In a Media Release on 23 May 2018, Malaysia’s Ministry of Finance announced that it had met with 1MDB’s Board of Directors. The directors confirmed that 1MDB was insolvent and was unable to pay its debts. 1MDB’s debts may be in the region of RM42 billion. This figure is based on the declassified Auditor General Report issued in 2015.
With this tremendous amount of debt, I touch on one aspect of directors’ liabilities. The directors and other officers of 1MDB, when allowing 1MDB to take on so much debt, can be held personally liable for these debts. Continue reading
Abandoned housing projects still occur in Malaysia. From 2009 to 2016, it was reported that there were 225 abandoned housing projects affecting more than 40,000 house buyers. In the worst case scenario, the housing developer may go bust and will get wound up. A liquidator is then appointed over the company.
In such a scenario, the liquidator may play a crucial role in reviving the abandoned housing project. The liquidator may be able to obtain funding from a white knight investor, or with help from the relevant ministry, the Ministry of Urban Wellbeing, Housing and Local Government.
However, the liquidator may face a conflict between two competing roles. Firstly, a liquidator undertakes duties and obligations under the Companies Act 1965 (and also under the new Companies Act 2016 when it comes into force). The liquidator’s role is to sell off the assets of the wound up company and distribute the monies to the creditors. Secondly, in an abandoned housing development, the liquidator may attempt to revive the project and to effectively carry on the duties of a housing developer, raise funds, and to collect money.
A recent Court of Appeal decision may cast some doubt on permitting a liquidator to revive an abandoned housing project.
The winding up of a company is the process of bringing an end to a company. The company’s assets are sold off and then used to pay off the company’s debts. Any excess proceeds are then returned to the shareholders of the company.
Here, I will give a brief overview of winding up law in Malaysia. We will start with getting our terminology right.
Mind Your Language: Winding Up, Not Bankruptcy
In getting our terminology right, we should refer to the term ‘winding up’ or even ‘liquidation’ when referring to this process of winding up a company. In Malaysia (and a few other jurisdictions like Singapore, the UK and Australia), these are the correct terms to be used. In contrast, in Malaysia at least, the term ‘bankruptcy’ is for individuals and where an individual may be adjudged bankrupt. Continue reading