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What are the criteria for determining which creditor protection laws are best for
Malaysia?
Overall this is a question of public policy. Some aspects are focused on economic
consideration and some are focused on fairness. From a drafting point of view Australian
law is the most suitable in Malaysia because it is clear. The law clearly specifies defences
and consequences despite it being draconian in nature. It is acknowledged that the best
kind of law is clear but less strict. It is essential for the court to make specific orders in a
particular situation. The law in Australia is clear but the consequence is too heavy. There
are both civil and criminal penalties. The maximum financial penalty the court can
impose is $200,000 and at the same time the court can also impose personal liability on
directors to compensate creditors. It is acknowledged that imposing both penalty and
compensation is excessive for someone in financial difficulty.
The New Zealand law does not give clear guidelines to businesses and gives wide
discretion to judges to decide. The Malaysian judges are not good at discretion and often
are quite literal in their interpretation of legislative provisions. Hence it is important to
have a clear law and which sets out the appropriate defences.
The consequences of insolvency can affect many parties such as creditors, shareholders,
tax authorities and customers. The law attempts to balance the interests of these various
groups who transact with companies in financial distress. At the same time the law
circumstances, the directors acted in the best interests of the corporation, having regard to all relevant
considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner,
commensurate with the corporation‘s duties as a responsible corporate citizen.
Directors may find themselves in a situation where it is impossible to please all stakeholders. The
―fact that alternative transactions were rejected by the directors is irrelevant unless it can be shown that a
particular alternative was definitely available and clearly more beneficial to the company than the chosen
transaction‖: Maple Leaf Foods, per Weiler J.A., at p. 192.
There is no principle that one set of interests — for example the interests of shareholders —
should prevail over another set of interests. Everything depends on the particular situation faced by the
directors and whether, having regard to that situation, they exercised business judgment in a responsible
way.‖
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