The High Court in the Sulaiman & Taye decision (see the grounds of judgment dated 8 July 2020 of Ong Chee Kwan JC) deals with very significant issues in relation to fraudulent trading. Fraudulent trading is where directors of a company have to bear personal liability for the debts of a company in winding up. This is because the directors carried on the business of the company with the intent to defraud its creditors. In particular, whether the delinquent directors bearing personal liability then has to pay directly to the aggrieved applicant or to pay into the wound up company’s assets for the general benefit of all the creditors. Continue reading
On Friday 8 May 2020, I will be moderating a webinar organised by the Asian International Arbitration Centre. The title is “Statutory Rescue: Whether Introducing a COVID-19 Act Can Save the Economy?” This is a free webinar and you can email: [email protected] to register for the Zoom webinar or you can view it on AIAC’s Facebook page.
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
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.
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.
Sweet & Maxwell is publishing an upcoming book: Law and Practice of Corporate Insolvency in Malaysia. It will be the first dedicated text in Malaysia covering restructuring and insolvency law. Each chapter is written by a lawyer, an insolvency practitioner or a combination of both. The book should be a good blend of the latest legal developments and practical tips.
The book will cover all the areas of winding up, receivership, schemes of arrangement, corporate voluntary arrangement and judicial management. Continue reading