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Australian Journal of Asian Law

Abstract from Volume 10 No 1 (2008)

The Civil Consequences for Breach of the Prohibition against the Giving of Financial Assistance: The Malaysian Approach

Chan Wai Meng, LLB (Hons) (1987) University of Malaya, LLM (1998) University of Malaya, PhD (2007) University of Malaya, is an Advocate and Solicitor of the High Court of Malaya.
Sujata Balan, LLB (Hons) (1996) University of London, LLM (2001) University of Malaya, is an Advocate amd Solicitor of the High Court of Malaya.

The prohibition against the giving of financial assistance by a company to persons who purchase or subscribe to a company’s shares or to those of its holding company has, for a long time, been an important feature of company law. In Malaysia, this prohibition is enacted in s 67(1) of the Companies Act 1965 (Rev 1973) (Act 125). This article focuses on an important question that has arisen in Malaysia in relation to this section, namely, what are the civil consequences of a transaction that breaches the prohibition in s 67(1). Is the transaction valid despite the prohibition, or is it void or voidable? This article explores this question by examining case law and a significant amendment that was made to s 67 in 1992. It also discusses recent proposals that have been made by the Corporate Law Reform Committee of Malaysia to reform and modernise the law on this subject.

(2008) 10(1) Asian Law 77

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