The Role of the Danaharta Act
Danaharta Nasional Bhd is an asset managment company that plays a vital role in the Malaysian economy today. Its role concerns the restructuring and resolving of non-performing loans (NPLs) in Malaysia. To ensure the management and selling of the NPLs are effectively done, the Pengurusan Danaharta Nasional Act 1998 was enacted as well.
This Act provides the proper and effective framework for Danaharta to undertake its mission. It contains not only provisions that protects Danaharta’s independence and integrity, but also governs Danaharta’s activities through a check and balance system. The Act also allows Danaharta to maximise returns through special powers given to it.
The first power gives Danaharta the ability to buy assets through statutory vesting. This is an essential power as it provides a fast way in which to enable Danaharta to acquire assets with certainty of title. Nevertheless, third party interests still exists even after the asset is purchased by Danaharta from the bank. Therefore, Danaharta must still deal with existing registered interests before selling any asset.
The second power concerns the ability for Danaharta to appoint special administrators to manage distressed companies with a 12 month moratorium on the assets of the company. This special administrator is a qualified candidate appointed by the Ministry of Finance, Bank Negara and the Securities Commission to help revive a business structurally, operationally or both. The special administrator does this by taking control and management of the assets and affairs of a corporate borrower and arriving with a proposal to settle the debt problem of the company. This proposal must be approved by Danaharta. Once approved, a majority of votes from secured creditors is required for approval. Subsequently, approval from relevant regulators is required.
In the event that the proposal is not accepted by Danaharta, a foreclosure can instead be made without the the normal lengthy duration that would normally ensue. Danaharta can therefore sell properties after 30 days, thus preserving value of the asset. However, the foreclosure process is still time consuming and may cause the value in which Danaharta to obtain from the liquidation to be less.
The Pengurusan Danaharta Nasional Act provides a framework which will enable Danaharta to operate efficiently, economically and effectively for the benefit of the public. Without such options provided, enterprises will weaken and their value lessen as lenders would increasingly look to liquidation and holders of security would rush to enforce their security. The asset management company therefore plays an important role in the economy by bringing real value to a company’s survival chances.