Case Update: When there are competing nominees to be appointed liquidator

The High Court in its Grounds of Judgment dated 20 June 2018 in Abdul Rahman bin Ismail v Pembangunan Qualicare Sdn Bhd (Penang High Court Winding Up Petition No. 28-6-01/2013) made an interesting observation when there are competing nominees to be appointed as liquidator in a court winding up.

The High Court raised the possibility of a need for a mini trial in order to test the suitability of the two competing liquidator nominees. Continue reading

1MDB is Insolvent: Directors’ Liabilities for the Debts

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

Compendium of Companies Act 2016 Cases: Part 1

With the Companies Act 2016 in force for more than a year, I thought it is useful to set out a compendium of cases and transactions that have applied the Companies Act 2016 provisions.

As a summary, in terms of the reported cases, many of the cases relate to winding up based on the inability of the company to pay debts. This is under section 466 of the Companies Act 2016 (the old section 218 of the Companies Act 1965). Other cases also relate to other areas of winding up or shareholder disputes. I also highlight below examples of capital reduction and schemes of arrangement. Continue reading

Case Update: Winding Up Petition Cannot be Stayed Pending Reference to Arbitration

In an earlier article ‘Arbitration and Liquidation: Never the Twain Shall Meet?, I had examined the possible tension between the contractual bargain to arbitration and the statutory right to bring winding up proceedings based on a debt. Would an arbitration agreement trump the statutory winding up process?

The recent High Court decision in NFC Labuan Shipleasing I Ltd v Semua Chemical Shipping Sdn Bhd [2017] MLJU 900; [2017] 1 LNS 943 found that there cannot be a stay under the Arbitration Act 2005 (AA 2005) of a winding up petition. A winding up petition is not a claim for payment. It is a class action in the public interest as part of a statutory regime. Therefore, it was held that a winding up petition is not a ‘proceeding’ that is susceptible to a stay pending arbitration. Further, a winding up petition does not concern a matter that is subject to an arbitration agreement. Continue reading