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New Zealand through the Companies (Amendment) Act 2006 which came into effect
on 1 November 2007 in Part 15A. 206 This rescue device has been widely used in
many jurisdictions including Australia, 207 Canada, 208 the United States 209 and the
UK. 210
Malaysia was badly affected by the financial crisis in 1998, and several reforms took
place pursuant to the crisis. Reforms of company law did not take centre stage or
become a priority for the government. Reforms were made as and when the need
arose and mostly when the country was having economic downturns. The financial
crisis of 1998 accentuated the weaknesses in the current company legislation and
acted as a catalyst to company law reform. A high number of companies‟ failures
demonstrated that there are loopholes in the current legislation. It is submitted that
206 The objective of Part 15A is to provide mechanisms for insolvent companies present and future to
maximise their chances of continuing their business, and if that is not possible, to provide a better
return for creditors and shareholders than it would have in liquidation. See section 239A of the New
Zealand Companies (Amendment) Act 2006. See also section 435A of the Australian Corporations
Act 2001.
207 Voluntary administration is a regime under Part 5.3A in section 435A of the Australian
Corporations Act 2001 - an administrator is appointed to take control of the company, investigate
into the company‟s affairs and report to the creditors on the company‟s future. If creditors decide
to execute a deed of arrangement, the administrator will administer the company according to the
deed. (R.P Austin and Ian M. Ramsay Ford’s Principles of Corporations Law (14 th ed., Lexis
Nexis Butterworth, NSW, 2010) at [27-020]).
208 Canada has similar voluntary administration but, unlike in Australia, an administrator does not
necessarily take over in the management of the company. Another notable point is the
requirement for secured creditors to give 10 days prior notice before enforcing security and they
are not able to veto the process as in Australia. In the UK, secured creditors no longer have the
option to veto the process when administrative receivership was abolished by the Enterprise Act
2002. Holders of qualifying floating charges created on or after September 15, 2003 are no longer
allowed to appoint an administrative receiver - a procedure previously used in order to defeat the
administration process. See Goode, above n78 at [10-07-10-08].
209 Due to different structures, adaptation of Chapter 11 similar to the United States is prevented.
Chapter 11 is a system with an automatic stay of 120 days against secured and unsecured
creditors when filing for such proceeding. The mechanism does not depend insolvency as a
criterion to operate. The effect of filing for Chapter 11 is that secured creditors are prohibited
from exercising their rights under the law. Such a device may not be suitable in New Zealand
with its strong secured creditors culture (NZLC SP11 at [186]).
210 Administration procedures were introduced in Part II of the UK Insolvency Act 1986. However,
the procedures were substituted for a new Part II consisting of section 8 by Enterprise Act 2002
clause 40 part 10 and section 248(1).
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