COVID-19 Response: Changes to “presumption of insolvency” provision under section 466(1) of Companies Act 2016

27 April 2020

On 23 April 2020, the Companies (Exemption) Order (No. 2) 2020 [P.U.(A) 123/2020] (“Exemption Order (No. 2)”) and the Direction of the Minister under Paragraph 466(1)(a) (“Directive”) were gazetted. Both the Exemption Order (No. 2) and the Directive will take effect from 23 April 2020 to 31 December 2020 (“Effective Period”).

Under the Exemption Order (No. 2), the Minister of Domestic Trade and Consumer Affairs (“Minister”) has, pursuant to section 615(1) of the Companies Act 2016 (“Act”), exempted all companies from the application of the “presumption of insolvency” provision under section 466(1)(a) of the Act. The Exemption Order (No. 2) also revokes the Companies (Exemption) Order 2020 [P.U.(A) 122/2020] which was gazetted earlier on the same day (“Exemption Order (No. 1)”). The Directive on the other hand, increases the statutory threshold for presumption of insolvency from RM10,000 to RM50,000.

The introduction of the Exemption Order (No. 2) and the Directive follows the announcement by the Minister on 10 April 2020 here that in order to ease the burden of the business community resulting from the COVID-19 pandemic, the time period for a company to comply with a notice of demand for the purpose of presumption of insolvency under section 466(1)(a) of the Act will be extended to six months from 21 days, and the statutory threshold in a notice of demand issued under section 466(1)(a) of the Act will be increased from RM10,000 to RM50,000.

To read the article, please click here.