Section 176. Qualifications of trustee for debenture holders

(1) Every borrowing corporation which offers debentures to the public for subscription or purchase in Malaysia shall make provision for the appointment of a trustee corporation as a trustee for the debenture holders in such debentures or in a trust deed relating to the debentures.

(2) Where a borrowing corporation is required to appoint a trustee for the debenture holders in accordance with subsection (1), the borrowing corporation shall not allot any of the debentures until the appointment has been made and the trustee corporation has consented to act as trustee.

(3) A trustee corporation shall not be appointed, hold office or act as trustee for the debenture holders of a borrowing corporation without leave of the Court if the trustee corporation is—

(a) a shareholder who beneficially holds shares in the borrowing corporation;

(b) beneficially entitled to moneys owed by the borrowing corporation to the trustee corporation;

(c) a corporation that has entered into a guarantee in respect of the principal debt secured by the debentures or in respect of interest in the principal debt; or

(d) a corporation that is by virtue of section 7 deemed to be related to—

(i) any corporation of a kind referred to in paragraphs (a), (b) and (c); or

(ii) the borrowing corporation.

(4) Subsection (3) shall not prevent a trustee corporation from being appointed, holding office or acting as a trustee for the debenture holders of a borrowing corporation by reason only that—

(a) the borrowing corporation owes to the trustee corporation or to a corporation that is deemed by virtue of section 7 to be related to the trustee corporation any moneys so long as such moneys are—

(i) moneys, excluding the moneys referred to in subparagraphs (ii) and (iii), which does not exceed ten per centum of the amount of the debentures proposed to be offered to the public at the time of the appointment or within the period of three months after the debentures are first offered to the public, and which does not exceed ten per centum of the amount owed by the borrowing corporation to the debenture holders at any time after the expiration of that period;

(ii) moneys that are secured only by a first first martgage over land of the borrowings corporation, or by any debentures issued by the borrowing corporation to the public or by any debentures not issued to the public which are issued under the same trust deed that creates other debentures issued at any time by the borrowing corporation to the public or by any debentures to which the trustee corporation, or a corporation that is deemed to be related to the trustee corporation is not beneficially entitled by virtue of section 7; or

(iii) moneys to which the trustee corporation, or a corporation that is entitled to be appointed as a trustee for the debenture holders of the borrowing corporation in accordance with the terms of the debentures or of the relevant trust deed by virtue of section 7 deemed to be related to the trustee corporation; or

(b) the trustee corporation, or a corporation that is deemed to be a shareholder of the borrowing corporation in respect of shares that trustee corporation beneficially holds by virtue of section 7 to be related to the trustee corporation so long as the shares in the borrowing corporation which are beneficially held by the trustee corporation and by all other corporations that are deemed to be related to the borrowing corporation by virtue of section 7 do not carry the right to exercise more than five per centum of the voting power at any general meeting of the borrowing corporation.

(5) Nothing in subsection (3) shall—

(a) affect the operation of any debentures or trust deed issued or executed before the commencement of this Act; or

(b) apply to or in relation to the trustee for the holders of any such debentures,

unless under any such debentures or trust deed a further offer of debentures is made to the public after the commencement of this Act.

(6) The corporation and every officer who contravene this section commits an offence and shall, on conviction, be liable to a fine not exceeding twenty thousand ringgit and, in the case of a continuing offence, to a further fine not exceeding one thousand ringgit for each day during which the offence continues after conviction.