The Insolvency (Amendment) Bill 2023 passed by the Dewan Rakyat on 24th May 2023 has now been gazetted making way for a more effective bankruptcy administration system to protect the welfare of bankrupt individuals. The Insolvency (Amendment) Act 2023 (“Act”) was gazetted on 11th August 2023 but will only come into operation on a date to be appointed by the Minister.
The Act is driven by a commitment to provide a solution towards debt relief for Malaysians facing insurmountable financial challenges and to enable bankrupts to be discharged from indebtedness and bankruptcy.
Key Amendments and Their Implications
2 additional categories qualifying for discharge from bankruptcy and preventing creditor(s) from raising objections (Section 33B)(2A)
The Act now includes 2 further categories where bankrupt individuals can qualify for a discharge from bankruptcy through a certificate of discharge issued by the Director General of Insolvency (“DGI“):
- a bankrupt who is incapable of managing himself and his affairs due to any mental disorder, as certified by a psychiatrist from any government hospital; or
- a bankrupt aged 70 years and above and in the opinion of the DGI, is incapable of contributing to the administration of his estate.
Improved provisions of automatic discharge
Section 33C currently provides for automatic discharge by way of a certificate of DGI after the expiration of 3-years from the date of a bankrupt’s submission of his statement of affairs, provided two conditions are met:
1st Condition: The bankrupt must have achieved the amount of the targeted contribution of his provable debt.
2nd Condition: The bankrupt must have complied with the requirement to render an account of moneys and property to the DGI.
However, due to the difficulty in complying with the 1st Condition, i.e., achieving the targeted contribution, there have not been any successful cases recorded for automatic discharge under section 33C. As a result, the 1st Condition has been amended to allow the DGI to determine the amounts to be paid for the administration of the bankrupt’s estate, having regard to the financial ability of the bankrupt.[1]
Notwithstanding the above and as a safeguard, new powers for the DGI have been added to suspend automatic discharge for a period of not more than 2 years if the bankrupt does not fulfil his obligations under the Act, as well as the authority to ask the bankrupt individual to provide further information on income, expected income, and property.
Section 33C applies retrospectively
The applicability of Section 33C extends to individuals who had been formally declared bankrupt before the passing of this Act. Essentially, 130,000 are expected to be discharged from bankruptcy once this Act comes into force.[2]
Electronic communications
The Act has also incorporated the ability to send notices via electronic communication (provided consent has been obtained) as well as to allow the use of remote communication technology for meetings with creditors.
The amendments are a welcomed change that provides clarity to the current legislation for smoother bankruptcy administration in Malaysia. However, in contrast, creditors may argue that it is now more challenging to recover its debt. Nonetheless, the amendments evidently provide the DGI greater flexibility to discharge bankrupts and to address concerns over the high number of bankruptcies in Malaysia over the years.[3]
[1] Izzul Ikram and Hailey Chung, ‘No successful case of automatic discharge under Insolvency Act, says Azalina’ (The Edge Malaysia, 23 May 2023) <https://theedgemalaysia.com/node/668203> accessed on 14 August 2023
[2] ‘Dewan Negara passes two Bills including Insolvency (Amendment) Bill’ (The Star, 19 Jun 2023) <https://www.thestar.com.my/news/nation/2023/06/19/dewan-negara-passes-two-bills-including-insolvency-amendment-bill> accessed on 14 August 2023
[3] ‘16 people declared bankrupt every day’ (New Staits Times, 1 February 2023) <https://www.nst.com.my/news/nation/2023/02/875389/16-people-declared-bankrupt-every-day> accessed on 14 August 2023