A Critical Study on whether the Single Asset Theory is Applicable in the Creation of Private Express Trust in Malaysia

Abstract

The aim of this paper is to ascertain whether the single asset theory of Professor Goode is applicable in the context of Malaysia trust law. The said theory postulates that company shares of the same issue and class are a single asset that can only be co-owned. Separate ownership of the said shares is not possible. Essentially a doctrinal methodology is employed for this research. Primary sources of law include the Malaysian Companies Act 2016 and the latest common law of Malaysia and some commonwealth countries. Secondary sources of law taken into consideration include law journals published worldwide. The current law on certainty of subject matter in Malaysia pertaining to an unidentified portion of unascertained fungible shares requires only semantic certainty. This entails an accurate description of the purported trust property and its quantity. Precise identification of the shares held on trust is not required. The ensuing nature of proprietary holding of the beneficiary of the shares subject to a trust is that of separate property. The recent resurgence of the single asset theory seems to cast doubt on the current law on certainty of subject matter. The said theory postulates that company shares of the same issue are non-fungible units that can only be co-owned, namely separate ownership is not possible. If the theory is applicable in Malaysia, it would alter the current trust law on the requirement of certainty of subject matter. Identification of unascertained fungible shares subject to a trust would then be required to satisfy the requirement of certainty of subject matter. Such a conclusion means that traditional trust law which requires identification of shares subject to a trust becomes applicable. This paper concludes that the said theory cannot be justified in Malaysia as it arguably contradicts the Malaysian Companies Act 2016, the current trust law of Malaysia, Hong Kong, United States and England. Thus it is submitted that the single asset theory that seeks to revive traditional trust law pertaining to the requirement of certainty of subject matter of fungible shares has no place in current Malaysian trust law.