Companies Act 2016

Company in Distress: Insolvency Issues relating to Employees

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Under Malaysia’s movement control restrictions and with COVID-19, companies are facing cash-flow issues and financial difficulties. With the employers facing such difficulties, the employees may also face salary cuts (for example, see this news report) or retrenchment. Companies may then slip closer towards financial distress and may have to pursue restructuring and insolvency options. This article sets out the insolvency issues relating to employees.

I set out the different scenarios where a company in distress may pursue a scheme of arrangement, apply for judicial management, end up placed in receivership or is compulsorily wound up. I touch on how these scenarios will affect the rights of employees. Continue reading →

Companies Winding Up Protection Takes Effect (Updated)

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In my earlier post, arising from COVID-19, I had written about the Companies Commission of Malaysia (SSM) providing seven reliefs for companies. One of them is a temporary winding up protection for six months and the increase to the debt threshold to above RM50,000 in the statutory demand.

First, the Minister of Domestic Trade and Consumer Affairs (being the relevant Minister under the Companies Act 2016) has now exercised his powers under section 615 of the CA 2016 and gazetted the Companies (Exemption) (No. 2) Order 2020, which I will refer to as Exemption Order No. 2. This provides for the six-month period to respond to a statutory demand.

Second, the Minister has also issued the direction under section 466(1)(a) of the CA 2016 to prescribe the threshold amount to above RM50,000.

Please note that Exemption Order No. 2 has revoked the earlier Companies (Exemption) Order 2020, which I will refer to as the Exemption Order No. 1.
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COVID-19: Companies Commission Provides Seven Reliefs to Companies

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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.

I will cover each of these seven reliefs and with some brief comments.

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Webinar: COVID-19 – Restructuring Options and Risks for Businesses

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As part of the ongoing CLJ Law webinar series, I will be speaking on Monday 13 April 2020 at 3pm. I will highlight the key restructuring and rescue options for businesses (both companies and for individuals), and also the potential risks for directors as the companies take on more debt during this COVID-19 period.

[Edit: The session filled up its 100 spots within an hour of registration opening. I am now discussing with CLJ Law whether a second session can be held. ]

This is a free webinar but requires prior registration and limited to only 100 pax. You can click to register here.

Company Law Case Update: Must Meet Pre-Conditions for Restraining Order in a Scheme of Arrangement

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The High Court has again confirmed that for the initial grant of a restraining order in a scheme of arrangement, the applicant must meet all the pre-conditions in section 368(2) of the Companies Act 2016 (CA 2016).

This was confirmed in the recent decision in Lagenda Erajuta Sdn Bhd (Grounds of Judgment dated 20 February 2020).

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Coronavirus: Restructuring and Insolvency for Businesses

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The coronavirus pandemic gives rise to the major risk of companies and small businesses going insolvent. In this article, I set out the restructuring and corporate rescue options for businesses in Malaysia. For example, companies can pursue the corporate rescue mechanisms under the Companies Act 2016. For small businesses who are sole proprietors, they may face bankruptcy. These individuals consider the voluntary arrangement under the Insolvency Act 1967.

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