s 20 Modification to the amount of indebtedness
During the period of operation of this Part, a creditor or creditors shall not be entitled to present a bankruptcy petition against a debtor under section 2o or 5 of the Insolvency Act 1967, unless the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the aggregate amount of debts owing to the several petitioning creditors, amounts to one hundred thousand ringgit. Fees of nominee 2Q. The Minister may prescribe the scale of fees to be charged by nominees in respect of voluntary arrangement. Act of Bankruptcy Acts of bankruptcy 3. (1) A debtor commits an act of bankruptcy in each of the following cases: (a) if in Malaysia or elsewhere he makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; (b) if in Malaysia or elsewhere he makes a fraudulent conveyance, gift, delivery or transfer of his property or of any part thereof; (c) if in Malaysia or elsewhere he makes any conveyance or transfer of his property or of any part thereof, or creates any charge thereon which would under this or any other written law for the time being in force be void as a fraudulent preference if he were adjudged bankrupt; (d) if with intent to defeat or delay his creditors he does any of the following things: (i) departs out of Malaysia or being out of Malaysia remains out of Malaysia; (ii) departs from his dwelling-house or otherwise absents himself, or begins to keep house or closes his place of business; or (iii) submits collusively or fraudulently to an adverse judgment or order for the payment of money; (e) if execution issued against him has been levied by seizure of his property under process in an action or in any civil proceeding in the High Court, Sessions Court or Magistrates Court where the judgment, including costs, is for an amount of *one thousand ringgit or more; (f) if he files in the court a declaration of his inability to pay his debts or presents a bankruptcy petition against himself; (g) if he gives notice to any of his creditors that he has suspended or that he is about to suspend payment of his debts; (h) (Deleted by Act A1534). (i) if a creditor has obtained a final judgment or final order against him for any amount and execution thereon not having been stayed has served on him in Malaysia, or by leave of the court elsewhere, a bankruptcy notice under this Act requiring him to pay the judgment debt or sum ordered to be paid in accordance with the terms of the judgment or order with interest quantified up to the date of issue of the bankruptcy notice, or to secure or compound for it to the satisfaction of the creditor or the court; and he does not within seven days after service of the notice in case the service is effected in Malaysia, and in case the service is effected elsewhere then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice or satisfy the court that he has a counterclaim, set off or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid and which he could not set up in the action in which the judgment was obtained or in the proceedings in which the order was obtained: Provided that for the purposes of this paragraph and of section 5 any person who is for the time being entitled to enforce a final judgment or final order shall be deemed to be a creditor who has obtained a final judgment or final order; (j) if the officer charged with the execution of a writ of attachment or other process makes a return that the * NOTE—Previously “five hundred ringgit”–see the Bankruptcy (Amendment) Act 1976 [Act A364]. debtor was possessed of no property liable to seizure; and for the purposes of this paragraph the date when the writ is lodged with the officer shall be deemed to be the date of the act of bankruptcy. (2) A bankruptcy notice under this Act shall be in the prescribed form and shall state the consequences of non-compliance therewith and shall be served personally to a debtor: Provided that a bankruptcy notice— (i) may specify an agent to act on behalf of the creditor in respect of any payment or other thing required by the notice to be made to or done to the satisfaction of the creditor; and (ii) shall not be invalidated by reason only that the sum specified in the notice as the amount due exceeds the amount actually due unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such mistake; but if the debtor does not give such notice he shall be deemed to have complied with the bankruptcy notice, if within the time allowed he takes such steps as would have constituted compliance with the notice had the actual amount due been correctly specified therein. (2A) Notwithstanding subsection (2), the court may make an order for substituted service of a bankruptcy notice as prescribed if the creditor can prove to the satisfaction of the court that the debtor, with intent to defeat, delay or evade personal service— (a) departs out of Malaysia or being out of Malaysia remains out of Malaysia; or (b) departs from his dwelling house or otherwise absents himself, or secludes himself in his house or closes his place of business. (2B) An application for an order for substituted service shall state the facts on which the application is founded. (2C) A substituted service of a bankruptcy notice, in relation to which an order is made under this section, is effected by taking such steps as the court may direct to bring the bankruptcy notice to the person to be served. (3) The word “debtor” in this Act shall be deemed to include any person who at the time when the act of bankruptcy was done or suffered by him— (a) was personally present in Malaysia; (b) ordinarily resided or had a place of residence in Malaysia; (c) was carrying on business in Malaysia either personally or by means of an agent; or (d) was a member of a firm or partnership which carried on business in Malaysia. Bankruptcy Order Bankruptcy order 4. The court may, on a bankruptcy petition being presented by a creditor under section 6 or by a debtor under section 7, make a bankruptcy order. Conditions on which creditor may petition 5. *(1) A creditor shall not be entitled to present a bankruptcy petition against a debtor unless— ** (a) the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the * NOTE—section 5 of this Act has been modified by section 20 of the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Act 2020 [Act 829], which came into operation on the date of publication of Act 829 and continued to remain in operation until 31 August 2021. Section 20 of Act 829 provides as follow: Modification to the amount of indebtedness 20. During the period of operation of this Part, a creditor or creditors shall not be entitled to present a bankruptcy petition against a debtor under section 2o or 5 of the Insolvency Act 1967, unless the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the aggregate amount of debts owing to the several petitioning creditors, amounts to one hundred thousand ringgit. ** NOTE—see section 3 of the Insolvency (Amendment) Act 2020 [Act A1624]. aggregate amount of debts owing to the several petitioning creditors, amounts to *one hundred thousand ringgit; (b) the debt is a liquidated sum payable either immediately or at some certain future time; (c) the act of bankruptcy on which the petition is grounded has occurred within six months before the presentation of the petition; and (d) the debtor is domiciled in Malaysia or in any State or within one year before the date of the presentation of the petition has ordinarily resided or had a dwelling house or place of business in Malaysia or has carried on business in Malaysia personally or by means of an agent or is or has been within the same period a member of a firm or partnership which has carried on business in Malaysia by means of a partner or partners or an agent or manager. (1A) The Minister may, after consultation with the Minister of Finance, by order published in the Gazette, amend the amount of debt in paragraph (1)(a) for the presentation of a bankruptcy petition for a specific time period, if the Minister is satisfied that there are special circumstances and that it would not be contrary to public interest, to do so. (1B) Where an order to amend the amount of debt for the presentation of a bankruptcy petition in subsection (1A) ceases or expires— (a) any bankruptcy petition, presented by a petitioning creditor against a debtor which is still pending immediately before the order in subsection (1A) ceases or expires, shall be continued or concluded in accordance with the amount of debt as amended by the order in subsection (1A); and (b) any bankruptcy petition, presented by a petitioning creditor against a debtor after the order in subsection (1A) * NOTE—Previously “fifty thousand ringgit”–see section 2 of the Insolvency (Amendment) Act 2020 [Act A1624]. ceases or expires, shall be continued or concluded in accordance with the amount of debt as specified in paragraph (1)(a). (1C) The order made under subsection (1 A) shall be laid before the Dewan Rakyat as soon as practicable after its publication in the Gazette. (2) If the petitioning creditor is a secured creditor he must in his petition either state that he is willing to give up his security for the benefit of the creditors in the event of the debtor being adjudged bankrupt or give an estimate of the value of his security. In the latter case he may to the extent of the balance of the debt due to him, after deducting the value so estimated, be admitted as a petitioning creditor in the same manner as if he were an unsecured creditor. (3) A petitioning creditor shall not be entitled to commence any bankruptcy action— (a) against a social guarantor; and (b) against a guarantor other than a social guarantor unless the petitioning creditor has obtained leave from the court. (4) Before granting leave referred to in paragraph (3)(b), the court shall satisfy itself that the petitioning creditor has exhausted all modes of execution and enforcement to recover debts owed to him by the debtor. (5) Where the petition is presented against a guarantor pursuant to subsection (4), a petitioning creditor shall state in his petition the particulars of his borrower. (6) For the purposes of subsection (4), modes of execution and enforcement include seizure and sale, judgment debtor summon, garnishment and bankruptcy or winding up proceedings against the borrower. (7) If the petitioning creditor fails to comply with the requirements of this section, the court shall dismiss the petition. Proceedings and order on creditor’s petition 6. (1) A creditor’s petition shall be verified by affidavit of the creditor or of some person on his behalf having knowledge of the facts, and shall be served personally to a debtor. (1A) Notwithstanding subsection (2), the court may make an order for substituted service of a creditor’s petition as prescribed if the creditor can prove to the satisfaction of the court that the debtor, with intent to defeat, delay or evade personal service— (a) departs out of Malaysia or being out of Malaysia remains out of Malaysia; or (b) departs from his dwelling house or otherwise absents himself, or secludes himself in his house or closes his place of business. (1B) An application for an order for substituted service shall state the facts on which the application is founded. (1C) A substituted service of a creditor’s petition, in relation to which an order is made under this section, is effected by taking such steps as the court may direct to bring the creditor’s petition to the person to be served. (2) At the hearing the court shall require proof of— (a) the debt of the petitioning creditor; (b) the act of bankruptcy or, if more than one act of bankruptcy is alleged in the petition, some one of the alleged acts of bankruptcy; and (c) if the debtor does not appear, the service of the petition, and if satisfied with the proof may make a bankruptcy order in pursuance of the petition. (3) If the court is not satisfied with the proof of the petitioning creditor’s debt or of the act of bankruptcy or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause no order ought to be made, the court may dismiss the petition. (4) When the act of bankruptcy relied on is non-compliance with a bankruptcy notice to pay, secure or compound for a judgment debt, the court may if it thinks fit stay or dismiss the petition on the ground that an appeal is pending from the judgment. (5) Where the debtor appears on the petition and denies that he is indebted to the petitioner, or that he is indebted to such an amount as would justify the petitioner in presenting a petition against him, the court, on such security, if any, being given as the court may require for payment to the petitioner of any debt which may be established against the debtor in due course of law and of the costs of establishing the debt, may, instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt. (6) Where proceedings are stayed the court may, if by reason of the delay caused by the stay of proceedings or for any other cause it thinks just, make a bankruptcy order on the petition of some other creditor, and shall thereupon dismiss, on such terms as it thinks just, the petition in which proceedings have been stayed as aforesaid. (7) A creditor’s petition shall not after presentation be withdrawn without the leave of the court. Debtor’s petition and order thereon 7. (1) A debtor’s petition shall allege that the debtor is unable to pay his debts, and the presentation thereof shall be deemed an act of bankruptcy without the previous filing by the debtor of any declaration of inability to pay his debts, and the court shall thereupon make a bankruptcy order. (1A) Where a debtor’s petition is presented on behalf of a firm in the firm’s name, the court shall not adjudge a person who is a member of the firm bankrupt unless such person is proved to the satisfaction of the court to be a partner by his admission or by evidence on oath. (2) A debtor’s petition shall not after presentation be withdrawn without the leave of the court. Effect of bankruptcy order 8. (1) On the making of a bankruptcy order— (a) except as provided by this Act, no creditor to whom the bankrupt is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the bankrupt in respect of the debt, or shall proceed with or commence any action or other legal proceeding in respect of such debt unless with the leave of the court and on such terms as the court may impose; and (b) all the property of the bankrupt shall become divisible among his creditors and shall vest in the Director General of Insolvency and the Director General of Insolvency shall be the receiver, manager, administrator and trustee of all properties of the bankrupt. (2) This section shall not affect the power of any secured creditor to realize or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed—nor shall it operate to prejudice the right of any person to receive any payment under or by virtue of section 31 of the Employment Act 1955 [Act 265] of the States of *Peninsular Malaysia or any corresponding provisions in Sabah and Sarawak. (2A) Notwithstanding subsection (2), no secured creditor shall be entitled to any interest in respect of his debt after the making of a bankruptcy order if he does not realize his security within twelve months from the date of the bankruptcy order. (3) On a bankruptcy order being made against a debtor he shall, within twenty-four hours after such order has been served upon him file an affidavit in the office of the Director General of Insolvency, containing a true and correct statement of the names and residences of all the partners, if any, in his business and of his principal assets and liabilities. Such statement shall for the purposes of this Act be deemed to be part of the debtor’s statement of his affairs referred to in section 16. * NOTE—All references to “West Malaysia” shall be construed as reference to “Peninsular Malaysia”– see the Interpretation (Amendment) Act 1997 [Act A996], subsection 5(2). (4) On such order as aforesaid being made against a debtor the Director General of Insolvency shall forthwith take possession of all books of account and other papers and documents in the possession, custody or control of the debtor relating to his property or affairs, and may take into his possession all or any deeds, books, documents and other property of the debtor. 9. (Deleted by Act A1534). Discretionary powers as to appointment of interim receiver and stay of proceedings 10. (1) The court may, if it thinks it is advisable for the protection of the estate, at any time after the presentation of a bankruptcy petition and before a bankruptcy order is made, appoint the Director General of Insolvency to be interim receiver of the property of the debtor or of any part thereof, and direct him to take immediate possession thereof or of any part thereof, including all books of account and other papers and documents belonging to the debtor and relating to his business. (2) The court may at any time after the presentation of a bankruptcy petition stay any action, execution or other legal process against the property or person of the debtor. Service of order staying proceedings 11. Where an order is made under section 10, staying any action or proceeding or staying proceedings generally, the order may be served by sending a copy thereof, under the seal of the court, by prepaid registered post to the address for service of the plaintiff or other party prosecuting such proceeding. Power to appoint special manager 12. (1) The Director General of Insolvency may, if satisfied that the nature of the debtor’s estate or business or the interests of the creditors generally require the appointment of a special manager of the estate or business other than the Director General of Insolvency, appoint a manager to act accordingly and with such powers, including any of the powers of a receiver, as are entrusted to him by the Director General of Insolvency. (2) (Deleted by Act A1534). (3) The special manager shall give security and account in such manner as the Director General of Insolvency, subject to the control of the court, directs. (4) The special manager shall receive such remuneration as the Director General of Insolvency, within the prescribed limits and subject to such control as aforesaid, determines. Advertisement of bankruptcy order 13. Notice of every bankruptcy order, stating the name, address and description of the debtor, the date of the order and the date of the petition, shall be gazetted and advertised in a local paper as prescribed. 14. (Deleted by Act A1534). Proceedings Consequent on Bankruptcy Order Meeting of creditors *15. (1) As soon as may be after the making of a bankruptcy order against a debtor, a meeting of creditors may be held for the purpose of considering whether a proposal for a composition or scheme of arrangement shall be entertained and generally as to the mode of dealing with the bankrupt’s property, and for any other purpose as may be prescribed. (1A) Any creditor who has tendered a proof of debts, or his representative duly authorized in writing, may question the bankrupt concerning his affairs and the causes of his failure. * NOTE—see section 17 of the Insolvency (Amendment) Act 2023 [Act A1695] w.e.f. 6 October 2023 which provides the following provision: Saving 17. Notwithstanding sections 15 and 16, any proceedings, actions or other matters required to be done under the principal Act which are still pending immediately before the coming into operation of this Act shall be continued or concluded under the principal Act as if the principal Act had not been amended by this Act. (2) With respect to the summoning of and proceedings at the meetings of creditors the rules in Schedule A shall be observed. Bankrupt’s statement of affairs *16. (1) Where a bankruptcy order is made against a debtor he shall make out and submit to the Director General of Insolvency a statement of and in relation to his affairs in the prescribed form, verified by affidavit, showing the particulars of his assets, debts and liabilities, the names, residences and occupations of his creditors, the securities held by them respectively, the dates when the securities were respectively given, the cause of his insolvency, the date when he last balanced his accounts before becoming insolvent, the amount of his capital at the date of such balance, after providing for all his liabilities and making allowances for bad and doubtful debts, and such further and other information as is prescribed or as the Director General of Insolvency requires. (2) The statement shall be so submitted within the following times: (a) if the order is made on the petition of the debtor, within seven days from the date of the order; (b) if the order is made on the petition of a creditor, within twenty-one days from the date of the order, but the Director General of Insolvency may in either case for special reasons extend the time by order made under his hand, to be forthwith filed, recording the reasons therefor. (3) If the bankrupt fails without reasonable excuse, proof whereof shall lie on him, to comply with the requirements of this section he shall be guilty of a contempt of court and may be punished accordingly. * NOTE—see section 17 of the Insolvency (Amendment) Act 2023 [Act A1695] w.e.f 6 October 2023 which provides the following provision: Saving 17. Notwithstanding sections 15 and 16, any proceedings, actions or other matters required to be done under the principal Act which are still pending immediately before the coming into operation of this Act shall be continued or concluded under the principal Act as if the principal Act had not been amended by this Act. (4) Any person stating himself, in writing, to be a creditor of the bankrupt may personally or by agent inspect this statement at all reasonable times and take any copy thereof or extract therefrom, but any person untruthfully so stating himself to be a creditor shall be guilty of a contempt of court and shall be punishable accordingly on the application of the Director General of Insolvency. Public Examination of Bankrupt Public examination of bankrupt 17. (1) Where the court makes a bankruptcy order, the Director General of Insolvency may make an application to hold a public sitting on a day to be appointed by the court for the examination of the bankrupt, and the bankrupt shall attend thereat, and shall be examined as to his conduct, dealing and property: Provided that when the bankrupt is a lunatic or suffers from any such mental or physical affliction or disability as in the opinion of the Court renders him unfit to attend his public examination the court may dispense with such examination or direct the bankrupt to be examined in such manner and place as the court thinks expedient. (2) The examination shall be held as soon as conveniently may be after the expiration of the time for the submission of the bankrupt’s statement of affairs and after the meeting of creditors. (3) The court may adjourn the examination from time to time. (4) Any creditor who has tendered a proof, or his representative authorized in writing, may question the bankrupt concerning his affairs and the causes of his failure. (5) The Director General of Insolvency shall take part in the examination of the bankrupt, and for the purpose thereof may, if specially authorized by theAttorney General, employ an advocate and solicitor but no advocate and solicitor shall be allowed to take part in the examination on behalf of the bankrupt. (6) The court may put such questions to the bankrupt as it thinks expedient. (7) The bankrupt shall be examined upon oath, and it shall be his duty to answer all such questions as the court puts or allows to be put to him. (8) Such notes of the examination as the court thinks proper shall be taken down in writing by the Registrar and shall be read over to and signed by the bankrupt, and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor at all reasonable times. (9) When the court is of opinion that the affairs of the bankrupt have been sufficiently investigated, it shall, by order, declare that his examination is concluded, but such order shall not preclude the court from directing a further examination of the bankrupt as to his conduct, dealings and property whenever it sees fit to do so. (10) (Deleted by Act A827). Composition or Scheme of Arrangement Power for creditors to accept and court to approve composition or arrangement 18. (1) Where a debtor is adjudged bankrupt, the creditors may, at any time after the adjudication by special resolution, resolve to entertain a proposal for a composition in satisfaction of the debts due to the creditor under the bankruptcy, or for a scheme of arrangement of the bankrupt’s affairs. (2) The composition or scheme shall not be binding on the creditors unless it is confirmed at a subsequent meeting of creditors by a special resolution and is approved by the court. (3) Any creditor who has proved his debt may assent to or dissent from such composition or scheme by a letter addressed to the Director General of Insolvency in the prescribed form, and attested by a witness, and sent or posted so as to be received by such Director General of Insolvency not later than the day preceding such subsequent meeting of creditors, and a creditor so assenting or dissenting shall be taken as being present and voting at such meeting. (4) The subsequent meeting of creditors shall be summoned by the Director General of Insolvency by not less than seven days’ notice. (5) The notice shall state generally the terms of the proposal and shall be accompanied by a report of the Director General of Insolvency thereon. (6) The debtor or the Director General of Insolvency may, after the composition or scheme is accepted by the creditors, apply to the court to approve it, and notice of the time appointed for hearing the application shall be given as prescribed. (7) (Deleted by Act A827). (8) The court before approving a composition or scheme shall hear a report of the Director General of Insolvency as to the terms of the composition or scheme and as to the conduct of the debtor, and shall hear any objections which may be made by or on behalf of any creditor. (9) If the court is of opinion that the terms of the composition or scheme are not reasonable or are not calculated to benefit the general body of creditors, and in any case in which the court is required under this Act to refuse a bankrupt his discharge, the court shall, or if any such facts are proved as would under this Act justify the court in refusing, qualifying or suspending the discharge, the court may, in its discretion, refuse to approve the composition or scheme. (10) If the court approves the composition or scheme the approval may be testified by the seal of the court being attached to the instrument containing the terms of the composition or scheme, or by the terms being embodied in an order of the court. (10A) If the court approves the composition or scheme under this section, the court may make an order annulling the bankruptcy order and vesting the property of the bankrupt in the bankrupt or in such other person as the court appoints, on such terms and subject to such conditions, if any, as the court orders. (11) A composition or scheme accepted and approved in pursuance of this section shall be binding on all the creditors so far as relates to any debts due to them from the debtor and provable in bankruptcy. (12) (Deleted by Act A1534). (13) A composition or scheme under this section may be enforced by the court on application by any person interested, and any disobedience of an order of the court made on the application shall be deemed a contempt of court. (14) If default is made in payment of any instalment due in pursuance of the composition or scheme, or if it appears to the court on satisfactory evidence that the composition or scheme cannot, in consequence of legal difficulties or for any sufficient cause, proceed without injustice or undue delay to the creditors or to the debtor, or that the approval of the court was obtained by fraud, the court may, if it thinks fit, on application by any creditor, adjudge the debtor bankrupt and annul the composition or scheme, but without prejudice to the validity of any sale, disposition or payment duly made or thing duly done under or in pursuance of the composition or scheme. (15) Where a debtor is adjudged bankrupt under subsection (14), any debt provable in other respects, which has been contracted before the date of the adjudication, shall be provable in the bankruptcy. (16) (Deleted by Act A1534). (17) (Deleted by Act A1534). (18) No composition or scheme shall be approved by the court which does not provide for the payment in priority to other debts of all debts directed to be so paid in the distribution of the property of a bankrupt. (19) (Deleted by Act A1534). 19−23. (Deleted by Act A1534).