Winding-up and Bankruptcy

Insolvency Law
LAD5093
DR. ZULKIFLI HASAN

Bankruptcy
Winding-up
CONTENTS

Introduction
Insolvency law is concerned with
companies and individuals who are debtors
and who are unable to repay their debts.
Personal Insolvency
Corporate Insolvency

Relevant Laws
Bankruptcy Act 1967
Bankruptcy Rules 1969
Companies Act 1965
Companies (Winding-up) Rules 1972

What is bankruptcy?
Bankruptcy is a process where a debtor is
declared a bankrupt pursuant to an Adjudication
Order made by the High Court against the
debtor if he is unable to pay his debts of at least
RM30,000.00.

Who is a debtor?
A debtor is a person subject to the bankruptcy
jurisdiction of the court under S 3(3) of the Bankruptcy
Act 1967, and at the time the act of bankruptcy is
committed:
Was personally present in Malaysia; or
Ordinarily resided or had a place of residence in
Malaysia; or
Was carrying on business in Malaysia either personally
or by means of an agent; or
Was a member of a firm of partnership which was
carrying on business in Malaysia.

How?
The High Court makes a Receiving Order and
Adjudication Order after a bankruptcy petition
has been presented.
1. Creditor’s petition
2. Debtor’s Petition

Creditor’s Petition
An act of bankruptcy (S 3(1) of the BA 1967) by the D must have
taken place within 6 months prior to the presentation.
BN against the debtor:
Is domiciled in Malaysia; or
Within 1 year b4 the date of the presentation of the petition has:
Ordinarily resided in Malaysia; or
Had a dwelling house in Malaysia; or
Had a place of business in Malaysia; or
Carried on business in Malaysia personally or by means of an
agent; or
Is, or has been within 1 year before the date of the
presentation of the petition, a member of a firm or
partnership which has carried on business in Malaysia by
means of a partner or partners or an agent or manager.

Debtor’s Petition
A DP is by itself an act of bankruptcy.
To make himself a bankrupt in order to protect himself from his
creditors’ claim.
No requirement that a minimum amount of debt must be owed
before a debtor’s petition can be presented. After its presentation, a
debtor’s petition cannot be withdrawn without the leave of the
court.
The petition (Form 3 of Bankruptcy Rules 1969) is to be filed at the
court of the State in which the debtor resides. Deposit with the
DGI RM1,500.00.
The court will not accept the petition for filing unless the receipt of
the DGI for the deposit is produced. A sealed copy of the debtor’s
petition must then be served on the DGI by post.
On the hearing of the debtor’s petition, the Court will make a
Receiving Order as well as an Adjudication Order.

Factors to Consider
In monetary claims, JD is the person against whom the
judgment or order is made or given.
To consider if it is worth to commence a bankruptcy
action.
The total judgment debt must be more than
RM30,000.00.
Where the judgment debtor has not complied with the
judgment or order made, may commence bankruptcy
proceedings against the judgment debtor to recover the
same.

Cont…
Judgment debtor could be in debt to several
other individuals or companies.
Once a debtor has been adjudged a bankrupt,
other creditors will file in the Proof of Debt
form and Proxy to be entitled to share in any
distribution from the estate of the bankrupt.
The distribution of the estate is according to the
priority of the creditors' claim.

Bankruptcy Rules 1969
Bankruptcy Proceedings
1. Judgment Serve to Debtor
2. BN & Request to Issue BN
BN valid for 3 months @ 90 days
7 days notice in BN
Serve to the JD by personal service by hand @
substituted service
3. Filing Affidavit of Service of the BN
4. Filing Creditors Petition & Affidavit verifying the
Petition
Must be filed within 6 months from the date of filing BN

Cont..
5. Serve to Insolvency Department
RM2,000-00 deposit
Copy of sealed Judgment;
Copy of BN and Request to issue BN
Copy of Affidavit of Service BN
Copy of Creditors Petition & Affidavit verifying
the Petition
6. Serve Creditors Petition & Affidavit
verifying the Petition to the JD

Cont..
7. 3 days b4 hearing of CP – Petitioner must serve to DGI:
Original sealed Judgment; Original BN, Copy of Request to
issue BN, Copy of Affidavit of Service BN, Original CP,
Copy of Affidavit verifying the Petition and all
other
pleadings and cause paper such as copy of Affidavit of
Service
8. Hearing of CP before Registrar
Hearing will not be heard until the expiration of 8 days
from the service of CP to the JD
JD is allowed to file Notice of intention to show cause
9. Registrar will issue Adjudication Order and Receiving
Order (Perintah
Penghukuman & Perintah Penerimaan)

Restrictions
Restriction to go abroad,
Acting as a director,
Carrying on business and requirement to
contribute to your bankruptcy estate regularly
for the benefit of the creditors.
To give up assets including your home and cars.
There is no automatic discharge from
bankruptcy in Malaysia. May be discharged
either by the Court or the DGI subject to any
creditor’s objection.

Winding-Up
Winding up is also known as "liquidation".
Where a company cannot pay its debt as and when
it falls due, a company is insolvent.
Winding up means where under the companies
law, an insolvent company in order to discharge its
liabilities, the control of the company's affairs will
be undertaken by a form of external
administration under a person called a "liquidator"
who will prepare for the company's dissolution.

Corporate Insolvency
The CA 1965 S 218(2): a company shall be deemed
insolvent if a creditor to whom a company owes more
than RM$500.00 and such sum is due for payment,
serves a written notice is given or to secure or
compound such sum to the satisfaction of the creditor.
A company that is insolvent will cease business and go
into liquidation after being wound up by the Court.
The company will be struck-off from the register of
companies and the assets of the company will be
liquidated or sold off. The proceeds of sales will be
distributed according to law.

Modes of Winding-up
Winding up of a company is the process whereby its life
is ended and its property administered for the benefit of
its creditors and members.
Modes of Winding up -
(I) compulsory winding up ie., by Court (s 218)
(Ii) voluntary winding up; (s 254)

Winding-up Procedure
Companies (Winding-up Rules) 1972de
1. Issue of Statutory Notice of Demand
2. lapse of 3 weeks and no payment made
3. Winding-up Petition Form 2
4. File Affidavit in F7 to verify the petititon
5. service of petition and affidavit
6. file affidavit of service

Cont…
7. to advertise in 2 local dailies twice 7 clear days b4
hearing
8. File of affidavit of compliance
9. Petitioner/Solicitor to appear on hearing date
10. Debtor may oppose the petition by filing and
servicing affidavit in opposition (AIO) 7 days b4
hearing
11. Petitioner may file and serve affidavit in reply
within 3 days upon receipt of AIO.

Cont…
12. any person who intends to appear during
hearing, must file notice of intention to appear F8
13. The ct may dismiss the petition or grant an
order.
14. Notice of winding-up must be gazzetted and
advertized in F 12
15. Service of the notice on appointed liquidator or
CCM, debtor. Must inform the liquidator in F10
within 14 days of the order.