On 26 and 27 October 2020, I spoke at the two-day webinar organised by the Companies Commission of Malaysia Training Academy. I was joined by Norhaslinda Salleh of the Companies Commission of Malaysia, Khoo Poh Poh of Ernst & Young and Jimmy Ng of Chooi & Co + Cheang & Ariff.
We covered a range of restructuring and insolvency topics. There were some interesting facts shared as well.
Judicial Management Statistics
One interesting fact was on the statistics of judicial management applications made since 2018. The judicial management provisions only came into on 1 March 2018. The years 2018 and 2019 saw 14 and 11 judicial management applications being filed respectively.
I am not entirely surprised to see that as at October 2020, 29 judicial management applications being filed.
The key advantage of filing a judicial management application is the automatic moratorium that will follow. Whether it is financial distress due to the COVID-induced movement control, or whether they are tactical applications being made, the judicial management application does stall legal proceedings.
It seems that the increased secured creditor veto over judicial management (which came into force on 15 January 2020) has not deterred judicial management applications.
However, it is a bit surprising to see how few judicial management applications eventually leads to a successful restructuring proposal. We do not know that out of the applications filed, how many judicial management orders were in the end granted. But as a corporate rescue tool, we see a paltry one successful proposal in 2018 and only one successful proposal in 2019. It was also shared that in the year 2019, there were altogether three proposals and with only that one successful proposal passed.
Judicial Management Order Longer than 12 Months
There was another interesting statistic mentioned.
There is an ongoing judicial management matter where the judicial management order has been extended beyond the 12 months. In Malaysia, it was thought that the maximum duration of a judicial management order is only six months plus one extension of six months. This is by virtue of section 406(1) of the Companies Act 2016 stating:
(1) A judicial management order shall remain in force for a period of six months from the date of the making of the order, unless the judicial management is otherwise discharged, but the Court may, on the application of a judicial manager, extend this period for another six months subject to such terms as the Court may impose.
It is good if that in the appropriate circumstances, and where the Court so allows it, that there can still be further extensions of the six-month period. There would be cases where the judicial manager is still required to be in control of the company in order to implement the proposal.
But we would have to see if there will be a contested application in the Court for such an extension beyond the total 12 months’ period. We can then hopefully read the grounds of decision interpreting this section 406(1).