UK’s Corporate Insolvency and Governance Bill: Possible Reforms for Malaysia’s Restructuring Laws

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.

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Company in Distress: Insolvency Issues relating to Employees

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

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

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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Case Update: High Court Decides on Restraining Order Requirements under Companies Act 2016

I had earlier written about a High Court decision that set aside a restraining order. The Court held that the applicant must meet the statutory pre-conditions for the grant of a restraining order in a scheme of arrangement from the very initial application stage.

The High Court has now issued its grounds of judgment dated 3 May 2019 in the case involving Barakah Offshore Petroleum Berhad and PBJV Group Sdn Bhd.

 

 

 

Upcoming Book: Law and Practice of Corporate Insolvency in Malaysia

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

Restraining Order under a Scheme of Arrangement Must Satisfy Pre-Conditions from the Start

An applicant must meet the statutory pre-conditions for the grant of a moratorium (otherwise known as a restraining order) under Malaysia’s scheme of arrangement even at the initial application stage. This was decided in a recent High Court decision dated 22 April 2019. The Court set aside the initial grant of the restraining order as the applicant companies had not satisfied the pre-conditions at the time of the application. I have since written the case commentary on this decision.

To my knowledge, this is also the first decision on this issue under the new section 368(2) of the Companies Act 2016 (CA 2016). There have been conflicting High Court decisions on this issue when interpreting the predecessor section 176(10A) of the Companies Act 1965 (CA 1965). The full grounds of judgment have not been issued yet.

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