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Introduction: In the rapidly evolving landscape of the digital age, startups are emerging as vital drivers of innovation and economic growth. Intellectual property (IP) plays a pivotal role for these budding ventures as it empowers them to gain competitive edge in the market. What is Intellectual Property? At its core, intellectual property encompasses the intangible assets resulting from human intellect and creativity. It recognizes and safeguards the products of our imagination, enabling creators to control and benefit from their unique works. Whether it’s a ground-breaking invention, a thought-provoking novel, an inspiring artwork, a captivating design, or a recognisable brand logo, intellectual property rights play a pivotal role in promoting progress, encouraging competition, and driving economic growth. Types of Intellectual Property: Copyright: Copyright is a legal term used to describe the rights that creators have over their literary and artistic works. Works covered by copyright range from books, music, paintings, sculpture, and films, to computer programs, databases, advertisements, maps, and technical drawings. Securing copyrights enables startups to prevent unauthorised reproduction, distribution, and public display of their works, especially crucial in the digital landscape.  Patent: A patent is an exclusive right granted for an invention. Generally speaking, a patent provides the patent owner with the right to decide how or whether the invention can be used by others. In exchange for this right, the patent owner makes technical information about the invention publicly available in the published patent document. Patents encourage technological advancements and foster innovation, protecting novel and non-obvious inventions. Startups with unique products or technologies can rely on patents to safeguard their innovations. Trademark: A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises. Trademarks date back to ancient times when artisans used to put their signature or “mark” on their products. Trademarks protect distinctive signs, symbols, names, and logos used to identify and differentiate products or services in the marketplace. They serve as valuable assets for businesses, establishing brand recognition and consumer trust. It is worth noting that the new trade mark law now also extends protection to non-traditional marks, including colour, shape, sound, and motion. Registering trademarks provides startups with the means to safeguard their brand identity from potential confusion among consumers, allowing them to establish a strong brand presence and foster customer loyalty. Industrial Design: An industrial design constitutes the ornamental or aesthetic aspect of an article. A design may consist of three-dimensional features, such as the shape or surface of an article, or of two-dimensional features, such as patterns or lines. Industrial designs safeguard the unique visual appearance of a product, encouraging innovation in design and preventing unauthorised copying. Geographical Indication: Geographical indications and appellations of origin are signs used on goods that have a specific geographical origin and possess qualities, a reputation, or characteristics that are essentially attributable to that place of origin. Most commonly, a geographical indication includes the name of the place of origin of the goods. Geographical indications provide protection against misappropriation, fostering economic development and preserving local traditions. Trade Secrets: In addition to the aforementioned types of intellectual property, trade secrets also play a crucial role in protecting confidential information. Trade secrets are IP rights on confidential information that may be sold or licensed. They encompass valuable business information, such as manufacturing processes, formulas, algorithms, customer lists, and marketing strategies, which provide a competitive advantage to companies. While the name of the individual client is not confidential, the list or database of clients on which a business has expended time and effort to compile may be.[1] The unauthorised acquisition, use, or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of trade secret protection. Trade secrets are not publicly disclosed like patents or trademarks but are protected through confidentiality agreements, non-disclosure agreements, and strict internal protocols. The Importance of Intellectual Property: Competitive Advantage: IP protection empowers startups to safeguard their unique products, services, or brand identities, differentiating them in the market and attracting customers. Market Value and Investment Opportunities: Intellectual property assets enhance a startup’s market value, attracting potential investors or partners. Strong IP protection demonstrates the company’s commitment to innovation and potential profitability. Revenue Generation: IP protection enables startups to commercialise their innovations through licensing or franchising agreements, generating revenue by granting others the right to use their IP in exchange for royalties or fees. Legal Recourse: IP protection empowers startups to take legal action against infringers, deterring potential competitors from copying or misusing their innovations and helping to maintain market share. Conclusion: In conclusion, intellectual property is a valuable asset for startups, paving the way for growth, innovation, and commercial success. By recognizing and protecting their intellectual property rights, startups can thrive in the competitive market and realize their full potential in the dynamic world of entrepreneurship. [1] Schmidt Scientific Sdn Bhd v Ong Han Suan [1997] 5 MLJ 632 ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Meta Platforms, formerly known as Facebook, recently launched an app called Threads, which quickly gained over 10 million users within the first seven hours[1]. The app aims to provide a more personal and intimate way for users to connect with their friends and followers. However, Meta’s competitor, Twitter is not happy with Threads, and has accused Meta of misusing its “trade secrets and other intellectual property” to develop the Threads app. Twitter attorney Alex Spiro claims that Meta hired several former Twitter employees who still had access to confidential information and trade secrets. Twitter also accused Meta of using such information to further develop the “copycat” app[2]. In a letter sent to Meta’s CEO and founder Mark Zuckerberg, Twitter’s lawyer Alex Spiro wrote: “Twitter intends to strictly enforce its intellectual property rights, and demands that Meta take immediate steps to stop using any Twitter trade secrets or other highly confidential information.” In response, Meta has denied these allegations, asserting that Threads is a “new and innovative” app that does not infringe on Twitter’s intellectual property. The company has expressed confidence that it will prevail in the face of these accusations. So is Meta’s Thread a threat to Twitter’s trade secrets? It’s still early to say for sure. However, the allegations against Meta are serious, and the outcome of the allegation could have a significant impact on the tech industry when trade secrets are involved. Interestingly, this turn of events includes a shift in perspective from Twitter’s owner, Elon Musk. In the past, Musk has criticised the farcical[3] nature of intellectual property registration and has made many of his own inventions open source[4]. However, in a surprising move, Musk has decided to take legal action and threaten to sue Meta for alleged trade secret violations. This suggests that Musk now sees Meta’s Thread as a genuine threat to Twitter, contradicting his previous stance on open innovation and the importance of safeguarding intellectual property, particularly trade secret. This gripping case raised crucial questions about the importance of safeguarding trade secrets and intellectual property. Trade secrets confer a competitive edge and valuable assets for businesses, and they must be safeguarded carefully. Instead of waiting for potential infringements that could lead to future difficulties, businesses should focus on safeguarding their trade secrets. What is Trade Secret? A trade secret is confidential information that gives a business a competitive advantage[5]. Trade secrets can include anything from product formulas to marketing strategies. In Twitter’s case, the source codes and users’ database are their trade secrets. Trade Secret Protection in Malaysia In Malaysia, trade secrets are recognised as confidential information but do not require registration for protection. Unlike other forms of intellectual property, trade secret protection is enforced through legally binding contracts rather than specific legislation. Disputes regarding trade secret infringement can only seek remedy for infringement under the common law tort of breach of confidentiality as no direct statutory protection nor definition of trade secret exists. Trade secrets are eligible for protection as long as they meet specific criteria: they must be commercially valuable, known only to a limited group, and the rightful holder must take reasonable steps to keep them confidential. How to Safeguard Trade Secret We learned that trade secrets confer a competitive edge to businesses. To safeguard trade secrets, it is recommended that you establish confidentiality agreements, non-disclosure agreements (NDAs), and clauses to prevent employees and other parties from divulging confidential information. These agreements should be in place during and after employments to ensure the ongoing protection of trade secrets. In Malaysia, trade secret protection relies on legally binding contracts rather than specific legislation. Disputes regarding trade secret infringement are typically resolved through Malaysian courts. In Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd[6], the court ruled that for a trade secret dispute to be actionable, the specifics on the trade secrets must be identified. In this case, the plaintiff’s failure to specifically identify the confidential information (the trade secret) led to their case being dismissed. This shows the importance of carefully identifying the trade secrets that you believe have been infringed upon. Conclusion: The case between Twitter and Meta is a complex one, and the outcome is still uncertain. However, the case raises important questions about the future of trade secrets in the tech industry. As the tech industry becomes more competitive, it is likely that we will see more cases of trade secret theft. Businesses in the tech industry need to be aware of the risks of trade secret theft and take steps to protect their confidential information. [1] https://www.forbes.com/sites/siladityaray/2023/07/06/zuckerberg-says-threads-crossed-5-million-signups-in-first-four-hours-as-musk-rails-against-instagram/?sh=29ccc4ad632c [2] https://www.cbsnews.com/news/twitter-threatens-lawsuit-meta-threads-elon-musk-mark-zuckerberg/ [3] https://www.businessinsider.com/elon-musk-patents-2012-11 [4] https://www.tesla.com/blog/all-our-patent-are-belong-you [5] https://www.wipo.int/tradesecrets/en/ [6] [2016] 3 MLJ 417. ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

In our previous article, we explored the significant transformation brough about in the legal industry by Artificial Intelligence (AI), perceiving “the law as data”, which has brought about significant transformations in the legal industry. However, it is crucial to fully grasp the phrase “AI sees the Law as data” as “AI sees the Law as data but not as Law”. While AI serves as a valuable tool in the legal field, it is essential to acknowledge the challenges it faces in practical legal applications, particularly in niche areas of law or smaller jurisdictions. Drawing a parallel, let’s consider the example of a knife: while it is an indispensable instrument in culinary settings, it can also pose potential danger if not used appropriately. While technology has made significant advancements, it still faces challenges when dealing with complex legal knowledge, especially in niche areas of law or smaller jurisdictions. According to Neil Sahota, the essence of AI lies in the training process provided to the machine which depends on supplying the system with data and algorithms to discern patterns, make predictions, or accomplish specific tasks. In simple terms, despite being fed with vast amount of data, AI still lacks critical thinking abilities and a practical understanding of the law. It relies solely on detected patterns and does not possess the same understanding of the law as a human lawyer. This results in a garbage-in-garbage-out scenario, hindering its effectiveness in addressing complex legal matters. Accuracy: Acquiring high-quality data for an AI system poses a challenge in the legal field. While diverse sources are used, ensuring accuracy becomes difficult once resources such as published books, Wikipedia articles, and a refined “Common Crawl” repository are exhausted. Unlike human lawyers who learn from handpicked reliable sources, AI models are fuelled by both labelled and unlabelled data, potentially leading to erroneous outcomes. Additionally, if trained on inaccurate data, AI models may generate hallucinations or fabricate facts. Interestingly, AI systems are only as good as the data on which they are trained. If the data is inaccurate, the AI system will also be inaccurate. A New York lawyer is facing possible sanctions after citing fake cases generated by OpenAI’s ChatGPT in a legal brief filed in federal court. The incident occurred in a personal injury lawsuit against Avianca, where the lawyer used ChatGPT to supplement his legal research. However, the judge discovered that six of the cited cases were bogus, leading to doubts about the reliability of the lawyer’s sources. The mistake gained media attention and prompted discussions about the need for verification when using AI-powered tools in legal research. Therefore, one should approach AI as a helpful starting point, rather than a definitive source. AI system may also have limited awareness of different legislation and jurisdictions. In a niche area or a small jurisdiction, AI models might not be effectively trained to address specific needs. Therefore, legal professionals should exercise caution when relying solely on AI-generated content for legal drafting. It is important to consider the limitations and potential inaccuracies of AI models and ensure that human expertise and verification are incorporated into the process. Bias Concerns: Similar to their human counterparts, AI systems can exhibit biases. Biased training data or algorithms design can result in unfair treatment of certain individuals or groups. Using historical data that reflects past mistake can lead AI systems to replicate these biases. AI systems can learn from the data they are trained on. This means that if an AI system is trained on data that is biased, the AI system will also be biased. For example, if an AI system is trained on a dataset of legal cases that predominantly favours men, the AI system may be more likely to recommend that men be given lighter sentences than women. The bias in AI systems can damage public trust in the legal system. For example, if people believe that AI systems are biased against them, they may be less likely to report crimes or cooperate with law enforcement. Addressing this challenge requires mechanisms for detecting, measuring, and mitigating biases in AI systems, ultimately promoting fairness and equity in the legal field. Transparency: Understanding the decision-making process of AI systems is crucial in the legal field. Transparency builds trust among legal practitioners, clients, and the public. By providing clear explanations and justifications for AI-generated outcomes, we can ensure ethical and responsible use of AI. Achieving transparency involves explainable AI techniques, documentation of AI processes, and external audits of AI systems. Despite these challenges, the use of AI in the legal field is expected to continue growing. AI has shown us the potential to pave the way towards AI Lawyer but not as a replacement of human expertise and judgement, yet. Even though there are many examples online where AI falls short, the reality is that it is very suitable for handling legal tasks under the supervision of a knowledgeable legal expert. While AI cannot replace human expertise and judgement, it serves as a valuable tool that enhances the capabilities and efficiency of legal professionals in the digital age.   ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Artificial intelligence (AI) has revolutionised various industries, and the legal field is no exception. Traditionally, the law has been seen as a set of rules and principles, however, AI sees the law as data. This perspective allows for the analysis and processing of legal information, leading to improvements in the legal domain. With the current progress on the technology and the introduction of Large Language Model (LLM), such as powerful models like OpenAI’s ChatGPT (Generative Pre-trained Transformer), AI has become an integral part of the legal profession. Law is a profession of words, and LLM is simply really good at that. AI’s application extends beyond automating tasks, analysing data, and generating legal documents. It signifies a paradigm shift in the legal field, introducing a novel approach for integrating AI with the law. In the legal field, AI is still in its early stages of adoption. It has the potential to identify patterns in legal data, predict case outcomes, identify areas of risk, and develop new legal strategies. Today, AI can even generate legal documents. This allows legal professionals to focus on more complex tasks, such as providing strategic legal advice and representing clients in court. AI’s impact on the legal field can be summarised in three key areas: Automating tasks:  AI excels at automating generic and repetitive tasks. AI-powered software can draft contracts, review documents for relevant information, and conduct legal research in a fraction of the time it would otherwise take by  a human lawyer. By freeing up time previously spent on these tasks, AI enables legal professionals to focus on more complex and strategic aspects of their work. Analysing data:  The legal field generates vast amounts of data, including case law, statutes, and regulations. AI system can analyse rapidly these data, extract valuable insights, identify patterns, and predict outcomes. Let’s say a legal team is handling a large volume of documents related to a case. AI software can quickly scan and analyse the documents to identify specific keywords, relevant information, or potential evidence, helping lawyers locate the most crucial details without manually reviewing each document individually. By leveraging AI’s data analysis capabilities, legal professionals can make more informed decisions, assess risks, and develop effective legal strategies. AI’s ability to rapidly process and analyse complex legal information provides a powerful tool to enhance legal research and augment human expertise. Generating legal documents:  AI technology offers the capability to generate accurate and tailored legal documents using predefined templates and algorithms. AI can also assist in generating legal briefs by automatically analysing relevant case law, extracting key arguments, and creating a structured and coherent document. Lawyers can use these AI-generated briefs as a starting point, allowing them to focus on refining and tailoring the arguments to fit the specific context of their case. This saves time, reduces errors and ensure adherence to legal requirements. While AI cannot replace human expertise and judgement, it serves as a valuable tool that enhances the capabilities and efficiency of legal professionals in the digital age. The transformation of the legal practice is evident through the automation of tasks, data analysis, and document generation, which are just a few examples of how AI is reshaping the legal practice. While the use of AI in the legal field is still in its early stages, however, it has the potential to revolutionize the way the law is practiced. By viewing the law as data, AI can streamline workflows, enable informed decisions, and deliver legal services more efficiently and accurately. ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Have you ever considered the amount of personal data you disclose each time you use your smartphone or computer? As technology advances, we willingly share our data, trusting that software or applications will handle it appropriately. However, the reality is that our personal information is constantly collected, stored, and shared, whether online or offline. In today’s economy, data has become a valuable commodity. As Mark Cuban describes it, “Data is the new gold. It’s the new oil.”. This highlights the need for vigilance regarding how our data is collected and managed. By understanding the value of our personal data and taking proactive measures to protect it, we can reduce the risk of financial loss and identity theft while promoting ethical and responsible use of our information. Data breaches have become a pressing concern in Western countries. Recent reports have shed light on how a popular short-form video app that was perceived by its user as a mere entertainment platform, is now under scrutiny due to its potential threat to national security. Malicious entities exploit user’s information, raising concerns about identify intelligence prospects for espionage or blackmailing unsuspecting targets. Consequently, data breaches can have severe consequences for both individuals and businesses. According to a 2022 report by Statista, online frauds were the most reported cyber threat incidents announced by Cybersecurity Malaysia, with over four thousand reports, followed by malicious codes. For individuals, safeguarding personal data preserves privacy and shields sensitive information from cybercriminals. In the digital era, where sharing every memorable detail of our lives through news feeds has become effortlessly accessible. We have immersed ourselves in the allure of easy sharing, inadvertently lowered our guard and forgetting the inherent value and preciousness of our personal data. This prevailing mindset has led to a collective oversight and boundaries of personal data and privacy in exchange for necessary enjoyment. Businesses, on the other hand, must recognise that personal data protection stands as a frontline defence against data breaches, which can lead to financial losses and irreparable damages to their hard-earned reputation. By prioritising robust personal data protection measures, businesses can fortify their foundation, instilling trust among customers and safeguarding their long-term success. In Malaysia, the Personal Data Protection Act 2010 (“PDPA”) aims to safeguard sensitive information from unauthorised access, use, or disclosure. Additionally, the European Union’s General Data Protection Regulation (GDPR) sets standards for organisations processing personal data of EU residents. While both PDPA and GDPR share some similarities in terms of their objectives to protect the privacy and personal data of individuals, however, the level and threshold of protection may differ. Personal data includes any data in any form, whether it is collected, recorded, stored, or processed by any means. For example, Personal data can be the information provided when filling out a survey form or even your thumbprint used for office door access. Although we may feel comfortable sharing our personal data in our daily activities, without proper protection and safeguarding, this information can be stolen or misused, resulting in financial loss, identity theft, and even reputational damages. The Malaysian legislator has introduced seven (7) data protection principles for data users to comply with. These principles provide guidelines for safeguarding personal data from unauthorised access, misuse, or disclosure. The 7 principles are as follows: Security – it imposes an obligation on a data user to take measures to protect personal data from loss, misuse, modification, unauthorised or accidental access or disclosure, and alteration or destruction during its processing; Purpose – it prohibits a data user from processing personal data without the consent of a data subject; Data Integrity – it requires a data user to take steps to ensure data hygiene; Notice and Choice – it requires data user to inform a data subject of various matters relating to the information of that data subject; Disclosure – it prohibits disclosure of personal data; Access – it gives right for data subject to access their own data; and Retention – personal data shall not be retained longer than necessary. Adhering to these principles helps ensure that personal data is processed and protected in a lawful and responsible manner. While individuals enjoy the services provided by data users, finding a balance between enjoying digital services and protecting personal data is crucial for safeguarding privacy and security. In conclusion, personal data protection is essential in today’s digital age and cannot be compromised. By implementing practical measures and adhering to relevant regulations and laws, individuals and businesses can protect their personal data from unauthorized access, use, or disclosure. ***** About the author: This article was written by Lim Yong Lin, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

As AI technology continues to advance, the question of copyright ownership for AI-generated images becomes increasingly important. With AI systems capable of creating highly realistic and original images, the issue of who owns the rights to these works becomes increasingly complex and contentious. Under traditional copyright law, ownership is granted to the person or entity that created the work. However, in the case of AI-generated images, it may be difficult to determine who the “creator” is. If the AI system is considered to be the creator, then the copyright may belong to the person or entity that owns or operates the AI system. On the other hand, if the person who trained the AI system or provided the data is considered the creator, then they may own the copyright. The question of AI-generated copyright ownership has already come up in some legal cases. In 2018, a monkey took a selfie with a camera left unattended by a nature photographer, and the photographer claimed copyright ownership of the image. However, a court later ruled that the monkey was the true author of the photograph, and therefore the photographer had no ownership rights. While this case involved a non-AI system, it highlights the legal complexity of determining authorship and ownership in non-human contexts. Another legal case involving AI-generated images is the dispute between artist Richard Prince and photographer Patrick Cariou. Prince used Cariou’s photographs as the basis for a series of works, which he altered and then sold. Cariou sued Prince for copyright infringement, but the court ultimately ruled that Prince’s use of the images constituted fair use. While this case did not involve AI-generated images, it raises questions about the extent to which derivative works created using other people’s material can be considered original works. Some experts argue that AI-generated images should be treated as works of collaboration between the AI system and its operator or trainer, with ownership shared between them. This approach would recognize the creative input of both the AI system and the human operator or trainer, who provided the data or parameters that the AI system used to create the image. Others believe that the law should be updated to explicitly address the issue of AI-generated works and determine a clear ownership framework. This could involve creating a new legal category of “AI-generated works” or clarifying existing copyright law to determine ownership based on the degree of creative input from both the AI system and the human operator or trainer. In conclusion, the question of copyright ownership for AI-generated images is a complex and evolving legal issue that currently has no clear answer. As AI technology continues to advance, it is likely that this issue will become increasingly important, and it will be up to legal experts and lawmakers to determine a clear framework for determining ownership of these works. Well, to our surprise, the above well written article is, in fact, generated by ChatGPT when provided with the input text prompt “Who owns the copyright in AI-generated arts?”. Imagine this: if the article were to be published without any alteration, in this scenario as a literary work, would I be considered the copyright owner of the article? Additionally, would I be infringing the copyright of ChatGPT? So who should have the copyright ownership towards the image generated by AI? First, we need to understand how copyright subsist in an artwork. It is important to consider eligibility criteria under the Malaysian law. According to section 7(3) of the Copyright Act 1987, an artwork must demonstrate there has been sufficient effort expended to make the work original in character and fixed in a tangible medium for expression to qualify for copyright protection. Here, the crux for the subsistence of copyright is that: work must be produced (expressed) with sufficient effort; and work must be original. Malaysian legislation has made it clear that a copyright subsists only in works that demonstrate sufficient effort expanded towards the originality of an Artwork. As such, a mere human involvement, by providing a text input prompt, in the creation of an AI-generated image does not automatically confer copyright ownership in the absence of sufficient effort expended. If the individual is able to establish that there is sufficient level of contribution in the creation of the work then they may be the owner of the artwork. Similarly, if an individual makes substantial alterations towards the AI-generated image to create derivative work under Section 8 of the Act, they may then be eligible for copyright ownership in the resulting work. In the scenario where AI-generated image is substantially produced by the AI, assuming the AI is considered a legal person, then the AI should be the copyright owner of the image. However, Malaysian copyright law does not explicitly address whether an AI can claim ownership and authorship. In the United Kingdom, the Copyright, Designs and Patent Act 1988 (CDPA 1988) already includes provisions related to computer-generated artwork. Section 9(3) of the CDPA 1988 states that, in the case computer-generated artwork, the author shall be taken to be the person by whom the arrangements necessary for the creation of work are undertaken. As an illustration, let’s consider a scenario where a graphic designer creates a piece of art using a computer. Without a doubt, the rightful author of the art is indeed the graphic designer and not the computer, which serves merely as a tool for designer to complete their work. The graphic designer is considered an author because, logically, he has applied his creativity, skills and experience to the art. While examining the provision, it seems to address the issue of ownership. However, who can say with certainty who made the necessary arrangements? Could it be: The person or organisation that developed the AI software? The person or organisation that “trained” the AI software? or The user, by providing their free and creative inputs into the software? One should understand the AI software frameworks, such as OpenAI’ DALL E or Stable Diffusion, are machine

Friendly loans between companies offer a valuable avenue for financial support. When granting or borrowing a friendly loan, companies must ensure compliance with their internal governance structures and ensure such an action is within the boundaries of legal landscape. This article explores the essential considerations and insights for granting or borrowing friendly loans in Malaysia. Compliance with Internal Governance Structure: Obtaining board approval is a crucial step before initiating any loan transaction, as the board of directors typically holds the authority to approve such decisions. In addition to a board’s approval, it is also important to examine the company’s constitution, memorandum and articles of association as well as shareholders’ agreement to identify any specific requirement such as obtaining shareholders’ consent for loan approval. These internal governance structures serve to safeguard the interests of all stakeholders, including shareholders, by providing a mechanism for checks and balances. Crafting A Comprehensive Loan Agreement: Besides complying the internal approval processes, a well-drafted loan agreement is important to establish clarity and protect the rights of both lenders and borrowers. This agreement typically covers important aspects including the loan amount, interest rates, repayment terms and any additional terms and conditions. In certain cases, companies may request for collateral security as part of the friendly loan arrangement including property, shares, or other valuable possessions that the borrower offers as security against the loan. By documenting these terms in the loan agreement, both lenders and borrowers gain a comprehensive understanding of their rights and responsibilities as well as the consequences of default. Understanding the Moneylenders Act 1951: Companies that provide loans to a non-related company often question whether granting a friendly loan, particularly when interest is charged, infringes the Moneylenders Act 1951 (“Act”).   If companies lend money as part of their regular business activities and meet the definition of a moneylender under the Act, they must obtain a license and comply with the Act. According to Section 2 of the Act, “moneylender” means any person who carries on or advertises or announces himself or holds himself out in any way as carrying on the business of moneylending, whether or not he carries on any other business. Such broad definition would include even those one-off loan transaction with genuine intention to help out family members, friends or business partners, and our courts have expressed their view that surely, this cannot be the intention of the Parliament. Operating a moneylending business without a license is a serious offence, carrying fines from RM 250,000 up to RM 1 million, and potential imprisonment for up to 5 years.  However, if companies lend money on a one-off basis, they are likely to fall outside the purview of the Act. The courts have recognised the validity of friendly loan transaction and recognised that interest can be charged in such transaction if it is justifiable and reasonable.   Having said that, it is essential for companies lending money to be cautious. In legal proceedings against these companies, a single loan with interest can raise a presumption that such companies are conducting moneylending activities. The burden of proof is shifted to the lender to prove against such presumption, in order to clear his name from being deemed as a moneylender under the definition of the Act. This presumption can be rebuttable by examining the specific facts and circumstances of each case. Factors such as the companies’ actual business activities and the frequency of lending money play a significant role in rebutting the presumption and demonstrating the non-moneylending nature of the transaction. Conclusion: By understanding the legal landscape, adhering to internal governance structures, and drafting well-documented loan agreement, companies can engage in friendly loans that comply with the law, protect the interests of all parties involved, and foster trust in their financial transactions. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

In an era where personal information is constantly exchanged and privacy concerns are escalating, businesses must prioritise data protection to address privacy concern. One effective way to demonstrate this commitment is through a well-written privacy notice. According to the Personal Data Protection Act 2010 (“PDPA”), all businesses, regardless of type and size, that process personal data in commercial transactions are required to prepare a privacy notice. Understanding the Privacy Notice: A privacy notice, also referred to as a privacy policy or personal data protection notice, is a document that explains how businesses collect, use, and process customers’ personal data. It covers important details such as the types of data collected, purposes of data processing, retention periods, rights of individuals, and contact information for inquiries or complaints. Non-compliance with the PDPA can lead to severe consequences for businesses, including fines up to RM300,000 and imprisonment not exceeding 2 years or both. Tips For an Effective Privacy Notice: To create a reader-friendly privacy notice, businesses can consider the following tips: communicate in a way that is easily understandable and avoid using long sentence. The notice should be prepared in both English and Bahasa Malaysia languages. clearly explain the types of personal data you collect, how it will be used, and any third parties with whom it may be shared. assure your customers that you have implemented security measures to protect their personal data. inform your customers about their rights and choices regarding their personal information, including how to opt out of marketing communications or correct their personal data. Practical Examples of Privacy Notice Implementation: Implementing a privacy notice is more than just ticking a box; it’s about effectively communicating your data protection practices to your customers. Here are some practical examples of how businesses can display privacy notices: Website Privacy Notice: place a prominently visible privacy notice on your website’s homepage or include a link in the footer for customers to access the full privacy notice. Mobile Applications: present users with a privacy notice during the app installation process or within the app itself. Ensure it is easily accessible in the settings, allowing users to review it at their convenience. Email Communications: include a link to your privacy notice in the email footer if you collect personal information through email sign-ups or subscription forms. Resource for Businesses: The Personal Data Protection Department of Malaysia issues a guideline on preparing a privacy notice along with a sample privacy notice. This resource serves as valuable reference for businesses. By following the guideline, businesses can ensure their privacy notices align with best practices and comply with legal requirements. (You can access the resource at: https://www.pdp.gov.my/jpdpv2/assets/2022/01/Panduan-Penyediaan-Notis-PDP-2022-compressed.pdf). A well-crafted and customised privacy notice not only fulfills legal obligations but also sends a strong message to customers that their privacy is your top priority. This fosters trust and loyalty in business-customer relationships, and ultimately building customer confidence. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

During peak seasons or in service-based sectors, working overtime becomes an inevitable necessity. Consequently, the issue of overtime payment frequently arises in such circumstances. According to the Employment Act 1955 (“EA”), overtime is defined as the additional hours worked by employees beyond their normal hours of work per day. Normal hours of work are the working hours agreed upon between the employer and the employee in the employment contracts. When employees worked beyond the agreed-upon hours of work, it becomes the employers’ obligation to provide overtime payment. It is important to note that not all employees are entitled to overtime payment. Employees earning a monthly salary above RM 4,000 are not entitled to overtime payment as mandated by the law. This means that any overtime payment is subject to the employers’ discretion. The EA provides specific rates of overtime payment that employers must follow. Employers have the flexibility to offer higher rates, but they are not allowed to offer lower rates. The rate of overtime payment varies depending on whether it is a normal working day, a rest day, or a public holiday. The table below illustrates the rates of overtime payment for various occasions. Day Prescribed Overtime Rate Normal Working Day HRP x 1.5   Rest Day HRP x 2 Public Holiday HRP x 3 ORP (ordinary rate of pay) = monthly rate of pay/26   HRP (hourly rate of pay) = ORP/normal hours of work The mandatory overtime payment can significantly increase the employers’ expenses, particularly during peak seasons or when a significant number of employees fall within the salary range of RM 4,000 and below. As such, some employers are exploring alternatives to preserve cash flow while still meeting the legal requirement. One commonly considered alternative is granting replacement leave to employees at a later date. However, the question is whether this approach is legally acceptable. It is important to note that the EA does not explicitly prohibit the use of alternative arrangements to replace overtime payment. Furthermore, there is a provision in the EA allowing employers and employees to agree on more favourable terms than the provisions outlined in the EA. It is subject to discussion as to whether a replacement leave is a better alternative and is more favourable to the employees. It is undeniable that some employees prefer monetary compensation over a day off. The safest approach for employers is to comply with the EA by providing overtime payment to eligible employees. If employers decide to pursue an alternative arrangement, they should clearly communicate the alternative to their employees, explain the rationale behind such a decision, and obtain the employees’ written consent for such arrangement. These will ensure transparency and fairness when dealing with the issue of overtime. To further assist employers in navigating the issue of overtime, the employers may consider the following: Requesting employees to work overtime only when necessary. Conducting performance reviews to identify the root causes of performance deficiencies if overtime is required due to performance issues. Hire more freelancers during peak seasons if the cost is lower than the cost of overtime payment. Establishing well-defined procedures and guidelines that clearly state when overtime is permissible, how it should be requested, and how it will be compensated. Establishing a system for recording overtime work, calculations, and payments. While it is important to comply with the law regarding overtime payment, it is equally important to address internal governance issues that may be causing excessive overtime. By reviewing and improving internal systems and procedures, employers can create a more productive work environment and reduce the need for excessive overtime. By striking a balance between hard work, fair compensation, and a healthy work environment, employers can create a foundation for employees’ satisfaction. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Consultancy services have become increasingly popular among individuals and businesses. Consultants offer a wide range of services such as digital marketing, branding, and others. They bring industry experiences and fresh perspectives to the table, assisting clients to address specific issues, improve performance and drive revenue growth. However, one of the common concerns shared by consultants is the potential risk of not receiving timely and full payment for their services, even if they have diligently fulfilled their obligations. On the other hand, clients are concerned about the lack of significant improvements in their business or consultancy fees that are disproportionate to the results achieved. To address these valid concerns and foster a win-win situation, a well-structured consultancy agreement with customised clauses plays an important role to protect the interest of both parties. Protecting the Consultants: A consultancy agreement outlines the scope of work, deliverables, and expected outcomes provided by the consultants. These clauses establish a clear understanding between the consultants and the clients. To address the issue of non-payment or delayed payment, consultants may include clauses such as late payment charges or suspension of services until full payment is received. These clauses ensure protection and compensation for consultants in the events of payment-related issues. Besides that, the consultants may include an outcome disclaimer clause in the consultancy agreement, specifying that certain results or outcomes cannot be guaranteed. For example, a successful franchise application or a top 3 Google ranking. This clause is especially important when the consultancy services involved third parties or are subject to external circumstances. By managing clients’ expectations and clarifying the limitations of the services provided, this clause protects consultants from unrealistic demands. Protecting the Clients:  To address concerns of performance not up to the standards, clients can specify milestones or performance targets within the consultancy agreement. This ensures that consultants must meet these targets before clients are obligated to make payments. Such an arrangement safeguards clients’ interests by ensuring that satisfactory results are delivered before any financial commitments are made. Additionally, clients can explore alternative payment mechanisms, such as offering free shares, as a means to motivate consultants and enhance their performance. For clients who pay a substantial consultancy fee, it is reasonable for them to expect exclusive services for a specified duration. To formalise this expectation, an exclusive service clause can be included in the consultancy agreement, stipulating that the consultants will solely provide services to the clients during the specified period. This clause ensures undivided attention from the consultants to the clients’ business and helps prevent conflicts of interest. Protecting Both Parties:  To safeguard the interests of both consultants and clients, the consultancy agreement can include clauses relating to intellectual property rights, confidentiality, and dispute resolution. These clauses protect the parties’ proprietary information and confidential information as well as help the parties to find a mutually agreeable solution to solve disputes. In conclusion, a customised consultancy agreement ensures that the consultants and the clients are aligned towards achieving their goals. Most importantly, it establishes a solid foundation of understanding and sets realistic expectations for both parties. This clarity not only helps consultants to focus their efforts on addressing specific issues, but also allows clients to have a clear understanding of what they can expect from the consultancy engagement. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.