On 10 April 2020, the Companies Commission of Malaysia (SSM) announced that seven reliefs will be provided to companies in light of the COVID-19 outbreak and Malaysia’s Movement Control Order (MCO). These initiatives are very much welcomed. They range from temporary protection from winding up of companies, extension of time to lodge statutory documents, and an extension of time for the annual general meeting.
#1: Moratorium of 30 days until after the MCO to Lodge Statutory Documents
SSM will grant a moratorium of 30 days from the end of the MCO to lodge all affected statutory documents. For now, the MCO has been in effect since extended to 28 April 2020 and possibly subject to further extensions.
So it is good that this moratorium is kept open-ended in that it will be pegged to the end of any extended MCO. This moratorium will benefit companies and limited liability partnerships. Within this 30-day moratorium, late lodgement fees are exempted. SSM has posted up a FAQ on this relief.
#2: Three Months’ Extension for Lodging of Financial Statements
SSM grants an extension of time of three months from the date the companies had to lodge their financial statements. As a result of this, companies have to be aware of the newly-issued Practice Directive No. 6 of 2020 now revised on 15 April 2020. An application for the extension of time must still be made and sent by email before 30 June 2020 to be eligible.
Please already read the FAQ on the extension of time for the lodging of financial statements. SSM will waive the application fee of RM100 for the extension of time.
#3: Extension until 31 December 2020 for Company Secretaries to Fulfill CPE Requirements
SSM has extended the compliance period of Section 241 of Companies Act 2016 for company secretaries to fulfil their CPE requirements until 31 December 2020. This is subject to certain terms and conditions. The FAQ sets out further clarification.
#4: Temporary Winding Up Protection
SSM has rolled out a form of temporary winding up protection for companies. The most common method of winding up a company is through the issuance of a statutory demand under section 466(1)(a) of the CA 2016 based on the prescribed amount by the Minister (which was RM10,000). The debtor company then has 21 days to respond to the statutory demand after which the creditor can file a winding up petition.
SSM’s protection works in two ways. The first is where the Minister will prescribe a higher amount of RM50,000 for the statutory demand. This is in place until 31 December 2020. This is an express power of the Minister to prescribe the amount through a gazette notice.
Second, instead of the 21 days, the companies will be given six months to respond to the statutory demand. This second component is significant and gives significant breathing space to companies. I will be interested to see how this variation of the 21 days will be carried out instead of an outright amendment of the CA 2016. I suspect the Minister exercised his powers under section 615 of the CA 2016 to grant some form of exemption and to impose terms and conditions.
I therefore wait to see the gazetting of any relevant notices and I will update this post. These notices are not on the Federal Gazette website yet. You can read the SSM FAQ on these winding up changes.
While these two components provide some temporary protection from one form of winding up, there can still be other methods to wind up a company. Further, distressed companies will still continue to face other legal proceedings. The companies’ assets may still be subjected to execution through garnishee proceedings or seizure of assets under a court order.
Companies may have to consider other moratorium options under the restructuring and rescue mechanisms of the CA 2016.
#5: Extension of the Compound Reduction Period
SSM extends the deadline of the “2020 Compliance Campaign of the Companies Act 2016” from 30 April to 30 June 2020. In this campaign, SSM will provide a maximum compound reduction rate of 90% from the original value of the compound for certain common offences under Companies Act 1965 and CA 2016. The SSM FAQ touches on this relief.
#6: Exemption for Companies Limited by Guarantee (CLBG) for Donations
SSM’s sixth initiative is to introduce an exemption to CLBG from obtaining approval for solicitation of donations from the public to help those affected by COVID-19.
SSM will grant exemption to CLBG which have been approved by the Inland Revenue Board Malaysia (IRB) pursuant to subsection 44(6) of the Income Tax Act 1967 (ITA 1967) from applying for the Minister or Registrar’s approval. This exemption is applicable until 31 December 2020.
CLBG which have not been approved by the IRB can also proceed to conduct the solicitation of donation activities from the public, but must make an official application within 30 days after the MCO ends. See the SSM FAQ for more details.
#7: Extension of Three Months to Hold the AGM
Finally, SSM will grant an extension of three months from the date the AGM has to be held. Companies must apply for the extension of time and where SSM will waive the RM100 fee.
You will have to refer to the same Practice Directive No. 6/2020 revised on 15 April 2020 where it contains the application form, and to also read the FAQ. I wrote an earlier post regarding the impact of COVID-19 and the holding of meetings.