Protecting Business Confidentiality: The Importance of Non-Disclosure Agreement (NDA) in Business Collaboration

Whether engaging in joint venture arrangements, strategic partnerships, or any other form of collaborative relationship, maintaining, protecting, and preserving confidential information are important for businesses. In a business collaboration, parties often share critical and proprietary information. This may include financial data, marketing strategies, ideas, customer list, and other forms of confidential information. Without a non-disclosure agreement (“NDA”), the disclosing party exposes itself to substantial risks as the receiving party could exploit the information for its own benefit or even share it with the disclosing party’s competitors. An NDA is a contract that protects confidential information exchanged between the parties. The primary purpose of an NDA is to establish the manners and restrictions in using the confidential information. In an NDA, the receiving party is often required to get prior written consent from the disclosing party before using or disclosing the confidential information beyond the agreed-upon purposes. Failure to obtain the written consent amounts to unauthorised use of confidential information. The NDA imposes an obligation on the receiving party to maintain the confidentiality of the information for a specified duration, thereby preserving the confidentiality of information even if the collaboration ends. An NDA ensures that the receiving party understands its obligations and the potential legal consequences of breaching its obligations. Besides that, it allows the disclosing party to seek legal remedies such as monetary damages or injunctive relief to protect its interest in the event of a breach. Additionally, an NDA sends a strong signal that the disclosing party prioritises the protection of confidentiality and expects the receiving party to do the same. This establishes a foundation of trust, encourages open communication and mutual respect between the parties involved, thereby facilitating the business collaboration. In conclusion, an NDA is an essential tool for safeguarding confidential information in a business collaboration. By signing an NDA, parties can establish clear expectations, minimise unauthorised disclosure, and have legal remedies in case there is an incident of an unauthorised disclosure that breaches the NDA. ***** 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.

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Expert Tips for Drafting an Effective Terms of Use and Lessons from Historical Missteps

The New Employment Law applies to EVERYONE!

Articles / Wong Shen Ming

On 15 August 2022, the Ministry of Human Resources issued and gazetted the Employment (Amendment of First Schedule) Order 2022 (“Order”) which will come into effect on 1st September 2022. Please note that this Order is only applicable to the Peninsular Malaysia. This Order removes the salary cap of those who are entitled to the benefits and protections under the current Employment Act 1955 (the “EA”). For more details regarding the series of amendments made to the EA, you may refer to our previous articles here: The New Employment Law Amendments: Empowering Employees The New Employment Law Amendments: What Have Been Missed Out? [Part 1] The New Employment Law Amendments: What Have Been Missed Out? [Part 2] Previously, the common rights and benefits provided in the EA such as the overtime payment, extra payment for working on public holidays, minimum notice period of termination, annual leave, sick leave, hospitalization leave, maternity and paternity leave, public holiday, etc only applied to employees earning a monthly salary of RM 2,000.00 and below. For employees earning more than RM 2,000.00 per month, their rights and benefits will be governed by their employment contracts. If the rights and benefits stipulated under the employment contracts are less favourable than the EA, the employees would still be bound by the terms of the employment contract. With the removal of the salary cap of RM 2,000.00 from Schedule 1 of the EA, the EA will now apply to ALL EMPLOYEES. This means that employees will now be entitled to the same rights, protections and benefits under the EA regardless of their monthly salaries, industries and nature of work. In other words, if the employment contract has provisions that are less favourable than the EA, the EA will prevail over the employment contract. Having said the above, certain exceptions apply. The Order states that employees earning RM 4,000.00 and above are not entitled to the following rights and benefits (the “Inapplicable Provisions”): Section 60(3) Payment for work done on a rest day Section 60A(3) Overtime payment Section 60C(2A) Allowance during shift work Section 60D(3), (4) Payment for work done during public holiday Section 60J Termination, lay-off and retirement benefits For illustration, an employee earning RM 3,000 per month will now be entitled to overtime payment calculated in accordance with the EA if the employee is required to work beyond 45 hours per week. On the other hand, an employee who is required to work beyond 45 hours per week but is earning RM 5,000 per month will not be entitled to overtime payment since Section 60A(3) is inapplicable to him. Both employees, however, will have the right to apply to the employers for a flexible working arrangement under Section 60P since it falls out of the Inapplicable Provisions. With the introduction of this Order and less than a month from its effective date, we believe it is a critical moment for employers to relook and modify their employment contracts to ensure the contracts are in conformity with the latest employment law. If your business may be impacted by the above changes, we highly encourage you to conduct a review of the terms of employment for ALL your employees as soon as possible to ensure that the terms are consistent with the provisions of the EA. ADDITIONAL NOTES: Section Description Quantum s. 60A(3) Overtime payment on a normal day 1.5x HRP for overtime after 8 hours of work s. 60(3) Payment and Overtime payment on a rest day [for employee being employed on a monthly or weekly rate of pay] 0.5x ORP for the first 4 hours of work 1.0x ORP for the subsequent 4 hours of work 2.0x HRP for overtime after 8 hours of work s. 60D(3) and (4) Payment and Overtime payment on a public holiday 2.0x ORP for normal 8 hours of work 3.0x HRP for overtime after 8 hours of work s. 60C(2A) Entitlement of allowance during shift day To be decided by employer based on regulations made by the Minister s. 60J Termination, lay-off and retirement benefits 10, 15 or 20 days for each year of completed service based on the employee’s year of service Note: ORP (ordinary rate of pay) = wages/26 days HRP (hourly rate of pay) = ORP/normal working hour *The above is inapplicable to employees earning more than RM 4,000.00 per month For calculation of overtime for employees being employed on a monthly rate of pay Ordinary Rate of Pay – Monthly Rate of Pay Ordinary Rate of Pay Monthly Rate of Pay Per Day = __________________ 26 For calculation of overtime for employees being employed on a weekly rate of pay Ordinary Rate of Pay – Weekly Rate of Pay Ordinary Rate of Pay Weekly Rate of Pay Per Day = __________________ 6 ***** About the author: This article was written by Edwin Lee Yong Cieh, Partner, Neoh Jia Shern, Corporate Associate and Wong Shen Ming, 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.

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Understanding Shareholders’ Pre-emption Rights And What Do They Mean For Your Company

Articles / ELP Law

Essentially, pre-emption rights give a company’s existing shareholders the first opportunity to acquire shares of the company before they are offered elsewhere, either on an issue of new shares in a new funding round or a share transfer by an existing shareholder. The idea is to prevent shares from being issued or transferred to third parties to the detriment of existing shareholders, thus impacting their rights and investment in the company. When a company intends to raise funds by issuing new shares or when a shareholder intends to sell his shares, it is vitally important for the parties concerned to consider whether any pre-emption right exists and if so, what process must be followed. This article provides a brief overview on the concept of pre-emption rights and in what context they may arise. (a) Statutory pre-emption right to new shares In respect of an issue of new shares, section 85 of the Malaysian Companies Act 2016 (“CA 2016”) affords a default pre-emption right to a company’s existing shareholders to be offered shares which are pro-rata to their existing shareholdings before any new shares which rank equally to their shares as to voting or distribution rights can be issued by the company, unless the company’s constitution provides otherwise. This default rule ensures that all shareholders of the same class are treated equally as they are given the opportunity to acquire their proportional shares of any additional share issuance by the company, thereby protecting their ownership interests from being diluted involuntarily without their consent. It is noteworthy that the statutory pre-emptive rights are specific to the same class of existing shares. What this means is that if a company has different classes of shares (say, class A and class B) and the company only issues class A shares, only the class A shareholders will be entitled to subscribe for those new class A shares by virtue of their pre-emption rights at their respective proportion. While the default pre-emption rights provides a useful tool to shareholders for preserving their ownership proportion in the company, it is never intended to impose an obligation on the existing shareholders to accept the pre-emptive offer nor attempt to allow the existing shareholders to acquire extra shares for free. The truth is that shareholders may only benefit from such anti-dilution mechanism if they are able to fork out additional capital for the additional shares. If an existing shareholder does not have the requisite financial capability to pay for the shares at the proposed price, chooses not to exercise his pre-emption right by waiving it or fails to accept the offer after a specified period of time for acceptance, then the shares would be offered to other parties which would inevitably result in a decrease of the ownership proportion of that shareholder. On the other hand, the law makes it possible for a company to opt out, disapply or alter the default pre-emption rights by amending its constitution. For instance, a company’s constitution may allow for new shares to be issued to potential investors without the need to follow the statutory pre-emption process, subject to the consent of all or a specified proportion of the shareholders being obtained. The constitution may also set out different procedures that have to be followed for the issue of shares. Some founding shareholders may even want to ensure that shares are issued to them or a selected group of persons first rather than to all existing shareholders on a pro-rata basis. In this event, the customised provisions in the constitution and/or the shareholders’ agreement will apply in place of the statutory process. But for those companies without a constitution, the statutory pre-emption rights will apply on the allotment and issue of shares. (b) Contractual pre-emption right to shares In respect of a transfer of shares, it is noteworthy that the CA 2016 is silent on the pre-emption rights on share transfers. The implication is that shareholders would lack the pre-emption protection for transfer of shares if such rights are not provided in the company’s constitution or a shareholders’ agreement. As such, a bespoke constitution and shareholders’ agreement would usually include clauses relating to pre-emption rights which apply on the transfer of shares by an existing shareholder and set out the procedures for a selling shareholder to transfer his shares together with a mechanism or formula for determining the transfer price, despite there is no statutory requirement for a company to give pre-emptive rights to its existing shareholders on share transfers. The objective underlying such pre-emptive right is to help preserve the original shareholder composition and limit the ability of an unknown or unwanted third party to become involved in the company. Another general aim is to give existing shareholders an equal right to benefit from a proportional increased stake in the company through purchasing a selling shareholder’s shares on the same terms as those offered to or by a third party while also preventing any shareholder from unfairly increasing their ownership interest in the company without the knowledge of other shareholders. Some constitutions and shareholders’ agreements may in addition provide for exceptions to the contractual pre-emptive rights on a transfer of shares. A common example is a transfer of shares to an entity or a person related to the selling shareholder, say, its holding company, subsidiary, family member or related company. There is a wide spectrum of possible provisions for pre-emption rights, and it is imperative that the company constitution and/or the shareholders’ agreement is/are properly drafted to reflect the intention and needs of the company and its shareholders. Practical Tips Pre-emption rights undoubtedly constitute a fundamental form of protection for shareholders to protect their interests in a company and are commonly granted to shareholders. Notably, the existence of pre-emptive rights will impact the process by which a company can issue shares or a shareholder can sell shares. Hence, before any new issue of shares or transfer of shares is proposed to be undertaken, it is essential to check the company’s constitution

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Subsidiary vs Affiliated vs Associated Company: A Definitive Guide

Articles / ELP Law

It is very common to find a provision in the contract describing that the company is one of the subsidiaries, affiliated or associated companies of another company. You might be wondering what the terms mean and what are the differences between these terms. This article aims to provide you with a general understanding of the terms. (a) Subsidiary Company A subsidiary company basically is like a child of another company. The parent company retains control and ownership in the subsidiary company in one of the following manners, as prescribed by the Companies Act 2016 (the “Act”): The parent company has control over the composition of the board of directors of the subsidiary company; The parent company controls more than half of the voting power in the subsidiary company; o; The parent company holds more than 50% of ordinary shares in the subsidiary company. In any of the above scenarios, the companies will be deemed to have a parent-subsidiary relationship. (b) Affiliated Company What is considered an affiliate company and how is it different from a subsidiary company? As mentioned above, when a parent company holds more than 50% of ordinary shares in a company, both companies are having a parent-subsidiary relationship. If the parent company holds less than 50% of shares, generally between 20% to 50% of ordinary shares, then the other company will not be its subsidiary company since the prescribed criteria under (a) has not been fulfilled, however, such company will be considered as its affiliated company. The Act does not define exactly the meaning of affiliated company. Hence, it can be defined widely in the contract and is not limited to the scenario of 20% to 50% of shares ownership. It may include the situation where both companies are being controlled by the same persons, either directly or indirectly. (c) Associated Company Similar to an affiliated company, the Act does not define what amount to an associated company. However, this term is defined in different legislation, guidelines and standards as follows: Under Section 15A(2) of Stamp Act 1949, a company is considered “associated” with the other company when it is the beneficial owner of not less than 90% of the issued share capital of the other. For example, if company A owns more than 90% of shares in company B, then company B will be its associated company (as well as being its subsidiary company too). According to Paragraph 5.2 of the Income Tax Guideline (Income Tax (Transfer Pricing) Rules 2012), two companies are associated companies if (i) one of the companies participates directly or indirectly in the management, control or capital of the other company; or (ii) the same persons participate directly or indirectly in the management, control or capital of both companies. For example, company A and company B will be associated companies if both companies are being controlled by Mr. C. According to Malaysian Accounting Standard Board (MASB 12–Investments in Associates), associate company is an enterprise in which the investor has significant influence, and which is neither a subsidiary nor a joint venture of the investor. Significant influence is presumed when there is a 20% or more voting power. For example, if company A owns more than 20% of shares in company B, then company B will be an associated company of company A. Looking at the above, there is no consistency in the definition of an associated company so its definition can equally go very wide in the contract. After reading this article, we trust that you will have a better understanding of the terms. You may further clarify with the company its organisational structure before signing the contract. We strongly encourage you to carry out a background check and due diligence before entering into any legal relationship with anyone. ***** About the author: This article was written by Edwin Lee Yong Cieh, Partner and Wong Shen Ming, 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.

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The New Employment Law Amendments: What Have Been Missed Out? [Part 2]

Articles / Edwin Lee

In Part 1, we discussed the issues of the coverage of the employment law and the status of labour workers. In Part 2, we will address the issue of leaves and discrimination at work. The objective of this article is to help you understand the important issues that have been missed which may impact you directly or indirectly and why they ought to have been included in this round of the employment law amendments. Leaves (a) Paternity Leave The employment law prescribes different types of paid leaves which include sick leave, paid annual leave, maternity leave etc. However, it did not include paternity leave. Under the Amendment Law, it initially introduced 3 days of paternity leave and it was subsequently increased to 7 days after a few rounds of discussions by the MPs. While this is a celebrated move, the MPs also put forward a few suggestions which can be incorporated to enhance the paternity protection: (i) Introduce an Australian concept of Flexible Parental Leave Pay (90 days leave with 30 days working from home leave); (ii) to make the 7 days paid leaves non-consecutively (because not everyone needs to take one whole week off); (iii) introduce longer paternity leave such as 14 days leave practiced by Norway and Sweden; 5 days leave by Myanmar; 10 days leave by South Korea, etc. (iv) introduce a shareable parental leave of up to 30 days. (i.e. mother and father can share and swap depending on their needs and availability). (b) “Cuti Iddah” One MP proposed to include “Cuti Iddah” as a compulsory leave in the Amendment Law. He suggested to provide 30 days of “Cuti Iddah” to female employees who unfortunately lost their husbands. This leave will enable them to better cope with sadness and to manage their emotions due to the passing of their loved ones. If this is the case, female employees will be entitled to two benefits which are maternity leave and “Cuti Iddah”. Some companies in Malaysia do provide in their employment contract at least 3 days bereavement leave in the event an employee’s spouse or other family members pass away, so that the employee can take some time off to settle and manage the funeral process. However, bereavement leave is not offered by all companies because it is not a compulsory leave mandated by law yet. That said, we also take the view that while such leave is good to have, to offer 30 days leave might seem a little unduly long. Workplace Discrimination (a) The definition of “discrimination” Although Section 69F in the Amendment Law empowers the Director General of Labour to investigate disputes regarding discrimination in the workplace, the word “discrimination” itself is not defined at all in the Amendment Law. A clear definition would prevent any form of arbitrary interpretation and give more certainty to implementation and enforcement. The Deputy Minister of Human Resources subsequently indicated that his Ministry is preparing a specific guideline on the definition and elements of discrimination in workplace, which is a laudable approach in our view. Having said that, we also take the view that any important definition should have been properly dealt with in the Amendment Law itself, rather than leaving it to another piece of guidelines or orders, especially we note that a definition of “Discrimination” was actually included in the draft Amendment Law proposed back in 2018. (b) Discrimination on job seekers The protection against discrimination is only relevant for discrimination at work, available for employees who fall under the employment law. Papar MP Haji Ahmad bin Hassan suggested that the discrimination provision should also extend to job seekers as well, since many job seekers encountered certain forms of unfair discrimination by potential employers, such as discriminatory remarks in the form of gender, religion, disability, marital status, pregnancy and language. In fact, this suggestion is in line with the draft amendment that was proposed back in 2018. Since our employment law only governs employment relationship, it covers only employment discrimination and it may be difficult for it to also extend to job seekers as there is no existing employment relationship in the first place. Nevertheless, the Deputy Minister of Human Resources suggested that job seekers who experienced any form of unfair discrimination can choose to lodge a complaint via an app called “Woking for Workers” developed by the Ministry of Human Resources. (c) Wearing Tudung to Work Pasir Mas MP, Ahmad Fadhli bin Shaari suggested that the right of Muslim female employees wearing tudung to work should be protected and if any employer prevents any Muslim female employee from wearing tudung to work, that should constitute an offence under the employment law. This suggestion would not only protect the right of Muslim female employees in honouring their religious practice, but it would also echo the spirit of preventing discrimination at work. However, Sepang MP Mohamed Hanipa bin Maidin said that this right need not be specifically stated in the employment law as the newly inserted provision relating to employment discrimination would cover this issue. (d) The Enforcement Authority The enforcement authority on the issue of discrimination in the workplace is the Director General of Labour. This raises the question of whether the Director General is the most suitable person to deal with this issue. For instance, in the United States, the Equality Employment Opportunity Commission is tasked to handle any issue of workplace discrimination against job seekers and employees in the workplace. In Hong Kong, the Equal Opportunities Commission was established to implement and enforce the anti-discrimination laws. It is interesting to note that back in 2018, the Department of Labour from the Peninsular Malaysia had conducted a comprehensive study on the implementation of Equal Employment Opportunities (EEO) in Malaysia where the said study referred to the practices in several countries such as the United States, the United Kingdom and Singapore. However, we have yet to see any development on this front yet and it is hoped that the Government would implement an EEO to

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Recruiting professionals studying candidate profiles

The New Employment Law Amendments: What Have Been Missed Out? [Part 1]

Articles / Edwin Lee

The employment law of Malaysia (i.e., the Employment Act 1995) has remained unchanged since 2012. It took the Parliament 10 years to eventually propose and pass amendments to the employment law through the Employment (Amendment) Act 2021 (“Amendment Law”). We discussed this long-awaited amendment in our previous article (you can find the article here). In this article, we wish to share what have been missed out during this round of amendments. The issues also refer to the debate between the Members of Parliament as documented in the Parliament’s Hansard dated 21 March 2022 and 30 March 2022. The objective of this article is to help you understand the important issues that have been missed which may impact you directly or indirectly and why they ought to have been included in this round of the employment law amendments. In this Part 1, we discuss the issues of the coverage of the employment law and the status of labour workers. The Coverage of The Employment Law (a) Gig Workers The number of gig workers are on the rise especially during the COVID-19 period. Gig workers mean workers who work on a temporary and on-demand basis. Some examples of gig workers include ride-hailing drivers, food delivery riders, freelancers etc. They are usually independent contractors who do not work on a fixed hours basis nor receive any employment benefits like other permanent basis employees. The increase of gig workers can be attributed to the development of new sharing economy platform model (the gig economy) popularised by the Internet era. Gig economy refers to an on-demand or platform economy consisting of companies that engage contract workers for a temporary period or on a project-basis instead of hiring them for permanent positions. According to Bukit Bendera MP, Wong Hon Wai, he remarked that statistics had shown that Malaysia currently has at least 200,000 registered Grab drivers and at least 13,000 Food Panda riders. Unfortunately, gig workers are not being expressly recognised as “employees” under the original employment law nor the Amendment Law. Without specific legislation governing the hiring of gig workers, gig workers currently are not entitled to the minimum protection under the employment law. Worst still, it may lead to unfair treatment and exploitation from employers. Few MPs have debated strongly that gig workers should also be equally protected under the employment law and treat them like employees where they should receive the same rights and benefits like other employees which include overtime payment, sick leave etc. Although there is a “presumption of employment” under the Amendment Law, it is only relevant when the provisions in the employment law have been breached and there is a need to determine the relationship between the parties. As such, it may not grant any protection to the gig workers in the usual circumstances. The reasons for excluding gig workers from the employment law is because the existing employment law only covers employees hired under a contract of service. Nonetheless, gig workers’ rights and benefits relating to work accidents and diseases are protected under the Self-Employment Social Security Act 2017. It was highlighted in the Parliament that the Ministry of Human Resources is planning to enact a specific law to further safeguard the social welfare and protection of these gig workers. (b) Whether certain protection will apply to all employees The employment law intends to protect employees who earn below RM 2,000 per month whereas employees who earn more than RM 2,000 would be governed by the employment contracts. However, certain protection such as maternity protection and complaint against sexual harassment will apply to all employees regardless of their wages. The Amendment Law removed the general application provisions which caused much confusion as to whether employees who earn more than RM 2,000 will lose their maternity protection and sexual harassment protection. The Deputy Minister of Human Resources however has indicated that his Ministry will issue a Ministerial Order to clarify that certain existing protection under the employment law will be applicable to all employees regardless of their wages. Frankly speaking, such move leaves much to be desired. If the Parliament’s intention was to maintain the existing protection for all employees, then the general application provisions did not have to be removed. Leaving such an important issue at the hands and powers of the Minister may cause more uncertainty in the future. It also means the Minister may alter, revoke or replace such Ministerial Order at his discretion any time he likes. (c) Breastfeeding female employees Although the Amendment Law has given women more rights by granting a longer maternity leave and removing the provisions prohibiting women from doing night shift and underground work, however, the need of breastfeeding female employees was not considered in the Amendment Law. In the absence of an express protection, Kulai MP Teo Nie Ching argued that many female employees may opt to stop breastfeeding their newborn babies. The reason being that it is difficult for them to pump or express their milk in the workplace as there is no private room or available space to store their milk. In the United States, the law has mandated employers to provide female employees with places or allocate appropriate rest time so that female employees can pump their breast milk for their children. In the Philippines, the law mandated that employers to provide 40 minutes for employees to pump their milk every day. In Malaysia, there is no such mandatory provision. The Kulai MP’s suggestion is actually aligned with the Maternity Protection Convention, 2000 (No. 183). Article 10 of the Convention states that breastfeeding mother shall be given one or more daily breaks to breastfeed their children. It is unfortunate that the Parliament did not include such protection in the Amendment Law. (d) Matters Relating to Pre-Employment Referring to the draft amendment issued back in 2018, there was an intention to expand the coverage of the employment law to also include pre-employment matters. This would include job vacancy post, registration of job

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BNM Announces 5 Successful Digital Bank Licence Applicants. What Can We Expect?

Articles / Ashraf Farid

Alas, the long-awaited announcement of the winners of the much-coveted digital banking licence issued by Bank Negara Malaysia (“BNM”), has been released. Among the 29 applications received by BNM, only 5 made the cut. You may be familiar with some of the names behind the successful applicants, which include the likes of people behind popular digital brands such as Grab, Boost, Shopee, Aeon Credit/MoneyLion, and reportedly, the popular credit card comparison site, Ringgit Plus. Read the full BNM announcement here What does this mean for us, and what can we expect? New Players in the Banking Industry. Traditional banking features such as savings and current accounts, prepaid, debit and credit cards, loan and credit facilities, etc. could all be rolled out as additional financial and credit products in the e-wallets we know today, on top of the existing buy-now-pay-later features. Fully Digitalised Banks. A digital bank is a bank that operates entirely, or almost entirely, online. Credit and loan applications will be done fully online, which eliminates the need to be physically present at bank branches. E-KYC will be safer, and more effective as ever. Customer service could become fully 24/7, and the online chat functions could be improved tremendously. There will be no need to fight the heat and wait in long queues. Gone are the days where you would need to take a half-day leave to sort out personal banking matters at a branch nearest to you. Cheaper Fees. With the lower overhead costs incurred by digital banks in the long-run, and to stay competitive, consumers could look forward to lower transaction fees across the board. Greater Accessibility to Financial Products. In the BNM announcement, BNM Governor Tan Sri Nor Shamsiah said, “Digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy — by overcoming geographical barriers, reducing transaction costs and promoting better financial management.” We could see innovative models and variations of the financial products packaged today specially for the underserved or unserved markets. Personalised Features. With the evolution of digital services and advancement in big data analytics, we could see in-app tracking and monitoring of spending habits improve. Of course, only time will tell what these new digital bank players have in store to boost user engagement. Putting all excitement aside, it may take between 12 to 24 months before we can see these features in action as these successful applicants will need to undergo a period of operation readiness that will be audited and validated by BNM before they can commence operations. What other features do you think will there be in the digital banks of the future? Your guess is as good as ours. The traditional banking that we know today will probably still stick around for a while. But one thing is for sure – digital banks will positively disrupt the banking industry. It certainly is exciting times ahead. ***** About the author: This article was written by Neoh Jia Shern, Corporate Associate at LPP Law – a 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.

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11 Practical Ways To Raise Funds For Your Business

Articles / Edwin Lee

Having a new business idea is great but finding a suitable funding source is equally as important, and often challenging. Without the backing of stable investments, a business will not be able to achieve its full potential regardless of how appealing the idea is. This article sets out the funding options that entrepreneurs can consider when starting a business. Bootstrapping Bootstrapping is one of the most common ways to fund a startup as you will be required to run your business using your own funds. This could come from personal savings, credit cards or selling assets such as your car or house to generate cash for the purpose of financing your business. This may seem like an easy way to obtain funds but keep in mind, if your business fails to succeed, you may end up with a substantial amount of debt in hand. Friends and Family Obtaining funds from friends and family is a classic simple option to kickstart a business. Your friends and family are usually supportive and would be willing to help fund your business unlike investors or banks who requires convincing and lots of consideration. However, the downside of this is that there is a risk of relationships being ruined, therefore you should always take steps to prevent this from happening. For example, setting up clear repayment terms and signing an agreement with them. Incubators and Accelerators This became popular in recent years amongst younger entrepreneurs who are seeking funds to start their businesses. These platforms are part communal workspace and part mentorship development centres, where young businesses can get a great start while partnering with some amazing people. Incubators are like a parent to a child, who nurture the business, provide shelter tools, training and network to a business, while accelerators help to run or take a giant leap. However, they are often focused on tech- heavy businesses, so you might struggle to find one that works for your company, if your business is not in the technology space. Winning Contests There has been an increase in the number of contests recently who can help entrepreneurs in fundraising. In order to win these contests, you have to ensure that you have a comprehensive and unique business plan to convince people that your idea is worth investing in. This is very interesting as not only you would be able to gain funds, you will also get some media coverage if you win these contests. Popular contests in Malaysia includes “Young Entrepreneur X Factor”, “MaGIC University Startup Challenge”, “Dream Factory Startup Contests” etc. Get an angel investor on board There has been a rise in online angel investment networks, as well as local investor groups you can pitch in to in person. Angel investors are usually high net worth individuals who provide industry knowledge, financial backing, as well as industry or business experience to early stage start-ups or entrepreneurs, while expecting to share the company’s financial rewards in return. Some of the popular angel investor platforms in Malaysia are Angel Investment Network, Capital, BizAngel and Cradle Fund. Usually, angel investors do not take more than 10-20% equity when investing in a start- up, allowing enough incentives to the business founders. The downside of this method is that they generally offer less financial backing compared to banks and venture capital funds. Venture Capitalist This is somewhat similar to angel investors where they provide funds based on their trust in your ability to create a successful, profitable venture. Often times, venture capitalists support start-up ventures (for an equity stake) or small companies that wish to expand but do not have access to equities markets, as they would be able to earn a massive return if these companies succeed. Of course, in order to convince them to invest in your idea, you will need a business model that stands out from the rest in the market. Popular venture capitalist companies in Malaysia and South East Asia includes NEXEA, RHL Ventures, 500 Start- ups etc. On the other hand, venture capital funds have a short shelf life in nature as they generally seek to recover their investments, obtain profit and move on to the next potential start- up. Government Grants and Loans While this method doesn’t cut a massive check, there are dozens of grants offered by federal and state governments that you can consider. In Malaysia, the government has implemented various financial schemes and incentives to help local startups and enterpreneurs to kick start their business. The main drawback of this method however is the fierce competition, as well as the box- ticking requirements to qualify for such grants. Personal Loans These loans are generally easier to get than a business loan and is suitable for businesses that don’t need a large amount of capital. The advantages of this option are you can retain full equity, can feasibly obtain a large figure, and that you can build your credit. The downside of this method is that personal loans generally have lower financing limits and higher interest rates. You also risk going into bankruptcy if you are unable to pay everything back, including interest. Small Business Loans While most banks do offer loans to small businesses, they tend to be more careful when doing so, ensuring that you have a good credit score. In Malaysia, banks usually grant such loans based on your bank statements, credit history, and other relevant financial information. Although these loans have higher financing limits and lower interest rates compared to personal loans, it can be difficult for business to qualify. Crowdfunding Crowdfunding is a rather new method for businesses to raise funds from individuals that support the projects or companies through small contributions. There are two types of crowdfunding: Reward- Based Crowdfunding and Equity- Based Crowdfunding. Reward- Based Crowdfunding is more similar to consumption rather than investing as the funders may not necessarily obtain back the money invested, instead they will receive certain rewards. Equity Crowdfunding is where people invest in a business

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What Are The Employment Benefits in Malaysia?

Articles / Edwin Lee

Productive and motivated employees are often crucial in ensuring the success of your business or company. Therefore, by offering benefits to your employees on top of salaries and wages, it shows that you care and are invested in not only their work, but their health and well- being. Depending on the type of organization, the job, and the type of employees (Employment Act (EA) Employees/ Non- Employment Act (Non- EA) Employees), employee benefits may be quite different. So, how do you categorize EA and Non- EA Employees? EA Employees are employees with wages not exceeding RM2000 a month or employees with wages over RM2000 a month that are engaged in manual labour; engaged in operation or maintenance of any mechanically propelled vehicle operated; engaged in any capacity in any vessel registered in Malaysia; domestic servants; or supervise or oversee employees engaged in manual labour. EA employees are governed under the Employment Act 1955 and are entitled to all benefits under the Act. On the other hand, Non- EA employees will be governed by the employment contract terms, where employers are mostly free to set their own employment benefits, as long as the employees agree to them in the employment contract. So, what are the employment benefits in Malaysia? Here’s all you need to know. Compulsory employment benefits Annual leave As for EA employees, their number of annual leave depend on the length of service in the company. They are allowed 8 days of annual leave if they have been in the company for a year or more but less than 2 years. For employees who served 2 years or more but less than 5 years, they are allowed 12 days of annual leave, and for 5 years or more, they will be given 16 days of annual leave. However, for Non- EA employees, they will be entitled to the number of leaves stated in the employment contract that they have agreed to. Sick and hospitalisation leave An employee is entitled to sick leave days that are approved by a registered medical practitioner. The number of sick leave provided will also depend on the employees’ length of service in the company. For employees who serve less than 2 years, 14 days are allowed. 18 days and 22 days sick leave will be allowed respectively to those who has been in the company for 2 years or more but less than 5 years, and those who worked for 5 years or more. Where hospitalization is required, EA employees are allowed 60 days of hospitalization leave per year but shall not exceed 60 days in total. On the other hand, for Non- EA employees, they once again have to refer to the agreed employment contract. Maternity leave All female employees are entitled to 98 consecutive days of paid maternity leave according to Section 44A of the Employment Act. An employee is entitled to receive maternity allowance if she has been employed for at least 90 days in aggregate during the 9 months before her confinement AND she was employed at any time in the 4 months immediately before her confinement. A female employee cannot be terminated during maternity leave or for a period of 90 days after her maternity leave. Public holiday In Malaysia, employees should be allowed a minimum of 11 public holidays, 5 of which must include National Day, Official birthday of Yang di- Pertuan Agong, Labour Day, Official birthday of the Yang di- Pertua Negeri of the state where the employee works and Malaysia Day. Where a public holiday falls on a Sunday, the next working day shall be a holiday. If an employee is required to work on a public holiday, he should be paid not less than 3 times his daily pay rate, the same applies to work overtime on the said public holiday. Lay off benefits An EA employee is entitled to receive termination or lay-off benefits employed under a continuous contract of employment for at least 12 months before the retrenchment exercise. Employees are entitled to 10 days’ wages for each year of employment if they have been employed for less than 2 years. If the employees have been employed for 2 years or more but less than 5 years, or 5 years or more, they are allowed 15 days’ wages and 20 days’ wages respectively for each year of employment. On the other hand, for Non- EA employees, they will once again have to rely on their signed employment contract. Optional employment benefits Insurance and medical coverage Many employers in Malaysia offer medical and insurance coverage as benefits. For example, medical insurance for outpatient and inpatient, vision or optical coverage, dental coverage, personal accident insurance coverage etc. Bonuses The way this is expressed varies from company to company. For example, a percentage of annual salary, a number of months of monthly salary etc. Bonuses are normally paid approximately twice to once a year to increase incentives amongst employees and encourage them to achieve their targets. Allowances In some cases, employers provide allowances to employees on top of their regular salary. These allowances can include parking allowance, travel allowance etc. Remote working Recently, providing flexibility to work remotely or from home has been increasingly popular as employers now trust employees to be able to work outside the office, as long as they get their work done efficiently in the specific given time. Professional training and certification Some companies offer professional training or certification for its employees. The professional training or certification mainly focuses on strengthening the employee’s skills so they can be more productive. In conclusion, other than the compulsory benefits set out in the Employment Act 1955, employers are free to provide any additional benefits that they think are most suitable in increasing employee productivity. Employers should always consider providing additional benefits to retain good employees and to attract new employees in joining the company. ***** About the author: This article was written by Edwin Lee Yong Cieh, Partner and Lee Jing, Intern –

What Are The Employment Benefits in Malaysia? Read More »

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