January 27, 2010

Independent Director and Audit Committee Board Member

This is not a how-to guide or a detail explanation of a duty of an independent director or an audit committee member in a listed company. This is more of a rant of a member of an audit committee with the recent amendments to the listing requirements of Bursa Malaysia (not sure is this allowed or not but this is just a personal opinion)

I have been an audit committee member of a public listed company since 2006 in which I was given the task to be an independent non-executive member of the Board of Director. An independent non-executive Board of Director member is someone who is independent of the management of the company and is not holding any post at all in the company. Among them, it is also required for at least one of them to be competent in accountancy and one of the next best thing is a lawyer (which I am). So, there you have it, at the moment I was appointed I was actually over my head.

If you know my full name, and if you ever google it (I did!), you will find which company. It may seems like a big deal but let me tell you that in term of fiduciary rewards, it is not. You will  only get some allowance south of RM3,000 if you are lucky and maybe lesser if you not so lucky. I remembered the gossips that all of us had when I attended the compulsory course I had to attend conducted by Bursa Malaysia (the Malaysian stock exchange) when we were to be appointed to the Board. Most of us felt we are not paid enough with the responsibilities that we carry. And one of those in attendance in that course was a former Federal Court judge!

That is what most of us are lamenting about nowadays when we hear that an audit committee  member can be found at fault if they did not disclose any indiscretion or anything which will devalue the share of a company especially those dubious investments company can sometimes make. It means that we are supposed to know everything the company do as if we are the management. It also require us to have communications with the employees as if we mingle with them every other day. They have just launch a whistle blowing policy in Malaysia due to a few corporate scandals which have been happening all over Malaysia. We are to reprimand the management and also to report any mismanagement to the authorities which can be Bursa or the Securities Commission. Not so easy if we are to have nothing to do with management isn't it?

Yes, we can question the Board of Directors (those in management) when we have the meeting but being entrepreneurs, we can't actually stifle them can we? If they want to invest in something, I usually try to question the viability of the project and sometimes, at the risk of sounding trying too hard ( which I don't really care as long as I discharge my duty), I do step on a few management toes. But, I do give a caveat in a form of the trust that I have in the founder of the company which had actually founded the company in the 70s himself. He did dabble in politics but that seems to be going downhill after March 8, 2008, which makes him concentrate on his company again.

As much as I like to rant, being an investor myself, I am actually someone who believe in what the authorities are doing (in contrast with the politicians). As much as I hate being on a tight leash as an independent director and an audit committee member, I understand the rationale of it and is all for it. That is why sometimes, as much as I love the idea of entrepreneurship as the next entrepreneur, when you raise money from the public for your listed company, you need to know you are already in a different ball game...

January 23, 2010

Real Property Gain Tax amendment finally out

Buying for investment? Factor in RPGT too

Of course the government has announced it month ago and seems to have imposed it immediately when New Year comes. There were two announcements made with regards to Real Property Gain Tax in 2009 which basically announced the resurrection of the dormant RPGT, as it is widely known, after it was put to sleep in April 2007. Everyone was happy when it was announced in 2007 that Malaysian who sold off their properties is not subjected to any more tax. As Malaysians do not have to declare any of their assets in their income tax (except for companies and individual who wants to get the benefit of paying interest to finance the purchase of their properties), within April 2007 until December 2009, Malaysia got away with the full profit of selling and making a profit of any house they owned.

Then in Budget 2010, the Prime Minister announced the return of the dreaded RPGT. Everyone was surprised of its severity as ANY transaction will be subject to RPGT. Which means that anyone selling his or her property, if they make a profit, they will have to pay a flat tax of 5%. Which means that, if you make a profit of RM10,000, your RPGT will be RM500 (this is a simplistic explanation without any exemption being taken into account). All this is supposed to be imposed on the people immediately on 1.1.2010.

Then, in another announcement, at the very last moment before the date of implementation, the Prime Minister announced a kind of reversal which gives the people some kind of reprieve. Basically, the government decided to give a kind of an exemption (which may not last forever) to the people in which only properties below 5 years being held by an individual will be taxed. How the tax is calculated is another matter.

So, what is the salient points of the new RPGT? Here are the basic operation of the new RPGT :

1) You will have to submit the forms for the determination of RPGT called CKHT 1 (for seller) and CKHT 2 (for buyer), either you think you will be taxed on the sale of your property or not. Even if you held the property more than 5 years, my advice is to ensure that you have submitted your form to the nearest Lembaga Hasil Dalam Negeri (LHDN). When you get an exemption letter or better known as a clearance letter, only then will you be in the clear.

2) You have to file these forms within 60 days of the signing of your Sale & Purchase Agreement. When it says 'days' there, it means 'working days'. It was changed from 'one month' to '60 days' in the Real Property Gain Tax Act.

3) The next important point is that the buyer (referred to as the acquirer in the Act) of the property has to forward a sum of two percent (2%) from the total purchase price to the LHDN regardless whether the buyer (or the seller) thinks he will or will not be taxed.

This is a very controversial and unprecedented piece of law in which the buyer has to pay this 2 percent regardless of any reason and can only be returned if it is determine that the seller is not liable to pay any RPGT or if he has to, it will be utilised for the payment of such amount.
These basic points are the important points that people must know about Real Property Gain Tax.

Just a reminder, all lawyers will offer the service of filing and ensuring you get the letter of clearance or make the necessary payment to LHDN. The burden of retaining the 2% of the purchase price and its payment under the law is on the acquirer or better known as the buyer. Buyer will be subject to penalty if he does not act on this. However, once you appoint a lawyer to do the filing of CKHT 1 or CKHT 2, the burden will be shifted to the lawyer under the Contract for Service you have appoint him under. Of course, as the buyer, you will be the one who will be penalised, if it was found you fail to file or pay anything to LHDN under RPGT but then, if you have a lawyer, you can claim the failure on him (unless he can prove back that you were at fault or he has done everything his power to enforce this part of the Act on you)

p/s : There are other explanations in the amendment about the calculation of RPGT which are actually done by LHDN (meaning you can huff and puff but in the end they are the one which will determine how much is the RPGT you have to pay) but as a lawyer, I am too dumb to understand it. Let me give you an example the wordings used :

"is the amount of tax charged on the chargeable gain on the person at the appropriate tax rate reduced by the amount of tax charged on such chargeable gain at the rate of five per cent"


p.p.s : Every time I tell my wife of such a piece of law exist, she will coolly says, "Wasn't it drafted by a lawyer?"

January 19, 2010

The making of company pictures

Last Friday, we had fun taking some official office pictures for our company profile. The last time we had a real photo shoot was when we officially open our firm in November 2007. All the pictures of our partners, our staff and our office that the clients see in our company profile were at least 2 years old. Not that we changed much from then (My weight did yo-yoed from heavy then slimmed a bit then back to heavy, making me back to what my weight was before) but we do love to take pictures.

So, here are some of the making of pictures where our official photographer Evo  from euveng.com who did a superb job and was patience enough with all the impromptu request for personal shots after the official photo had been taken.

If you want to see the full pictures which have been posted in Facebook, you can join our fan page here :

Khairul, Suhaila & Hazlina Facebook fan page

January 15, 2010

If you can't fight them, join them?

I have issued a new directive to my office. All must use Facebook to their utmost advantage. And now two ways about it....

That may have been one of the weirdest and unconventional directive I have ever given to my staff. I told my partner a day before and as she is more of a real world person than a social media user, she did asked whether it can give us any mileage at all. I discussed with her the reach of social media with Facebook as there are between 3.5 to 4 Million of Facebook users in Malaysia alone (depending on which report to believe). I also told her of various approaches by potential clients which happen to me as I am known as a lawyer everywhere and a blogger only in certain circles. Some do approach me for free legal advice and second opinion but some do approach me to do real work in the real world. I don't mind any of the inquiries which did not bear any fruits as you may never know when you will get your clients from the next time.

I once was also skeptical of Facebook that I shun adding anyone I never met in real life there as I believe that I want to keep it private. Contradictorily, I had created a Facebook fan page of my legal firm's as early as 2007 as I was moving office and I want to tell most my friends of the new location of my office. I changed name in 2009 and that the tools in Facebook were unresponsive to me (or I am too dumb) in trying to migrate my fans from the old firm's fan page to the new one. It was in hibernation until an idea struck me, thanks to observing other big companies, locally and in other countries, utilising social media to its utmost advantage.

I am going to launch my legal firm's Facebook fan page this coming 1st of February but you can see the old one through this link : Khairul, Suhaila & Hazlina's Facebook fan page .

Join us and tell me of any other suggestions which can help us as much as it can help you. And just in case you want to see how my staff look like, here's a sneak preview (until a better picture is posted)

January 12, 2010

40 Questions You Should Ask Your Lawyers...

As I have been harping about it for quite sometimes to anyone I meet and to all the media I can get my hands on such as Twitter (twitter.com/kruel74) and Facebook (My profile), I am currently writing a book entitled 40 Questions You Should Ask Your Lawyers When Buying a Property In Malaysia. The book is written from a layman point of view and I am trying to explain how one should approached one's lawyer when buying a property. These are the inside information but whether you know it or not, most lawyers will know it and they usually selectively share these trade secrets.

This is not a tell-all book but it is to help one to use lawyers properly and understand them on how intricate is the law business is. Some say being a lawyer is easy as all you need is the gift of the gab. That is just one component of a business which is wrought with so many labels that people throws at. I did try to explain in the book that our profession is a sunset business. It will be smaller and smaller as people and government gets smarter and technology becomes easier to use. Why pay a lawyer when you can do everything yourself?

However, before that day comes, lawyers will always be a component which is to be the ultimate middle man between you and all those red tape which are always there. And I will start with explaining how to buy a house first, then maybe I'll go down less trodden roads like civil disputes and criminal offenses.

Here is the rough draft of my book cover which might change later as the designer is still at it. I actually love it and it managed to capture all that I want it to be... (but this cover still has grammatical error and not the final one)

January 8, 2010

Free Moving Cost : No more easy financing?

I bought my current home without paying anything at all except the RM500 which I booked it and I actually got that back when the bank release the whole sum. The loan also pay the legal fees which actually went back to my legal firm and I even managed to buy another property using the same tactic. All these happens circa 2003 - 2004, my early days of marriage. I actually handled the money and arrange all the legal stuff while my wife decided on the house. I even got the owner, who is a Dato' to give us a personal tour (twice!) for us to see the house before it was completed. He really knows personal touch is the best way to do business. The peak of this type of loan was in 2005.

Anyway, as the world turns and Malaysia become too lax in the 100% loan type of financing, Bank Negara decided to only allow Free Moving Cost or the payment of legal fees by the banks but they can only finance 90% of their housing loans. Even if they say they are giving 95%, that 5% is for them to pay for your legal fees (which are usually capped at 3% of the loan sum) and your Mortgage Rate Term Assurance (MRTA) which is the insurance to protect the bank if anything happens to you.

That last only until last year. Do you know that since 01.01.2010, there will be no more 100% financing or 95% financing with legal fees and MRTA being paid by the bank or 90% loan with legal fees paid for? Bank Negara had asked all banks to stop it and you have to bear everything yourself.

Of course, the housing developers are smarter and those which have deep pockets are offering to help you pay part of the 10% of your purchase price. Some offer 10 + 90. Some even offer 5 + 95. No, those are not the lesson kids learn in school but the type of properties where you pay only 10% or 5% and the pay the balance ONLY WHEN THE PROPERTIES ARE COMPLETED. Even better than the bank's offer right? But, if you buy a property from another individual person, which does not allow for such arrangement, you will still have to fork 10% of the purchase price for down payment before you find a housing loan to pay the 90%.

So, for now, the best properties to buy seem to be a property build fresh by a housing developer who gives you the best deal in town. As for loans, my advice is to get the bank officer to quote you before you commit yourself. Our term for it is 'shopping for housing loans'. Everyone does it nowadays...

January 4, 2010

Property investment : One expensive property or a few smaller one?

I have actually been in the property investment market for a few years even since I can afford one. I started with no money down and I managed to get two of that type of housing where they gave out 100% housing loans during the height of 100% loan circa 2003 - 2007. Then they only pay your legal fees with your insurance and now, starting in 2010, you have to pay all your cost yourself. Shows that we may see a bit of a slowdown in property sector huh?

Don't worry. As much as property sector will slow down, people will still buy property. What will separate the good and the mediocre type of properties are the mantra of real estate : Location, location, location. Now, you have to choose really wisely. No more impulse buying (which were what my property purchases have been in the past)

So, as I have liquidated all my smaller size properties and refinance my house, which left me with a sum to be reinvested, the dilemma for me will be whether I should pool all these liquidated asset profits/returns and invest them into one expensive property or a few of the medium size/priced properties?

There are pros and cons of either option. Maintaining one property will be easier and I will be left with some cash for other type of investments. One loan and one bank. A few properties will allow me to spread the risk but a few loans and a few banks to deal with.

Am more on the first option but is still looking.

One of the option. 2% down until completion...

January 2, 2010

Happy New Year and Happy New Decade

This one is a bit confusing. Some say we will only enter the new decade next year but didn't we celebrate New Year Eve of 2000 as the new decade and this makes 2010 as the new decade too right?

Whatever it is, it was the celebration for a new year and I had fun though I celebrated it in a hotel room with just my wife.

I did my resolution post but I think I want to add another one which is to look for a new investment property and to invest in more things than I have done the last decade.

Gold maybe?

Anyway, have a great year ahead...and er....decade?
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