9 July, 2016
Amendment to the Gas Supply Act 1993
On 14 June 2016, Senate passed the Gas Supply (Amendment) Bill 2016. The key change to the law is the introduction of the third party access framework, where third parties will be allowed to bring in liquefied natural gas into Malaysia. It has been a long standing criticism that the gas industry has been monopolized by two industry players who are Gas Malaysia Berhad, the only entity that is licensed by the Energy Commission under the Gas Supply Act 1993 to supply and sell reticulated natural gas in Malaysia, and Petronas Gas Berhad, the owner and operator of transmission pipelines and regasification terminals in Peninsular Malaysia. The introduction of the third party access framework is set to enhance competition in the natural gas supply industry. The 2016 Bill also introduces a new Part VIA (General Competition Practices) and a Gas Competition Appeal Tribunal to regulate competition practices in the natural gas supply industry. For example, the 2016 Bill introduces a prohibition of any horizontal or vertical agreement which has the object or effect of significantly preventing, restricting or distorting competition in the market.
This brings clarity on the applicability of competition law to the gas industry, and is in line with the provisions of the Competition Act 2010 ("CA 2010"). The status of the industry was previously unclear given that only activities under the Petroleum Development Act 1974 were expressly excluded from the provisions of the CA 2010.
The 2016 Bill also introduces new licenses which requires the approval of the relevant Minister in the Prime Minister’s Department ("Minister") and new licenses which the Energy Commission ("EC") is authorised to grant without first obtaining the Minister's approval. Under the 2016 Bill, the Minister's approval is required for licenses involving high cost infrastructure such as regasification terminals, transmission and distribution pipelines where else the EC will be authorised to issue licenses for activities such as the importation of natural gas into regasification terminals, shipping, retail and the use of natural gas. The explanatory note to the 2016 Bill states licenses issued by the EC only without the requirement of the Minister's approval, are so because these licenses do not involve high cost of asset and are large in number as well as renewable on an annual basis.
However, the 2016 Bill has also been criticized for being anti-competitive as it introduces Clause 11B(2) which empowers the Minister to designate a person to be granted a transportation license with monopoly status for a specific area of gas supply to ensure efficient market operation.
Companies Bill 2015
Malaysia's Parliament has recently passed the Companies Bill 2015, and the bill is now awaiting royal assent. Upon entering into force, the Companies Bill will replace the Companies Act 1965. Some of the key changes to the legal framework of company law in Malaysia introduced through the Companies Bill are:
- the introduction unlimited capacity for companies, as companies will no longer be required to specify object clauses in its memorandum of association;
- no requirement for memoranda and articles of associations, although companies may still opt to adopt a constitution;
- the migration to a no-par value regime for shares;
- the introduction of an alternative procedure for capital reduction based on a solvency test;
- in respect of share buy-backs, the introduction of (1) a solvency test and (2) confirmation that the automatic cancellation of shares under a share buy-back will not be deemed a reduction of capital;
- liberalisation of the prohibition against financial assistance through the introduction of a whitewash procedure;
- the removal of the requirement for private companies to have annual general meetings;
- the increase in sanctions/penalties for failure of directors to meet the standards of directors’ duties and responsibilities;
- a change in the minimum numbers of director for a private company and a public company. The new regime provides that a private company only requires a minimum of one director while a public company must still have a minimum of two directors.
The new regime does retain the requirement for the minimum number of directors to be ordinarily resident in Malaysia; and
the introduction of a corporate voluntary arrangement and judicial management scheme.
For further information, please contact:
Eng Beng SC, Partner, Rajah & Tann
eng.beng.lee@rajahtann.com
