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Corporate Rescue Mechanism under the Companies Act 2016
Corporate Rescue Mechanism under the Companies Act 2016
Both the corporate voluntary arrangement and judicial management, together with the Companies (Corporate Rescue Mechanism) Rules 2018 (“Rules”), came into force earlier this year on 1 March 2018 with the gazetting of notice P.U. (B) 106/2018.
We have previously discussed the insolvency law policy and procedure, touching briefly on judicial management and corporate voluntary arrangement. We will now look at the rules applicable for the application for these two rescue mechanisms.
Part II (Rule 3 to 7) of the Rules deals with the application for corporate voluntary arrangement.
To kick start the process, the director, judicial manager or liquidator who propose for the voluntary arrangement shall:1
- file the proposal with the Court by completing Form 1 of the First Schedule together with the document setting out the terms and conditions of the voluntary arrangement and other statements as required under the section 398(1) of the Act; and
- notify the Registrar of such proposal on the date of filing of Form 1.
Once the meeting of the company and meeting of its creditors are held under Section 399 of the Act, the nominee appointed under Section 397 (1) of the Act shall within 7 days from the date of the meetings, file in to Court a report of the result of the meetings in Form 2 of the First Schedule. The nominee shall also notify the Registrar of the results on the date of filing of Form 2.
In the event the nominee withdraws his/her consent to act2, the nominee shall file his/her withdrawal of consent in Form 3 of the First Schedule to the Court and notify the same to:
- the Registrar in such manner as may be determined by the Registrar;
- the company on the date of filing by furnishing a copy of the Form 3; and
- the company’s creditors within 7 days from the date of filing of Form 3.
The directors of the company, Official Receiver or nominee appointed under Section 397 (1) of the Act may also apply to replace the nominee with another person. The person so appointed to replace the nominee shall file into Court a statement in Form 4 of the First Schedule indicating his/her consent to act. The said replacement nominee shall also notify the Registrar of his/her appointment on the date of filing of Form 4 in such manner as may be determined by the Registrar.
Once the moratorium under Section 398 of the Act comes to an end, the nominee shall, within 7 days from the expiry the moratorium, notify the Court of the end of the moratorium in Form 5 of the First Schedule of the Rules and furnish a copy of the same to the Registrar, company and creditors.
Scheme of Arrangement
The rules dealing with the application for Scheme of Arrangement is much more extensive and can be found in Part III of the Rules (Rule 8 to 17).
The application to Court for judicial management order under Section 40 of the Act is made by way of Originating Summons3 supported by affidavit4 affirmed by the person(s) making the application (or by any director or person duly authorised by the company). The Registrar must be notified of the application for judicial management order.
If the application is taken by the creditor of the company, the cause papers must be served on the company within five days from the date of filing by leaving a copy of the same with the secretary, director or other officer of the company at its registered office, or any member of the company as the Court may direct, or simply at the registered office of the company. Upon service of the cause papers, the creditor is required to make an affidavit of service in Form 8 of the First Schedule.
The Court shall fix a hearing date for the application within sixty days from the date of filing but may alter such date before the notice of the application is advertised under Section 408 (1)(a)5 of the Act, which has to be done not less than fourteen days before the hearing date. Failure to advertise the notice of the application for judicial management order may result in adjournment of the hearing date or dismissal of the application.
The applicant for the judicial management order shall, within forty eight hours of the request and upon payment of the necessary sum, furnish a copy of the cause papers to any creditor or member of the company. Any secured creditor, or person who has appointed or is or may be entitled to appoint a receiver and manager who intends to appear at the hearing of the application for judicial management order shall serve a notice of intention to appear in Form 10 of the First Schedule on the applicant or his/her solicitor.
An affidavit to oppose the application for judicial management order must be served on the applicant or his/her solicitor not less than seven days from the hearing date, and any affidavit in reply to the affidavit opposing the application for judicial management order must be filed by the applicant within three days from the date of service if the affidavit opposing the application for judicial management order.
If the application for judicial management order is allowed by the Court, the order shall be in Form 13 of the First Schedule. The applicant shall inform the judicial manager of the judicial management order within two days from the date of the judicial management order. Within five days of being informed of the judicial management order, the judicial manager shall publish a notice of the judicial management order in Form 15 of the First Schedule and forward a copy of the notice and order to the Registrar.
The above is a brief summary of the Rules applicable for the application of Corporate Voluntary Arrangement and Scheme of Arrangement. In the event you require a more detailed discussion on these two corporate rescue mechanisms, please do not hesitate to contact us.
1 Under Section 396 of the Act.
2 Under paragraph 5 of the Seventh Schedule to the Act.
3 In Form 6, First Schedule.
4 In Form 7, First Schedule.
5 In Form 9, First Schedule.
Wong Weng Yew
Tay & Partners
AN OVERVIEW OF THE AMENDMENTS TO THE ARBITRATION ACT 2005
AN OVERVIEW OF THE AMENDMENTS TO THE ARBITRATION ACT 2005
Arbitration is gaining traction as an attractive alternative dispute resolution method as the demand for out-of-court dispute resolution continues to grow. Arbitration is widely known for, among others, its flexibility, affordability, speed, confidentiality and privacy, as well as the ability to appoint one’s arbitrator in forming the arbitral tribunal and decide the venue for arbitration.
The law of arbitration In Malaysia is governed by the Arbitration Act 2005 (the “Act”). Following the change of name of the Kuala Lumpur Regional Centre for Arbitration (KLRCA) to the Asian International Arbitration Centre (Malaysia) (the “AIAC”) and the coming into force of the Arbitration (Amendment) (No. 2) Act 2018 on 8 May 2018, the Act has undergone several significant amendments in compliance with the latest revision of the UNCITRAL Model Law on International Commercial Arbitration (1985) in 2006.
Key amendments to the Arbitration Act 2005
The following are some key amendments to the Act:
- The definition for the term “arbitral tribunal” as set out in Section 2 of the Act is expanded to cover “emergency arbitrator” in order to cater to urgent interim relief for parties in arbitration proceedings.
- The new Section 3A allows a party to arbitration to opt to be represented by any representative of its choice unless otherwise agreed by the parties. This provision enables the party to select a representative who is an expert in the relevant field or subject of the arbitration and not necessarily a lawyer.
- Section 4 is amended to empower the courts to look into the subject matter of Sections 19F and 19G provides for the obligation of material disclosure and costs and damages respectively.he dispute, apart from public policy, to determine if it is capable of settlement by arbitration under the laws of Malaysia.
- Section 9 of the Act which provides the definition of what amounts to an arbitration agreement in writing is amended and expanded to cover arbitration agreements made through electronic forms of communication. An arbitration agreement communicated electronically, for instance by emails, is now duly recognised by the Act.
- By virtue of the amended Sections 11 and 19 of the Act, parties to arbitration proceedings may, instead of filing interlocutory applications in the Malaysian courts, request the arbitral tribunal to grant interim measures prior to the issuance of the arbitral award. In this respect, the following new sections were introduced:
- Section 19A states the conditions to be satisfied by the party requesting an interim measure under Section 19.
- Section 19B provides for the application for preliminary orders to prevent frustration of an interim measure.
- Section 19C states the specific regime for preliminary orders and provides the requirement for notice, validity of such orders and the nature of the same.
- Section 19D accords power to the arbitral tribunal to modify, suspend or terminate an interim measure it has granted, upon an application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.
- Section 19E states the requirement for the arbitral tribunal to seek provision of security from the party requesting an interim measure or the party applying for a preliminary order.
- Sections 19F and 19G provides for the obligation of material disclosure and costs and damages respectively.
- Section 19H states that an interim measures granted by an arbitral tribunal will be recognised as binding and shall be enforced upon application to the competent court.
- Section 19I states the grounds for refusing recognition or enforcement of an interim measure by an arbitral tribunal.
- Section 19J provides that the High Court has the power to issue an interim measure in relation to arbitration proceedings, irrespective of whether the seat is in Malaysia.
- The amended Section 30 no longer distinguishes between domestic and international arbitrations. The arbitral tribunal shall now decide disputes in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Where there is no agreed designation of the law by the parties, the arbitral tribunal shall apply the law determined by the conflict of law rules. The arbitral tribunal may also decide matters based on equity and conscience subject to the authorisation of the parties.
- The amended Section 33 now expressly empowers the arbitral tribunal to grant pre-award and post-award interest on any sums that are in disputes.
- Newly-added Sections 41A and 41B appear to be clear-cut confidentiality clauses, fortifying the hallmark of arbitration proceedings. The publication, disclosure or communication of information related to the arbitral proceedings or the arbitral award may only made if it is made (i) to protect or pursue a party’s legal right or interest; or (ii) to enforce or challenge the arbitral award. Such publication, disclosure or communication of information may be made if it is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, etc or if it is made to a professional or any other advisor of a party. Further, all court proceedings under the Act are to be heard in closed court in order to maintain the advantage of confidentiality in arbitration proceedings.
- Last but not least, Sections 42 and 43 of the Act which enable concurrent court jurisdiction or intervention over arbitral awards are repealed. Parties could no longer rely on Section 42 to refer questions of law before the High Court as an alternative method to set aside or vary an award. Such repeal inevitably promotes the finality of arbitral awards.
Interestingly, the supervisory role played by the courts may seem to have been diluted with the repeal of Sections 42 and 43 pursuant to the amendment act. However, it is pertinent to note that at the same time, more powers were granted to the courts by virtue of the revised Section 4(1) and the new Section 19J.
In general terms, the amendments of the Act are made with the aim to enhance party autonomy in arbitration, reduce court intervention and promote finality of arbitral awards. The amendments also signify that Malaysia is an arbitration-friendly country in this day and age and is committed to ensure our legislation is relevant and up to date with the current arbitral laws and practice in the region.
Hopefully the amendments of the Act would now make Malaysia one of the best arbitral seats in Asia, alongside with other serious contenders, notably Singapore and Hong Kong.
Chuah Chong Ping
Tay & Partners
DOMESTIC AIR CARRIER’S LIABILITY TOWARDS PASSENGERS
DOMESTIC AIR CARRIER’S LIABILITY TOWARDS PASSENGERS
In Malaysia, the governing laws that apply to domestic air carriage (i.e. non-international carriage) are the Carriage by Air Act 1974 (“1974 Act”) and the Carriage by Air (Application of Provisions) Order 1975 (“1975 Order”). The combined effect of 1974 Act and 1975 Order is that the terms of the rules relating to international carriage apply substantially in uniform manner regardless of whether the flight is international or domestic.1
In All Nippon Airways Co Ltd v Tokai Marine & Trading Co Ltd2, the Court of Appeal decided that in any carriage by air, the provisions of the 1974 Act read with the Warsaw Convention govern the transaction in question, to the exclusion of and without reference to the rules of the local law and common law more specifically common law causes of action.
In general, the 1975 Order applies to all non-international carriage of persons, baggage or cargo performed by the aircraft for reward; non-international gratuitous carriage by aircraft performed by an air transport undertaking; and carriage of mail and postal packages.
The purpose of this article is to explore the domestic air carrier’s liability in respect of the death of passengers in a fatal accident.
Scope of Domestic Air Carrier's Liability
To begin with, the carrier’s liability towards the passengers is on a strict liability basis. The carrier is liable for damage sustained in the event of the death or wounding of a passenger of any bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.3 However, the carrier shall be wholly or partly exonerated from its liability to the claimant if it is proved that the damage was caused or contributed to by the negligence of the claimant.4
In general, damage sustained in case of death or bodily injured of a passenger whereby the incident that caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking, the carrier is liable for proven damages up to 250,000 Francs.5 It should be noted that any provision tending to relieve the carrier of liability or to fix a lower limit than the amount of 250,000 Francs is null and void.6
The amount of 250,000 Francs is equivalent to RM48,000.7
Whether the aircraft accident report is admissible as evidence in the court?
It should be noted that the limit of liability for proven damages up to 250,000 Francs shall not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that, in the case of such act or omission of a servant or agent, it is also proved that he was acting within the scope of his employment.8
In this regard, it is questionable as to whether the aircraft accident final report prepared by the Air Accident Investigation Bureau of Malaysia is admissible as evidence in the court to prove that that the damage resulted from an act or omission of the carrier, his servants or agents done with intent to cause damage or recklessly and with knowledge that damage would probably result.
In Malaysia, the investigation of aircraft accident would be conducted by the investigator-in-charge in accordance with Annex 13 to the Convention of the International Civil Aviation (also known as Chicago Convention) and the Civil Aviation Regulations 2016 (“CAR 2016”).
In particular, Regulation 187 of CAR 2016 confers power to the Minister to issue any notice, circular, direction of information as may be necessary to give effect to Annex 13 to the Convention of the International Civil Aviation. In the exercise of his power, the Minister of Transport has issued the Directive No. 002/2016 dated 9 May 2016 (“Directive 02/2016”). Thus, the investigation of aircraft accident is regulated by CAR 2016 and the Directive 02/2016.
The aircraft accident final report should not be admissible as evidence in the court because as provided in Regulation 43(1) of the Directive 02/2016:
“Notwithstanding any other written law, any report of the investigation is not admissible as evidence in any civil or criminal proceedings..."
The rationale for non-admissibility of the aircraft accident final report may be explained as follows:
- First, the fundamental objective of the investigation is for the prevention of accident and incident in the future and not for the purpose of apportioning blame or liability.9
- Secondly, the conduct of the investigation is to be separated from any other investigation by other authorities for the purpose of apportioning blame or liability.10
- Thirdly, a separate investigation is to be conducted by other authorities (such as Royal Malaysia Police) to apportion blame or liability.11
Dependency Claim under the Civil Law Act 1956
Other than the proven damages up to 250,000 Francs, the statutory dependants of the deceased passenger are also entitled to dependency claim for the following damages:12
- Loss of Support from the deceased passenger's earnings
The dependency claim for loss of support is governed by Section 7(3) of the Civil Law Act 1956.
The dependency claim for bereavement is provided by Section 7(3A) of the Civil Law Act 1976 and the sum to be awarded as damages shall be RM10,000.
- Reasonable Funeral Expenses
Section 7(3)(ii) of the Civil Law Act 1976 provides that damages may be awarded in respect of the funeral expenses of the person deceased if such expenses have been incurred by the party for whose benefit the action is brought.
In Malaysia, the Limitation Act 1953 prescribes a period of limitation depending on the type of cause of action. For any cause of action in relation to tort and contract, the limitation is generally 6 years when the cause of action accrues.13
However, insofar as the limitation period for aviation law is concerned, the right to claim for damages shall be extinguished if an action is not brought within 2 years, reckoned from the date of arrival at the destination; or from the date on which the aircraft ought to have arrived; or from the date on which the carriage stopped.14
In Chen Lian Thai & Lim Shen Lee v Malaysian Airline System Bhd  6 CLJ 433, the plaintiffs, who were the administrators of the estate of the deceased, filed a writ of summons against the defendant for damages and compensation arising from the death of the deceased. The deceased was a passenger who died in the defendant’s domestic flight that crashed on 15 September 1995. The High Court dismissed the plaintiffs’ claim based on the following reasons:
- The terms of Article 29 in the 1st Schedule of the 1974 Act differ from the usual terms in the 1953 Act. Whilst the Limitation Act 1953 bars an action, Article 29(1) in the 1st Schedule of the 1974 Act extinguishes the right to damages. The effect is that if an action is not brought within 2 years of the events stated in Article 29(1), it is extinguished.
- Article 29(1) in the 1st Schedule of the 1974 Act provides that the method of calculating time is to be determined by the law of the court being seized of the case. Otherwise, the time from which the time is reckoned is set forth in Article 29(1).
In this instance, the ordinary calculation for time was applicable. Since the air crash occurred on 15 September 1995, the action ought to have been brought latest by 14 September 1997. The writ action was filed on 8 May 1998, i.e. 7 months and 3 weeks late. Thus, the plaintiffs’ action was filed after the right to damages had been extinguished and it therefore failed.
For the death of aviation passengers, the process of claiming for damages against air carriers in court is complex and time-sensitive. As such, the claimants should immediately seek legal assistance of a lawyer to safeguard and protect their rights to damages and to ensure that appropriate advice on what should be done and how to claim for the best possible damages is obtained at the outset.
1 Chen Lian Thai & Lim Shen Lee v Malaysian Airline System Bhd  6 CLJ 433 at page 436.
2  4 MLJ 744 at page 751.
3 Article 17 of Schedule to the 1975 Order.
4 Article 21 of Schedule to the 1975 Order.
5 Article 22 of Schedule to the 1975 Order.
6 Article 23(1) of Schedule to the 1975 Order.
7 Section 2 of Carriage by Air (Ringgit Equivalents) Order 1978.
8 Article 25 of Schedule to the 1975 Order.
9 Regulation 188(1) of CAR 2016; Regulation 7(1) of the Directive 02/2016.
10 Regulation 188(2) of CAR 2016; Regulation 7(2) of the Directive 02/2016.
11 Regulation 9 of the Directive 02/2016.
12 ;Section 7 of the Civil Law Act 1956.
13 Section 6 of the Limitation Act 1953.
14 Section 7(1) of the 1974 Act; and Article 29(1), 1st Schedule of the 1974 Act.
Tay & Partners