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    LEGAL BLOG BY JASON NG & PARTNERS

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CORPORATE & SECURITIES LAW

CORPORATE & SECURITIES LAW

HOW TO SURVIVE IN TODAY'S CHALLENGING CORPORATE REGULATORY AND SECURITIES ENFORCEMENT ENVIRONMENT THROUGH CORPORATE GOVERNANCE BEST PRACTICES FOR INVESTOR PROTECTION AND THE BEST INTEREST OF A CORPORATION?
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EMPLOYMENT & INDUSTRIAL LAW

EMPLOYMENT & INDUSTRIAL LAW

HOW TO RESOLVE EMPLOYMENT DISPUTES, BREACH OF CONFIDENTIALITY, NON-COMPETITION, IMMIGRATION PROBLEMS AND OTHER INDUSTRIAL RELATED ISSUES IN THE MOST EFFICIENT MANNER IN TERMS OF TIME, MONEY AND QUALITY?
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CRIMINAL & REGULATORY COMPLIANCE

CRIMINAL & REGULATORY COMPLIANCE

HOW TO DEAL WITH ISSUES RELATED TO COMMERCIAL CRIME, CORPORATE FRAUD, CRIMINAL PROSECUTION, INVESTIGATION, REGULATORY COMPLIANCE, ENFORCEMENT REGULATIONS AND OTHER SUSPECTED BREACH OF LAW IN THE MOST DEFENSIVE MODE?
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REAL ESTATE & BANKING

REAL ESTATE & BANKING

HOW TO MANAGE SALE AND PURCHASE OF PROPERTY, LOAN OR FACILITIES AGREEMENTS, LANDLORD AND TENANT RELATIONSHIP, BANKING LITIGATION, BANKRUPTCY OR WINDING UP MATTERS, COMPULSORY LAND ACQUISITION AND OTHER RELATED REAL-ESTATE TRANSACTIONS IN THE MOST PRACTICAL WAYS?
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THIS BLOG SEEKS TO REDEFINE CURRENT LEGAL ISSUES!

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Letter of Comfort

comfort

What is a Letter of Comfort?

It is a written assurance, often issued by the seller’s parent company or bank, which is intended to offer “comfort” to the buyer as to the seller’s ability or willingness to perform its obligations. Commercially, they may also be used to supplement or clarify the loan documents. Generally, comfort letters are not intended to be legally binding obligations but is usually a statement of moral responsibility. Comfort letters are issued because the seller is unable or unwilling to provide a bond or guarantee of performance.

Purpose of a Letter of Comfort

A comfort letter is used by the parent company to encourage a lending institution to issue a credit to a subsidiary. The purpose of having a comfort letter is to encourage the lending institution to enter into a legally binding transaction with the subsidiary company while attempting to avoid liability if the subsidiary fails to perform. Reasons for using a comfort letter are:

- seller’s guarantee facility may have been reached and it may be unable to procure further guarantees.

- seller is not empowered to obtain a guarantee because of financial constrains or its constitution or borrowing facilities

- issuer of the comfort letter may be unwilling to undertake a binding legal obligation on behalf of the seller.

- if the seller’s parent is to issue the letter, the parent may wish to preserve its own credit ratings and gearing

- unlike guarantees, on demand bonds and standby letter of credit, comfort letter are not required to be noted in a company’s           accounts as contingent liabilities.

Is a Letter of Comfort legally binding?

Comfort letters are usually not meant to be legally binding. However, this may depend on the party’s intention and how the letter is drafted. Thus, the effect of the letter may vary from non-binding statement of present intention (usually the case) to a legally binding contractual obligation. It is thought that because of how a letter of comfort is drafting, it may lead to subsequent involvement of the drafting party in the agreement itself. If so, this may just cause the letter of comfort to be part of the implied contract and assume the drafter to be the guarantor.

When is it legally binding?

It is legally binding if the party’s intended it to be so. Overall context of the transaction in which the comfort letter was written, the language of the letter may lead the court to to find the letter as part of an implied contract. If a parent company of a subsidiary which later became insolvent had a letter which contained a statement such as

“It is our policy to ensure that the business of (the subsidiary) is at all times in position to meet its liabilities to you under (the facility).”

This may not amount to a contractual promise as it was merely a statement of present fact. If the statement was inaccurate when given, the the buyer could have brought an action against the issuer in deceit or misrepresentation (refer to Benson Limited v Malaysian Mining Corporation Bhd (1989) 1 WLR 379).

Other examples of statements which may not be legally binding:

- “We are confident that our subsidiary will be able to meet its obligations to you”

- “We will not take any action which would prevent our subsidiary from fulfilling its obligations to you”

However, a comfort letter may sometimes contain express wording to the effect that it does not intend to be legally bound to reinforce the non-binding effect of the letter. This does not mean that it will not be bound. If it still contains the essential elements of a contract such as offer, acceptance, consideration, intention to create legal relations, it will inevitably lead to it being a legally binding contract. It would not matter if “comfort letter” is expressly stated on the letter because it constitutes a binding undertaking. However, if it is found to be a legally binding contract, resulting loss and damage may be difficult to prove.

 

Immigration: Foreign Workers in Malaysia

immigration

Types of Passes

There are basically four (4) types of ‘passes’ available to foreign nationals for work-related purposes. These passes are as follows:-

 

(i)                 Employment Pass

An employment pass is issued to a foreigner who is categorized as an Expatriate who works for a company, government, or non government agency or statutory body. There is a minimum salary, and the contract of employment should be for a period of no fewer than two (2) years. Although there is no specific definition as to who will qualify as an expatriate, typically it applies to investors, skilled workers, professionals, and senior management in corporations.

 

(ii)               Visit Pass (Temporary Employment)

A Visit Pass (Temporary Employment) is issued to skilled and semi-skilled foreign general workers. This pass is for short term employment of fewer than two (2) years, issued on a year-to-year basis, for the sectors such as manufacturing, construction, plantation; and service (eg. Domestic maid, pump attendants, and restaurants).

 

(iii)              Visit Pass (Business)

An expatriate who enters the country for short term work related purposes. The BusinessPass is usually valid for three (3) months and renewable upon departure and re-entry.

 

(iv)               Visit Pass (Professional)

A Visit Pass (Professional) is issued to a foreigner on a short term (9 to 12 months) visit who enters the country on specific professional purposes i.e, as:

  • Artist, musician, performer, sportsman
  • Experts in installation and commissioning of machineries
  • Missionaries and mission workers; and
  • Academics, researcher, or speaker.

 

Approval of Employment Pass of Expatriate

 

(a)                The sponsor/employer company will have to be approved with expatriate post. The approval is made by a committee comprised of the respective ministries/agencies and the immigration Department. The Committee will evaluate if such a post should be held by an expatriate based on the job specifications, functions and feedback from the Ministry of Labour on the available workforce in Malaysia.

 

(b)         The sponsor company may then proceed to apply for the Expatriate candidate to be issued an employment pass. The Immigration Department will issue the employment pass to the candidate upon being satisfies that the candidate fulfills all the criteria set out for that expatriate post.

 

(c)                Upon obtaining the above approval, an application for the issuance of the employment pass may be made by submitting an application form accompanied by a cover letter addressing the following information :

 

  • Particulars of the applicant company;
  • The company’s employee date according to category/ salary;
  • Particulars and job functions of expatriate post applied for;
  • Justification for the expatriate candidate to hold the post; and
  • Organization chart.

Industrial Relations Act 1967

Industrial Relations Act 1967 is an Act to regulate the relationship between the employers and workmen and their trade union. It deals with differences or disputes arising from the employer-employee relationship. It establishes the principles on which these relations are founded, namely:-

(i)                 trade unionism – the principle that employees and employers have the right to organize  themselves in trade unions in order to protect and promote their respective interests;

(ii)               union recognition – the principle that employee unions must be registered with the relevant authority and being recognized as the proper representatives of the employees.

(iii)             collective bargaining – the principle that employee unions and the employers may negotiate on periodic basis, the terms and conditions of employment. Collective agreement if achieved may be binding upon the parties.

(iv)             dispute resolution – the principle recognizes variety of ways available to employers and the unions to peacefully resolve differences and disputes between them.

WELCOME TO OUR BRAND NEW BLOG!

WELCOME TO OUR FIRM’S BRAND NEW BLOG. 

THIS BLOG SEEKS TO REDEFINE THE LEGAL ISSUES FOR TODAY’S LEGAL PRACTITIONERS, LAYMEN, STUDENTS AND THE PUBLIC AT LARGE. LEGAL RESEARCH IS NO LONGER A TOOL MEANT FOR LAWYERS, PROSECUTORS OR JUDGES.  IT IS NOW A RE-TOOL, RE-THINK AND REVELATION OF USEFUL INSIGHTS INTO OUR DAILY LIVES, WORKS OR BUSINESSES.

The materials contained on this blog have been prepared for informational purposes only and do not constitute legal advice or opinion.  These materials may not reflect the most current legal developments, judicial position or decisions. Furthermore, this information should in no way be taken as an indication of future results.

Communication of the information contained on this blog is not intended to create, and receipt does not create a solicitor-client relationship. Online readers should not act upon this information without seeking professional counsel.

Some links within this blog may lead to other sites. This Legal Blog does not necessarily sponsor, endorse or otherwise approve of the materials appearing or written in such sites.

Messrs Jason Ng & Partners shall not be liable for any lost suffered by you as a result of relying on the information contained herein.