Tay Partners

InsiderTAPS (17 August 2017)

Regulating Mobile App-based Ride Hailing Services in Malaysia

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The Land Public Transport (Amendment) Bill 2017 and the Commercial Vehicles Licencing Board Act (Amendment) Bill 2017 (collectively, “Amendments”) were passed in the Parliament on 27 July 2017. The Amendments were made pursuant to the Taxi Industry Transformation Programme which aims to regulate the emerging e-hailing industry and to create level playing field between said industry and local taxis. Mobile app-based ride hailing service providers in Malaysia have been operating in a legal vacuum as there was no specific legislation to govern or regulate this service. The Amendments are timely in view of the increasing popular demand on e-hailing in Malaysia which has already become a compelling alternative to the traditional taxi.

Below is a summary of the key changes to be introduced by the Amendments.

    • Under the Amendments, mobile app-based taxi service providers can only legally operate intermediate business in Malaysia after obtaining the required intermediation business licence. “intermediate business” is defined as the “business of facilitating arrangements, bookings or transactions of an e-hailing vehicle whether for any valuable consideration or money’s worth or otherwise”. The regulatory body responsible for processing the licence application is the Land Public Transport Commission (SPAD) in Peninsular Malaysia and the Commercial Vehicles Licensing Board (CVLB) in Sabah and Sarawak. It is an offence to operate intermediate business without a licence.
    • The Amendments seems to place emphasis on financial position of an e-hailing service operator. An applicant is required to provide complete information of his financial standing to prove his ability to maintain and operate the intermediation business in order to apply for the licence. A licence holder is also required to inform CVLB of any proceedings or claims which might have an adverse effect on the financial condition. An application for an intermediation business licence shall be made in the form and manner as determined by the relevant regulator and shall be accompanied by the prescribed application fee and such information and documents as may be specified by the relevant regulatory body. SPAD and CVLB should be expected to issue a guideline soon to set out the relevant details. Existing e-hailing service provider will be given one year grace period to apply for the required licence.
    • The licence is renewable but it is not transferrable or assignable unless with the relevant regulator’s authorisation. Any change in control of the licence holder is required to be informed to the relevant regulator.
  • e-hailing vehicle will be classified as a public service vehicle subject to an intermediate business licence. E-hailing vehicle is defined as a motor vehicle having a seating capacity of four persons and not more than eleven persons (including the driver). e-hailing drivers will be required to meet conditions similar to those placed on conventional taxi drivers such as such as displaying driver’s identification card, undergo mandatory medical check-ups, a car registered as a public service vehicle, pass annual vehicle inspections, and have proper insurance covers. These changes are welcoming to boost passenger’s confidence in e-hailing service as there have been a number of reported accidents and also incidents involving sexual assaults committed by ride-share drivers lately.

e-hailing vehicle drivers would be considered as carrying out self-employment activities under the Self Employment Social Security Act 2017, i.e. the service of carriage of passengers by means of public service vehicle or motor vehicle owned by a person, or managed, maintained or operated by a person, under any form of arrangement with the owner or lessor of the vehicle; and (ii) whether for hire or reward or for any other valuable consideration or money’s worth or otherwise. This new Act seems to provide automatic classification of the drivers as independent contractor. In some jurisdictions, the drivers are regarded as employees and the e-hailing company is compelled to pay social security contributions and other employee’s legal benefits. Under this new Act, the drivers will be required to register with and pay contribution to SOCSO. The rate of contribution is approximately 1.25% of his or her monthly earnings. The Amendments will have to be passed by the Senate, obtain Royal Assent and be gazetted before they come into force. It is therefore too soon to determine whether the new legal framework will transform the taxi industry and support technology innovation in Malaysia but the ride sharing innovators are at least here to stay for now.

Nicole Leong
Senior Associate, Corporate & Commercial Practice Group

For further information and advice on any areas of corporate and commercial advisory work, please do not hesitate to get in touch with the following:

Tay Beng Chai
Managing Partner and Head of Corporate Practice
+603 2050 1881