Section 126. Financial assistance not exceeding ten per centum of shareholders’ funds

(1) This section shall not apply to a company whose shares are quoted on a stock exchange.

(2) A company may, by a special resolution, give financial assistance for the purpose of the acquisition of a share in the company or its holding company or for the purpose of reducing or discharging a liability incurred for such an acquisition if—

(a) the directors resolve, before the assistance is given, that—

(i) the company may give the assistance;

(ii) the giving of the assistance is in the best interest of the company; and

(iii) the terms and conditions under which the assistance is to be given are just and reasonable to the company;

(b) on the same day that the directors passed the resolution, the directors who voted in favour of the resolution make a solvency statement that complies with provisions in relation to the giving of the assistance;

(c) the aggregate amount of the assistance and any other financial assistance given under this section that has not been repaid does not exceed ten per centum of the aggregate amount received by the company in respect of the issue of shares and the reserves of the company, as such aggregate amount is disclosed in the most recent audited financial statements of the company;

(d) the company receives fair value in connection with the giving of the assistance; and

(e) the assistance is given not more than twelve months after the day on which the solvency statement is made under paragraph (b).

(3) The resolution of the directors under paragraph (2)(a) shall set out in full the grounds for the conclusions of the directors made under that paragraph.

(4) A reference in paragraph (2)(c) to any other financial assistance given under this section that has not been repaid includes the amount of any financial assistance given in the form of a guarantee or security for which the company remains liable at the time the financial assistance in question is given.

(5) Within fourteen days from giving financial assistance under this section, the company shall send to each member of the company a copy of the solvency statement made under paragraph (2)(b) and a notice containing the following information:

(a) the class and number of shares in respect of which the assistance was given;

(b) the consideration paid or payable for those shares;

(c) the name of the person receiving the assistance and, if a different person, the name of the beneficial owner of those shares;

(d) the nature, the terms and, if quantifiable, the amount of the assistance.

(6) The company and every officer who contravene this section commit an offence and shall, on conviction, be liable to a fine not exceeding three million ringgit or imprisonment not exceeding five years or to both 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.