BANKRUPTCY THRESHOLD! INCREASED FROM RM50,000 TO RM100,000

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BANKRUPTCY THRESHOLD! INCREASED FROM RM50,000 TO RM100,000

by Samantha Au Yong, LLB (Hons) (Cardiff), Barrister-at-Law (Middle Temple)

 

COVID-19 pandemic has significantly affected and impacted businesses and the economy throughout the world. In order to lessen the impact of the pandemic, the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Bill 2020 (“the Act”), was tabled in Parliament to provide temporary relief to people by modifying the relevant provisions in several legislations including the Insolvency Act 1967.

This article briefly discusses the modification of the Insolvency Act 1967 made by the Act.

 

1. Bankruptcy threshold has been increased from RM50,000 to RM100,000

The Act was passed by the Dewan Rakyat on 25th August 2020, which amended the Insolvency Act 1967 by increasing the bankruptcy threshold from RM50,000 to RM100,000. In other words, creditors may only file for bankruptcy action against their debtors if the debt owing is more than RM100,000. However, a date has yet to be fixed by the Minister for the Act to come into operation (“Operation Date”).

2. When will the new amendment take effect?

The Act does not have a retrospective effect. Any bankruptcy proceedings commenced pursuant to the Insolvency Act 1967 which are still pending immediately before the Operation Date, shall be dealt with under the Insolvency Act 1967. In other words, any bankruptcy proceedings having commenced immediately before the Operation Date remain unaffected.

3. What will happen if you have been declared as a bankrupt?

All of your property shall be automatically vested in the Director General of Insolvency (DGI) and the DGI shall take possession of the property. Further, travel ban will be imposed on you where you will be unable to travel out of the country without the DGI’s written permission or before obtaining a court order. The DGI has also the authority to manage your finances including salaries, loan repayments and other commitments.

4. How can you be discharged from being a bankrupt?

There are three modes for a bankrupt to be released from bankruptcy.

a.  First mode – Order of Court

Section 33(1) of Insolvency Act 1967 Act 360 (IA 1967) states as follows:-

“A bankrupt may at any time after being adjudged bankrupt apply to the court for an order of discharge, and the court shall appoint a day for hearing the application.”

 b.  Second mode – the DGI’s certificate

Section 33A of IA 1967 states as follows:-

“(1)   The Director General of Insolvency may, in his discretion but subject to section 33B, issue a certificate discharging a bankrupt from bankruptcy.

(2)   The Director General of Insolvency shall not issue a certificate discharging a bankrupt from bankruptcy under subsection (1) unless a period of five years has lapsed since the date of the bankruptcy order.”

Section 33B of IA 1967 states as follows:-

(1)   Before issuing a certificate of discharge under section 33A, the Director General of Insolvency shall serve on each creditor who has filed a proof of debt a notice of his intention to issue the certificate.  

c.  Third mode – Automatic Discharge

Section 33C of IA 1967 states as follows:-

(1) A bankrupt shall be discharged from bankruptcy under this section on the expiration of three years from the date of the submission of the statement of affairs under subsection 16(1)—

(a) if the bankrupt has achieved amount of target contribution of his provable debt; and

(b) if the bankrupt has complied with the requirement to render an account of moneys and property to the Director General of Insolvency under paragraph 38(1)(b).

Based on the above, the most common mode is either the First or Third Mode. However, there are a stringent process and requirement to satisfy the courts and/or the DGI in order to be released as a Bankrupt. However, if one can comply with the section of the Insolvency Act 1967, there should not be any reason why a discharge will not be given.           

                     

NOTE: The contents herein are intended to be for general information and reference only, and it does not, and is not intended to, constitute or substitute for legal advice.

For any further enquiries, please do not hesitate to contact our Mr. Nadesh Ganabaskaran @ nadesh@malekpauliangan.com.

By | 2020-09-04T11:59:54+00:00 September 4th, 2020|Insolvency, Litigation, Uncategorised|0 Comments

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