These debts remain and are not extinguished outright. Ensuring robust framework for managing supply chain risk – review the supply chain network and … However, the Receiver is not a representative or agent for the party owning these assets or the plaintiff, but rather, he/… The moratorium also prevents any one creditor from potentially gaining priority over the others through exerting pressure on the company in the form of legal proceedings. Setting Up a Company in Malaysia: A Foreigner’s Guide. What is receivership? PRESSED for time as it grapples with a debt pile of US$4 billion, Singapore’s giant oil trader Hin Leong Trading (HLT) has pulled out its application to the court for a debt moratorium, and decided instead to go down the judicial management path, sources told The Business Times. The statutory moratorium also extends to quasi-judicial proceedings such as adjudication and arbitration proceedings[2]. 2020 © THOMAS PHILIP ADVOCATES AND SOLICITORS | DISCLAIMER NOTICE | WEB DESIGN BY TOMMY NG. In Malaysia, the Companies Act 2016 offers three corporate rescue mechanisms which can be used to avail distressed companies. Similarly, a creditor would also have the right to terminate a contract with the company for breach of contract although the creditor would likely be prevented from pursuing any damages or recovery against the company arising from the breach by the statutory moratorium. Under the Judicial Management scheme, two slightly different types of moratoria would take effect at different stages of the process, namely the interim moratorium and the permanent moratorium. Moratorium. Corporate voluntary agreements (CVA) However, it is unclear whether a creditor is prevented by the statutory moratorium from making a demand for repayment under such financial facilities and whether such demand constitutes a “step taken” towards the enforcement of a security. Similarly, winding up petitions and other execution proceedings such as writs of seizure and sale would also be stopped by the statutory moratorium[1]. Besides legal processes or legal suits, the company under judicial management is also protected from other actions by creditors to enforce a debt. The statutory moratorium would also protect the status quo and the assets of the company from being dismembered through various execution proceedings before a Judicial Manager is appointed. (s. 410 CA) If the court grants a JM Order, the moratorium continues for 6 months, with the option to extend for a further 6 months. Upon granting of the said court order, a moratorium is put in place the moratorium that would be in place from the time an application is made for a judicial management order until the grant or dismissal of the order. In making his decision for Hyflux to be placed judicial management, Justice Aedit said a court-supervised moratorium, which has been granted to … Commission of Malaysia 2001. All rights reserved. On 17th March 2003, the Corporate Law Reform Committee (“CLRC”) was established. Under what circumstances, a company may be placed under receivership? The CA provides for the following rescue mechanisms namely (i) Corporate Voluntary Arrangement (ii) Judicial Management, and an improved (iii) Scheme of Arrangement process whereby there are moratorium periods preventing legal proceedings or action to be taken against the financially distressed company (Moratorium). This interim moratorium lasts until either the application for Judicial Management is dismissed or is allowed. However, it should be borne in mind that the burden is on the party seeking leave of Court to make out a case for leave to be granted. Certain institutions regulated by the Central Bank of Malaysia and the Capital Markets and Services Act 2007, such as financial institutions, insurance companies and asset management companies, will be unable to access the judicial management regime. Malaysia ('CCMI) has recommended that judicial management ('JMI) be introduced in Malaysia as one of the ways to deal with corporate insolvency matters. This essentially prevents third parties, such as creditors of the company, from commencing or proceeding with any legal action against the company without the leave of Court. The judicial manager is armed with a moratorium sought for PricewaterhouseCoopers (PwC) LLP to be appointed its interim judicial manager, In-depth analyses and award-winning multimedia content, Get access to all with our no-contract promotional package at only $0.99/month for the first 3 months*. Lavinia Kumaraendran (Partner) Notwithstanding, creditors and third parties are not completely out of options against a company under judicial management as they can still apply for leave to commence or proceed with legal actions against the company. These amendments were to ensure corporate and business activities are able to function in a “cost effective, consistent, transparent and competitive business environment in line with international standards of go… But a log-in is still required for our PDFs. The special characteristics of judicial management are the moratorium commence automatically as soon the judicial management procedure begins. The application for appointment of judicial manager may be made by the company itself, the directors or the creditors. SPH Digital News / Copyright © 2020 Singapore Press Holdings Ltd. Co. Regn. Instead, these resources can then be channelled into more productive efforts towards rescuing the company in financial distress. Judicial Management, which was based on the English administration regime, was intended as a mechanism through which potentially viable companies could restructure their liabilities and rehabilitate themselves. As the statutory moratorium only provides protection to the company from legal and execution proceedings, there is nothing to prevent the company from commending or continuing proceedings against a third party[6]. They can read the article in full after signing up for a free account. Tel: 603-6201 5678 / Fax: 603-6203 5678 Email: lkk@thomasphilip.com.my In this article, I set out the restructuring and rescue options for businesses in Malaysia. 1. The test appears to be whether such action or application is one which can equally be made by the company while it was a going concern[4]. During the six months period of moratorium, the company cannot be wound-up[5]. WHO MAY APPLY FOR A JUDICIAL MANAGEMENT ORDER They range from the new corporate rescue mechanisms in the Companies Act 2016 (CA 2016) for companies and the voluntary arrangement under the Insolvency Act 1967 (IA 1967) for sole proprietors. The interim moratorium under Section 410 provides that: (a) No resolution shall be passed or order made for the winding up of the company; (b) No steps shall be taken to enforce any charge on or security over the company’s property or to repossess any goods in the company’s possession under any hire purchase agreement, chattels leasing agreement, or retention of title agreement, except with the leave of Court and subject to such terms as the Court may impose; and. Judicial Management Statistics in Malaysia. Key Changes About The New Companies Act In Malaysia. (See Lief N.O vs Western Credit (Africa) PTY LTD 1966 (3) SA 346 (W). Read more at … (c) No other proceedings and no execution or other legal process shall be commenced or continued and no distress may be levied against the company or its property except with leave of the Court and subject to such terms as the Court may impose. LIQUIDATION, JUDICIAL MANAGEMENT & SCHEME OF ARRANGEMENT – PROCEDURE & PRACTICE CHANTAN LLC 23 ADVANTAGES OF JUDICIAL MANAGEMENT • Immediate moratorium against legal actions (breathing space) No winding up order can be made Creditors cannot enforce security Civil proceedings cannot be commenced Existing actions are stayed Until we resolve the issues, subscribers need not log in to access ST Digital articles. In such applications by creditors for leave, the Court will consider the circumstances of each case. Design Studio also announced on Monday that three of its Malaysia-incorporated subsidiaries, namely DS Project Management, DSG Manufacturing Malaysia and DSG Projects Malaysia, have applied to High Courts in Malaysia to be placed under judicial management. This is because of the automatic moratorium that comes into play. Firstly, a temporary or interim moratorium takes effect immediately upon the filing of an application for Judicial Management pursuant to Section 410 of the Companies Act 2016. To encourage more troubled companies to proactively use the Judicial Management corporate rescue mechanism (which involves a judicial manager being appointed to the company together with an automatic moratorium), the amendments liberalise the regime in the following ways: [3] It remains to be seen whether such mechanism is available to public listed companies. ... that there is no automatic moratorium for scheme of arrangements unlike a corporate voluntary arrangement and judicial management. Generally, the statutory moratorium provided under the Judicial Management scheme is intended to give the company in financial distress come breathing space and be protected from having to fend off multiple legal proceedings from various disgruntled creditors and other third parties who are seeking to recover their debts from the company. One example includes the right to a set-off, which is considered a personal right which is not related to a real or proprietary interest against the company[5]. Besides that, the company will be also protected from any legal proceedings and no shares could be issued or transferred[6]. The judicial manager will prepare a scheme for creditors’ approval for which a 75% majority sanction is required. The Companies Act 2016 introduced the Judicial Management system as a scheme to rescue businesses in financial distress. It would allow the Judicial Manager the time and protection they need to come up with a rescue or restructuring plan without having to deal with the constant pressure arising from the legal proceedings. Website: www.thomasphilip.com.my, Sean Tan Yang Wei (Associate) As a result, carrying out any necessary actions to preserve the assets of the receivership estate. One of the salient and most important features of the Judicial Management scheme is that it provides for a statutory moratorium on all proceedings, execution and legal process against the company. Judicial management is a method of debt restructuring where an independent judicial manager is appointed to manage the affairs, business and property of a company under financial distress. INTRODUCTION. 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