individual, or of the spouse of the individual;

(c)

any lineal ascendant or descendant of the individual, or of the spouse of the individual;

(d)

the spouse of any individual referred to in paragraph (b)

or (c);

(e)

any lineal descendant of an individual referred to in paragraph (b) or (d);

(f)

any uncle, aunt or cousin of the individual, or of the spouse of the individual; or

*NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777]

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

Development Financial Institutions 21

(g)

any spouse, or any lineal ascendant or descendant, of an individual referred to in paragraph (f);

“associate”, in relation to a person, means—

(a)

any person who is a nominee or an officer of that person;

(b)

any person who manages the affairs of that person;

(c)

any firm of which such person, or any nominee of his, is a partner or a person in charge or in control of its business or affairs;

(d)

any corporation within the meaning of the

*Companies Act 1965, of which such person, or any nominee of his, is a director or is in charge or in control of its business or affairs, or in which such person, alone or together with any nominee of his, has or have a controlling interest, or shares to the total value of not less than twenty per cent of the total issued capital of that corporation; or

(e)

the trustee of any trust, where—

(i)

the trust has been created by that person; or

(ii)

the total value of the assets contributed by that person to the trust at any time, whether before or after the creation of the trust, amounts, at any time, to not less than twenty per cent of the total value of the assets of the trust;

“standards” includes any obligation or requirement as specified by the Bank under this Act and such standards may contain any interpretative, incidental, supplemental, consequential and transitional provisions;

*NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777]

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

“subsidiary” has the same meaning as in section 5 of the

*Companies Act 1965;

“company” has the same meaning as in the *Companies Act 1965;

“holding company” has the same meaning as in section 5 of the

*Companies Act 1965;

“share”, in relation to a corporation, means an issued share of the corporation and includes stock except where a distinction between stock and share is expressed or implied;

“modification”

includes amendment, adaptation, alteration, variation, addition, division, substitution or exclusion;

“capital funds” means paid-up capital and reserves, and includes, for the purposes of sections 33C, 38 and 39, the whole or such proportion of any other class, category or description of capital as the Bank may specify.

(1A)

For the purpose of the definition of “relative” in subsection (1)—

(a)

the adoption of any person by another under any written law of Malaysia or any country, territory or place outside

Malaysia, or under any custom recognized by any class of persons in Malaysia or in any country, territory or place outside Malaysia, shall be treated as creating between the adopter and the adopted person the same natural relationship as the adoptive relationship, and other relationships in relation to it shall be determined accordingly; and

(b)

references therein to a relationship include, where relevant, a relationship by half-blood.

(2)

For the purposes of this Act—

*NOTE—The Companies Act 1965 [Act 125] has been repealed by the Companies Act 2016 [Act 777]

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

Development Financial Institutions 23

(a)

“persons acting in concert” means persons who, pursuant to an agreement, arrangement or understanding, co-operate to acquire jointly or severally interests in shares of a corporation for the purpose of obtaining or consolidating control of that corporation or act jointly for the purpose of exercising control over a corporation; and

(b)

without prejudice to the generality of paragraph (a), the following persons shall be presumed to be persons acting in concert, unless the contrary is established:

(i)

a corporation and its related and associate corporations;

(ii)

a corporation and any of its directors, or the relative or associate of any of its directors, or any related trusts;

(iii)

a corporation and any pension fund established by it;

(iv)

a person and any investment company, unit trust or other fund whose investments such person manages on a discretionary basis;

(v)

a financial adviser and its client which is a corporation, where the financial adviser manages on a discretionary basis the client’s funds and has ten per cent or more interest in the shares of the client; or

(vi)

a person who owns or controls twenty per cent or more of the voting shares of a corporation falling within subparagraph (i) and any relative of such person, or any related trusts together with one or more persons falling within subparagraph (i).

(3)

For the purposes of this Act—

(a)

a corporation is established when it is incorporated;

(b)

a statutory body is established when it comes into existence under the law establishing, appointing or constituting it;

(c)

a co-operative society is established when it is registered;

(d)

a partnership is established when it is formed;

(e)

a sole proprietorship is established when it commences its business;

(f)

any other individual, body, association or group of persons, whether corporate or unincorporate, which requires registration or other form of recording or recognition under any written law before it can lawfully commence its activities, is established when it is so registered, recorded or recognized.

(4)

For the purposes of this Act, a corporation is an associate corporation of another corporation if not less than twenty per cent and not more than fifty per cent of the shares of the first-mentioned corporation are held by that other corporation.

(5)

Any reference in this Act to the power of the Minister or the

Bank to impose or specify conditions shall include the power of the

Minister or the Bank, as the case may be, to amend or revoke any existing conditions or impose any new conditions.

s 4Functions of the Bank

(1)

The Bank shall have all the functions conferred on it by this

Act and the Governor shall perform the functions of the Bank on its behalf.

(2)

The Bank may authorize a Deputy Governor or any of its officers to perform any of its functions under this Act.

Development Financial Institutions 25

(2A)

The Bank may establish and authorize a committee consisting of members as the Bank may determine to perform any or all of its functions under this Act on behalf of and in the name of the Bank.

(3)

The Bank may, either generally or in a particular case, appoint a person who is not an officer of the Bank to perform any or all of its functions on behalf of and in the name of the Bank or render such assistance in the performance of its functions under this Act as the

Bank may specify.