BODY to the applicant to appoint an interim


general there are two distinctive corporate rescue mechanisms available under
the Companies Act 2016, which are the judicial management and the corporate
voluntary arrangement. For the purpose of our assignment, only judicial
management mechanisms will be discussed.  

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judicial management process basically grants the directors, shareholders or
creditors of a particular company apply to Court to appoint a qualified
Judicial Manager to run the management of the company when situation of
improving or restoration of the company is required1. A creditor or creditors
of the company have the rights to apply for judicial management2. However application for judicial
management by creditors is subjected to the conditions of the interest of
creditors would be better served rather by winding up3.

management under the Companies Act 2016 observed to be more pro-creditor rather
than pro-debtor. This is because, there are provisions under the Act which
grants certain advantages to the creditors of a company. The best example to
illustrate this is section 405(1) of the Companies Act 2016 which allows a
creditor, which includes a contingent or prospective creditor to apply for a
judicial management order. Once the condition to file a judicial management is
fulfilled, 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 to
appoint an interim judicial manager.

the whole process of applying for judicial management until such application
becomes an order or dismissed, the company shall not pass any resolution, no
security can be enforced and no proceedings can take place without leave from
the Court4. The special
characteristics of judicial management is the moratorium commence automatically
as soon the judicial management procedure begins. During the six months period
of moratorium, the company cannot be wound-up5. Besides that, the company
will be also protected from any legal proceedings and no shares could be issued
nor transferred6.
This time period could be further extended to another six month if the Court

judicial manager plays an important role in the judicial management process
which he is required to do handle the company’s management and perform the
duties which Court orders him to do. In addition to this point, the judicial
manager also has the duty to prepare and present a proper restructuring plan for
the 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 judicial
manager during the creditors’ meetings.  In
the event of such restructuring plan been approved by the creditors, the
judicial manager shall proceed to apply to Court for the plan to be legally
authorized. Explained above are the brief procedure on how a judicial management
process could take place in a company.

are also situations that once again reaffirms that judicial management is
pro-creditor which the creditor or members of the company shall apply to the
Court for an order when the company’s business and property managed by the
judicial manager was done in unfairly prejudicial manner which affected the
creditors or members interest8 or any act or omission the
judicial manager was very prejudicial in nature9. In other words, the creditors
or members are allowed to apply to the Court during the judicial management
process takes place in the company only if either one of the situation of
section 425(1) of the Companies Act 2016 occurs which the judicial manager acts
against the nature of his duty.

Court shall grant a relief for the complained matters or adjourn the hearing or
even make any other order which the Court feel it’s appropriate upon receiving such
application by the creditors or members10. The orders which Court
grants may bring different effects to the parties involved. It can be useful to
regulate the company’s further management, or require the judicial manager not
to act the manner which the applicant companied, or even discharge the judicial
management order and make other orders which the Court feels appropriate11.  

section 426 (1) of the Companies Act 2016 lays down that company which provide
undue preference to a creditor in circumstances such as transaction involving
property done against the company or transaction in benefit of any one particular
creditor shall be held fraudulent and void. In other words, there shall not be
specific preference given to a particular creditor in any circumstances.

a nutshell, judicial management practiced in Malaysia is more towards the
pro-creditors. However, there are still room for improvements such as further
provisions to protect the creditors from the commencement of judicial
management process until the order is finally granted by the Court.

1 Section
405(1) of Companies Act 2016

2 Ibid

Section 405(1)(b) of Companies Act 2016

Section 410 of Companies Act 2016

Section 411(b) of Companies Act 2016

Section 411(a) of Companies Act 2016

Section 406(1) of Companies Act 2016

Section 425(1)(a) of Companies Act 2016

Section 425(1)(b) of Companies Act 2016

Section 425(2) of Companies Act 2016

11 Section
425(3) of Companies Act 2016