Since 2016, the Interest Schemes sector in Malaysia has been regulated under the Interest Schemes Act 2016 (Act 778).
What has changed between the previous guise when the Interest Schemes sector was regulated under Part IV Division 5 of the Companies Act 1965?
Not much at all except that the regulator has set the benchmark for new applicants at a higher level in terms of specifying requirements for prior industry experience by promoters for any proposed Interest Schemes and augmented by relevant audited financial history for the corporation intending to manage and operate the proposed Interest Scheme or any related, associated or affiliate corporate entity.
The range of possible applicants for Interest Schemes are businesses that are involved in holiday and leisure timeshare, golf and recreational clubs and memorial parks. Broadly, these businesses are involved in the right of use and enjoyment category.
The segment that has the greatest potential in Interest Schemes are in the investment schemes category where financial returns are offered and also a possible hybrid category that may combine financial returns with right of use and enjoyment.
In the hybrid category it may be possible for a promoter to offer ownership of a slice of the business enterprise by way of contractual rights to any surplus proceeds or financial returns from the business enterprise operations together with a right to use and enjoy retail goods and services or holiday accommodations forming part of the enterprise.
For SMEs that are in need for corporate finance solutions Interest Schemes may still offer a medium term mezzanine financing solution. We have advised on several such solutions that has proven to be very useful to the SME clients.
One of the SME clients is being advised by us on graduating to the Capital Market regulated by the Securities Commission of Malaysia and Bursa Malaysia en route for an initial public offering either in the LEAP Market or the ACE Market.
