The Insolvency (Amendment) Act 2020, which came into force on 1st September 2021, amended Section 5 of the Insolvency Act 1967 (“IA 1967“) on the conditions on which a creditor may present a bankruptcy petition against a debtor.
The following is Section 5 of the IA 1967, as amended by the Insolvency (Amendment) Act 2020 [with the amendments in red]:
“Conditions on which creditor may petition
5. (1) A creditor shall not be entitled to present a bankruptcy petition against a debtor unless—
(a) the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the aggregate amount of debts owing to the several petitioning creditors, amounts to
fifty thousand ringgit one hundred thousand ringgit;
(b) the debt is a liquidated sum payable either immediately or at some certain future time;
(c) the act of bankruptcy on which the petition is grounded has occurred within six months before the presentation of the petition; and
(d) the debtor is domiciled in Malaysia or in any State or within one year before the date of the presentation of the petition has ordinarily resided or had a dwelling house or place of business in Malaysia or has carried on business in Malaysia personally or by means of an agent or is or has been within the same period a member of a firm or partnership which has carried on business in Malaysia by means of a partner or partners or an agent or manager.
(1A) The Minister may, after consultation with the Minister of Finance, by order published in the Gazette, amend the amount of debt in paragraph (1)(a) for the presentation of a bankruptcy petition for a specific time period, if the Minister is satisfied that there are special circumstances and that it would not be contrary to public interest, to do so.
(1B) Where an order to amend the amount of debt for the presentation of a bankruptcy petition in
subsection (1A) ceases or expires—
(a) any bankruptcy petition, presented by a petitioning creditor against a debtor which is still pending immediately before the order in subsection (1A) ceases or expires, shall be continued or concluded in accordance with the amount of debt as amended by the order in subsection (1B); and
(b) any bankruptcy petition, presented by a petitioning creditor against a debtor after the order in subsection (1A) ceases or expires, shall be continued or concluded in accordance with the amount of debt as specified in paragraph (1)(a).
(1C) The order made under subsection (1A) shall be laid before the Dewan Rakyat as soon as practicable after its publication in the Gazette.”
The amendment to Section 5(1)(a) of the IA 1967 means that bankruptcy petitions can no longer be presented for debts below RM100,000.00.
Judgment Creditors with judgment sums below RM100,000.00 have to consider pursuing other alternatives for the satisfaction of the judgment.
The newly introduced Section 5(1A) of the IA 1967 allows for the Minister to temporarily reduce the minimum debt threshold for bankruptcy petitions which is found in Section 5(1)(a) of the IA 1967.
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