In our previous article, “SSM Announcement on Seven Initiatives to Ease the Burden on the Corporate during the Movement Control Order (MCO)”, we discussed the seven initiatives announced by the Companies Commission of Malaysia (“Commission”). One of the initiatives is the increase of the winding-up threshold under Section 466 of the Companies Act 2016 and the extension of the period to respond to a notice of demand. Accordingly, the Minister, with the recommendation of the Commission, made the Companies (Exemption) Order 2020 (“Order”). The Order will take effect on 23.4.2020 and expire on 31.12.2020.
The Order essentially provides for the exemption of Section 466(1)(a) of the Companies Act 2016, whereby a company is deemed to be unable to pay its debts in the event the said company neglects to pay the sum in a statutory notice of demand to the creditor or to secure or compound for the debt to the satisfaction of the creditor within 21 days from the date of service of the statutory notice of demand. The Order further provides that, as of 23.4.2020 until 31.12.2020, a company shall only be deemed unable to pay its debt under Section 466(1)(a) of the Companies Act 2016 in the event the said company neglects to pay the sum in a statutory notice of demand to the creditor or to secure or compound for the debt to the satisfaction of the creditor within six months from the date of service of the statutory notice of demand.
In simpler terms, due to the impact of the Movement Control Order on businesses nationally and globally, a company now has six months to satisfy a creditor’s statutory notice of demand. However, it is pertinent to note that the Order is only in effect until 31.12.2020.
By Tommy Wong
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.