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As the COVID-19 crisis continues to take its toll on the economy, many companies that are facing financial difficulties have been exposed to the risk of insolvency. In the current climate, there is no doubt that struggling companies would have to resort to some form of corporate restructuring in order to avoid being liquidated. The Companies Act 2016 (“CA 2016”) provides two option of corporate rescue mechanism to rehabilitate the businesses of distressed companies.

1) Corporate Voluntary Arrangement (CVA)

The CVA mechanism enables a company facing financial difficulties to enter into a plan or a debt restructuring agreement with its creditors with minimal Court intervention. The application of a CVA imposes an automatic moratorium on any legal action by creditors which would remain in force for 28 days (and may be extended up to a maximum period of 60 days from the commencement of the moratorium).

Excluded Companies

Section 395 of the CA 2016 provides that CVA shall not be applicable to:-

• a public company;
• a company which is a licensed institution, or an operator of a designated payment system regulated under the laws enforced by the Central Bank of Malaysia;
• a company which is subject to the Capital Markets and Services Act 2007; and
• a company which creates a charge over its property or any of its undertaking.

By such design, this mechanism can only be utilised by private limited companies which do not have their properties or undertakings charged to another entity.

Initiating a CVA

The proposal for CVA may be prepared by the company directors, judicial manager or liquidator (as the case may be). This proposal would include an appointment of a nominee, who is a qualified insolvency practitioner to assess the prospect of the proposal being implemented and whether the company is likely to have sufficient funds available during the proposed moratorium to carry on its business.

Once the nominee lodges the proposal in Court, the moratorium on legal actions by creditors is automatically imposed. This moratorium essentially suspends the power of creditors to take legal action against a company, including but not limited to the initiation of winding up proceedings. Further, no steps may be taken to impose any security over the company’s property or to repossess goods in the company’s possession under any hire-purchase agreement, except with the leave of the Court.

When a moratorium is in force, a meeting for creditors and shareholders shall then be held to discuss the proposal. In the case of a creditor’s meeting, a 75% majority vote is required for approval of the proposal while for a meeting of shareholders, a simple majority will suffice. Once approved, the proposal becomes binding on all creditors and members. The nominee also functions as a supervisor of the agreement to monitor its implementation.

2) Judicial Management (JM)

The JM mechanism allows the company director(s) or a creditor to apply for a Court order that places the management of a company in the hands of a judicial manager appointed by the Court.

The judicial manager must then prepare a workable restructuring plan which has to be acceptable to the majority of the creditors. Once the plan is approved by 75% of the total value of the creditors, the restructuring plan will be implemented and binding on all creditors.

Excluded Companies

Most companies are eligible under the JM mechanism, with the following exceptions as provided under Section 403 of the CA 2016:-

• a company which is a licensed institution or an operator of a designated payment system regulated under the laws enforced by Bank Negara Malaysia; and
• a company which is subject to the Capital Markets and Services Act 2007.

Commencing a JM

Once the JM application is filed in Court, an automatic moratorium takes place to prevent the initiation of any legal proceedings by creditors against the company. The Court shall hear the application within 60 days from the date the application is filed. Struggling companies will therefore enjoy the moratorium from the filing of the JM application until the application is dismissed or granted by the Court.

The Court is empowered under Section 405(1) of the CA 2016 to grant a JM order if: –

• it is satisfied that the company is or will be unable to pay its debts; and
• it considers that the making of the order is likely to achieve one or more of the following purposes:–
• the survival of the company, or the whole or part of its undertaking as a going concern;
• the approval of a compromise or arrangement between the company and its creditors;
• a more advantageous realisation of the company’s assets would be effected than on a winding up.

Further, Section 405(5)(a) of the CA 2016 vests the Court with an overriding power to make a JM order if it considers the public interest so requires. In the case of Leadmont Development Sdn Bhd v. Infra Segi Sdn Bhd [2018] 10 CLJ 412 , the High Court held that what constitutes a public interest would be determined on a case to case basis.

Once a JM order is granted by the Court, companies will continue to enjoy a second moratorium against winding up and legal actions which would last throughout the duration of the JM order. The judicial management order will remain in force for 6 months and may be extended for another period of not more than 6 months.

CVA or JM?

The CVA mechanism is encouraged for companies that prefer minimal Court intervention. The mechanism is also more cost efficient and time saving as compared to a JM, which requires the supervision of the Court. One of the key benefits of the CVA is that directors would remain in control of the company which allows the company to carry on its business as usual, since the appointment of the nominee does not discharge directors from their duties.

A key point as highlighted above is that the CVA is only limited to private limited companies which do not have any charge over their properties or undertakings. This exclusion would significantly limit the use of the CVA as many financially distressed companies would likely have existing loans which are paired with a charge. As such, the CVA may only benefit a number of small and medium enterprises which have not obtained loans from financial institutions or other entities.

Meanwhile, a JM would be useful for companies who may not have the experience in weathering such unprecedented times. The appointment of a judicial manager has the benefit of having the company temporarily managed by a qualified insolvency practitioner who has the necessary experience in rehabilitating and restructuring the company.

The appointment of a judicial manager may also provide some comfort to creditors in ensuring that struggling companies are being managed by professionals. Once the judicial manager steps in, the judicial manager takes over the directors’ duties and has the power to manage the affairs, business and property of the company. The company’s directors are legally required to cooperate with the judicial manager during the enforcement of the JM order.

A JM is far more costly and its entire process is rather cumbersome in comparison to a CVA. Companies applying for a JM order would need to satisfy the test laid out in Section 405(1) of the CA 2016. A JM application will also be dismissed if a receiver/receiver and manager has been (or will be) appointed and the application is opposed by any secured creditor.

Companies must bear in mind that both CVA and JM bears with it an element of publicity as they are legally required to among others, be announced to the public by way of newspapers advertisements.

Conclusion

While both corporate rescue mechanisms have their own drawbacks and advantages, the key feature for both options is the imposition of a moratorium on legal proceedings. This would enable financially struggling companies a much needed buffer to restructure and turn around their businesses to avoid the risk of going into liquidation. As the revenue of most companies have been impacted one way or another by the COVID-19 crisis and the MCO restrictions, it may be time for companies to consider exploring the above options of corporate rescue mechanism other than merely carrying out an internal corporate restructuring programme (which may be inadequate). It may seem rather extreme in the first instance, but in some cases, it may be a necessary step in ensuring the company stays afloat.

By: Jaclyn Chang

DISCLAIMER: This article is for general information only and should not be relied upon as legal advice and/or legal opinion. Messrs Yeoh & Joanne accepts no liability for any loss which may arise from reliance on the information contained in this article.

COVID-19危机:企业救援机制

随着COVID-19危机继续对经济造成损害，许多面临财务困难的公司面临破产风险。在目前的环境下，毫无疑问，陷入困境的公司将不得不诉诸某种形式的企业重组，以避免被清盘。《2016年公司法令》提供了两种企业救助机制选择，以恢复陷入困境的公司的业务。

1) 公司自愿安排Corporate Voluntary Arrangement

公司自愿安排机制使面临财务困难的公司能够与债权人在法院极少干预的情况达成计划或债务重组协议。公司自愿安排机制将自动暂停债权人的任何法律行动，该行动将持续28天(从暂停开始起最多可延长60天)。 

不被包括的公司

《2016年公司法令》第395条提及，CVA不适用于：-

• 上市公司；
• 属持牌机构的公司或根据马来西亚中央银行执行的法律规定指定的支付系统运营公司；
• 受《2007年资本市场和服务法令》约束的公司；和
• 对其财产或其任何业务进行抵押或保证的公司。

按照这种设计，这种机制只能由私人有限公司使用，这些公司的财产或业务不归另一个实体所有。

发起公司自愿安排机制提案

公司自愿安排机制提案可由公司董事、司法经理或清算人(视情况而定)提出。该提案将包括任命一名指定人，该被指定人是一名合格的不抵债专业人员，负责评估该提案实施的前景，以及该公司在拟议的暂停期内是否有足够的资金继续进行业务。

一旦该指定人向法院提交提案，债权人的法律诉讼将自动暂停。这种暂停基本上中止了债权人对公司采取法律行动的权力，包括但不限于启动清盘程序。此外，除非经法院许可，否则不得采取任何措施对公司财产进行担保或根据任何租购协议收回该公司拥有的货物。

当暂停生效时，应召开债权人和股东会议讨论该提案。在债权人会议的情况下，批准提案需要75%的多数票，而在股东会议上，简单多数就足够了。一旦获得批准，该提案对所有债权人和成员都具有约束力。该指定人还担任协议的监督人，监督协议的执行。

2) 司法管理Judicial Management

司法管理令允许公司董事或债权人申请法院命令，将公司的管理权交给法院任命的司法管理人员。

司法经理必须准备一个可行的重组计划，该计划必须为大多数债权人所接受。一旦该计划获得债权人总价值的75%的批准，重组计划将被实施，并对所有债权人具有约束力。 

不被包括的公司

大多数公司都符合司法管理令，但《2016年公司法令》第403条的以下例外情况除外:-

• 属持牌机构的公司或根据马来西亚中央银行执行的法律规定指定的支付系统运营公司；和
• 受《2007年资本市场和服务法令》约束的公司

开始司法管理令

一旦司法管理令的申请被提交到法院，就会自动暂停，以防止债权人对该公司提起任何法律诉讼。法院应在提出申请之日起60天内审理申请。因此，陷入困境的公司将在公司将从提交司法管理令申请到申请被法院驳回或批准之间得到暂时的暂停。

根据《2016年公司法令》第405(1)条，法院有权在以下情况下授予司法管理令：-

• 信纳该公司已经或将会没有能力偿付其债项；和
• 认为通过发出该法院令可能达到以下一个或多个目的：-
• (i) 公司的存续，或其全部或部分承企业的经营；
• (ii) 批准公司与其债权人之间的妥协或安排；
• (iii) 公司资产的变现比清盘更有利。

此外，《2016年公司法令》第405(5)(a)条赋予法院压倒性的权力，如果它认为公共利益需要，可以发布JM法院令。在Leadmont Development Sdn Bhd v. Infra Segi Sdn Bhd [2018] 10 CLJ 412一案中，高等法院认为，将根据个别案件于决定什么将构成公共利益。

一旦法院批准了司法管理令，公司将继续享有第二次暂停清盘和法律诉讼的权利，这种权利将在司法管理令的整个有效期内持续。司法管理令将持续6个月，并可再延长不超过6个月。 

公司自愿安排机制还是司法管理令呢？

公司自愿安排机制更适用于那些偏爱极少法院干预的公司。与需要法院监督的司法管理令相比，该机制也更具成本效益和节省时间。公司自愿安排机制的主要好处之一是，董事将继续控制公司，使公司能够照常进行业务，因为任命委任指定人并不解除董事的职责。

上文强调的一个关键点是，公司自愿安排机制只限于没有对其财产或其任何业务进行抵押或保证的私人有限公司。这种排除将极大地限制公司自愿安排机制的使用，因为许多陷入财务困境的公司很可能现有贷款或财产抵押。因此，公司自愿安排机制可能只惠及一些没有从金融机构或其他实体获得贷款的中小企业。

与此同时，司法管理令对于那些可能没有经历过如此前所未有的情况的公司来说比较有用。任命一名司法经理的好处是，公司由一名合格和在公司的恢复和重组方面具有必要的经验的不抵债专业人员临时管理。

司法经理的任命也可以给债权人提供一些安慰，确保在困境的公司由专业人士管理。一旦司法经理介入，司法经理将接管董事的职责，并有权管理公司的事务、业务和财产。法律要求公司董事在执行司法管理令期间与司法经理合作。

与公司自愿安排机制相比，司法管理令的成本相对比较高，整个过程也相对复杂。申请司法管理令的公司将需要满足《2016年公司法令》第405(1)条规定的测试。如果一名接管人/接管人和管理人已经(或将)被委任，并且该申请遭到任何有担保债权人的反对，则司法管理令申请也将被驳回。

公司必须切记，公司自愿安排机制和司法管理令都有一个公开的因素，因为它们在法律上需要通过报纸广告向公众公布。

结论

虽然这两种企业拯救机制都有各自的缺点和优势，但两种选择的关键特征都是暂停法律诉讼。这将使陷入财务困境的公司获得急需的缓冲，以重组和扭转业务，避免陷入清盘的风险。由于大部分公司的收入都受到COVID-19危机和行动管制令的影响，公司应该考虑探索上述企业拯救机制的选择，而不仅仅是实施内部企业重组计划(这可能是不够的)。首先，这可能看起来有些极端，但在某些情况下，这可能是确保公司生存下去的必要步骤。

文章来自于：张美琪律师 (Jaclyn Chang Mei Qi)

文章翻译：李淑婷律师 (Lee Su Ting)

免责声明:本文仅供参考，不应作为法律建议和/或法律意见。Yeoh & Joanne律师事务所不会承担因依赖本文所含信息而产生的任何损失的责任。