Category: Startups

Cradle Circle: Bridging Visionary Startups and Investors in Second Series Event

The second series of Cradle Circle, hosted by Cradle Fund Sdn Bhd (Cradle), witnessed a vibrant convergence of more than 180 startups, investors, and venture capitalists. This annual event was meticulously designed to serve as a dynamic platform for budding founders to pitch their ideas, while also acting as a nexus for potential investors and key stakeholders within the startup sphere to forge connections and exchange invaluable insights.

Norman Matthieu Vanhaecke, the Acting Group CEO of Cradle, underlined the event’s overarching goal, emphasizing its dual role in facilitating pitching sessions and cultivating a collaborative atmosphere that fosters networking and synergy among diverse stakeholders. Beyond the stage of pitching, Cradle Circle also extends its nurturing embrace to empower startups in presenting their innovative business solutions. The event additionally availed startups the invaluable opportunity to glean wisdom from seasoned industry experts.

The inaugural session, spearheaded by Cradle’s Legal team, bore the title “From Legal Limbo to Investor Bingo: Cracking the Code for Startup Success.” It delved into the intricate challenges that startups grapple with in areas spanning funding, regulatory compliance, and investor engagement. The session not only shed light on these hurdles but also provided a comprehensive roadmap to navigate these complexities and optimize fundraising endeavours. The second session, aptly named ‘Failures among Startups’, witnessed the participation of startup founders who candidly shared their personal entrepreneurial journeys, encompassing experiences and obstacles overcome.

“Cradle Circle epitomizes an exceptional conduit for startups to unveil their products within a collaborative and hospitable ambiance, thereby nurturing growth and nurturing nascent concepts,” elaborated Norman. “We anticipate this event to wield the potency of a potent growth catalyst, connecting businesses with the contacts and recommendations imperative for thriving in today’s fiercely competitive business arena.”

Juliana Jan, the Senior Vice President of Grant and Investment at Cradle, expressed deep gratitude for the overwhelming support and engagement witnessed during the second iteration of Cradle Circle. This year’s event served as a catalytic force for fostering more profound collaborations across diverse stakeholders within the startup ecosystem—a mission resonating with Cradle’s core objective of fostering robust relationships and dismantling obstacles that frequently beset startups.

“We take immense delight in witnessing the tangible positive influence that this event has imprinted on participating entrepreneurs. By facilitating fundraising pitches alongside access to legal and HR counsel, we aim to fortify the vibrant startup community further. Anticipating the next round of Cradle Circle, we eagerly look forward to enriching this experience with more empowering initiatives,” Juliana affirmed.

Participating in the pitching session were ten dynamic startups: Heytech Sdn Bhd, ACS Pentas (Asia) Sdn Bhd, ODESI ECOB Sdn Bhd, Nonivasi Care Sdn Bhd, Pandai Education Sdn Bhd, Valuing IP Sdn Bhd, BlueDuck Sdn Bhd, Life Origin Sdn Bhd, CoKeeps Sdn Bhd, and SpaceIn Sdn Bhd.

Buoyed by the triumph of the second edition, Cradle pledges to steadfastly continue its commitment to steering the next generation of startups onto the path of success. With a holistic approach, Cradle remains dedicated to offering indispensable guidance and mentorship, nurturing the growth and resilience of these aspiring ventures.

For more insights into Cradle and its avenue for funding, startups and ecosystem participants are encouraged to visit www.cradle.com.my

August 18, 2023
Pre-Budget 2023: Expectations For A More Sustainable Tax
The 2022 Budget was short on outlining any initiatives to enable Malaysia to build a more sustainable tax revenue base. The review of the tax incentives
regime has yet to be finalised and hopefully, some progress will be announced in the coming Budget.

We expect the 2023 Budget to outline a more structured mid to long term reform of the tax system, so that we can have a more sustainable tax system. Malaysia needs to, in the medium term, broaden the scope of the existing Sales and Service Tax (SST), and ultimately make it a broad-based
consumption tax with added features such as tax invoicing similar to a Value-Added Tax.

We should also have a more inclusive capital gains tax and move quickly on an efficient integrated national tax agency, in order to have a more sustainable tax.

Tax Treatments To Review

Currently, fees paid to tax advisers and company secretaries for the various services rendered on tax and corporate compliance matters are subject to restriction. Furthermore, the Inland Revenue Board of Malaysia (IRBM) recently issued the Corporate Tax Governance Framework (Framework) to enhance companies’ processes and governance on income tax matters.

The Framework expects the involvement from the board of directors, audit committee and senior management to set up appropriate checks and balances on tax reporting.

However, the IRBM states that costs incurred for advice and assistance to develop the Framework are considered to be capital in nature and therefore not tax deductible. This further irks businesses as such expenses are incurred to encourage corporate governance.

For a more sustainable tax, another area to review is the exclusion of Intangible Assets from the definition of the term “Plant” in the 2021 Budget. This has resulted in cost incurred such as computer software, licences, trademarks, patents, films, copyrights etc are no longer eligible for capital allowances or tax depreciation, despite these being assets utilised in the production of taxable income.

This is truly surprising, given the Government is leading the push from brick-and-mortar businesses to a digitalised and knowledge-intensive
economy. Engagements have been held among various parties and it is hoped that in the upcoming Budget, the IRBM would review those tax treatments.

A More Sustainable Tax Structure

As a country, we cannot keep on borrowing and servicing debt. We should remove unnecessary exemptions and deductions, and simplify things
to enable all to be part of the tax net. There is a need to push on towards a reliance on consumption taxes, in order to achieve a more sustainable tax.

The Ministry of Finance (MOF) has stated in the Pre-Budget Statement in June that tax reform initiatives with the objective of broadening the
tax base, as proposed by Tax Reform Committee, will continue to be implemented.

The initiatives include:
- a) Undertaking a review of broad-based incentives, reliefs and deductions
- b) Improving tax administration through comprehensive registration of taxpayers
- c) Better training of tax personnel
- d) Improved registration of cross-border trade
- e) Strengthening the tax audit and investigation
- f) Enhancing legal certainty for taxpayers
Necessary details on the aforementioned will need to be spelt out in the 2023 Budget.

On the international front, Malaysia has committed to implement several agreed upon tax standards to create a competitive business environment for investors and to counteract cross-border tax evasion activities. To date, we have implemented four minimum standards of the Base Erosion and Profit Shifting (BEPS) Action Plans, while continuing to review the rest of the Action Plans under our domestic tax law.

Domestically, the tax net can be widened by tracking down those who should be within the tax net. That means curtailing tax evasion, curtailing smuggling, registering those who should be registered as taxpayers, and devising strategies using the tonnes of data that various agencies
accumulate to ensure that all who should be taxable are indeed taxed.

In the Budget 2022, several initiatives were introduced to manage revenue leakages, including:
- a) Removal of tax exemption on foreign-sourced income received in Malaysia by a Malaysian tax resident
- b) Introduction of the Tax Compliance Certificate as a precondition for tenderers to participate in Government procurement
- c) Implementation of a Tax Identification Number (TIN)
It was a surprise when a five-year exemption of the tax on foreign income was announced subsequently. Even Singapore and Hong Kong, which have similar tax systems to Malaysia do not have such a time-based exemption period.

However, the implementation of Tax Compliance Certificate and the TIN are very good compliance initiatives to reduce leakages, but more details are needed.

In line with the 12th Malaysia Plan to strengthen digital services infrastructure, the digitalisation of the tax function will be implemented with e-Invoicing to be done in stages. This will enhance the efficiency of the country’s tax administration, reduce compliance costs to taxpayers, and
increase the efficiency of business operations. E-Invoicing will also support the use of TIN as a measure to expand the income tax net.

The Auditor General’s report has stated time and time again about losses and waste in the public sector. Greater accountability on where our tax ringgit goes and how it is utilised is essential to further narrow the trust deficit that exists, which is a factor why some are reluctant to pay their taxes.

A more sustainable tax structure for the future is probably in the pipeline. But such matters can be excruciatingly slow in coming into fruition, due to the lack of political will and vested interests.

All said, the 2023 Budget may turn out to be an election budget, with a slew of populist measures to score brownie points that may damage the country’s rather fragile fiscal momentum. Against this backdrop, debt and inevitably debt service charges, will rise.

Given that Malaysia’s narrow tax base means high concentration revenue risk to the overall economy, its fiscal vulnerability could increasingly become a trigger factor for sovereign rating downgrades by international credit rating agencies. Here’s to a more sustainable tax structure for a better Malaysia.

About the Author

Dr Veerinderjeet Singh is a tax observer who is the Non-Executive Chairman of Tricor Malaysia. He is the Immediate Past President of the MIA and MICPA, and a Past President of CTIM. He is a strong advocate of tax reforms and sits on the boards of a few public entities. He is also an Adjunct Professor at Monash University Malaysia, as well as a Vice Chair of the Global Tax Commission at the International Chamber of Commerce based in Paris.
September 2, 2022
5 Legal Tips That Every Start-Ups Should Know
I have over the last couple of years worked with entrepreneurs in start-up businesses. The one thing that continually stands out is that most of my clients do not consider the “legal aspects” as an important facet to their business. If they do seek advice, it may sometimes appear as if the advice expected is a quick solution to a long-term problem, which is never good for any type of business. That’s why it is important to know some of the legal tips, especially for start-ups.

Most start-up entrepreneurs use the reason that legal advice is costly and as such, it is an expenditure they do not want to invest in. I can assure you that once legal proceedings are initiated against you either personally or against your company, the cost you would incur in getting good legal counsel would be a lot more than what you may be incurring now.

In the long run, the fees will be higher, and the process a lot more time-consuming and protracted. It will be a detrimental lesson to learn. My advice is to always be aware of your legal rights and duties under the Companies Act 2016 if you wish to be in business.

I have always said that laying the foundation right from the beginning is key to any successful business. Here are legal tips, where you have to yourself these questions if you are in the start-up business or wish to start one:

1. Do I Have Partnership And/Or Founder Agreement In Place?

Oftentimes, people get so excited about a business plan that they forget to discuss the nitty-gritty. It is important to have regular meetings with your co-founders or investors about the terms of your partnership.

Some questions you may wish to ask and set out clearly in your partnership and/or founder agreement are:
- What are your specific roles and responsibilities as founders?
- What if one founder wishes to exit? What happens to his shares?
- What is the agreed percentage that each founder will get?
- What are the overall goals and expectations for the business?
- What are the consequences if the founders do not hit their specific KPIs?
- What are the pay-outs for allowances, dividends or salaries for co-founders?
2. Will The Start-up Be Registered As A Private Limited Company, Enterprise Or A Limited Liability Partnership?

This question is pivotal as there are tax implications as well as other accounting and auditing requirements that the start-up will need to comply with. Over and above that, personal liabilities of the partners and founders will also need to be considered.

For example, if an enterprise is set up, then there will be personal liability involved as opposed to a private limited company, where the company will take on that liability as a legal entity.

Do speak to your lawyer and accountant on a structure that would best suit you and your business.

3. Employment Issues

Image of business documents, pen and glasses on workplace during meeting of partners

Having employment contracts in place for the people you hire whether they are freelancers or full-time employees is vital. This will reduce the risk of having a labour court dispute arise in the event you wish to terminate a particular employee who is not performing as expected.

Do ensure that your employment contracts have a confidentiality clause that binds your employees so as to ensure that your client and your confidential information are not divulged or disseminated to any third party.

4. Data Protection Matters

When your start-up business involves managing someone else’s personal data, there are legal standards that you must comply with in managing and handling such personal data. For example, obtaining the consent of the Data Subjects before you obtain their personal data, storing of the said personal data, giving access of the personal data you have in your possession to the Data Subjects when they ask for it.

Recently, the Personal Data Protection Commissioner has indicated her intention to carry out inspection on data users that are not registered or not required to be registered under the Personal Data Protection Act in order to ensure compliance with the general provisions of the Act as well as the minimum security, retention and data integrity standards set out under the Personal Data Protection Standards 2015.

5. Intellectual Property Matters

It is important to check with the Intellectual Property Corporation of Malaysia (“MyIPO”) whether some other company or person has already trademarked your startup business name. Please do the necessary searches to ensure that you are not using someone else’s business name or logo. This will ultimately relieve you of any hassle of being sued for trademark infringement.

And what a pity that would be if you have already gained traction in your startup business and people are starting to recognise your brand name not to mention the unnecessary legal cost of having to defend a suit for trademark infringement.

What I have set out here are just a few of the areas you may wish to consider in your own startup business. However, each and every business will have different needs or requirements so it would be best to speak to a legal advisor on setting your foundation right.

Even if you are already a successful start-up, I believe it is never too late to do a legal audit to check if everything has been set right, to avoid any unnecessary legal repercussions.

About the author

SHARMILA RAVENDRAN is the founder of the law firm, Messrs Ravindran located in Mont Kiara, Kuala Lumpur. She has more than 14 years of experience in the legal industry servicing clients that include local and foreign companies. She is now actively involved in corporate advisory work and commercial litigation and is a Panel Adjudicator with the Kuala Lumpur Regional Centre for Arbitration. She also sits on the Bar Council Child Rights Committee and is the Legal Director for Lean in Malaysia. She can be contacted at sharm@ravindran.com.my.
August 18, 2022
Review Your Business Legal Health Yearly

Whether we are business owners or in employment oftentimes we neglect our legal well-being. The general notion is ‘what isn’t broken need not be fixed’.

What we fail to recognise is that most of the time, a lot of our legal problems, which may at the material time appear small or insignificant, can with time and neglect, multiply and become costly to rectify.

Most times these legal crises and complications can be averted or reduced if the right steps are taken at the appropriate time.

Why is a Legal Health Check Important?

It is important to remember that if your financial and legal matters are badly managed, you are directly exposing yourself personally as well as your company and clients to various legal implications.

These risks can cause unnecessary cost, loss of business relationships, knowledge and possible statutory or regulatory breaches. The effect of a badly managed business is far- reaching and can in some situations take years to rectify/remedy.

The advice here is to be constantly aware and apply your mind to a couple of key areas when you are performing your own legal health check. Here are some of them:

1. Have You Complied with the Relevant Statutory Regulations & Laws?

Often, as business owners, you may not be aware of the changes in law that may have taken place, and as such need to be advised by your legal advisers on the latest legislation or amendments to any current legislation that concerns the industry you are in and the services you render.

There are currently more than 20 new Acts that have been made and countless new regulations and amendments to the current laws.

If you are not keeping abreast with the changes, you will be exposing yourself and your business to risk. What you do not can hurt you!

2. Partnerships and Shareholding

Make it a yearly affair where you have a formal discussion with your partners/directors on their roles, scope of work, performance and entitlements.

Have these discussions minuted and served on them officially. This makes it easier to address partnership or business issues and enables you to make any necessary changes to your business structure, revising targets, scope of work etc.

It is also of utmost importance to have written partnership and/or shareholders agreement to cover all terms of your partnerships and shareholding.

Ensure that your agreements adequately deal with matters such as buyouts, raising capitals, succession, put & call options and exit clauses. Your partners/directors must also be fully aware of their duties and obligations under the new Companies Act 2016.

3. Trade Creditors and Debtors

By this time of the year, you must know who owes your company money and how you intend to recover those unpaid debts. Have a list of creditors prepared and send out the necessary reminders and letters of demand.

Start the process of recovering monies before the New Year. The longer you wait, the harder it will be to collect these debts.

For those creditors who, for whatever reason cannot pay you in full, it would be advisable to speak to them about an instalment plan and get a settlement agreement drafted to confirm the instalment terms. If possible collect post-dated cheques.

4. Employment Contracts

It is pivotal for you to know what your exposure as a company or business in an employment dispute. It is also important for you to know the processes and procedures that you need to carry out before you terminate a belligerent employee.

It is prudent that you have an Employment Handbook prepared and served on all your employees.

This year alone there have been a lot of discussion on the need for change to our employment laws in particular, to laws covering sexual harassment at work, maternity and paternity leave, data protection and personal information.

5. Intellectual Property

Whatever industry you’re in, it is prudent to consider registering your trademark and tradename. As your business gains popularity and people start recognising your brand and name, it is inevitable that a competitor may want to benefit from your goodwill to gain some traction.

You do not want a competitor to proceed to use your name and logo in a similar industry and reap the benefits and goodwill off your hard work.

Please do consider securing your intellectual property rights. It makes it easier for you to enforce your rights when you have the requisite trademarks being registered.

6. Written Contracts and Agreements

Always have your written contracts and agreements revised and up to date. Review the terms of your Purchase Orders, Invoices, Supplier Contracts, Equipment/ Machinery Leases, Rental Agreements.

It is important that at all material times, you are aware of your key suppliers and key customers. Review these contracts and agreement as there may be renewal clauses in those contracts that may have slipped your mind, which could cause you undue losses.

7. Train Your Staff

Always train your staff to be aware of what type of legal documents to look out for. For example, a Winding up Notice that is served on your registered address needs to be brought to the immediate attention of the Board of Directors, as there are dire repercussions of not responding to the said Notice within the statutory imposed period of time.

Conclusion

There is no such thing as a ‘one size fits all’ when it comes to legal matters. You will need to design your own Legal Health Check which is suitable for your own business or company.

Like a well-tended garden, you will need to constantly prune, remove and regrow your legal structures to ensure that it is in perfect order.

Always remember that a detailed examination of these key areas will help you identify any danger or grey areas which will then enable you to circumvent or reduce any potential risks and liabilities to your business.

About the author

SHARMILA RAVENDRAN is the founder of the law firm, Messrs Ravindran located in Mont Kiara, Kuala Lumpur. She has more than 14 years of experience in the legal industry servicing clients that include local and foreign companies. She is now actively involved in corporate advisory work and commercial litigation and is a Panel Adjudicator with the Kuala Lumpur Regional Centre for Arbitration. She also sits on the Bar Council Child Rights Committee and is the Legal Director for Lean in Malaysia. She can be contacted at sharm@ravindran.com.my.

July 27, 2022