Corporate Insolvency, Rehabilitation and Charges
REVIEWING THE CORPORATE INSOLVENCY REGIME – THE PROPOSAL FOR A CORPORATE REHABILITATION FRAMEWORK;
REVIEWING THE COMPANY RECEIVERSHIP PROCESS; AND
COMPANY CHARGES AND REGISTRATION PROCESS – IMPROVEMENTS TO THE PRESENT REGISTRATION SYSTEM.
The remit of Working Group D of the CLRC is to consider the current law and practice relevant to corporate securities and insolvency practices. Chapter 1 of the Consultative Document (the Document) deals with the review of the corporate insolvency framework. Chapter 2 discusses issues concerning the review of the corporate receivership whilst Chapter 3 concentrates on matters relating to company charges and its registration processes.
One of the objectives of this review is to create a comprehensive corporate insolvency framework:
- that will facilitate the winding up of companies where there is no prospect of the business becoming profitable and viable;
- that will be able to provide an efficient system to rehabilitate companies where appropriate;
- that is able to ensure the protection of rights of creditors and members by providing an enforcement mechanism without undue delay or difficulty; and
- that ensures accountability of the persons involved in the process and transparency of the process.
Chapter 1 comprises of Part I, Part II and Part III. Part I of Chapter 1 discusses whether the Companies Act 1965 should be revised to include corporate rescue procedures to help revitalise ailing companies in Malaysia with a view towards ensuring and promoting efficient and sustainable use of economic resources and encouraging private sector development and growth. The key recommendations of the CLRC on the corporate insolvency framework are stated in Part II of Chapter 1 which contains the views of the CLRC in relation to the introduction of a judicial management framework. Part III of Chapter 1 contains the views of the CLRC in relation to the introduction of a company’s voluntary arrangement framework.
Chapter 2 focuses on the review of issues pertaining to the company receivership process under sections 182 to 192 of the Companies Act 1965. One of the main recommendations is the proposal to codify the agency status of a receiver under the Companies Act 1965. This is to ensure clarity on the status of the receiver that he becomes the agent of the company upon his appointment by the debenture holder. Another important recommendation by the CLRC is the proposal to extend the agency status of a receiver following a winding up order. This recommendation, however, is subject to the consent of the liquidator being first obtained before a receiver should continue to be the agent of a company under liquidation.
Chapter 3 considers several aspects of company charges and the registration process with a view of improving the relevant law and procedures. The main purposes of the registration of a charge under the company law is to recognise a claim which otherwise would be voidable against a liquidator in the case of where a company goes into liquidation and to serve as a centralised registration unit to enable third parties to make searches in respect of charges registered in relation to a particular company’s asset. The main thrust is the retention of the present registration system of company charges but with changes or improvements to the existing system that will be able to facilitate business, protect interest of stakeholders and reduce unnecessary business and compliance costs.
We hope to receive views and comments on the recommendations stated in this Consultation Document. Please reply to Puan Nor Azimah Abdul Aziz at the Companies Commission of Malaysia (SSM) by 27 September 2007.
Download the above consultative document here (.pdf)