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Section 368 of the Companies Act 2016 governs the power of the Court to restrain proceedings against a company.

The Companies (Amendment) Act 2024, specifically in Section 11 of the same, amended certain parts of Section 368 of the Companies Act 2016.

Section 368 of the Companies Act 2016 now reads as follows (with the amendments in red):

“(1) If no order has been made or resolution passed for the winding up of a company and a compromise or arrangement has been proposed between the company and its creditors or any class of those creditors, the Court may, in addition to any of its powers, on the application in a summary way of the company or any member or creditor of the company, restrain further proceedings in any action or proceeding against the company except by leave of the Court and subject to any terms as the Court may impose.

(1) Where no order has been made or resolution has been passed for the winding up of a company and a compromise or arrangement has been proposed between the company and its creditors or any class of those creditors, the Court may, in addition to any of its powers, on an application in a summary way by the company or any member or creditor of the company, grant a restraining order for a period of not more than three months from the date on which the restraining order is granted.

(1A) Upon the filing of an application for a restraining order under subsection (1) and until the application is decided by the Court or until the lapse of two months from the date of filing of the application, whichever is earlier— 

(a) no order may be made, and no resolution may be passed, for the winding up of the company;

(b) no receiver or receiver and manager may be appointed over any undertaking or property of the company;

(c) no proceedings may be commenced or continued against the company other than the proceedings under section 366, 368C, 368D, 369A or 370 except with the leave of the Court and subject to any terms as the Court may impose;

(d) no execution, distress or other legal process may be commenced, continued or levied against any property of the company except with the leave of the Court and subject to any terms as the Court may impose;

(e) no steps may be taken to enforce any security over any property of the company, or to repossess any goods held by the company under any chattels leasing agreement, hire purchase agreement or retention of title agreement, except with the leave of the Court and subject to any terms as the Court may impose; and

(f) no right of re‑entry or forfeiture under any lease in respect of any premises occupied by the company may be enforced except with the leave of the Court and subject to any
terms as the Court may impose.

(2) The Court may grant a restraining order under subsection (1) to a company for a period of not more than three months and the Court may on the application of the company, extend this period for not more than nine months if Subject to any terms that the Court may impose, the Court may grant an extension of not more than nine months to the period of restraining order referred to in subsection (1) to a company if

(a) the Court is satisfied that there is a proposal for a scheme of compromise or arrangement between the company and its creditors or any class of creditors representing at least one-half in value of all the creditors;

(b) the Court is satisfied that the restraining order is necessary to enable the company and its creditors to formalise the scheme of compromise or arrangement for the approval of the creditors or members under section 366;

(c) a statement of particulars as to the affairs of the company made up to a date not more than three days before the application is lodged together with the application; and

(d) the Court approves the person nominated by a majority of the creditors in the application by the company under subsection (1) to act as a director or if that person is not already a director, appoints that person to act as a director notwithstanding the provisions of this Act or the constitution of the company.

(3) The person approved or appointed by the Court to act as a director of the company under paragraph (2)(d) shall-

(a) have the right of access to the accounting and other records including registers of the company at all reasonable times; and

(b) be entitled to require from any officer of the company any information and explanation as he may require for the purposes of his duty.

“(3A) A restraining order granted under subsection (1) and an extension of the period of restraining order granted under subsection (2) may include one or more of the following orders:

(a) no order may be made, and no resolution may be passed, for the winding up of the company;

(b) no receiver or receiver and manager may be appointed over any undertaking or property of the company;

(c) no proceedings may be commenced or continued against the company other than the proceedings under this section, section 366, 368C, 368D, 369A or 370 except with the leave of the Court and subject to any terms as the Court may impose;

(d) no execution, distress or other legal process may be commenced, continued or levied against any property of the company except with the leave of the Court and subject to any terms as the Court may impose;

(e) no steps may be taken to enforce any security over any property of the company, or to repossess any goods held by the Company under any chattels leasing agreement, hire purchase agreement or retention of title agreement, except with the leave of the Court and subject to any terms as the Court may impose;

(f) no right of re‑entry or forfeiture under any lease in respect of any premises occupied by the company may be enforced except with the leave of the Court and subject to any terms as the Court may impose.

(3B) No restraining order under this section shall be granted to a company if an order had been granted to the company under subsection (1), section 368B, 368D or 369C, or its related company under section 368A, as the case may be, within the preceding period of twelve months.

(4) Unless the Court otherwise orders, any disposition of the property of the company including things in action and any acquisition of property by the company, other than in the ordinary course of business, made after the grant of the restraining order by the Court shall be void.

(5) Where an order is made under subsection (1), every company in relation to which the order is made shall, within seven days-

(a) lodge an office copy of the order with the Registrar; and

(b) publish a notice of the order in one widely circulated newspaper in Malaysia in the national language and one widely circulated newspaper in Malaysia in the English language, and the company and every officer who contravene this section commit an offence and shall, on conviction, be liable to a fine not exceeding one hundred thousand ringgit and in the case of a continuing offence, to a further fine not exceeding one thousand ringgit for each day during which the offence continues after conviction.

(6) An order made by the Court under subsection (1) shall not have the effect of restraining-

(a) further proceedings in any action or proceeding that should be taken against the company by the Registrar or the Securities Commission; or

(b) further proceedings in any action or proceeding against any person including the guarantor of the company but does not include the company that had applied for the restraining order.

(7) If a company disposes or acquires any property other than in the ordinary course of its business, without leave of the Court, the company and every officer who contravene this section commit an offence and shall, on conviction, be liable to imprisonment for a term not less than five years or to a fine not exceeding three million ringgit or to both.”

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