Referral Fee Agreement Malaysia: Key Considerations for Businesses

Referral fee agreements are a common practice in business transactions across various industries in Malaysia. Such agreements involve payment of a commission or fee to an intermediary or referral agent for referring a potential customer to a business.

A referral fee agreement in Malaysia is typically entered into between a business and a referral agent, also known as an introducer or intermediary. The agreement outlines the terms and conditions governing the payment of commission or fee to the referral agent for successful referrals.

Before entering into such an agreement, businesses must consider certain key factors to ensure compliance with legal and regulatory requirements. In this article, we discuss the key considerations for businesses when entering into a referral fee agreement in Malaysia.

1. Legal Requirements

The first and foremost consideration is compliance with legal and regulatory requirements. In Malaysia, the payment of referral fees is governed by the Contract Act 1950. Under this Act, a referral fee agreement is only valid if it meets certain requirements, such as mutual consent, free consent, capacity to contract, and lawful object.

Additionally, businesses must also comply with other relevant laws and regulations, such as the Personal Data Protection Act 2010 and the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.

2. Commission Structure

Another key consideration is the commission structure. The commission or fee payable to the referral agent may be a flat fee, a percentage of the transaction value, or a combination of both. The commission structure should be mutually agreed upon and clearly stated in the agreement to avoid any confusion or dispute in the future.

3. Eligible Transactions

The referral fee agreement should also clearly state the type of transactions that are eligible for the payment of commission or fee. For instance, if the referral agent is only allowed to refer new customers to the business, this should be stated in the agreement. The agreement should also specify the timeframe within which a referral must be made to be eligible for commission.

4. Confidentiality and Data Protection

The referral fee agreement must also address issues relating to confidentiality and data protection. The referral agent may have access to confidential information about the business or the referred customers, and it is important to ensure that such information is protected. The agreement should state the obligations of the referral agent to maintain confidentiality and comply with data protection laws.

5. Termination and Renewal

Finally, the referral fee agreement should address termination and renewal. The agreement should specify the circumstances under which the agreement may be terminated, such as breach of contract or expiration of the agreement period. The agreement should also address renewal or extension of the agreement, including the terms and conditions of such renewal.

In conclusion, businesses in Malaysia must consider several factors when entering into a referral fee agreement with a referral agent or intermediary. Compliance with legal and regulatory requirements, commission structure, eligible transactions, confidentiality and data protection, and termination and renewal are key considerations to ensure a successful and mutually beneficial partnership. Businesses should seek legal advice when drafting a referral fee agreement to ensure compliance with applicable laws and regulations.