Consumer Lending and Personal Borrowing
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Questions and Answers

What is the primary reason for an individual to borrow as a consumer?

  • To finance business activities
  • To acquire assets or meet personal consumption needs (correct)
  • To obtain a loan for a joint venture
  • To invest in company shares only

    • What is an example of an asset acquisition loan?

  • Financing educational expenses
  • Meeting emergency medical expenses
  • Investing in company shares
  • Purchasing a vehicle (correct)

    • What is the primary responsibility of an individual borrower?

  • To assign the loan repayment to a third party
  • To jointly repay the loan with other borrowers
  • To personally repay the loan (correct)
  • To repay the loan through a business entity

    • What happens when two or more individuals borrow a loan jointly?

    <p>All joint borrowers are responsible for repayment</p> Signup and view all the answers

    What is the minimum legal age limit to borrow?

    <p>18</p> Signup and view all the answers

    What determines the eligibility of personal borrowers?

    <p>The bank's lending policy and other factors</p> Signup and view all the answers

    What is a possible reason for an individual to request a personal consumption loan?

    <p>To meet peak expenditure periods</p> Signup and view all the answers

    What is the primary consideration for a financial institution when lending to multiple joint borrowers?

    <p>The financial institution's lending policy and the borrowers' ability to repay</p> Signup and view all the answers

    What is a discharged bankrupt?

    <p>A person who has settled their previous liabilities and has been released from bankruptcy status</p> Signup and view all the answers

    What is the main requirement for businesses in Malaysia?

    <p>Registration at the CCM</p> Signup and view all the answers

    What is the purpose of the CCM?

    <p>To administer provisions under the Companies Act 2016</p> Signup and view all the answers

    What is the document issued when a business is registered?

    <p>Notice of Registration</p> Signup and view all the answers

    What is the consequence of registering a company under the Companies Act 2016?

    <p>The notice of registration is conclusive that the company is duly registered</p> Signup and view all the answers

    What is a sole proprietorship?

    <p>A business with a single owner or sole proprietor</p> Signup and view all the answers

    What is unique about a sole proprietorship in terms of loans?

    <p>The borrower can choose to apply for credit facilities in personal name or business name</p> Signup and view all the answers

    What is the purpose of the CCM issuing a certificate of incorporation?

    <p>Upon an application by the company and payment of the prescribed fee</p> Signup and view all the answers

    What is the primary purpose of a partnership in business?

    <p>To jointly conduct a business with a view to profit</p> Signup and view all the answers

    What is the maximum number of partners allowed in a partnership business?

    <p>20 partners</p> Signup and view all the answers

    What is the consequence of having more than 20 partners in a business?

    <p>The business is required to incorporate or register as a limited liability company</p> Signup and view all the answers

    What is the exception to the 20-partner rule in a partnership business?

    <p>Legal firms and professional practices</p> Signup and view all the answers

    What is the primary legislation governing partnership businesses in Malaysia?

    <p>Partnership Act 1961 (Revised 1974)</p> Signup and view all the answers

    What is the purpose of a Partnership Deed in a partnership business?

    <p>To provide details of the partnership including the capital contribution of each partner, profit sharing arrangements, and drawings from the business</p> Signup and view all the answers

    What happens if a partnership deed is not revealed to the lender in a partnership business?

    <p>The lender need not concern itself with its provisions</p> Signup and view all the answers

    What prevails in the absence of a partnership deed in a partnership business?

    <p>The Partnership Act 1961 (Revised 1974)</p> Signup and view all the answers

    What is the basis of the rule that determines the effect of payments from an account?

    <p>First-in, first-out</p> Signup and view all the answers

    In which order are debts presumed to be repaid according to the rule?

    <p>In the order they were incurred</p> Signup and view all the answers

    What happens to the liabilities of an outgoing partner upon death, retirement, or resignation?

    <p>They are determined as at the date of the event</p> Signup and view all the answers

    What is the liability of an outgoing partner for debts incurred after their departure?

    <p>They are not liable at all</p> Signup and view all the answers

    What happens to new receipts by a company according to the rule?

    <p>They are used to pay the earliest debts</p> Signup and view all the answers

    Why is it difficult to determine the outgoing partner's liability for revolving facilities?

    <p>Because the incoming credits repay the earliest debits</p> Signup and view all the answers

    What is the effect of determining the outgoing partner's liability as at the date of departure?

    <p>They are absolved from liability for debts incurred after departure</p> Signup and view all the answers

    What is the importance of giving notice to the lender upon the departure of a partner?

    <p>To determine the outgoing partner's liability</p> Signup and view all the answers

    What is the primary distinction between a company limited by shares and a company limited by guarantee?

    <p>The amount of liability for members</p> Signup and view all the answers

    What is the requirement for a company's name under Section 25(1) of CA 2016 if it is an unlimited company?

    <p>The name must end with the word 'Sendirian' or the abbreviation 'Sdn'</p> Signup and view all the answers

    What is the maximum number of shareholders allowed in a private company under Section 42(1) of CA 2016?

    <p>50 shareholders</p> Signup and view all the answers

    What is a characteristic of a private company under Section 42(2) of CA 2016?

    <p>It restricts the transfer of its shares</p> Signup and view all the answers

    What is the requirement for a private company's name under Section 25(1) of CA 2016?

    <p>The name must end with the words 'Sendirian Berhad' or its abbreviation 'Sdn Bhd'</p> Signup and view all the answers

    What is the primary distinction between a public company and a private company?

    <p>The ability to invite the public to deposit money with the company</p> Signup and view all the answers

    What is the liability of a member of an unlimited company?

    <p>No limit on the liability</p> Signup and view all the answers

    What is the requirement for a company to be classified as a company limited by guarantee?

    <p>The company's members' liability is limited to the amount they agreed to contribute in the event the company is wound up</p> Signup and view all the answers

    What is the status of clubs and societies in terms of legal recognition?

    <p>They are unincorporated bodies with no legal status</p> Signup and view all the answers

    What is required for a society to sue or be sued in court?

    <p>A public officer registered with the Registrar of Societies</p> Signup and view all the answers

    What happens to a society if it does not comply with the law?

    <p>The Registrar can deregister it</p> Signup and view all the answers

    How can a club or society be dissolved?

    <p>By all members agreeing to the dissolution</p> Signup and view all the answers

    What is the role of committees in clubs and societies?

    <p>They are elected by the members to run the club or society</p> Signup and view all the answers

    What is the limitation of committees in clubs and societies?

    <p>They cannot act outside the scope given to them by the general body of members</p> Signup and view all the answers

    What happens to a club or society upon the application of its members or any other person?

    <p>The court may order the dissolution of the club or society</p> Signup and view all the answers

    What is the purpose of rules and by-laws in a club or society?

    <p>To establish the constitution of the club or society</p> Signup and view all the answers

    What is a director personally liable for if they fail to meet their responsibilities?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of the solvency test in relation to dividend payments?

    <p>To ensure the company's cash flow and balance sheet solvency</p> Signup and view all the answers

    What is the consequence of a director breaching their duties under the CA 2016?

    <p>Imprisonment for a term not exceeding five years or a fine not exceeding RM3 million</p> Signup and view all the answers

    What is an example of a breach of a director's general duties?

    <p>All of the above</p> Signup and view all the answers

    What is the primary purpose of privatizing government administrative and economic units?

    <p>To allow entities to operate as commercial enterprises</p> Signup and view all the answers

    What happens to a director who is disqualified under the insolvency law?

    <p>A contribution order is made against the director</p> Signup and view all the answers

    What happens to government guarantees when government units are incorporated into companies?

    <p>They are no longer required</p> Signup and view all the answers

    What is defined as an issued share to which there is attached a right to vote?

    <p>Voting shares</p> Signup and view all the answers

    What is the primary source of funding for statutory bodies in Malaysia?

    <p>Government allocations</p> Signup and view all the answers

    What is the purpose of the solvency test in relation to a company's dividend payments?

    <p>To ensure the company is solvent immediately after the dividend is paid</p> Signup and view all the answers

    What is the consequence of a director failing to comply with specific duties?

    <p>They are liable to imprisonment for a term not exceeding five years</p> Signup and view all the answers

    What is required to disclose their interest in a Malaysian incorporated public company?

    <p>Individuals and corporations with an interest in 5% or more of the voting shares</p> Signup and view all the answers

    What is required for a statutory body to seek a loan?

    <p>Clearance from the Ministry of Finance</p> Signup and view all the answers

    What is the primary characteristic of a company limited by guarantee?

    <p>It has members with limited liability</p> Signup and view all the answers

    Who is defined as a substantial shareholder according to Section 136 of the CA 2016?

    <p>A person who has an interest in 5% or more of the voting shares</p> Signup and view all the answers

    What is an example of improper use of a company's property?

    <p>Using company funds for personal gain</p> Signup and view all the answers

    In what situation is the number or the aggregate number of shares not less than 5% of the total number of all the voting shares?

    <p>When a person has an interest in one or more voting shares in a company</p> Signup and view all the answers

    What is the consequence of registering a company under the Companies Act 2016?

    <p>The company is governed by the rules of management and borrowings</p> Signup and view all the answers

    What is the requirement for a company with two or more classes of shares?

    <p>The person has an interest in one or more voting shares in one of those classes</p> Signup and view all the answers

    What is the primary purpose of a Partnership Deed in a partnership business?

    <p>To outline the rules and procedures of the partnership</p> Signup and view all the answers

    What is the effect of determining the outgoing partner's liability as at the date of departure?

    <p>It becomes easier to determine the liability</p> Signup and view all the answers

    What is the aggregate number of shares required for a person to be a substantial shareholder?

    <p>Not less than 5% of the total number of all the voting shares</p> Signup and view all the answers

    To whom does the obligation to disclose interest apply?

    <p>To individuals and corporations with an interest in 5% or more of the voting shares</p> Signup and view all the answers

    Why must substantial shareholders disclose their interest to the relevant public company and to the CCM?

    <p>Because they have an interest in 5% or more of the voting shares</p> Signup and view all the answers

    What is a unique feature of a limited liability company?

    <p>Separation of ownership and management</p> Signup and view all the answers

    What is the term for a person appointed to represent the interests of shareholders in a company?

    <p>Nominee director</p> Signup and view all the answers

    What is the name of the Act that governs partnerships in Malaysia?

    <p>Partnership Act 1961</p> Signup and view all the answers

    What is the term for a company that is owned by its members, who have limited liability?

    <p>Limited liability company</p> Signup and view all the answers

    What is the purpose of the Certificate of Registration of Business?

    <p>To register a business</p> Signup and view all the answers

    What is the term for a type of share that has priority over ordinary shares in the event of liquidation?

    <p>Preference shares</p> Signup and view all the answers

    What is the term for a type of business that is owned and controlled by its members?

    <p>Cooperative society</p> Signup and view all the answers

    What is the term for a person who is responsible for the day-to-day management of a company?

    <p>Chief executive officer</p> Signup and view all the answers

    Study Notes

    Consumer Lending

    • Lending to an individual is termed consumer lending, as it is not tied to any business activity or business purpose
    • Personal borrowers' needs are diverse and vary from financing asset acquisitions to personal consumption
    • Examples of asset acquisition include investments in properties, vehicles, and company shares
    • Personal consumption loans may be requested to meet peak expenditure periods, educational expenses, or emergencies like medical treatment

    Joint Borrowers

    • If two or more individuals borrow a loan jointly, all individuals are responsible for repayment
    • More than two individuals can obtain a loan and agree to be jointly responsible for repayment, as long as the financial institution is satisfied with their ability to meet the loan servicing obligation
    • There are no legal restrictions on the number of joint borrowers for a loan, and the bank's lending policy is the main guideline

    Eligibility of Personal Borrowers

    • Age is an important factor when lending to personal customers, with a minimum legal age limit of 18
    • A discharged bankrupt is a person who has settled their previous liabilities and has been released from bankruptcy status by the Director General of Insolvency
    • The lending policy of the bank will indicate if lending to a discharged bankrupt is permitted

    Registration of Business Borrowers

    • Businesses must be registered at the Companies Commission of Malaysia (CCM) under the Registration of Businesses Act 1956 (Revised 1978)
    • The CCM administers provisions under the Companies Act 2016 and the Registration of Businesses Act 1956 (Revised 1978)
    • A business can be registered as a sole proprietorship, a partnership, a limited liability company, an unlimited liability company, or a limited liability partnership

    Types of Business Categories

    Sole Proprietorship

    • A sole proprietorship is a business with a single owner or sole proprietor
    • The borrower can choose to apply for credit facilities in their personal name or business name

    Partnership

    • A partnership is an association of two or more persons to jointly conduct a business with a view to profit
    • The business entity is not distinct from the partners, and must be registered under the Registration of Businesses Act 1956 (Revised 1978)
    • A partnership can have up to 20 partners; a business with more than 20 partners is required to incorporate or register as a limited liability company

    Limited and Unlimited Liability Companies

    • Under the Companies Act 2016, companies can be classified as limited and unlimited liability companies
    • A limited liability company is limited by shares or guarantee, and members' liability is limited to the amount unpaid on their shares or the amount they agreed to contribute in the event the company is wound up
    • An unlimited company has no limit on the liability of its members
    • The name of an unlimited company shall end with the word "Sendirian" or the abbreviation "Sdn"

    Private and Public Companies

    • A private company is required to have certain characteristics, including being a company limited by shares, having not more than 50 shareholders, restricting the transfer of its shares, and not allotting shares or debentures with a view of offering them to the public
    • The name of a private company should end with the words "Sendirian Berhad" or its abbreviation "Sdn Bhd"

    Substantial Shareholders

    • A person or corporation with an interest in 5% or more of a Malaysian incorporated public company's voting shares must disclose that interest to the company and the Companies Commission of Malaysia (CCM).
    • A substantial shareholder is defined as someone with an interest in one or more voting shares in a company, where the number of shares is not less than 5% of the total number of voting shares.

    Director's Responsibilities

    • A director may be personally liable for breaching their general duties, including:
      • Failing to account for profits made from transactions with a conflict of interest
      • Making unlawful distributions
      • False or misleading reporting that causes the company a loss
      • Wrongful or fraudulent trading
      • Failing to pay debts
      • Disqualification proceedings

    Dividends

    • Dividends can only be paid out of profits if the company satisfies the solvency test, which includes cash flow solvency and balance sheet solvency.

    Clubs and Societies

    • Clubs and societies are unincorporated bodies with no legal status of their own.
    • They are formed by persons grouping together and agreeing to form a club or society, with members drawing up and adopting rules and by-laws.
    • Societies must be registered with the Registrar of Societies, while clubs do not need to be registered.
    • Members can dissolve a club or society by agreement, and the court can also order dissolution upon application by members or others.

    Government Entities

    • The government may privatize some of its administrative and economic units, incorporating them into companies.
    • These companies are subject to the rules of management and borrowings under the Companies Act 2016.
    • Government guarantees are no longer expected, as these companies are expected to run privately as commercial enterprises.

    Statutory Bodies

    • Statutory bodies are established under statute in Malaysia, such as the Armed Forces Fund Board and the Malaysian Multimedia Commission.
    • These bodies are allocated funds by the government and undertake some self-funding activities, but must comply with directives from the relevant governing ministry or statute.
    • Borrowings require clearance from the Ministry of Finance, and any guarantees or support require approval from the Ministry of Finance.

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    Description

    This quiz covers the basics of consumer lending, including different types of personal loans for asset acquisition and consumption. It also explores the various needs of personal borrowers.

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