BODY to the applicant to appoint an interim

BODY 2 Ingeneral there are two distinctive corporate rescue mechanisms available underthe Companies Act 2016, which are the judicial management and the corporatevoluntary arrangement. For the purpose of our assignment, only judicialmanagement mechanisms will be discussed.  Thejudicial management process basically grants the directors, shareholders orcreditors of a particular company apply to Court to appoint a qualifiedJudicial Manager to run the management of the company when situation ofimproving or restoration of the company is required1. A creditor or creditorsof the company have the rights to apply for judicial management2.

However application for judicialmanagement by creditors is subjected to the conditions of the interest ofcreditors would be better served rather by winding up3. Judicialmanagement under the Companies Act 2016 observed to be more pro-creditor ratherthan pro-debtor. This is because, there are provisions under the Act whichgrants certain advantages to the creditors of a company. The best example toillustrate this is section 405(1) of the Companies Act 2016 which allows acreditor, which includes a contingent or prospective creditor to apply for ajudicial management order. Once the condition to file a judicial management isfulfilled, the applicant i.

e. the creditor shall nominate the judicial manager.Section 405(5) (b) of the Companies Act 2016 gives power to the applicant toappoint an interim judicial manager. Duringthe whole process of applying for judicial management until such applicationbecomes an order or dismissed, the company shall not pass any resolution, nosecurity can be enforced and no proceedings can take place without leave fromthe Court4. The specialcharacteristics of judicial management is the moratorium commence automaticallyas soon the judicial management procedure begins.

During the six months periodof moratorium, the company cannot be wound-up5. Besides that, the companywill be also protected from any legal proceedings and no shares could be issuednor transferred6.This time period could be further extended to another six month if the Courtrequires7.

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Thejudicial manager plays an important role in the judicial management processwhich he is required to do handle the company’s management and perform theduties which Court orders him to do. In addition to this point, the judicialmanager also has the duty to prepare and present a proper restructuring plan forthe betterment of the company. It shall be approved by a steady majority of 75%of the total value of creditors whose claim been acknowledged by the judicialmanager during the creditors’ meetings.  Inthe event of such restructuring plan been approved by the creditors, thejudicial manager shall proceed to apply to Court for the plan to be legallyauthorized. Explained above are the brief procedure on how a judicial managementprocess could take place in a company. Thereare also situations that once again reaffirms that judicial management ispro-creditor which the creditor or members of the company shall apply to theCourt for an order when the company’s business and property managed by thejudicial manager was done in unfairly prejudicial manner which affected thecreditors or members interest8 or any act or omission thejudicial manager was very prejudicial in nature9. In other words, the creditorsor members are allowed to apply to the Court during the judicial managementprocess takes place in the company only if either one of the situation ofsection 425(1) of the Companies Act 2016 occurs which the judicial manager actsagainst the nature of his duty. TheCourt shall grant a relief for the complained matters or adjourn the hearing oreven make any other order which the Court feel it’s appropriate upon receiving suchapplication by the creditors or members10.

The orders which Courtgrants may bring different effects to the parties involved. It can be useful toregulate the company’s further management, or require the judicial manager notto act the manner which the applicant companied, or even discharge the judicialmanagement order and make other orders which the Court feels appropriate11.  Furthermore,section 426 (1) of the Companies Act 2016 lays down that company which provideundue preference to a creditor in circumstances such as transaction involvingproperty done against the company or transaction in benefit of any one particularcreditor shall be held fraudulent and void. In other words, there shall not bespecific preference given to a particular creditor in any circumstances. Ina nutshell, judicial management practiced in Malaysia is more towards thepro-creditors.

However, there are still room for improvements such as furtherprovisions to protect the creditors from the commencement of judicialmanagement process until the order is finally granted by the Court. 1 Section405(1) of Companies Act 20162 Ibid 3Section 405(1)(b) of Companies Act 20164Section 410 of Companies Act 20165Section 411(b) of Companies Act 20166Section 411(a) of Companies Act 20167Section 406(1) of Companies Act 20168Section 425(1)(a) of Companies Act 20169Section 425(1)(b) of Companies Act 201610Section 425(2) of Companies Act 201611 Section425(3) of Companies Act 2016