02 November 2023
Since our Client Alert of 7.3.2023 highlighting the changes in the discharge from small scale debt bankruptcies, further changes to the bankruptcy regime have taken place. The Insolvency (Amendment) Bill 2023 was tabled and passed by Parliament. Now known as the Insolvency (Amendment) Act 2023 (“the Act”), it came into force on 6.10.2023 .
The Act amends the Insolvency Act 1967 (“the 1967 Act”) and changes the administration of bankrupt estates in Malaysia as well as expediting the discharge of bankrupts.
The main amendments are summarised as follows and they include:
1. Dispensing the need for a first creditors’ meeting to be called by the Director General of Insolvency (DGI)
There is no longer a mandatory requirement for a first creditors’ meeting to be held. A meeting of creditors will only be held upon request and if necessary.
2. Introducing the use of remote communication technology
The usage of remote communication technology is introduced into the administration of bankruptcies. Meetings of creditors and the service of notices/documents may now be effected by using remote communication technology.
3. Broadening the list of non-objections by the creditor to the discharge of a bankrupt
Section 33B of the 1967 Act previously provided that a creditor shall not object to the discharge of a bankrupt by Certificate of the DGI for the following categories:
a) a bankrupt who was adjudged a bankrupt by reason of him being a social guarantor;
b) a bankrupt who is registered as a person with disability under the Persons with Disabilities Act 2008;
c) a deceased bankrupt;
d) a bankrupt suffering from a serious illness certified by a Government Medical Officer.
The Act has now expanded the above list of non-objections by introducing two additional categories (“the New Categories”):
i) a bankrupt who is incapable of managing himself and his affairs due to any mental disorder, as certified by a psychiatrist from any government hospital; and
ii) a bankrupt aged seventy years and above and in the opinion of the DGI, is incapable of contributing to the administration of his/her estate.
The New Categories will also apply retrospectively to those who have been adjudged bankrupt before the Act came into force.
4. Removal of monetary thresholds in certain categories
The Act has also removed the fixed threshold value of certain categories and amended the value to read “as may be prescribed”. The affected categories concerned the value of a bankrupt’s assets exempted from distribution amongst creditors and the value for cases qualified for summary administration in small cases.
5. Revamping the automatic discharge provision and introducing the suspension of the automatic discharge provision
As a result of the changes introduced by the Act, a bankrupt shall be automatically discharged from bankruptcy on the expiration of (3) three years from the date of submission of the bankrupt’s statement of affairs, if:
i) the bankrupt has paid the sum of money determined by the DGI, having regard to the financial ability of the bankrupt; and
ii) the bankrupt has complied with the requirement to render an account of moneys and property to the DGI under his duties as a bankrupt.
When determining the sum of money to be paid by the bankrupt, the DGI shall consider various matters mentioned in section 33C(2) of the 1967 Act, including, the current monthly income of the bankrupt and the debt provable in bankruptcy. The DGI may request further information to determine the sum to be paid by the bankrupt, including information in respect of income, expected income and properties of the bankrupt.
For purposes of an automatic discharge, the DGI shall serve a notice of the automatic discharge to each of the creditors who has filed a proof of debt not less than 6 months before the expiration of the 3 years.
Can a creditor object to the automatic discharge?
Yes. A creditor can object to the automatic discharge by making an application to the court within twenty-one days from the date of the notice of automatic discharge for an order to suspend the discharge. However, the objection can only be made based on the following grounds:
a) that the bankrupt has committed any offence under the 1967 Act or under sections 421 to 424 of the Penal Code (for e.g. dishonest or fraudulent removal or concealment of property to prevent distribution among creditors);
b) that the discharge under this section would prejudice the administration of the bankruptcy’s estate; or
c) that the bankrupt has failed to co-operate in the administration of estate.
Upon an application made by the creditor to object to the automatic discharge, the court may if it thinks just and expedient either:
i) dismiss the application and approve the discharge; or
ii) suspend the discharge for a period of two years.
This automatic discharge provision shall apply retrospectively to those who have been adjudged bankrupt before the Act came into force.
Suspension of automatic discharge
The Act also empowers the DGI to suspend the automatic discharge of a bankrupt described above. A bankrupt’s automatic discharge will be suspended for a period not exceeding two years if the bankrupt fails to comply with his duties and obligations under the 1967 Act on the expiry of the three-year period from the date of submission of his/her statement of affairs.
The suspension of the automatic discharge takes effect on the date stated in the notice issued by the DGI. Such notice would also be served on each creditor who has filed a proof of debts not less than 6 months before the expiration of the 3 years.
During the suspension period, the bankrupt must continue to fulfil his duties and obligations under the 1967 Act. At the end of the suspension period, the bankrupt will be automatically discharged, and the DGI shall issue a certificate of automatic discharge.
This provision shall also apply retrospectively to those who have been adjudged bankrupt before the Act came into force.
This article is intended for general information of the clients of our Firm. It should not be regarded as legal professional advice. If you need advice based on specific facts, please do contact our firm.
|Megan Phang Yuet Yee