Among the measures announced by the Prime Minister and Minister of Finance of Malaysia, Dato’ Seri Anwar Ibrahim, during his 2023 Malaysia Budget Speech on 24 February 2023 was a proposal to amend the Insolvency Act 1967 (‘
the Act’) to enable bankrupts to be automatically discharged quickly.
The Finance Minister added that pending the amendment of the Act, “minor cases” involving debts of less than RM50,000 that fulfil the criteria will be immediately discharged beginning 1 March 2023.
Thereafter, the Malaysian Department of Insolvency (‘
MDI’) uploaded, among others, a set of Questions and Answers on its website
1 to shed light on the conditions that have to be fulfilled for a bankrupt to be discharged in ‘minor cases’ referred to by the Finance Minister.
Below is a series of questions and answers, reproduced largely from the Questions and Answers on the MDI’s website.
| 1. |
When is the date for the implementation of the mode of discharge for small-scale debt bankruptcy?
The implementation date for this mode of discharge is 1 March 2023.
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| 2. |
What is the category of small-scale debt?
Small-scale debt refers to cases where the total debt admitted by the DGI in the bankruptcy is RM50,000 and below.
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| 3. |
What is the legal provision involved in this mode of discharge?
This mode of discharge will be carried out under section 33A of the Act which confers discretion on the Director General of Insolvency (“DGI”) to issue a Certificate of the Director General of Insolvency (“DGI’s Certificate”) to discharge a bankrupt who fulfils the prescribed conditions.
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| 4. |
Who are the bankrupts who can be considered for discharge under this initiative?
The DGI will give consideration to bankrupts who satisfy the following conditions: |
| • |
a period of more than five years has elapsed since the date of the Receiving Order and Adjudication Order or the Bankruptcy Order;
|
| • |
the admitted debt or balance of such debt must not exceed RM50,000;
|
| • |
the bankrupt has cooperated with the MDI in the administration of bankruptcy matters concerning the bankrupt; and
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| • |
the bankrupt has provided all information and documents required by the Insolvency Officer.
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| 5. |
What are the issues that may prevent a bankrupt from obtaining the DGI’s Certificate? |
| • |
There is a Court order or ongoing proceedings in Court against the bankrupt or in the administration of the bankruptcy under the Act; or
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| • |
Actions or investigative proceedings are being carried out under the Act against the bankrupt.
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| 6. |
Will a bankrupt who has not attended or contacted the Branch Office that is administering his bankruptcy case be eligible to apply for a discharge?
Such a bankrupt is still eligible to apply. However, the bankrupt is required to cooperate and provide full information in order for the Insolvency Officer to carry out the administration of the bankruptcy and the process of the discharge application.
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| 7. |
How can a bankrupt obtain information on the amount of his debt and check the status of his bankruptcy?
The bankrupt may obtain information on the amount of his debt and check his bankruptcy status at the Branch Office that is administering his bankruptcy by attending personally or by letter or email. |
| 8. |
How can a bankrupt apply for this discharge? |
| • |
The bankrupt may attend personally or communicate by letter or email or complete the “Application for Discharge by Certificate of the Director General of Insolvency under Section 33A IA 1967” form and submit the same to the Branch Office administering his bankruptcy.
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| • |
The Insolvency Officer will review the application, the status of the administrative documents and all information related to the bankruptcy administration.
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| • |
The bankrupt must cooperate and provide the information and documents required by the Insolvency Officer.
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| 9. |
What is the procedure after the bankrupt has applied for his discharge? |
| • |
The Insolvency Officer will review the status of the case and ensure that the documents and matters related to the administration of the bankruptcy are complete and in order; and
|
| • |
The DGI will issue a “Notice to Creditors of Intention to Issue a Certificate of Discharge under section 33A” (“Form 96”)2 to the creditors of the bankrupt.
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| 10. |
Can the bankrupt’s creditors object to the discharge? |
| • |
The creditors may object to the DGI’s intention to discharge the bankrupt by furnishing a “Notice of Creditor's Objection under Section 33B” (“Form 97”)3, stating his grounds of objection, unless the bankrupt falls within one of the four categories of exempted bankrupts.
|
| • |
Form 97 must be furnished to the DGI within 21 days after the date of service of Form 96 on the creditor.
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| 11. |
What are the four categories of bankrupts who are exempted from objections by the creditor?
The four categories of bankrupts against whom no objection shall be made are: |
| • |
a bankrupt who was adjudged bankrupt by reason of his being a social guarantor;
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| • |
a bankrupt who is registered as a person with disability under the Persons with Disabilities Act 2008;
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| • |
a deceased bankrupt; and
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| • |
a bankrupt suffering from a serious illness certified by a Government Medical Officer. |
| 12. |
What will happen if an objection is received from a creditor? |
| • |
The DGI will decide on the objection and inform the creditor.
|
| • |
If the DGI rejects the objection, the creditor may within 21 days of being informed of the DGI’s rejection apply to Court for an order to prohibit the DGI from issuing a certificate of discharge.
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| • |
After hearing the parties involved, the Court will:
|
| a) |
dismiss the creditor’s application; or
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| b) |
make an order prohibiting the DGI from issuing a certificate of discharge for a period not exceeding two years.
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| 13. |
What will happen if there are no objections raised by the creditors? |
| • |
The bankrupt will be discharged from his bankruptcy by the DGI’s Certificate.
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| • |
However, the bankrupt must still cooperate with the DGI if the bankruptcy administration has not been completed (section 35A of the Act).
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| • |
The discharge does not release the bankrupt from government debts, if any (section 35 of the Act). |
Comments
The Government’s initiative to expedite the discharge of bankrupts with ‘small-scale debts’ is well intended and will enable bankrupts who satisfy the prescribed conditions to make fresh starts in life. However, the bankrupts will not be ‘immediately discharged’ as stated by the Minister of Finance, but rather, be required to follow the procedures set out in sections 33A and 33B of the Act. Perhaps the Government’s commitment to drive this initiative will expedite the discharge process.
Article by Trevor Padasian (Partner) of the Insolvency Practice of Skrine.4
1 The Questions and Answers on MDI’s website can be accessed
here.
2 Rule 194 of the Insolvency Rules 2017.
3 Rule 195 of the Insolvency Rules 2017.
4 The writer extends his appreciation to Boey Kai Qi (Pupil) for his contribution in the preparation of this article.