Latest Update: Companies winding up protection in relation to Covid-19 situation
On 23 April 2020, the Minister of Domestic Trade and Consumer Affairs has exercised his powers under Section 615 of the Companies Act 2016 and gazetted the Companies (Exemption) (No. 2) Order 2020 (“Exemption Order No. 2”). This provides the debtor six-month period to respond to a statutory demand (instead of the original 21 days).
Second, the Minister has also issued a direction under Section 466(1)(a) of the Companies Act 2016 to prescribe the threshold amount to above RM50,000 (instead of the original RM10,000).
The above mentioned changes have great implications on the winding up process as the usual process to commence a winding up procedure by creditors is the issuance of a statutory demand under Section 466(1)(a) of the Companies Act 2016 based on the prescribed amount by the Minister. In the original arrangement, the debtor then has 21 days to respond to the statutory demand. After the expiry of this period, the debtor is deems not able to repay the debt and the creditor can file a winding up petition.
With Exemption Order No. 2, instead of 21 days, a debtor company now has six (6) months to respond to a statutory demand. Therefore, any filing of a winding up petition based on the statutory demand will be served at the expiry of the 6-month period after the issuance of the statutory demand. This amendment is crucial as it helps many companies stay focus on its operations and survival during this critical period instead of getting distracted by legal actions initiated by creditors.
To assist business owners to have an understanding on the legal protection given to them by the laws against their creditors, WeCorporate have outlined a summary on the restructuring and corporate rescue options for businesses in Malaysia in this link.
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