Many thought that Malaysia had no specific legislation enacted to regulate the private memorial parks until the Federal Court decision in NV Multi Corporation Berhad & 10 Others vs Suruhanjaya Syarikat Malaysia (year 2010). This landmark Nirvana case confirmed the application of Section 84 of the Companies Act 1965 (“the Act”) to the industry as “interest scheme”, just like recreational membership scheme and time-sharing scheme.

Section 84 of Companies Act 1965

In the Nirvana case, Federal Court was called to decide on whether the business of Nirvana Group as memorial park operators which consists of, inter alia, the sale of burial plots and urn compartments to the public fall within the meaning of Section 84 of the Act thereby requiring compliance with the provisions therein (specifically Sections 84 to 97 of the Act).

It was expressly argued by Nirvana Group that purchasers do not enter into contracts that give rise to a right to participate in the profits nor right to participate in the assets of Nirvana Group’s business undertaking or scheme; and that there is no financial gain or expectation of a dividend or a share or interest in the business for the purchasers. The purchasers had “mere use” only that do not amount to participation.

Federal Court decided that the “interest” acquired by the purchasers fall within the ambit of Subsections (a) and (b) of Section 84(1) of the Act. “Interest” should be given a wide ordinary meaning to mean “a benefit, advantage or share” and not confined to merely financial gain, yield, profit or dividend.

The rationale provided by the Federal Court in this Nirvana case are worth a read. The following paragraphs of this article are excerpts reproduced from the Federal Court judgement.

Right to participate in asset for benefits

In concluding that limb (a) of Section 84(1) of the Act applies, the Court opined that: “Considering the nature that they are burial plots and storage spaces for urns, these involve the use of land in perpetuity (through the “licence” to use the burial plots or urn compartments created by virtue of the agreements – emphasis added). It is unlikely the graves would be exhumed or moved elsewhere. The permanency of these remaining on the land must be the foremost consideration of the plaintiffs and this is reflected in the agreement itself with the appointment of a trustee to operate the parks once they are fully developed. This is a clear indication of the purchasers’ participation in the assets of the plaintiffs not for profits, but for benefits.”

Common enterprise that led to expectation of interest

The Court also concluded that limb (b) of Section 84(1) of the Act applies, as purchasers also participate in a common enterprise which led them to expect interest from the efforts of the plaintiffs. The purchasers are closely connected in the sense that they expect the burial plots or urn storage spaces to be made available, securely guarded in a clean, pleasant and well maintained environment, when they make the initial payment. The purchasers also expect, in return for payment of maintenance charges, the plaintiffs’ continuous maintenance of the park facilities to a high standard as the purchasers are expected to return from time to time to pay respects to those buried in the park. This forms an integral factor to the success of the common enterprise.

Since the landmark decision was made, private memorial parks in Malaysia have progressively made applications to the Suruhanjaya Syarikat Malaysia for approval accordingly. These management companies put in place trust deed where corporate trustee is appointed for the scheme. They also issue prospectus containing details of the scheme and terms and conditions of the sale and purchase of the rights of use of burial plots and urn compartments.

Companies Act 1965 has since been repealed and replaced by Companies Act 2016. A new Interest Schemes Act 2016 has also been enacted, with effect from 31 January 2017. We will discuss at length the Interest Schemes Act 2016 in subsequent articles on this website.