In a landmark decision, the Malaysian Federal Court handed down a 2:1 decision favouring the Companies Commission of Malaysia's case against a company that sold burial plots and urn compartments. In essence the CCM's case was that the company was selling interests that required regulation under Part IV Division 5 of the Malaysian Companies Act, 1965. The case is listed as 01( )-15-2008 (W). The media report from Malaysian Insider is as follows:
PUTRAJAYA, June 8 — Purchasers of burial lots and urn compartments in memorial parks can heave a sigh of relief as they are now protected from losing their investment should the company go into liquidation or if the land is transferred to another party.
The Federal Court, in a landmark ruling today, declared that NV Multi Corporation Bhd and 10 of its subsidiaries must register their business prospectus and the companies’ approved trustees with the Companies Commission of Malaysia (CCM) to enable the body to regulate the companies’ activities and to safeguard the public from losing their investment.
NV Multi Corporation is the operator of the Nirvana Memorial Parks which deal with cemetery development by providing services to the public to acquire burial lots and compartments for storage of urns containing ashes of the cremated, on land developed by the company as memorial parks.
A purchaser is required to execute a standard form of contract when acquiring a burial lot or an urn compartment in these parks.
Chief Judge of Sabah and Sarawak Tan Sri Richard Malanjum, who led a three-man Bench, held that this was because the company’s business fell within the definition of “interest” in section 84 (1) of the Companies Act 1965.
“Interest” is defined in section 84 (1) of the Act as any profit and asset of any financial or business undertaking or scheme or in any common enterprise in which the holder of the right or interest is led to expect profits or interest from the efforts of the promoter of the enterprise.
A company, whose business falls under that section, would be committing an offence and can be subjected to penalties of up to five years’ imprisonment and a fine of up to RM100,000 under section 94 of the Act if it fails to comply with the requirements of that section.
Malanjum, who presided together with Federal Court judges Datuk Hashim Yusoff and Tan Sri James Foong Cheng Yuen, in a 2-1 majority, dismissed the appeal brought by NV Multi Corporation, NV Alliance Sdn Bhd, Nirvana Memorial Park Sdn Bhd, Nirvana Memorial Park (Johor) Sdn Bhd, Nirvana Memorial Park (Kuching) Sdn Bhd, Nirvana Memorial Park (Klang) Sdn Bhd, NV Multi Resources Sdn Bhd, Asia Premier Propartners Sdn Bhd, Nirvana Memorial Park (Sabah) Sdn Bhd, Nirvana Memorial Park (Shah Alam) Sdn Bhd and Nirvana Memorial Park (Sibu) Sdn Bhd.
The court also ordered the companies to pay RM50,000 in costs.
Foong, in his judgment, said the company’s business fell within the definition of “interest” under section 84 (1) because both the companies and their purchasers participated in a common enterprise which involved the use of land in perpetuity and purchasers continuing to pay upkeep and maintenance costs.
In a dissenting judgment, Hashim said NV Multi Corporation’s business was basically a simple sale of burial plots and urn compartments and not an investment per se.
“There is no relationship between the purchasers of the burial plots and urn compartments among themselves and no common enterprise to re-sell their plots and urn compartments collectively. There is no sharing of profits,” Hashim said.
In 2005, the High Court ruled that the companies need not register their prospectus with CCM and also their trustees after the latter (the companies) obtained a declaration that their business in relation to the sales of urn compartments and burial lots did not fall under the definition of “interest” in that section of the Act.