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The Insolvency (Amendment) Rules 2023

17 October 2023

Following the amendments made to the Insolvency Act 1967 (“IA 1967”) pursuant to the Insolvency (Amendment) Act 2023 (“Amendment Act”) which came into force on 6 October 2023, the Minister in the Prime Minister's Department (Law and Institutional Reform) (“Minister”) had issued the Insolvency (Amendment) Rules 2023 [P.U. (A) 301] (“Amendment Rules”) which take effect on the same day, to amend the Insolvency Rules 2017 [P.U.(A) 305/2017] (“IR 2017”) to reflect the changes made to the IA 1967.1
 
The amendments made to the IR 2017 include the following:
 
Use of remote communication technology
 
Amendments had been made to Rules 1662 and 2103 of the IR 2017, together with Form 1174, to allow service of notice through electronic communication, i.e., by way of e-mail. Additionally, a new Rule 281A had been inserted into the IR 2017 to give effect to the use of electronic communication, i.e., by way of e-mail for service of notices and other documents under Section 130 of the IA 1967.5
 
A new Rule 210A had also been inserted into the IR 2017 to provide for the meeting of creditors by remote communication technology if the Director General of Insolvency (“DGI”) considers it to be appropriate.6
 
Automatic discharge of the bankrupts
 
To assist the bankrupt to be released automatically in a short period of three to five years, the terms of payment under Section 33C of the IA 1967 had been eased by replacing the first condition of achieving the amount of his targeted contribution of his provable debt with a requirement for him to pay “the sum of money determined by the DGI for the purposes of the administration of the bankrupt’s estate, having regard to the financial ability of the bankrupt.”7 Corresponding amendments had been made to Rule 199 of the IR 2017 to replace the “Notice of target contribution” with a “Notice to bankrupt”.8
 
Amendments had been made to Rule 2009 of the IR 2017, as well as Form 10010 and Form 10111, to replace the word “discharge” with “automatic discharge” for clarification and consistency purposes.
 
The new Section 33C(1)(b) of the IA 1967 provides that a bankrupt shall be suspended from the automatic discharge on the expiration of three years from the date of the submission of his statement of affairs for a period not exceeding two years if the bankrupt has failed to comply with his duties and obligations under the Act.12 If the DGI suspends an automatic discharge under the new Section 33C(1)(b), the DGI is required to serve a notice of suspension of the automatic discharge on the bankrupt and on each creditor who has filed a proof of debt.13
 
A new Rule 200A had thus been inserted into the IR 2017 to provide for a “Notice of suspension of automatic discharge” under the new Subsection 33C(8A) of the IA 1967. The said “Notice of suspension of automatic discharge” had been provided as Form 100A.14
 
Dispensing with the mandatory requirement of holding the first meeting of creditors
 
It was previously mandatory under Section 15 of the IA 1967 for the first meeting of creditors to be held as soon as may be after a bankruptcy order is made. The purpose of this first meeting of creditors is to consider whether a proposal for a composition or scheme of arrangement shall be entertained and generally as to the mode of dealing with the bankrupt's property. The Amendment Act replaced the mandatory nature of this requirement with a discretionary power and the purpose of the section is maintained with the added scope, that is, “…and for any other purpose as may be prescribed” by the Minister.15
 
In light of the above, the Amendment Act replaced all references to the “first meeting of creditors” in the IA 1967 with “meeting of creditors”. The Amendment Rules also sought to replace all references to the “first meeting of creditors” and “second meeting of creditors” in the IR 2017 with “meeting of creditors”.
 
Reference to Section 108 of the IA 1967 where no public examination shall apply to summary administration
 
Amendments had been made to Rules 16416 and 22717, Forms 12318 and 12419,  to include a reference to Section 108 of the IA 1967 apart from Section 106 of the IA 1967 in relation to summary administration. Specifically, Section 108 of the IA 1967 provides that in any case where a bankruptcy order has been made and the DGI reports to the Court that the bankrupt is a wage-earner and that none of his debts appears to have been contracted in any trade or business in the management of which the bankrupt took part, the Court may make an order that the bankrupt’s estate be administered in a summary way and there shall be no public examination unless the Court orders otherwise.
 
Value “as may be prescribed” by the Minister
 
It is pertinent to note that several amounts specified in the provisions of the IA 1967 had been replaced with amounts “as may be prescribed” by the Minister pursuant to the Amendment Act to provide greater flexibility in the administration of bankruptcies. Instead of a fixed sum of amount, the amounts may be revised according to the prevailing economic conditions and circumstances without having to undergo the legislative process of amending the IA 1967.
 
That being said, the amounts “as may be prescribed” by the Minister had been set down by the Amendment Rules as follows: 
  1. A new Rule 179A had been inserted into the IR 2017 to provide for the value of bankrupt’s property not divisible among the creditors under Section 48(1)(a)(ii) of the IA 1967. The value of the properties of bankrupts exempted from distribution to the creditors are:
  1. the tools, if any, of his trade to a value not exceeding RM20,000.00; and 

  2. the necessary wearing apparel and bedding and other like necessaries of himself, his wife and children to a value not exceeding RM10,000.00.20
  1. A new Rule 227A had been inserted into the IR 2017 to provide for the value of assets for summary administration under Section 106 of the IA 1967. The bankrupt’s estate shall be administered in a summary manner if the value of assets (after deducting any sums paid to secured creditors in respect of their securities) are unlikely to exceed RM40,000.00.21 

  2. A new Rule 227B had been inserted into the IR 2017 to provide for the value of the income of wage-earner for summary administration under Section 107(1) of the IA 1967. For the purposes of summary administration, a wage-earner is defined as a person who is or has been employed on a salary or wage of an amount:
  1. not exceeding RM2,000.00 per month excluding any temporary allowance; and 

  2. if he has any other income exclusive of any pension he may receive, not exceeding RM500.00 per month and does not arise from any trade or business in the management of which he takes any part.22 
 
Article by Trevor Jason Mark Padasian (Partner) of the Insolvency Practice of Skrine.23
 
 
1 Our summary on the main amendments under the Insolvency (Amendment) Act 2023 (while the Amendment Act was in the form of a Parliamentary Bill can be accessed here.
2 Rule 6 of the Amendment Rules amending Rule 166 of the IR 2017.
3 Rule 14 of the Amendment Rules amending Rule 210 of the IR 2017.
4 Rule 23(y) of the Amendment Rules amending Form 117 of the Schedule to the IR 2017.
5 Rule 22 of the Amendment Rules inserting new Rule 281A to the IR 2017.
6 Rule 15 of the Amendment Rules inserting new Rule 210A to the IR 2017.
7 Section 9(b) of the Amendment Act amending Section 33C(1) of the IA 1967.
8 Rule 10 of the Amendment Rules amending Rule 199 of the IR 2017.
9 Rule 11 of the Amendment Rules amending Rule 200 of the IR 2017.
10 Rule 23(l) of the Amendment Rules amending Form 100 of the Schedule to the IR 2017.
11 Rule 23(n) of the Amendment Rules amending Form 101 of the Schedule to the IR 2017.
12 Section 9(b) of the Amendment Act amending Section 33C(1) of the IA 1967.
13 Section 9(g) of the Amendment Act amending Section 33C of the IA 1967.
14 Rule 23(m) of the Amendment Rules inserting new Form 100A to the Schedule to the IR 2017.
15 Section 3 of the Amendment Act amending Section 15 of the IA 1967.
16 Rule 5 of the Amendment Rules amending Rule 164 of the IR 2017.
17 Rule 18 of the Amendment Rules amending Rule 227 of the IR 2017.
18 Rule 23(ze) of the Amendment Rules amending Form 123 of the Schedule to the IR 2017.
19 Rule 23(zf) of the Amendment Rules amending Form 124 of the Schedule to the IR 2017.
20 Rule 9 of the Amendment Rules inserting new Rule 179A to the IR 2017.
21 Rule 19 of the Amendment Rules inserting new Rule 227A to the IR 2017.
22 Rule 19 of the Amendment Rules inserting new Rule 227B to the IR 2017.
23 The writer extends his appreciation to Tan Yng Yiin (Pupil) for her assistance in the preparation of this article.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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