Rescuing mechanisms in Malaysia: COVID-19 Act | Article – HSBC VisionGo
This series contains two parts.
The first part revisits the recent amendments to the Insolvency Act 1967 in Malaysia which is also commonly known as ‘Bankruptcy Law’. On 25 August 2020, the Insolvency (Amendment) Bill 2020, herein referred to as the “Insolvency Bill”, was passed with a simple voice majority before the House of Representatives of the Malaysian Parliament.
The second part concerns the special measures arising out of COVID-19. Given the magnitude of the pandemic affecting the world, on the home front, the Malaysian Government has enacted its own legislative measures to deal with the crisis brought by the pandemic through the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Act 2020, herein referred to as the “COVID-19 Act”.
Enforcement of Malaysia’s Temporary COVID-19 Act (2020)
The COVID-19 Act was passed before the House of Representatives at the Malaysian Parliament on 25 August 2020 in the same sitting as the Insolvency (Amendment) Bill 2020 was presented and received His Majesty’s royal assent under Article 66(4) of the Federal Constitution, after which the Bills effectively came into force upon the date of publication in the Gazette on 23 October 2020.
The Government has introduced plans and measures with the aim of helping individuals to mitigate economic losses and providing temporary relief through the amendment of the Insolvency Bill (which also affects 16 other statutes but will not be addressed here). The COVID-19 Act also aims to provide further relief from the effect of the pandemic as well as the implementation of Movement Control Order throughout the country that almost crippled the economy single-handedly.
The amendment pursuant to clause 20 of the COVID-19 Act, which also covers section 5(1)(a) of the Insolvency Bill, stipulates that the provisions shall continue to remain in force for a period of two years or at least until 31 August 2021. Although the COVID-19 Act was intended to seek temporary increment to the minimum debt threshold, the increment introduced under clause 2 of the Insolvency Bill is not bound by any specific time frame which enables the relevant Minister to exercise his empowered discretion to further amend the minimum debt threshold, thus may well prevent any inconsistency that may arise, which will require a corresponding amendment to effect a change to the minimum debt threshold.
The Act which prevails over inconsistency
Having said that, the amendments incorporated into the Insolvency Bill are largely in line with the amendments introduced in the COVID-19 Act. However, there are certain variance between the two which warrants specific attention. It is pertinent to note that any conflict or inconsistency arising from the provisions under the Insolvency Bill and other written laws, the provisions under COVID-19 Act shall prevail and supersede the extent of the conflicting provision. In light of the overriding COVID-19 Act, the Minister is empowered to vary the minimum debt threshold requirement at his discretion, in pursuant to both measures while in force.
In view of the calamity brought by the COVID-19 pandemic which undoubtedly has caused major effects and long-term economic impact on the country as well as the global economy, it is envisaged that the aforesaid increment of the minimum debt threshold, pursuant to both measures, may act as a safeguard from an influx of personal insolvency proceedings. Arguably it may, in fact, create a severe influx of cases whereby creditors may rush to issue bankruptcy notices against their debtors, ensuring that they fall within the ambit of the present threshold before the new Insolvency Bill takes effect. Therefore, be it a saving grace to some individuals but at the same time, it may well inflict unintended impact on creditors who are considering enforcing judgments of debts between RM50,000 and RM100,000.
Only time will determine if the initiatives are effective in combatting people’s immediate financial struggles due to COVID-19 or retrospectively will hasten the process which would go against the very purpose of the measures being enacted.
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