This seminar will cover all the common practical issues for companies arising from the movement control restriction. With the heightened risk of solvency-related issues, directors must also be aware of their responsibilities and the risks of personal liability.
This is a guest post by Gerard Tang and Tan Hei Zel. It is one of the 3 articles selected to be published on TML following our open call for submissions. We would like to thank everyone who sent in their articles. We hope to see more quality legal writing published, which will hopefully lead to vibrant discussions and thought leadership in the Malaysian legal industry.
The Companies (Exemption) (No. 2) Order 2020 (“Order”) has provided temporary reprieve from winding-up proceedings. The Order, issued by the Minister of Domestic Trade and Consumer Affairs (“Minister”), has extended the time frame to respond to a statutory demand up to six months. However, this article explains how the Order is potentially ultra vires and flawed.
The Order exempts all companies from section 466(1)(a) of the Companies Act 2016 (“Act”). Section 466(1)(a) provides for a statutory presumption of insolvency of a company where:
(a) the company is indebted in a sum exceeding the amount prescribed by the Minister;
(b) a notice of demand for the debt is served on the company; and
(c) the company fails to pay the debt within 21 days after service of the notice.
The exemption is applicable to notices served between 23 April 2020 and 31 December 2020. This exemption is subject to the condition that a company shall pay its debt within 6 months after service of the notice (“Condition”). This is a timely measure to tide businesses over during the economic downturn and a creative use of the exemption provision in the Act. However, we argue that the Order is potentially ultra vires and flawed. Continue reading →
In response to COVID-19, the UK has fast-tracked its Corporate Insolvency and Governance Bill (the PDF copy of the Bill is here and with helpful Explanatory Notes). The overarching objective of this Bill is to provide businesses with the breathing space they need to continue trading during this difficult time and to avoid insolvency. I set out seven of the key measures that UK is introducing and the possible reforms that Malaysia can adopt.
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.
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.
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.