Qualified persons can now apply to be licensed as liquidators, or also known as insolvency practitioners, in Malaysia. This allows for the licence holder to take on appointments as: (i) liquidator; (ii) receiver or receiver and manager; (iii) judicial manager; and (iv) a nominee in a corporate voluntary arrangement.
The Accountant General of Malaysia recently issued its Guidelines for Qualification as Liquidator under the Companies Act 2016 (CA 2016) dated 21 January 2020 (only available in the Malay language). This now allows for qualified persons to apply for a liquidator licence under the CA 2016.
I write about the past qualification route for liquidators under the Companies Act 1965 (CA 1965) and this new qualification regime under the CA 2016.
Previously: Liquidator Qualification under the CA 1965
Under the previous CA 1965, a licensed liquidator had to hold an audit licence. The definition of an ‘approved liquidator’ under the CA 1965 was ‘an approved company auditor who has been approved by the Minister under section 8 as a liquidator and whose approval has not been revoked’.
So, individuals who had extensive liquidation-related experience could not necessarily obtain the licence to become an approved liquidator. Instead, a person had to first hold an audit licence and thereafter, show the necessary knowledge to qualify as an approved liquidator. In addition, once the individual became an approved liquidator and was focused on liquidation-related work, the individual had to still do sufficient audit work in order to maintain the audit licence.
As part of the reforms that led to the new CA 2016, the policy was to decouple the audit licence from the requirement to hold a liquidator licence. Liquidation-related experience and knowledge should be the guiding requirement to qualify as a liquidator.
The New Qualification Regime
The new qualification as a liquidator will involve these steps:
#1: Be a Member of a Recognised Professional Body
As set out in section 433(3) and (4) of the CA 2016, any person who is a member of a recognised professional body may apply to the Minister of Finance in order to be approved as a liquidator. The Minister of Finance may approve such person as a liquidator if he is satisfied with the experience and capacity of the person.
To date, there is no published criteria or requirements on how a body or an association can qualify as a recognised professional body.
But as set out in the next step, there are two recognised professional bodies.
#2: Two Recognised Professional Bodies
On 8 March 2018, there was a prescription notice P.U. (B) 123/2018 gazetted to state that the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants as recognised professional bodies under section 433 of the CA 2016.
#3: The Accountant General Guidelines
An applicant must satisfy these qualifying requirements under the Accountant General Guidelines and where I summarise some of the key requirements:
- Must be a Malaysian citizen or permanent resident.
- A member of a recognised professional body.
- Not a bankrupt, not convicted of any offence involving fraud or dishonesty, and not convicted of any offence relating to the promotion, formation or management of any body.
- Experience requirements: (i) 5 years of full-time working experience in the field of insolvency; (ii) if the applicant has this relevant experience but no longer practicing insolvency, then having not left the practice of insolvency more than 3 years from the date of application; (iii) if the practical insolvency experience is from outside of Malaysia, then the applicant must have practised insolvency for 1 year in Malaysia.
- A sponsor letter from another approved liquidator.
- Must have the capacity in carrying out the duties as a liquidator.
The applicant will undergo an interview with a committee made up of representatives from the MIA and key regulators on these aspects:
- MIA: competency on accountancy of companies.
- SSM: The CA 2016 and the powers as liquidators.
- Securities Commission Malaysia: The laws and regulations on Public Interest Entities.
- Malaysian Department of Insolvency: Competencies on practical aspects of insolvency covering technical aspects of winding up of companies, restructuring of companies and corporate rescue mechanisms.
#4: Additional Requirements under the Guidelines and the SSM Circular
The liquidator licence is personal to the individual. But the Guidelines allow the liquidator to practice as a sole practitioner or in a partnership.
The Guidelines envisages that there can be a liquidator firm being: (i) a non-audit firm registered with the MIA; (ii) a limited liability partnership (under the Limited Liability Partnership Act 2012); or (iii) a sole proprietorship or partnership (registered under the Registration of Businesses Act 1956).
The Guidelines will have to be read together with the newly issued Circular 1/2020 dated 24 January 2020 by SSM and which contains the new form that has to be lodged with SSM.
What is not clear from the Guidelines and the Circular is whether the liquidator firm can be established as a private limited company and if so, what are the requirements of such a private limited company. Where the liquidator firm is a partnership, the requirements are that all the partners must also be licensed liquidators.
#5: Withdrawal of the Liquidator Licence
Paragraph 7 of the Guidelines also provides that there can be a withdrawal of the approval to be a liquidator. Any complaint or queries can be placed before the Committee set up under the Guidelines. The Committee is empowered to obtain any explanation from the liquidator or to issue a show cause notice to the liquidator.
This allows for an additional avenue of oversight over the conduct of liquidator.