Malaysia has made efforts to remain ahead of the curve during the pandemic by providing companies with the company winding-up protection. On 23 April 2020, the Minister of Domestic Trade and Consumer Affairs implemented the new changes to provide greater assistance for struggling businesses. One of the key changes includes raising the RM50,0000 minimum threshold for a company winding-up notice by fivefold. Also, the time limit for companies in Malaysia to pay the amount specified in the company winding-up notice has been extended from 21 days to 6 months. In this article, we will go through these key changes in greater depth.
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6-Month Extension for Company Winding-Up Notice
Firstly, the Minister 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, an increase from the previous 21-day period.
Increase Threshold to RM50,000 for Company Winding-Up Notice
Secondly, 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, a rise from the original RM10,000.
Impact on Company Winding-Up Process
The above mentioned changes will have great implications on the winding-up process. This is because the usual process to commence a company 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 has 21 days to respond to the statutory demand. After the expiry of this period, the debtor is deemed not able to repay the debt and the creditor can file a company 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 company 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 in Malaysia stay focused on its operations and survival during this critical period instead of getting distracted by legal actions initiated by creditors. By not being subjected to possible creditors’ company winding-up applications, companies in Malaysia can have more time in evaluating multiple options to stay afloat, or even consider corporate restructuring.
It is important that companies in Malaysia have a good understanding of the legal protection given to them by the Malaysian laws against their creditors. At WeCorporate, we offer company secretarial services to ensure that your business is up-to-date with the ongoing changes in the legal requirements. Engage us now to protect your business and achieve greater heights.
The following shows the 2 key changes initiated by the Minister for company winding-up notice:
- Increase in Extension from 21 Days to 6 Months
- Increase Threshold from RM10,000 to RM50,000 for Company Winding-Up Notice
- The Minister exercised his powers in April 2020 to help companies in Malaysia to better cope with the winding-up notice.
- With the Exemption Order No. 2 in place, a debtor company now has 6 months to respond to a statutory demand, instead of 21 days.
- The creditor can only file a winding-up petition after the expiry of the 6-month period, upon the issuance of the statutory demand. This is when the debtor is deemed unable to repay the debt.
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