BY THE BOOK LEGAL FRAMEWORK

By : JAYASURIYA KAH & CO

AS one of Malaysia's 13 states, Sabah is governed by, four principal sources ofwritten law. These are the federal constitution, the state constitution, federal laws enacted by the Malaysian parliament that are declared applicable to Sabah and Sabah's own state laws, enacted by the State Legislative Assembly.

Sabah (then North Borneo) was a British Crown colony from 1946 until independence in 1963. British rule left a great impact on the local laws, and some state laws in use today relating to land, mining, local government, town planning, public health and succession of property have their origin in colonial times. Similarly, British rule in Malaya pre-independence had a huge influence on its laws and legal system. With the formation of Malaysia, Sabah inherited a number of laws applicable in Malaya that were derived from Britain and its colonies.

Lawyers from Commonwealth countries would have little difficulty understanding Malaysian laws on companies, banking. commerce, contracts, taxation, crime and employment, to name a few. Although Sabah's legal system is predominantly based on English common Iaw, there are also secondary legal systems affecting certain sections of the law, such as sharia, or Islamic law. and native customary law.

FEDERAL CONSTITUTION: The federal constitution is the supreme law of the country and applies equally to all of Malaysia’s states. The constitution was promulgated in 1957 but was significantly amended in 1963 after Sabah and Sarawak joined Malaysia to safeguard the interests, rights and autonomy of their people. The constitution divides the law-making authority of the federation into its legislative authority, judicial authority and executive authority. This is known as separation of powers and is the cornerstone of a parliamentary democracy based on the British system.

Article 74 of the federal constitution enjoins the federal parliament to share legislative power with the 13 state legislatures. Matters on which the respective legislatures have jurisdiction are listed in the ninth schedule of the federal constitution as a federal list, state list and concurrent list.

The states may not interfere in matters within the exclusive jurisdiction of the federal government and vice versa. lf there is any inconsistency between federal law and state law, the federal law takes precedence over the state law.

As a condition for Sabah joining Malaysia, safeguards were enshrined in the federal constitution. These include the guarantee that natives of Sabah shall have quotas for public service positions, scholarships, places in public educational institutions and permits or licences to do business.

Lawyers from Sabah are assured the right to practice in the state to the exclusion of lawyers from other parts of Malaysia or elsewhere, while Sabah and Sarawak are guaranteed a separate High Court. The use of the English language in courts is also guaranteed, as are the right to additional revenue and special grants, and the power over immigration for non-residents entering and working in Sabah.

STATE CONSTITUTION: The governor of Sabah is its head. Under the state constitution the governor has the power to appoint the Chief Minister, Speaker and Deputy Speakers of the legislative assembly, dissolve the legislative assembly, protect the position of natives and the legitimate interest of other communities.

In other executive acts, the governor acts on the advice of the Chief Minister, The state constitution provides for a legislative assembly represented by 60 members, who are elected for a term of five years. There are 60 political constituencies based on defined geographical areas.

Each constituency elects a member to the legislative assembly Following the results of an election to the assembly the governor appoints as Chief Minister a member of the assembly who in his judgment is likely to command the confidence ofa majority ofthe assembly. The governor also appoints the other ministers on the advice ofthe chief minister The last election of the assembly was in 2008, when the ruling National Front coalition or Barisan Nasional won 59 ofthe 60 seats in the assembly Shortly after the election the Sabah Progressive Partywhich has two elected members, Ieft the ruling coalition.

Today the National Front coalition, with 57 elected members, maintains majority control in the assembly and is vested with the mandate to continue its development agenda for the state.

STATE GOVERNMENT: The state cabinet, headed by the Chief Minister and supported by civil servants, administers Sabah, The highest decision-making body is the cabinet, which meets regularly. All cabinet policies and decisions are implemented by civil servants in the relevant ministry or department.

The State Attorney-General is the state governments legal adviser and ensures that all government decisions and actions are constitutional and comply with the law. Where a government action is unlawful or unjust, the affected citizen may seek legal redress through judicial review and apply for public law remedies, such as orders of prohibition, certiorari and mandamus.

Within the state government there are several local authorities to administer the state's various municipalities and districts. Except for the city of Kota Kinabalu, which is under the direct charge of the Chief Minister the municipalities of Sandakan and Tawau and the other districts come under the jurisdiction of the minister of local government and housing.

Each municipal or district council is headed by a president or chairman who is a civil servant. The members of a council are appointed from its own community The council resembles a mini-government for the locality, with powers to issue trading and business licences, approve development proposals, construct public amenities, maintain health and hygiene, promote welfare of residents, abate nuisance and collect rates. The state government makes by-laws and regulations from time to time to regulate the functions performed by local authorities.

THE COURTS: The judiciary is empowered to hear and rule on civil and criminal matters, and to decide on the legality of any legislative or executive acts as provided under Article 125A of the Federal Constitution. It is also conferred authority to interpret the federal and state constitutions and determine the validity of any law passed by parliament. The Malaysian Courts of Justice are the Superior Courts and the Subordinate Courts.

The Superior Courts are the Federal Court, the Court of Appeal and two High Courts of coordinate jurisdiction: the High Court in Malaya for the states in Peninsular Malaysia and the High Court in Sabah and Sarawak.

The Subordinate Courts are the Sessions Court and the Magistrates Court. The Federal Court is Malaysia’s highest judicial authority and its final court of appeal. It reviews decisions referred from the Court of Appeal, and has original jurisdiction in constitutional matters and disputes between states or between the federal government and a state.

Federal Court decisions could previously be appealed to the Privy Council in London, but on January 1, 1978, Privy Council appeals in criminal and constitutional matters were abolished, and on January 1, 1985, all other appeals were abolished.

The Court of Appeal hears civil and criminal matters against the decision of the High Court in Sabah. The High Court in Sabah has original jurisdiction to hear all civil and criminal matters throughout the state. It also exercises appellate jurisdiction over certain decisions of the Sessions and Magistrates’ Courts.

There are also Syariah Courts set up to hear disputes among Muslim citizens. The Syariah Courts do not form part of the civil courts system and are administered according to the principles of sharia law. Sabah also has its own Native Courts established by the Native Courts Enactment of 1992. These have thejurisdiction to hear cases where native law and customs are involved within the territorial jurisdiction of these courts.

THE LAND SYSTEM: The administration of land falls under the authority of the state government. Sabah has its own land law and system of registration which is different from the National Land Code 1965 as applied to Peninsular Malaysia. The primary legislation that regulates Iand in Sabah is the Land Ordinance.

Sabah's land system, though based on the Torrens system where the state guarantees an indefeasible title to properly registered titles, is a modified one as it is similar to deferred indefeasibility. Under this principle it is implied that registered titles are guaranteed indefeasibility even though there is no express provision conferring indefeasibility of title or interest in land upon registration.

Section 88 of the Land Ordinance provides that no new title and no dealing with, claim to or interest in any land except land still held under native customary tenure without documentary title shall be valid until it has been registered in accordance with the provisions of Part V of the Ordinance. Under the Land Ordinance, dealings capable of registration include transfer, charge and sub-lease of land. By virtue of Section 88, registration of such dealing is of paramount importance to safeguard one's interest.

Registration is initiated when a prescribed form is lodged with the Lands and Surveys Department after payment of stamp duty. The form must be signed by the relevant parties and attested by an authorised person, usually an advocate. When claiming an interest in land it is prudent to lodge a caveat, which prevents any further dealing with the land unless with the written consent of the person who lodged the caveat.

Lands are classified into country town and native. The purpose of the classification of lands, which is mainly segregated by geographical features, is to regulate land ownership and usage. Country and town lands are alienated by the state to individuals or companies on leasehold tenure ranging from 30-99 years.

In the past it was common for the government to alienate country lands for a term of 999 years and many such titles are still extant. Native lands are alienated in perpetuity but only to the natives of Sabah.

Native lands can only be dealt between natives. Any dealing on native land between native and non-native is illegal and the transaction void. However a non-native (including foreign interest) is permitted to take a sub-lease of native land for a period not exceeding 30 years.

A charge on land is a common form of security for banks that grant loans to borrowers. Unlike a mortgage in England and other Commonwealth countries, a charge does not operate to transfer the land to the bank.

The bank, however has rights as a secured creditor over the land, and if there is an event of default the bank may apply to sell the land by auction. The application for an order to sell the land is made to the collector of land in accordance with the Land Rules.

NATIVE CUSTOMARY RIGHTS: Sabah land law also recognises native customary rights, despite it being non-registrable. Before any state Iand is alienated, the collector is bound to make an enquiry as to whether native customary rights exist on the land. Section 15 of the Land Ordinance prescribes the instances in which native customary rights can be established.

There is increasing awareness by native communities to assert their customary rights over Iand. The courts have been zealous in protecting the customary rights of natives, as demonstrated in recent decisions by the Court of Appeal and the Federal Court. In 2010 Sabah‘s government passed a law to provide for communal titles to be issued to native communities, so that they can hold land in a more definitive manner.

FOREIGNERS ACQUIRING PROPERTY: Sabah's land policy is considered the most liberal in the country, as there is seemingly no restriction on foreign interests acquiring either country or town land. The kind of real estate that a foreign interest may be interested in acquiring, such as residential homes, shops, offices, hotels, factories and plantations; would likely be held under country or town leases, or even subsidiary titles.

In most cases, these titles can be transferred to foreign interests. There can be instances where resort properties and plantations are developed on native titles. In such cases it is difficult, if not impossible, to transfer ownership of the titles to a foreign interest.

To overcome this, foreign investors sometimes propose to take a 30-year sub-lease on the property, but such arrangements are best made after legal advice. The federal government, through the Foreign Investment Committee (FIC), imposes rules and regulations that govern foreign investment in Sabah. The FIC is a section of the Economic Planning Unit in the Prime Minister's Department, and functions as a regulator of foreign investments in Malaysia.

A foreign interest intending to acquire certain categories of property in Sabah is required to apply to the FIC for approval. For many years the FIC Guidelines on acquisition of property by foreign interest were very stringent, but there has been much relaxation of the guidelines since 2010 in an effort to further Iiberalise the economy. The latest guidelines can be viewed at www.epujpm.my.

The courts have held that the FIC Guidelines are purely administrative in nature and do not have the force of law. Nonetheless, failure to obtain the approval of the FIC may result in other administrative bodies, such as licensing agencies, immigration authorities and industry regulators refusing to grant licences, permits or consents. It is therefore essential for foreign investors to comply with the guidelines to avoid repercussions.

FOREIGNERS ENTERING SABAH: The Immigration Department of Malaysia is responsible for the granting of relevant visas and permits to foreigners to enable their entry into the country a foreign person must possess a valid passport or travel document, fulfil the visa requirements (if applicable) and complete the arrival/ departure card, Before entering the state, all visitors, except for people originating from Sabah, must also fill in immigration papers. Passports of all visitors must be valid for six months from the time of entry into Sabah. Further information is available on the official website of the Immigration Department of Malaysia.

FOREIGN WORKERS: Depending on their expertise and the sector, foreigners may be allowed to take up employment in Sabah. The sectors approved for employing foreign workers are manufacturing, plantation, construction and services. Before applying for the permit, an employer must have the licence from Sabah's Department of Labour and the approved quota of foreign workers from the relevant authority in Sabah.

There are three main types of permit issued to foreigners aiming to work in Sabah, The first is for expatriates who require an employment pass, and covers all expatriate personnel within the definition of foreign expatriate set out by the Immigration Department.

The second is for foreign unskilled or semi-skilled workers who require a visit pass for temporary employment, and covers all foreign workers in the manufacturing. plantation, construction and service sectors.

The third type of permit is for foreign skilled workers who require a professional visit pass. This covers foreign artists. missionaries. experts or volunteers who are allowed to work on a short-term basis after obtaining the visit pass (professional). The number of unskilled or semi-skilled foreign workers in Sabah has reduced drastically in recent years. As a result. the cost of labour has been on the rise.

LABOUR LAW: The main piece of legislation dealing with labour Iaw in Sabah is the Labour Ordinance, which protects employees by stating the minimum terms and benefits an employer must provide to employees. The Labour Ordinance also nity protection, holidays, minimum working hours, annual and sick leave as well as overtime rates. Where a foreign person is involved, the Labour Ordinance requires an employer to obtain not only the licence, but also an approved insurance for the employee.

Sabah's Department of Labour under the Ministry of Human Resources is responsible for managing and enforcing labour laws in Sabah. It also provides registration and placement of jobseekers, careers guidance and advisory services. Labour or employment law in Malaysia tends to lean in favour of employees. Dismissal of workers must be for just cause and conducted with due process. having regard to rules of natural justice. Employers in Malaysia must register their workers for social security insurance under the Employees' Social Security Act of 1969.

Employers are also to contribute to the Employees Provident Fund by paying a sum of 12% on the employee’s salary to the fund. Further; the employer has to deduct 11% of the employee's salary for payment to the fund.

VISITS: A foreigner only needs a social or business visit pass if the purpose of the visit is to attend meetings or business negotiations, inspect a factory, introduce new products to companies in Malaysia or sign an agreement. The pass is issued for a period of up to three months. A social or business visit pass cannot be used for employment, business or conducting professional work. Other types of passes include the dependant pass, student pass and exemption pass.

A dependant pass is required for spouses and children of a foreign person who has already obtained an employment pass, A student pass is for foreigners who enrol as students in an approved educational institution in Malaysia. Where a visa is required, the application for a student pass must be submitted together with the visa, An exemption pass requires a letter from the Ministry of Foreign Affairs Malaysia, a letter from the Ministry of Defence Malaysia (for army personnel) and a letter from the applicant's embassy.

A social visit pass for 10 years (and renewable) is available for eligible foreigners under the Malaysia My Second Home programme (MM2H), allowing multiple entry into Malaysia during the prescribed period. The MM2H programme is open to citizens of countries recognised by Malaysia, regardless of race, religion, gender or age.The MM2H programme provides advantages such as housing purchase, education and tax exemption for foreigners, to provide a more comfortable stay However, MM2H residents are not allowed to take up employment or do business in Malaysia unless prior permission is given.

FOREIGN INVESTMENT: Sabah lies in the centre of the growth region of Brunei, Indonesia, Malaysia and Philippines (BIMP). The BIMP region has vast potential as a manufacturing and service hub. Its location, political stability and friendly investment climate make Sabahan attractive destination for foreign investment, Sabah also has modern airports and seaports in most of its towns and cities.

From Kota Kinabalu International Airport, major Asian cities such as Tokyo, Seoul, Taipei, Hong Kong, Manila, Jakarta and Kuala Lumpur are about three hours away. Furthermore, a network of all-weather roads, which links most of the towns and cities in the state, enables efficient distribution of goods. All the main towns and cities are provided with water and electricity supply and excellent telecoms facilities.

In enhancing its industrial development, Sabah has developed a modern and self-contained industrial park, Kota Kinabalu Industrial Park (KKIP), 25 km from the city of Kota Kinabalu and 5 km from Sepanggar Bay port.

Other industrial facilities include integrated timber complexes, palm oil industrial clusters at Lahad Datu, Sandakan New Growth Centre, Sabah Oil and Gas Terminal at Kimanis and Sipitang Oil and Gas Industrial Park.

ln a globalised world where information and communications technology is of paramount importance in doing business, the state government has moved towards e-government, while the business community is adept in the use of information and communications technology to enhance business and trade.

The government recently set up Sabah Development Corridor (SDC) to promote and accelerate the development of Sabah into a leading economic region and a choice destination for investment, work and living.

The SDC is coordinated by a newly formed body, the Sabah Economic Development and Investment Authority (SEDIA). SEDIA is a body corporate established by an act passed in the legislative assembly The chairman of SEDIA is the Chief Minister and the members are drawn from the state cabinet and high-ranking federal and state officers.

The SDC is a balanced development programme that caters for the whole state. Under the 10th Malaysia Plan (2011-15) new measures were introduced by the federal government to transform Malaysia into a high-income economy There is an expectation of funds being allocated to Sabah for infrastructure expenditure and grants to improve the people’s well-being.

One measures is to actively promote the economic activities of the SDC by providing special funding and incentives to approved investors. To increase the confidence of foreign investors in Malaysia the federal government will. In appropriate cases, enter into an investment guarantee agreement (ICA) with an investor. The ICA provides protection to investors against nationalisation and expropriation of their assets, and ensures efficient settlement of disputes.

INCENTIVES: Investment incentives are found mainly in the area of taxation. Tax incentives come under the Promotion of Investments Act of 1986, Income Tax Act of 1967, Sales Tax Act of 1972, Excise Act of 1976 and Free Zones Act of 1990. Sectors that can qualify are manufacturing, agriculture, tourism and approved service sectors, as well as research and development, training and environmental protection activity.

The direct tax incentives grant partial or total relief from income tax payment for a specified period, while indirect tax incentives are in the form of exemptions from import duty sales tax and excise duty. The major tax incentives for companies investing in manufacturing are pioneer status and investment tax allowance (ITA). Eligibility for pioneer status and ITA is based on certain priorities, including the level of value-add provided, technology used and industrial linkages. Eligible activities and products are known as promoted activities or promoted products.

A company that is granted pioneer status gains a five-year partial exemption from income tax. It pays tax on 30% of its statutory income, with the exemption period commencing from its 'production day', defined as the day its production level reaches 30% of its capacity. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the companies post-pioneer income.

To encourage investments in the SDC, applications received from companies that conduct their business in approved activities in the SDC will enjoy a 100% tax exemption on their statutory income during a five-year period. Companies may also apply for ITA. A firm granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within five years of the date the first qualifying capital expenditure is incurred, It can offset this allowance against 70% of its statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised. The remaining 30% of its statutory income will be taxed at the prevailing company tax rate.

For approved activities in the SDC, applications will have an allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income for each year of assessment.

For the agriculture sector several incentives including pioneer status. ITA, incentives for food production and modernising chicken and duck-rearing, accelerated capital allowance and tax exemption on the value of increased exports are also provided.

The federal government also equips other sectors such as biotechnology, environmental protection, tourism, research and development, information and communications technology, approved service projects. and shipping and transportation with various incentives that are tailor-made to meet the needs of these sectors individually Enquiries and applications concerning incentives can be made to the Malaysian Industrial Development Authority.

FORMS OF BUSINESS: Various forms of business models can be used to set up business in Sabah. A business organisation may take any of the following forms;

• Sole trader or proprietor

• Company (private limited company, public limited company or branch of a foreign company)

• Partnership

· Unincorporated association

· Representative and regional office

· Operational headquarter (OHQ)

· International procurement centre (IPC)

· Regional distribution centre (RDC)

The most common forms of business entities are companies, and to some extent, representative and regional offices, OHQs, IPCs and RDCs.

LOCALLY INCORPORATED COMPANIES: All companies in Malaysia are governed by the Companies Act of 1965 and their respective memorandum and articles of association. Registration with the Companies Commission of Malaysia (CCM) is mandatory.

A company must maintain a registered office in Malaysia where all books and documents required under the provisions of the Companies Act are kept. The name of the company shall appear in legible Romanised letters, together with the company number on its seal and documents. A company must have at least two directors who each have their principal or only place of residence within Malaysia. Both directors may be holders of foreign passports, but as such persons usually are able to fulfil the above residence requirement only after obtaining their work permits, the directorships may initially be held by locals.

Secretarial companies are generally able to provide nominee resident directors for companies that are not heavily engaged in operations until foreign directors fulfil local residence requirements. The secretary of the company must have their principal or only place of residence in Malaysia. The secretary must be a member of a prescribed body or be licensed by the CCM.

The Companies Act provides for three types of companies;

A company limited by shares where the personal liability of its members is limited to the par value of their shares and the number of shares taken or agreed to be taken by them.

A company limited by guarantee where the members guarantee to meet liability up to an amount nominated in the memorandum and articles of association in the event of the company being wound up.

An unlimited company where there is no limit to the members liability

The most common company structure in Malaysia is a company limited by shares. Such limited companies may either be private (Sendirian Berhad or Sdn Bhd) or public (Berhad or Bhd).

SDN BHD: A private company limited by shares has provisions in its memorandum and articles of association that restrict the right to transfer its shares; limit the number of its members to 50, excluding employees and some former employees; and prohibit any invitation to the public to subscribe for its shares and debentures, or to deposit money with the company.

BHD: A public company can be formed on alternatively a private company can be converted into a public company, subject to certain requirements in the Companies Act. A public company limited by shares can offer shares to the public, subject to compliance with Malaysian securities laws. A public company can apply to have its shares quoted on the Malaysian stock exchange, subject to compliance with the requirements of the exchange and the Securities Commission.

SHARE CAPITAL: Share capital in local companies may be divided into different classes. The usual classes of shares are ordinary shares or a combination of ordinary and preference or other class shares. Preference shares are defined in the Companies Act as shares that do not carry either (a) voting rights except under limited prescribed circumstances or (b) any right to participate beyond a specified amount in any distribution, whether by way of dividend or on redemption in a winding up or otherwise. The rights attaching to any class of preference shares are required to be setoutin the memorandum and articles of association of the company.

DIVIDENDS: Profits of a local company may be taken out via dividend payments of the local company. Dividends may only be paid out of profits. Dividends are usually paid out to shareholders on a pro rata basis unless they are holders ofa class of shares which entitle them to preferential dividends. For such class of shares with cumulative dividends, dividends not paid out in any year are accumulated for payment in later years.

ACCOUNTS AND ANNUAL RETURNS: The Companies Act requires a company to lay before the members at its annual general meeting (AGM) a duly audited set of accounts (consisting of profit and loss accounts and a balance sheet). The AGM is required to be held once every calendar year at intervals of not more than 15 months. A company is also obliged to lodge its annual return (including a certified copy ofthe accounts) with the CCM within one month after the AGM. However the accounts of 'exempt' private firms are not required to be filed with the CCM but still have to be audited. An Exempt Private Certificate is required to be filed with the annual return, together with a statement signed by the firm’s auditors stating whether in his opinion;

• Proper accounting records and other books have been kept;

-The accounts have been audited in accordance with the Companies Act;

-The auditor's report on the accounts was made subject to any qualification and if so the particulars of the qualification: and

• At the date up to which the profit and loss account has been made up, the firm appeared to have been able to meet its liabilities as and when they fell due. An 'exempt' private company is a company with not more than 20 members. none of whom are corporations,whether th rough direct or indirect shareholding.

KEY SHAREHOLDING THRESHOLDS FOR PRIVATE LIMITED COMPANIES: It is helpful to take note of the following key shareholding thresholds when deciding how much equity to take up in a local company;

25% of voting shares entitles the shareholder to block special resolutions, which requires the approval of 75% of such members, entitled to vote at a general meeting and to block schemes of arrangement requiring members' approval, which require approval of a majority in number representing 75% value. The Companies Act stipulates a number of instances which need special resolutions.

50% of voting shares entitles the shareholder to block ordinary resolutions. Over 50% of voting shares gives effective control and the ability to pass ordinary resolutions.

75% of voting shares entitles the shareholder to pass any special resolution and gives him almost absolute control of the local company.

SHAREHOLDERS AGREEMENTS: Depending on the terms and conditions, shareholders agreements are generally enforceable in Malaysia. Provisions of share- holders agreement may be incorporated into the memorandum and articles of association of the company.

BRANCHES OF FOREIGN COMPANIES: Any foreign company that intends to set up a place of business or undertake business activities in Malaysia may do so by incorporating a local company or by registering itself as a foreign company in Malaysia.

The term 'branch office' is normally used for a foreign company registered in Malaysia. The branch office has to be registered with the CCM before it commences business or establishes a place of business in Malaysia. Certain licences, permits, registrations and such are issued only to Malaysian companies and not to foreign companies or foreign branches. There is also a need for the branch office to comply with certain filing requirements with the CCM.

EXCHANGE CONTROL: Bank Negara Malaysia (BNM) is the country's central bank and regulates monetary policy and currency exchange. The main legislation that deals with currency exchange in Malaysia is the Exchange Control Act of 1953. Malaysia has strict laws against money laundering. Banks and specified persons. such as lawyers and accountants, are required by law to report to the central bank on certain monetary transactions under the Anti-Money Laundering and Anti-Terrorism Financing Act of 2001, and approval may be required on certain currency transactions. Foreigners are allowed to open and maintain ringgit-denominated as well as foreign currency accounts in local banks or financial institutions.

REPATRIATION OF FUNDS: There are no restrictions on repatriation of funds in Malaysian bank accounts, save for the requirement to report on the amount repatriated to BNM for its information. A foreigner who intends to repatriate funds from his account in Malaysia must first obtain the necessary tax clearance from the tax authority. Where there is no clearance, the bank will impose a withholding tax of 10% until the taxis assessed or the clearance is obtained.

INTELLECTUAL PROPERTY: The protection of intellectual property in Sabah comes under the legislation and authority of the federal government. The Intellectual Property Corporation of Malaysia is responsible for regulating and supervising issues relating to intellectual property in the country. Malaysia is also a member of the World Intellectual Property Organisation and a signatory of the Agreement on Trade

Related Aspects of Intellectual Property Rights. There is also legislation for the protection of intellectuals property. The Patents Act of 1983 and the Patents Regulation of 1986 protect the inventor of patents from being commercially exploited.

However the inventor may assign licence or otherwise deal with the patent as they wish. The Trademark Act of 1976 deals with the protection and registration of trademarks in Malaysia. Trademark refers to words, logos and pictures that distinguish the goods and services of a business from another: As proof of the ownership of a trademark, the person has to show that goodwill and reputation have attached to the trademark through continuous use.

Other legislation relating to protection of intellectual property includes the Copyright Act of 1982 which deals with literature, music, films, broadcasts, sound recordings and derivative works; the Industrial Design Act of 1996 and the Industrial Design Regulations of 1999, which protect industrial designs such as the ornamental or aesthetic aspect of an article; the Layout Designs of Integrated Circuit Act of 2000, which protects creators of layout designs of integrated circuits; and the Geographical Indications Act of 2000, which protects the originality of traditional products.

ENFORCEMENT OF CONTRACTS: Contract law in Malaysia is very similar to the principles of the common law on contracts. All the dealings and issues arising from contracts are governed under the Contracts Act of 1950. A valid contract is formed after acceptance of an offer that is supported by consideration (whether or not of monetary value) and premised by an intention to create a contract between the parties.

The law will only recognise a contract if it is made by the panties who have the legal capacity to contract and that they enter into the contract on their free will without duress or coercion. A contract must be for a lawful purpose, otherwise the transaction may be declared void or unenforceable by the courts.

In instances where a term of the contract is breached by one party the other party is entitled to bring an action against the wrongful party to seek redress or compensation through the courts. The courts may award damages to the innocent party or make an order for the contract to be specifically performed.

LEGAL REPRESENTATION: Sabah has its own legal profession distinct from West Malaysia and Sarawak. To be entitled to practise law, a law graduate from a recognised university must undergo a period of pupilage and then be admitted as an advocate of the High Court. The Advocates Ordinance is the legislation governing lawyers and it being a fused profession lawyers commonly styled themselves as 'advocates and solicitors'.

Only advocates admitted to practise in Sabah can dispense legal advice and represent clients in courts. There are currently about 450 advocates practising in Sabah. All advocates are conversant in the English language and strive to bring the best services to their clients. Many firms have the experience and expertise to advise on a wide range of commercial laws.

The Sabah Law Association (SLA) represents the interests of Iawyers in Sabah. Membership is not compulsory, although atleast 90% of lawyers are members. The government and courts have long recognised the important role played by the SLA. The SLA's president sits on several government committees and is regularly consulted on legal matters affecting the state, and the courts hear the view of the SLA on the admission of new advocates and matters affecting lawyers. Advocates are bound by a set of rules in their work, and there is a scale of fees for advocates to charge clients.

DISPUTE RESOLUTION: Apart from going through litigation in the courts, alternative dispute resolution is very much encouraged in Sabah. The most common dispute resolution besides litigation is arbitration, although mediation is gaining popularity. There is a recent trend of judges in the Sabah courts encouraging litigants to try mediation before they eventually hear the dispute. There is now a pool of accredited mediators who can offer mediation services, many of whom are senior and experienced lawyers, Kuala Lumpur Regional Centre for Arbitration is Malaysia`s foremost arbitration centre. It offers advice, assistance and settlement of both domestic and international disputes. All arbitration is governed by the Arbitration Act of 2005. Most commercial contracts incorporate arbitration clauses into their terms. The Arbitration Act of 2005 requires the counts to give effect to an arbitration agreement unless the agreement is found to be invalid or against public policy An arbitral award is enforceable as a court order or judgment.