At the beginning of 2021, the COVID situation in Malaysia seems to be recovering. As economic activities resumed, everything was going back to normal. Ever since the pandemic happened, the government has made an effort to safeguard the country’s economy. For example, they proposed to amend the debt threshold for bankruptcy petition from RM50,000 to RM100,000 via the Insolvency (Amendment) Act 2020.
Three main provisions relate to the new changes of insolvency law:
- Insolvency Act 1967 (Act)
- Temporary Measures For Reducing The Impact Of Coronavirus Disease 2019 (Covid-19) Bill 2020 (Temporary Covid-19 Bill)
- Insolvency (Amendment) Act 2020 (Amendment Act)
For context, the Amendment Act intended to amend the Act following the Temporary Covid-19 Bill.
The amendment aimed to buffer the sudden rise of the bankruptcy rate in the country. Malaysian Department of Insolvency is vigilant in the aftermath of the first wave of the pandemic. While all of us are adapting to the new normal, economic activities still have to persist.
What has changed for the provision?
The particular change to Section 5(1)(a) Insolvency Act 1987 is through Clause 19, 20, 21 Part VII Temporary Covid-19 Bill. To avoid any confusion of which provision that public should follow. The Temporary Covid-19 Bill is the ultimate law that governs all insolvency-related conflicts till 31 August 2021 only.
Though the Insolvency (Amendment) Act 2020 is gazetted, it has yet to be enforced. The official enforcement date for it is 1 September 2021. Until then, any insolvency-related issues will still refer to the Temporary Covid-19 Bill. In short, the threshold for filing a bankruptcy petition is still RM100,00. The only difference between these two Acts is that the Minister’s power to change the threshold’s desired time period is on hold until the enforcement date.
The Current Situation
While we all are waiting for the improvement of the pandemic, it is unlikely to witness any miracle happen in such a short time. The government is proactively arranging the vaccine distribution to the public. Vaccination might indeed be the key to economic recovery. However, Malaysia’s population that is fully vaccinated is only 3.5%. It is roughly 1.13M people out of 32.7M total Malaysia’s population, which is considered a meagre vaccination rate.
For all the economic loss that happened during this period, it takes time to recover. This new amendment will be a temporary fix for the public to have more time to oversee their finances.
Rahayu Partnership provides a wide range of services that cover internationally and locally. We urge everyone to take vaccines and stay home safely. We are all in this together. For any insolvency-related issues, please do not hesitate to contact us for consultation.
By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com