Your Snapshot of Key Legal Developments in Asia
Issue 3 - Jul/Aug/Sep 2019
- MLVT Lifts Ban on Prohibited Work and Occupations for Foreigners
- MLVT Issues Regulation on Minimum Wage for Workers in Textile, Garment and Footwear Industries for 2020
- MOC and MOT Issue Inter-Ministerial Regulation on the Use of Company's Name on Letters, Documents, Signboards and Advertisements
- Cambodia and Malaysia Sign Double Tax Agreement
- 2020 Foreign Employee Quota Application
- Introduction of the Accelerated Board on the Indonesia Stock Exchange
- The Next Step in the Disclosure of Ultimate Beneficial Ownership in Indonesia
- The Indonesian Competition Authority Actively Monitors Past Merger Transactions
- Incentives for the Electric Vehicles Industry
- Indonesia Introduces New Property Regulation
- Laos Updates Regulatory Framework for Commercial Banks
- New Certificate Requirements for Foreign Traders in Laos
- Trademarks Bill 2019 Passed by Parliament
- Apex Court Departed from Its Earlier Decision on How Invalidity of an Independent Claim Affects Validity of Dependent Claims - Merck Sharp & Dohme Corp & Anor v Hovid Bhd
- The Royal Malaysian Customs Department Issues Guide on Digital Services to Clarify Implementation of Service Tax on Imported Digital Services
- Central Bank of Malaysia (Bank Negara Malaysia) Issues Policy Document on Risk Management in Technology to Regulate Technology Risk and Cybersecurity Management by Financial Institutions
- The Companies (Amendment) Bill 2019 Passed in Parliament
- Application of Retail/Wholesale Licence for Existing Trading Companies
- Myanmar Arbitration Centre Launched
- CBM to Allow Foreign Banks to Operate in Myanmar
- Gambling Law Enacted
- Philippines, Singapore Sign MoU on Personal Data Protection
- Insurers Allowed to Undertake Securities Borrowing and Lending
- SEC Circulars Impose Stricter Requirements on Financing Companies and Lending Companies
- Philippines Signs up to be 9th Country in Asia Pacific Economic Cooperation Cross-Border Privacy Rules System
- PCC Streamlines Merger Rules for Solicited PPP Projects
- Court of Appeal Issues First Decision on Share Buybacks
- Tax Treatment and Insolvency Provisions for Variable Capital Companies (VCCs) Formalised
- Laws Passed to Expand Coverage of Reciprocal Arrangements between Singapore and Foreign Countries for Enforcement of Judgments
- Advisory Guidelines on Collection, Use or Disclosure of NRIC Numbers Come into Effect on 1 September 2019
- New International Treaty on Mediation Inked in Singapore
- Clarification of Minimum Capital Requirements for Foreign Companies in Thailand
- New Developments in Competition Law
MLVT Lifts Ban on Prohibited Work and Occupations for Foreigners
On 5 October 2019, the Ministry of Labour and Vocational Training ("MLVT") issued Statement N035/19 ("Statement") reversing a regulation issued in August 2019 ("Prakas N360/19") that prohibited self-employed foreigners from taking on specified jobs. Based on the Statement, due to the demand of the skilled labor force of foreigners in service sectors and to encourage investment in Cambodia, the MLVT has re-allowed foreigners to be self-employed in all types of business.
By way of background, Prakas N360/19 barred foreigners from taking on the following jobs:
- driver of all types of vehicles as a business (two-wheeled drive, three-wheeled drive, motorcycle rickshaw (tuk tuk), all-terrain vehicle, passenger carrying vehicle and goods loading vehicle);
- vendor selling goods in public area either on foot or using all types of vehicles;
- massage service provider in public area;
- barber, hairdresser or beautician;
- sewing service provider or shoes polishing service provider;
- tailor or dressmaker;
- tyre repairer or mechanic;
- producer of Khmer souvenirs;
- producer of Khmer musical instruments, monks' alms bowls or Buddha statues; and
- goldsmith or processor of precious stones.
MLVT Issues Regulation on Minimum Wage for Workers in Textile, Garment and Footwear Industries for 2020
On 20 September 2019, the Ministry of Labour and Vocational Training ("MLVT") issued Prakas N389/19 on Minimum Wage Determination for Workers in Textile, Garment and Footwear Sector for 2020 ("Prakas N389/19"). It will come into effect on 1 January 2020.
Based on Prakas N389/19, the minimum wage of workers in the textile, garment and footwear industries will be US$190 per month. The minimum wage of the workers in the probationary period will be US$185 per month. They will receive the prescribed minimum wage when they successfully complete the probationary period and become regular workers.
Piece-rate workers shall be paid based on the actual piece of work produced, if their current wage is greater than the prescribed minimum wage. However, in the event that their current wage is lower than the prescribed minimum wage, the employers shall add the balance to make it equivalent to the prescribed minimum wage accordingly.
All other monetary benefits enjoyed by the workers remain the same.
Prakas N389/19 states that any stipulation agreed to by the employers and the affected workers that is contrary to it shall be null and void.
MOC and MOT Issue Inter-Ministerial Regulation on the Use of Company's Name on Letters, Documents, Signboards and Advertisements
The Ministry of Commerce ("MOC") and the Ministry of Tourism (MOT) have issued Joint Prakas No. 257 MOC.CRD.PrK dated 12 September 2019 on the use of a company's name on letters, documents, signboards or public advertisements ("Joint Prakas"). According to the Joint Prakas, registered companies and businessmen must only use the company/business names that are registered in the Commercial Register of the MOC in the course of conducting their approved business activities. This includes the use of company names on any letters, documents, signboards and any electronic signs for display or public advertisements in the territory of the Kingdom of Cambodia.
The use of company name must comply with these two requirements:
- the name in Khmer must be displayed above the company name that is written in another language, with a size that is two times larger than that name in another language; and
- any translation of name from one language to another is prohibited. For example, if the original name of a company is in English, the name in Khmer must be written based on the pronunciation of that name, but it cannot be translated from English to Khmer language.
Cambodia and Malaysia Sign Double Tax Agreement
On 3 September 2019, during the official visit of Malaysian Prime Minister Tun Dr. Mahathir Mohamad to Phnom Penh, Malaysia entered into a Double Taxation Agreement ("DTA") with the host country. Under the DTA, double taxation will be avoided in that any tax paid in Cambodia by Malaysian companies in accordance with the DTA will be allowed as a credit against the tax payable in Malaysia on the same income, subject to the tax laws of Malaysia. Similarly, the tax paid in Malaysia for Cambodian companies will be allowed as a deduction from the tax payable on the same income in Cambodia.
2020 Foreign Employee Quota Application
Organisations in Cambodia employing or intending to employ foreign employees in 2020 will be required to apply for a foreign employee quota from the Ministry of Labour and Vocational Training ("MLVT"). MLVT has yet to issue its annual regulation providing for the work permit applications for foreign employees. Despite the absence of such a regulation, MLVT has announced that the application for such a work permit is officially opened to the public and companies can start applying for their 2020 quota from September 2019 onwards.
Cambodia Bans Online Gambling Activities
The Royal Government of Cambodia (RGC) has issued a Circulation dated 18 August 2019 addressing the online gambling activities in Cambodia with the following three key messages:
- Authorities at all levels are ordered to intensify investigations into illegal online gambling operations both inside and outside of Cambodia.
- All existing duly licensed online gambling operators are allowed to operate until the expiration of their licenses. The Government will stop renewing the licenses thereafter.
- The Government will stop granting approvals-in-principle and licenses to operate online gambling businesses from the day of the issuance of a directive to this effect.
Reduction of Cambodian Public Holidays in 2020
The Royal Government of Cambodia (RGC) has announced, through Sub-decree No. 112 SD.P dated 2 August 2019, that public holidays for civil servants and employees in 2020 will be reduced from 28 days to 22 days. The reduction in the number of Cambodian public holidays is expected to enhance work efficiency, increase productivity and guarantee economic competition with the regional neighbours.
Starting from 2020, the Khmer New Year public holidays will be increased from three days to four days, while the public holidays allocated for the religious festival of Meak Bochea, the National Memorial Day, the International Children Day, the Paris Peace Accord Day and the International Human Rights Day will be removed. The public holidays for the King's birthday will be shortened from three days to one day in May. Therefore, in total, six days of public holidays will be removed.
Recent Updates to Chinese Cybersecurity and Data Protection Measures
The Cyberspace Administration of China ("CAC") has released a series of draft measures and regulations pertaining to cybersecurity and data protection in China for public comments. The measures and regulations will impose higher standards of cybersecurity and data protection, and strengthen China's cybersecurity and data protection regime across various sectors and fields of application.
Cybersecurity Review Measures
The draft Cybersecurity Review Measures seek to "improve the degree of security and controllability of Critical Information Infrastructures (CII)" and "maintain national security". To achieve this, CAC will establish a national cybersecurity review unit in conjunction with other regulatory bodies and entities. A cybersecurity review office will also be established to, among other things, develop cybersecurity review-related regulations and procedures.
Data Security Management Measures
The draft Data Security Management Measures ("DSM Measures") set out obligations and actions aimed at "safeguarding national security, public interest, protecting the lawful rights and interests of citizens, legal entities and other organizations in cyberspace". The proposed measures cover the collection, storage, transfer, processing, use of data as well as other activities relating to data carried out on the internet within China.
The DSM Measures would also introduce the concept of a person responsible for data protection, akin to the role of a Data Protection Officer ("DPO") under the Singapore Personal Data Protection Act (PDPA) and the EU General Data Protection Regulation (GDPR).
Regulations on the Protection of Children’s Personal Information Online
The draft Regulations on the Protection of Children's Personal Information Online ("Regulations") are developed for the purposes of "protecting children's personal information security and promoting the healthy development of children." "Children" refers to minors under the age of 14.
Given that children are vulnerable, the Regulations require Network Operators, which include network owners, network managers and internet service providers ("Network Operators"), to have in place dedicated policies and user agreements for the protection of children’s personal information. They must also appoint dedicated DPOs within their organisations to oversee the collection and use of personal data relating to children.
Measures on Security Assessment of the Cross-border Transfer of Personal Information
The draft Measures on Security Assessment of Cross Border Transfer of Personal Information ("PI Measures") require Network Operators to first conduct security assessment prior to transferring personal data collected within the territory of China to another country ("cross-border transfer of personal data"). The PI Measures further stipulate that Network Operators should not carry out cross-border transfer of personal data if the security assessment reveals that such a transfer may endanger national security and compromise public interest. They should not also carry out cross-border transfer of personal data if the security assessment reveals that the transfer does not provide adequate protection for personal data.
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Introduction of the Accelerated Board on the Indonesia Stock Exchange
The Indonesian government recently introduced an Accelerated Board on the Indonesia Stock Exchange ("IDX"), which will cater to market demand to allow start-ups with small or medium-sized assets to have access to the capital markets through the stock exchange. Under the IDX regulation and the Financial Services Authority's regulation on the Accelerated Board, issuers with small or medium-sized assets receive certain leniencies with respect to, among others, asset size, operational activities, and minimum free float.
As a safeguard, the IDX requires the issuer to disclose its controllers, as well as observe a lock-up period of six months from the listing date against the issuer's controlling shareholders. The IDX regulation also allows a company that has been listed on the Accelerated Board to move to the Development Board or the Main Board.
As of the date of publication, the IDX, together with other stakeholders (particularly securities companies), is preparing the trading mechanism and infrastructure to support the Accelerated Board once it is up and running.
The Next Step in the Disclosure of Ultimate Beneficial Ownership in Indonesia
The enactment of the Ministry of Law and Human Rights regulation on disclosure of ultimate beneficial ownership marked another step in Indonesia's move towards a new era of corporate governance reform. Under this new regulation, all companies are now required to disclose their ultimate beneficial owners.
Some argue that the enactment of this regulation signals Indonesia's strong interest and commitment in becoming a full member of the Financial Action Task Force ("FATF"). Indeed, certain provisions in the new regulation closely mimic the recommendations under the FATF Guidance on Transparency and Beneficial Ownership. One such provision is the formulation of ultimate beneficial ownership that focuses on the natural persons who actually own and receive advantage from the company.
However, issues may arise when dealing with a complex ownership structure, as it may be difficult to identify the actual beneficial owner. Furthermore, the regulation also imposes a heavier burden on the notary, as well as the founder and executives of the company, who have an obligation to disclose beneficial owners.
The Indonesian Competition Authority Actively Monitors Past Merger Transactions
In mid-2019, the Indonesian Competition Authority ("KPPU") announced that notifications for 12 acquisitions by eight Indonesian companies were not made within the specified timeframe. This announcement was the result of a systematic scrutiny by the KPPU over notifiable transactions occurring since 2010.
The announcement contained names of large and publicly listed companies. In addition, the value of the 12 transactions mentioned in the announcement varied from IDR 90 million to IDR 2 trillion. The KPPU highlighted that the maximum fine imposed against some business may well be beyond the value of the transactions. Meanwhile, the period of delay of the notification ranged from 11 months to 5 years.
On 1 October 2019, KPPU imposed a record-breaking fine of IDR20.66 billion (approx. US$1.46 million) on PT Citra Prima Sejati ("CPS") for its failure to notify the KPPU of two transactions within the required timeframe. These transactions involved CPS' acquisition of two Indonesian mining companies, PT Buana Minera Harvest and PT Mitra Bisnis Harvest, on 24 December 2013.
As the KPPU is silent on the period during which it would examine a transaction, businesses need to be cautious as it can effectively investigate any transaction that has not complied with the notification requirements since the Indonesian Merger Control Regulations came into effect in 2010, such as the recent investigation and eventual imposition of fine on CPS.
Incentives for the Electric Vehicles Industry
In contemplation of Indonesia's plan to produce electric and hybrid-powered vehicles by 2025, President Jokowi signed the long-awaited electric vehicles regulation in August 2019, which stipulates a number of fiscal and non-fiscal incentives for the electric vehicles industry. Fiscal incentives include import tariff incentives for battery-based electronic vehicles and their supporting machinery and materials, luxury goods sales tax deduction, certification and financing support. Meanwhile, non-fiscal incentives include an exception from road restriction.
Although the regulation will not be in force until the government issues a ministerial-level operative regulation (which must be issued within a year from the enactment of this regulation), these incentives are a positive move towards the right direction in combating pollution in Indonesia.
Indonesia Introduces New Property Regulation
In August 2019, Indonesia repealed two regulations governing the sale and purchase of apartments and houses, and replaced it with one comprehensive regulation.
The new regulation governs not only the marketing of property and execution of a preliminary sale and purchase agreement (Perjanjian Pendahuluan Jual Beli or "PPJB") between a potential buyer and a developer, but also the payment mechanism during the marketing and post-signing period of PPJB.
With regard to the payment mechanism, a prospective buyer may cancel a transaction and receive a full refund from the developer if the developer fails to meet any of the deadlines during the marketing period. This applies even if the failure is not caused by the developer, although in this case, the amount refunded will be deducted by 10% plus any tax payable by the developer. This same refund mechanism applies to the post-signing period of the PPJB, except that the developer has the right to retain either the full payment or 10% of the payment if the failure is caused by the buyer.
Laos Updates Regulatory Framework for Commercial Banks
On 7 June 2019, the revised Law on Commercial Banks No. 56/NA dated 7 December 2018 ("Updated Law") was published on the Laos' official electronic gazette. The Updated Law came into effect 15 days after its publication in the gazette. Banks that are already established in Laos are given two years to implement the new rules contained in the Updated Law, except the requirements on increased minimum registered capital, for which they are given five years to implement.
The key features of the Updated Law include:
- Registered capital – The minimum registered capital for commercial banks has been raised from LAK 100 billion (approx. US$11.5 million) to LAK 500 billion (approx. US$58 million), while the minimum registered capital for Lao branches of foreign commercial banks has been raised from LAK 50 billion (approx. US$5.8 million) to LAK 300 billion (approx. US$34.5 million).
- Appointment and dismissal of executives – The consent of the Bank of the Lao PDR ("BOL") must be obtained before an executive is appointed or dismissed. An "executive" of a commercial bank is defined as a member of the board of directors or its component committees, a member of the directors' council, a department head or a branch head.
- Governance – The Updated Law also clarifies a number of rules relating to governance structures of a bank, including those that relate to the board of directors, its component committees and the director's committee.
- Preventive and remedial measures – In addition to meeting the requirements for maintaining adequate capital which may vary depending on the BOL's determination, there is a new obligation for commercial banks that are deemed important to the stability of the Lao banking system. This obligation requires commercial banks to devise plans for handling financial, economic or other relevant crises. The plans must be in accordance with the BOL policy and must be updated annually.
New Certificate Requirements for Foreign Traders in Laos
On 5 June 2019, the Department of Import and Export of the Ministry of Industry and Commerce ("MIC") issued Decision on Trading Rights of Foreign Traders No. 0623/MOIC ("Decision"). This was published in the official electronic gazette on 12 June 2019 and took effect 15 days after its publication.
The Decision applies to foreign traders that are issued with a Trading Rights Certificate ("Certificate") by the Department of Import and Export of MIC, which allows the holders of such certificates to import or export goods. Foreign traders which are not registered in the country need to apply for a Certificate to be able to import and export goods.
The Certificate requirement has been imposed in addition to existing pre-requisites for importing or exporting goods.
Eligibility to apply for a Certificate
To be eligible to apply for a Certificate, foreign traders must: (i) operate in accordance with the laws of their country of origin; (ii) not have committed an offense, or be involved in criminal proceedings related to trading or financial matters; and (iii) be from a contracting member country of the World Trade Organization.
Documents to submit
An applicant for the Certificate must submit several supporting documents, including a copy of the passport or incorporation certificate from the country of the foreign trader, a document certifying the overseas address of the foreign trader, and criminal record (if any) or a certification that the foreign trader does not have any criminal record.
Once issued, the Certificate is valid for three years and can be renewed.
Trademarks Bill 2019 Passed by Parliament
The Trademarks Bill 2019 ("Bill") was recently passed by the Parliament. The Bill will repeal and replace the current Trade Marks Act 1976 once it comes into force.
The following are some of the key features of the Bill:
- Accession to the Madrid Protocol (the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks) which provides a cost-effective and efficient way for trademark holders to seek protection for their marks in multiple countries through a single filing.
- Multiple-class applications are permissible under the Bill.
- Allowing non-traditional trademarks such as sound, scent, colour and sequence of motions to be registered.
- A trademark application may be refused on absolute grounds and/or relative grounds.
- Recognition of common law rights relating to unregistered marks under the tort of passing-off, as well as marks which contravene copyright and industrial design laws.
- Priority claim will no longer affect filing or registration date.
- Applications and rights to priority can be assigned or transmitted.
- Broader infringement scope.
- Shorter post-registration period for conclusiveness of registrations (reduced from seven to five years).
- Trademark recognised as personal or moveable property.
Apex Court Departed from Its Earlier Decision on How Invalidity of an Independent Claim Affects Validity of Dependent Claims - Merck Sharp & Dohme Corp & Anor v Hovid Bhd
In what is a landmark decision, the Federal Court by a 3:2 majority departed from its previous decision in SKB Shutters Manufacturing Sdn. Bhd v Seng Kong Shutter Industries Sdn. Bhd. & Anor. In essence, the Federal Court held that:
- when an independent claim of a patent is held to be invalid, it does not necessarily follow that all dependent claims which make reference to the invalid independent claim will automatically fail. The validity of each of these dependent claims has to be assessed by the Court separately by examining the evidence adduced by the parties; and
- Section 79A(3), Patents Act 1983 does not preclude amendment of claims of a patent per se but only precludes amendment during legal proceedings. In other words, an amendment application can be made during the proceedings but the Registrar of Patents can record the amendment after the proceedings.
The Royal Malaysian Customs Department Issues Guide on Digital Services to Clarify Implementation of Service Tax on Imported Digital Services
On 20 August 2019, following the enactment of the Service Tax (Amendment) Act 2019, the Royal Malaysian Customs Department ("Customs") issued the Guide on Digital Services ("Guide") in order to further clarify the definition and scope of the terms "digital services", "foreign service provider" and "consumer" in the Service Tax Act 2018 ("STA").
- "Digital services" has been further defined as services to be delivered through information technology medium with minimal or no human intervention from the service provider, which include (but are not limited to) the following:
- Software, applications and video games;
- Music, e-books and films;
- Advertisement and online platforms;
- Search engines and social networks;
- Database and hosting;
- Internet based telecommunications;
- Online trainings; and
- Others such as subscriptions to online newspapers and journals, provisions of other digital content like images, text, information and payment processing services.
Central Bank of Malaysia (Bank Negara Malaysia) Issues Policy Document on Risk Management in Technology to Regulate Technology Risk and Cybersecurity Management by Financial Institutions
With the increasingly prevalent use of technology in the provision of financial services, the Central Bank of Malaysia (Bank Negara Malaysia or "BNM") recognises that there is a need for financial institutions to strengthen their technology resilience against operational disruptions to maintain confidence in the financial system. In order to ensure continuous availability of essential financial services to customers and adequate protection of customer data, on 18 July 2019, BNM issued the Policy Document on Risk Management in Technology ("RMiT Policy Document"). The RMiT Policy Document will come into effect on 1 January 2020.
The RMiT Policy Document prescribes minimum requirements in respect of, among other things: (i) responsibilities of board and senior management of financial institutions; (ii) management of data storage including cloud services; and (iii) outsourcing to third party service providers.
Financial institutions will be required to review their existing policies and outsourcing arrangements in order to ensure compliance with the requirements under the RMiT Policy Document.
The Companies (Amendment) Bill 2019 Passed in Parliament
In July 2019, the Companies (Amendment) Bill 2019 ("Bill") was passed by the Dewan Rakyat (House of Representatives) of the Malaysian Parliament. The Bill has, as at the day of this article, yet to be gazetted. The Bill seeks to make amendments to the Companies Act 2016 ("CA 2016"). Four of the key amendments are highlighted below.
First, the Bill seeks to amend the definitions of "subsidiary" and "holding company" in the CA 2016 by replacing the words "issued share capital" with “total number of issued shares” and to provide that a corporation shall be deemed to be a subsidiary of another corporation if the corporation holds more than half of the total number of shares of the first corporation. However, this shall not include preference shares.
Secondly, the Bill proposes to limit the scope of application of Section 66 of the CA 2016 which sets out the statutory requirements relating to the execution of documents by a company. A new subsection (6) will be introduced to clarify that the statutory methods of execution prescribed in Section 66 will only apply to documents that are required to be executed by any written law, resolution, agreement or constitution. An employee authorised by a company is therefore not required to execute documents such as letters, invoices and contracts that do not fall under the new definition of documents in accordance with Section 66.
Thirdly, Section 340(1)(c) of the CA 2016 will be amended to provide that the appointment and the fixing of the remuneration of auditors shall be transacted at every annual general meeting (AGM) of a public company. This amendment also removes the requirement for the fee of directors of a public company to be included in the agenda, except for public and listed companies in certain cases, as provided for in Section 230(1).
Lastly, the Bill aims to reinstate the powers of the court to require a plaintiff company to give sufficient security for costs, via the introduction of a new Section 580A. Similar to Section 351 of the repealed Companies Act 1965, the court will also be empowered to direct the costs of any action or proceedings to be borne by the party to the action or proceedings.
These proposed amendments seeking to redefine, clarify and reintroduce statutory requirements forms the CA 2016's first substantial amendments since its coming into force. This represents regulators' initiatives to understand the practical applications of the legislation and to ultimately achieve effective governance.
Updates on the Proposed Amendments to the Personal Data Protection Act 2010
In March 2019, the Malaysian Communications and Multimedia Minister, Minister Gobind Singh Deo, announced that the Communications and Multimedia Ministry, through the Personal Data Protection Department, is in the midst of reviewing the Personal Data Protection Act 2010 ("PDPA") to ensure that it is up-to-date and in line with the latest developments in the global data protection landscape.
In particular, the Ministry is looking to align the PDPA with new regulations on data protection introduced globally, in particular the European Union General Data Protection Regulation ("GDPR").
Pursuant to this, the Personal Data Protection Department has recently organised and conducted a workshop discussion with stakeholders from various industries which are likely to be impacted by the amendments to the PDPA, in order to obtain their comments and feedback on the proposed amendments to the PDPA. It is envisaged that the Personal Data Protection Department will be working towards preparing a list of proposed amendments to the existing PDPA for the approval of the Minister no later than the end of 2019.
Application of Retail/Wholesale Licence for Existing Trading Companies
Trading in Myanmar has long been restricted for foreign companies in Myanmar. It was liberalised only in 2017 when the Ministry of Commerce ("MOC") permitted 100% foreign-owned companies and foreign-Myanmar Joint Venture Companies ("JV Companies") to undertake the importation and sale of a select group of goods, which include fertiliser, seeds, pesticides, hospital equipment, construction materials and agricultural equipment ("Selected Goods").
Following this, MOC issued Notification No. 25/2018 to further liberalise trading by allowing foreign companies and JV Companies to undertake trading of goods, provided they apply for and are granted wholesale and/or retail licence in Myanmar. The notification categorises existing trading companies operating in Myanmar into three types:
- established foreign companies or JV Companies already operating in Myanmar that wish to register as wholesalers or retailers but do not currently have the right to sell goods wholesale or at retail;
- established foreign companies or JV Companies that are currently permitted to conduct wholesale or retail business via a Ministry of Investment Commission (MIC) Approval, or to undertake trading of the Selected Goods; and
- domestic companies undertaking wholesale or retail business.
The notification stipulates that foreign companies or JV Companies with less than 20% Myanmar shareholding that wish to apply for the relevant license must satisfy the following initial investment capital requirements:
- US$5 million – wholesale license
- US$3 million – retail license
- US$8 million – both wholesale and retail licenses
As for foreign companies or JV Companies with 20% or more Myanmar shareholding, the initial investment capital requirements are as follows:
- US$2 million – wholesale license
- US$0.7 million – retail license
- US$2.7 million – both wholesale and retail licenses
A fully Myanmar-owned company does not have to meet any initial investment capital requirements for license applications.
Foreign companies and JV Companies were given until 18 August 2019 to apply for a retail and/or wholesale licence for the Selected Goods. Pursuant to News Letter No. 6/2019 of the MOC, the importation and sale of the Selected Goods are not allowed if the importer or seller does not hold a retail or wholesale licence. Foreign companies and JV Companies engaged in the business of trading the Selected Goods must ensure that they apply for the requisite license and inject the required minimum investment capital set out in the MOC Notification 25/2018.
Myanmar Arbitration Centre Launched
On 3 August 2019, the Union of Myanmar Federation of Chambers of Commerce and Industry ("UMFCCI") launched the Myanmar Arbitration Centre ("MAC"). The MAC is the central seat for arbitration disputes in Myanmar in accordance with the Myanmar Arbitration Law 2016.
The establishment of the MAC advances the UMFCCI's involvement in resolving commercial disputes in Myanmar, which was previously done only through mediation.
CBM to Allow Foreign Banks to Operate in Myanmar
The Central Bank of Myanmar ("CBM") has been planning to issue banking licences to selected foreign banks with an aim to developing Myanmar's banking sector and facilitating the State's economic development. In August 2019, the Foreign Bank Selection Body of CBM selected an advisory firm to act as its consultant for the selection process of foreign banks which will be allowed to operate in Myanmar. CBM is expected to issue directives and guidelines on the application for a foreign banking license.
Gambling Law Enacted
On 7 May 2019, the Pyidaungsu Hluttaw (Myanmar Parliament) enacted the much-anticipated Gambling Law. The enactment of the Gambling Law generated interests among investors seeking to invest in the casino business. Unlike the Gambling Act which has since been repealed, Section 23 of the Gambling Law authorises the Government to screen the business entities applying to operate casinos in Myanmar with reference to certain requirements, such as foreign investment ratios, compliance requirements and approvals and capital requirements. These requirements will be set out in the form of notifications or operational rules to be issued under the Gambling Law.
The Gambling Law still prohibits and restricts other forms of gambling that are not approved by the Government, including the establishment and operation of a Gambling-house, defined as a house, building, compound, enclosure, garden, room or vehicle where gambling takes place. It also prohibits unlicensed lotteries and other similar games.
Philippines, Singapore Sign MoU on Personal Data Protection
On 9 September 2019, the Philippine National Privacy Commission ("NPC") and the Singapore Personal Data Protection Commission ("PDPC") signed a Memorandum of Understanding ("MOU"), which provides for the areas of mutual exchange of information and assistance to facilitate cross-border data flows, such as participation in the APEC CBPR and the ASEAN Cross-Border Data Flows Mechanism.
With the signing of the MOU, the Philippines and Singapore envision exchanges of information and best practices to foster innovation. Both countries will also work on mutual assistance in data privacy enforcement. NPC recognises this as a reaffirmation of both the Philippines' and Singapore’s recognition of the importance of data governance and cross-border data flows to global trade in a digital economy.
Notably, this is the first data protection-related MOU between Singapore PDPC and an ASEAN data protection authority.
Insurers Allowed to Undertake Securities Borrowing and Lending
On 4 September 2019, the Insurance Commission ("IC") issued Circular Letter 2019-45 ("CL 2019-45"), superseding Circular Letter 2014-31 which was issued by IC on 8 July 2014. CL 2019-45 allows insurance/reinsurance companies and mutual benefit associations to participate in securities borrowing and lending ("SBL") transactions as lenders, subject to certain requirements and guidelines which include limiting the borrowing period to a maximum of two years from the receipt of the SBL Confirmation Notice, providing a list of acceptable collaterals and prescribing methods on how to value the securities or collateral used. Any Master Securities Lending Agreement arising out of the SBL transaction also requires authorisation from IC and must be registered with the Bureau of Internal Revenue.
SBL enables short selling, whereby investors borrow shares, which they perceive to be overvalued, from the SBL to sell them, with an aim to buying them back at a lower price to replace the borrowed share. Short selling was first allowed in the Philippines by the Philippine Stock Exchange ("PSE") in 2018, and the Securities and Exchange Commission approved the PSE's Short-Selling Guidelines not long after. Prior to this, short selling was prohibited and penalised.
SEC Circulars Impose Stricter Requirements on Financing Companies and Lending Companies
The Securities and Exchange Commission ("SEC") recently issued two Memorandum Circulars that introduce stricter requirements for financing companies and lending companies. Earlier this year, SEC sought public feedback on drafts of these Circulars concerning unfair debt collection practices, following numerous complaints against financing and lending companies and their third-party service providers, for allegedly harassing borrowers and employing abusive, unethical, and unfair means to collect debts.
Taking into account comments from the public, SEC issued on 20 August 2019 Memorandum Circular No. 18, series of 2019 ("MC 18-2019") which prohibits unfair collection practices by financing and lending companies. MC 18-2019 provides a list of unfair collection practices, prescribes penalties for violations, and requires strict confidentiality of a borrower's personal data.
In addition, SEC issued on 18 September 2019 Memorandum Circular No. 19, series of 2019 ("MC 19-2019") which prescribes the disclosure requirements for advertisements of financing and lending companies, and reporting of online lending platforms. In response to inquiries posed to SEC regarding the registration and legitimacy of financing and lending companies, SEC issued MC 19-2019 to provide for registration of business names of financing and lending companies. There are penalties for any violation of the Circular.
Philippines Signs up to be 9th Country in Asia Pacific Economic Cooperation Cross-Border Privacy Rules System
In August 2019, the Philippines submitted a letter of intent to be the ninth participating country in the Asia Pacific Economic Cooperation Cross-Border Privacy Rules ("APEC CBPR") System, which is a voluntary certification mechanism that allows for the safe transfer of data by companies within the Member States’ economies. The APEC CBPR System reduces compliance costs for businesses by removing the need to comply with diverse domestic requirements. According to Privacy Commissioner Raymund E. Liboro, there is a three-month gestation period following the Philippines’ application to join the APEC CBPR System, and the Philippines hopes to become a member of the APEC CBPR this year.
The APEC CBPR System uses appropriately qualified Accountability Agents that have been recognised by participating economies to certify that participating organisations' privacy policies and practices comply with the APEC CBPR System requirements. Accountability Agents (public or private) are also responsible for ensuring that any non-compliance is remedied in a timely fashion and, in appropriate cases, reported to the relevant enforcement authorities.
At present, there are eight participating economies: USA, Mexico, Japan, Canada, Singapore, Republic of Korea, Australia and Chinese Taipei.
PCC Streamlines Merger Rules for Solicited PPP Projects
Pursuant to the Memorandum of Agreement signed between the Philippine Competition Commission ("PCC") and the Public-Private Partnership ("PPP") Center in July 2018, PCC issued Memorandum Circular No. 19-001 ("Circular") which details the procedure for securing a Certificate of Project Exemption ("CPE"). This effectively allows prospective bidders to meet the requirements of both the Philippine Competition Act and the Build-Operate-Transfer Law in a streamlined process. The Circular, which outlines the procedure for PCC's review of the PPP project and the grant of the CPE, provides for a streamlined process and enables PCC to establish the necessary competition safeguards early on, leading to less delays in the projects. The Circular took effect on 16 August 2019.
Previously, joint ventures formed by prospective bidders that met the thresholds under the Philippine Competition Act had to first obtain the approval of the PPP Center and, thereafter, notify and undergo full merger review by PCC.
Under the Circular, government agencies and instrumentalities may seek an exemption from the compulsory notification requirement on behalf of the prospective bidders in respect of a solicited project by filing an application for a CPE with PCC. However, PCC will still review the nature and scope of the project, the bidding design and process, and any competition concerns that may arise from the nature or composition of prospective bidders and the proponent of the project. While this review is ongoing, the relevant government agency or instrumentality and the PPP Center are required to continue processing the PPP project.
Court of Appeal Issues First Decision on Share Buybacks
The Companies Act is known to prohibit a company from providing financial assistance to an acquirer of its own shares. More fundamentally, it also prohibits a company from directly or indirectly acquiring its own shares. In The Enterprise Fund III Ltd v OUE Lippo Healthcare Ltd  SGCA 48, the Singapore Court of Appeal had the opportunity to issue its first judgment on the prohibition against a company acquiring its own shares. In particular, the Court examined the statutory scope of an indirect acquisition of a company's own shares, as well as the operation of the relevant saving provisions.
The case involved a multi-part transaction by which the Appellants made funds available to the Respondent for the acquisition of the Respondent's own shares. Here, the Court of Appeal found the transaction to be void, save for one part of the transaction that fell within the saving provisions. As a result, the Respondent was held to bear no contractual obligation or liability to the Appellants with respect to the transaction.
Notably, the Court held that:
- Where a series of steps have been taken to effect a company’s acquisition of its own shares, even the parts of a transaction that are not the final or most proximate step might nonetheless be caught by the prohibition if they were sufficiently proximate to the intended outcome of self-acquisition; and
- A transaction in breach of this prohibition is void, unless it is in respect of the disposition of book-entry securities, which entails a change in the legal title to the shares or securities concerned.
Tax Treatment and Insolvency Provisions for Variable Capital Companies (VCCs) Formalised
On 3 September 2019, the Variable Capital Companies (Miscellaneous Amendments) Bill ("Bill") was passed in Parliament. The Bill was introduced in Parliament on 5 August 2019. The Bill has yet to come into force.
The Bill sets out, among other things, provisions relating to the tax treatment for and the receivership and insolvency regime applicable to variable capital companies ("VCCs").
The Variable Capital Companies Act 2018 ("VCC Act") was passed in Parliament on 1 October 2018. The VCC Act has yet to come into force. The VCC Act sets out a new legal framework for a VCC, which has features tailored for investment funds. These features include the ability to pay dividends using profit or capital. The shareholders of a VCC are the fund investors. A VCC must be managed by a fund manager that is regulated by the Monetary Authority of Singapore (MAS). In addition to being set up as a single standalone fund, a VCC may also take the form of an umbrella VCC structure. This enables a VCC to combine the advantage of a single legal entity at the umbrella VCC fund level, with segregation of assets and liabilities at the sub-fund level. We understand that the VCC framework is expected to be in effect at the end of 2019.
Tax treatment for VCCs
The Bill will amend the Income Tax Act, the Goods and Services Tax Act and the Stamp Duties Act to provide for the tax treatment for VCCs. Key features of the tax treatment are as follows:
- Corporate Income Tax treatment – A VCC will be treated as a company for Corporate Income Tax purposes. An umbrella VCC will only be required to file a single Corporate Income Tax return with the Inland Revenue Authority of Singapore, regardless of the number of sub-funds it has. Deductions and allowances for expenses incurred by an umbrella VCC will be applied at the sub-fund level to determine the sub-fund's chargeable income. An umbrella VCC will also be eligible for fund management tax incentives under sections 13R (Singapore Resident Fund Scheme) and 13X (Enhanced Tier Fund Scheme) of the Income Tax Act. Further, where applicable, an umbrella VCC may enjoy the start-up or partial tax exemption regardless of the number of sub-funds it has.
- Goods and services tax ("GST") treatment – GST will be applicable at the sub-fund level. GST accounting and registration have to be done separately by each sub-fund that is liable for GST registration because each sub-fund makes independent sale and purchase decisions based on its respective investment mandate.
- Stamp duty treatment – Stamp duty is levied at the sub-fund level because each sub-fund may enter into contracts relating to the transfer of immovable property and shares. For example, stamp duty will be levied on an instrument that transfers the interest in property and shares between sub-funds.
Receivership and Insolvency provisions for VCCs
The VCC Act contains provisions on the receivership and winding up of VCCs and their sub-funds. These provisions are adapted from the Companies Act ("CA"). The Insolvency, Restructuring and Dissolution Act 2018 ("IRDA"), which has been passed by Parliament but has yet to come into force, will consolidate all personal and corporate insolvency and debt structuring laws under one statute. When the IRDA comes into force, the insolvency provisions of the CA will be repealed. The Bill will amend the VCC Act so that the insolvency framework for VCCs and their sub-funds will make reference to the relevant provisions of the IRDA instead of the CA.
Laws Passed to Expand Coverage of Reciprocal Arrangements between Singapore and Foreign Countries for Enforcement of Judgments
On 5 August 2019, Parliament introduced two Bills relating to the reciprocal enforcement of judgments between Singapore and foreign countries. On 2 September 2019, the Bills were passed in Parliament, becoming the Reciprocal Enforcement of Foreign Judgments (Amendment) Act ("REFJA Amendment Act") and the Reciprocal Enforcement of Commonwealth Judgments (Repeal) Act ("RECJA Repeal Act"). The REFJCA Amendment Act has since come into operation on 3 October 2019. The main development brought about by the REFJA Amendment Act is that the scope of judgments that may be covered by reciprocal arrangements between Singapore and foreign countries will be expanded. Previously, the reciprocal enforcement regime only covered final money judgments given by superior courts in civil proceedings, as well as final judgments given by superior courts in criminal proceedings for the payment of damages or compensation to an injured party.
Under the new framework, four other types of judgments will be added to the list of judgments enforceable by reciprocal arrangement:
- Non-money judgments such as freezing orders, injunctions and orders for specific performance;
- Lower court judgments;
- Interlocutory judgments; and
- Judicial settlements, consent judgments and consent orders.
To consolidate the reciprocal enforcement regime, the REFJA and the RECJA will be combined under one statute. The reciprocating Commonwealth countries under the RECJA will be transferred to the REFJA, and the RECJA Repeal Act will then repeal the RECJA when it comes into force.
For more information, click here to read our Legal Update.
Advisory Guidelines on Collection, Use or Disclosure of NRIC Numbers Come into Effect on 1 September 2019
The Advisory Guidelines on the Personal Data Protection Act for NRIC and other National Identification Numbers ("Advisory Guidelines") issued by the Personal Data Protection Commission (PDPC) came into effect on 1 September 2019 and are now in full force and effect. Under the Advisory Guidelines, organisations are generally not allowed to collect, use or disclose National Registration Identity Card ("NRIC") numbers (or copies of NRIC), unless the collection, use or disclosure of such NRIC numbers (or copies of NRIC) is required under the law or necessary to accurately establish or verify the identities of the individuals to a high degree of fidelity.
The Advisory Guidelines do not apply to the collection, use and disclosure of NRIC numbers (or copies of NRIC), including the retention of physical NRICs by a public agency or an organisation that is acting on behalf of a public agency.
The Advisory Guidelines also set out alternative identifiers that organisations may consider adopting to establish or verify the identities of Individuals.
For more information, click here to read our Legal Update.
New International Treaty on Mediation Inked in Singapore
On 7 August 2019, 46 States signed a new international arbitration treaty on mediation that will enable cross-border enforcement of mediated settlement agreements amongst the signatory countries. It provides businesses an option to resolve cross-border disputes, in addition to litigation and arbitration.
The United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention on Mediation ("Convention"), was adopted by consensus at the UN General Assembly on 20 December 2018 which also authorised the signing of the Convention in Singapore on 7 August 2019. Singapore was the first signatory of the Convention.
The Convention, the first UN treaty to be named after Singapore, applies to international commercial settlement agreements resulting from mediation. It will not apply to international settlement agreements that are concluded in the course of judicial or arbitral proceedings and which are enforceable as a court judgment or arbitral award. In addition, it will not also apply to settlement agreements concluded for personal, family or household purposes by one of the parties (a consumer), as well as settlement agreements relating to family, inheritance or employment law.
Clarification of Minimum Capital Requirements for Foreign Companies in Thailand
On 28 August 2019, a new ministerial regulation clarifying the provisions regarding the minimum capital requirements set out in the Foreign Business Act B.E. 2542 (1999) ("FBA") took effect. Specifically, the ministerial regulation clarifies the minimum capital required of companies that intend to avail themselves of the privileges provided for in treaties and agreements such as the US-Thai Treaty of Amity and Economic Relations.
Companies which are established in Thailand that avail themselves of the privileges under the treaties and agreements must meet the applicable minimum capital requirements by 29 August 2029, regardless of whether they have commenced their businesses before or after 29 August 2019.
The ministerial regulation repealed and replaced previous regulations relating to the minimum capital requirements for foreign companies, and consolidated these requirements into one law. The provisions in the regulation that apply to companies which do not avail themselves of the privileges set out in the treaties or agreements remain unchanged.
- THB 2 million minimum capital – applicable to a foreign company that is not conducting a restricted business under the FBA. The minimum capital must be fully paid up before the commencement of business operations.
- THB 3 million minimum capital or 25% of the average estimated expenses for three years of operations, whichever is higher – applicable to a foreign company which is subject to the FBA restrictions. The minimum capital must be fully paid up within three years after the license to operate business is granted.
New Developments in Competition Law
Thailand's Trade Competition Commission ("Commission") continues to publish new guidelines and regulations to implement the Trade Competition Act ("TCA"). A snapshot of some of the latest developments are set out below.
- On 19 August 2019, the Office of the Trade Competition Commission ("OTCC") published a draft Notification of the Trade Competition Commission Re: Guideline for Consideration of Unfair Trade Practices in Franchising Business B.E. ("Draft Notification") for public consultation. The Draft Notification provides, among others, the definitions of "Franchise", 'Franchisor", and "Franchisee", the obligations of the Franchisor, as well as the factors to be considered in determining whether a franchisor's trade practices may cause damage to its franchisees. The Draft Notification was open for public consultation from 19 August to 20 September 2019.
- On 23 July 2019, OTCC published the Notification of the Trade Competition Commission Re: Criteria, Procedures and Conditions for Imposing the Settlement Fine B.E. 2562 (2019) ("2019 Notification") to repeal and replace the Notification of the Trade Competition Commission Re: Criteria, Procedures and Conditions for Imposing the Settlement Fine B.E. 2561 (2018). The 2019 Notification provides that the competent officials may not enter into a settlement of a case relating to the violation of the TCA where it appears that the offender repeatedly committed such an offense (i.e. more than three times), or the commission of such an offense effectively affected free and fair competition.
- On 19 July 2019, OTCC published the Notification of the Trade Competition Commission Re: Guidelines for Determining Unfair Trade Practices between Wholesale/Retail Business Operators and Manufacturers or Distributors B.E. 2562 (2019). The notification sets out the criteria for determining trade practices of wholesale/retail business operators which could constitute conduct unfairly resulting in damage to other business operators, specifically to manufacturers and distributors.
Amendments to the Law on Insurance Business
In June 2019, the National Assembly enacted Law No. 42 to amend certain provisions of the existing Law on Insurance Business.
The most notable amendment, which will come into effect from November 2020, is the introduction of regulations to govern auxiliary insurance services (e.g. insurance consultancy, claims settlement, actuarial services). Until this amendment comes into force, these auxiliary insurance services remain unregulated in Vietnam. The existing Law on Insurance Business primarily governs insurers and insurance agents/brokers, as opposed to the auxiliary insurance service providers.
The requirements to be imposed on such providers under Law No. 42 remain relatively general, and no specific licensing processes have been prescribed. However, once Law No. 42 comes into operation, it is possible that it may be supplemented by further government guidance or specifications in the form of decrees.
Proposed New FiT for Solar Projects in Vietnam
In September 2019, the Ministry of Industry and Trade of Vietnam submitted to the Prime Minister and Office of Government the final draft of the Prime Minister's decision on the mechanism for encouraging the development of solar power projects in Vietnam ("Final Draft"). The Final Draft sets out the proposed feed-in-tariff ("FiT") rates which would be applied for solar projects until 31 December 2021.
Under the most recent FiT regime which was in place from 1 June 2017 to 30 June 2019, a FiT of US$0.935 per kWh was applied across the board for all types of solar projects (i.e. floating, ground-mounted and rooftop). The attractive FiT saw an influx in investment in solar energy in Vietnam over the past two years. With that regime having lapsed, there has been considerable interest in the FiT that would be applied going forward.
Based on the Final Draft, the following FiT would apply (save for select provinces): US$0.709 per kWh for ground-mounted solar projects, US$0.769 per kWh for floating solar projects and US$0.935 per kWh for rooftop solar projects. The latest proposal is for the FiT for rooftop solar projects to retain the same rate.
Law on Anti-Corruption and Implementing Regulations
On 1 July 2019, Vietnam's new Law on Anti-Corruption came into effect. Shortly thereafter, its implementing decree also came into force. Unlike its predecessor (which generally only covered the public sector and state-owned companies), the law also regulates certain non-state organisations, including credit institutions and public companies.
A key introduction made in the law is the requirement for these non-state organisations to now have in place internal mechanisms (e.g., corporate policies) to handle corruption-related issues within their organisations. Furthermore, these organisations will be subject to Government audits from time to time to determine if they are compliant with the anti-corruption regulations.
However, no specific penalties have been enacted for non-compliance with these requirements, and the law has left the implementation of these requirements to be subject to self-governing by the organisations.
Further, the law does not – at least at this stage – impose any specific administrative or criminal penalties on private organisations that are not within the scope of the term “non-state organisations” listed in the law.