BANKRUPTCY AND DISCHARGED OF BANKRUPTPrepared by: Sazlinidayu binti Kamarul baharin

Law Reform and RevisionSenior Federal Counsel

BANKRUPTCY PROCEEDINGWHO CAN INITIATE BANKRUPTCY PROCEEDING?

•GOVERNMENT•FINANCIAL INSTITUTION•COMPANY•INDIVIDUAL

HOW TO INITIATE BANKRUPTCY PROCEEDING?

MODE IN BANKRUPTCY PROCEEDING.

BANKRUPTCY NOTICE AND SUBSEQUENTLY BANKRUPTCY PETITION IS FILED IN THE HIGH COURT.

PRECONDITION FOR THE PRESENTATION OF THE BANKRUPTCY PETITION

1. Amount owing by the Debtor is RM30,000 or more

2. The debtor must have committed an act of bankruptcy

PARTIES INVOLVED IN BANKRUPTCY

DEBTOR CREDITOR THE OFFICIAL ASSIGNEE

Bankruptcy noticeThe bankruptcy notice when is served on debtor acts as “DEMAND”Amount must not less than 30,000.00 inclusive interest.

FORMALITIES Bankruptcy notice is issued by the court and dated by the registrar and sealed.The notice must be accompanied by a request to the registrar to issue a bankruptcy notice.The sealed copies of the Bankruptcy notice are returned to the judgment creditor to facilitate service on the JD.

Interest due must be quantified up to the date of issue of bankruptcy notice (BN)There must be an endorsement upon the notice if the debtor has any set-off , counterclaim or cross demand the debtor must within the specified period file and affidavit to that effect in courtIn bankruptcy notice must state address of the creditor within the jurisdiction of the court whom the debtor is required to pay.If the address given outside jurisdiction it will be defective.

Bankruptcy notice valid for 3 month from the date of issue. [r96]If unable to serve within 3 months the judgment creditor may apply to the court to extend the BN as it seems fit.

SERVICE OF NOTICE a. BN must be personally served on the debtor hence

cannot be served through representative or manager.b. If not possible to served BN within time must apply for

extension of time to serve .c. If service still not affected the next step creditor must

apply and obtain an order for substituted service.d. Before the court allowed the order for substituted

service , it must satisfy itself :-• It cannot be effected because the debtor is keeping

out of way to avoid service or in any other cause.

SUBSITUTED SERVICEUsually by way :-Advertising in any national newspaperEffectively bring the bankruptcy proceeding to the knowledge of the debtor.Notice board Last known address

Notice must be founded upon final jugdement or final order Order which means that the judgement or

order should be one which finally disposes of the rights of the parties, otherwise it will be treated as an interlocutory order.

If the creditor agreed not to commenced bankruptcy proceeding after obtaining judgment he will estopped from issuing BN.

If 6 years or more have lapsed since the date of the judgment may not issue without the leave of the court

Creditor’s petitionCondition:-May be presented eitheri. By a creditor or several creditor or ii. by Debtor himself

Section 5 BANKRUPTCY ACT 1967No petition can be presented 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 *thirty 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.

Creditor petition must be verified by an affidavit of the creditor.

Each statement in the petition must be deposed by someone within whose knowledge.

Must be in prescribed form , dated , signed and witnessed.

Attestation of the signature of the person signing the petition is Mandatory requirement.

Filing of Petition Must be filed in the court in the Debtor

resides. If the debtor resided in one state and

carried on business in another , petition must be filed where he has carried on his business.

Petitioning creditor must deposit RM2,000 with the Official Assignee to cover fees and expenses. [Bankruptcy Rules 1969 r 103(1)].

Service of Petition Must be personally served and proved by affidavit. Substituted service may be made if the court

satisfies by affidavit or any other evidence on oath , where personal service cannot be effected because the debtor is avoiding the service of the petition.

Hearing Must not be heard until expiration of 8 days from

the service unless there is a good cause shown fro the hearing at an earlier date.

The date of commission of the act of bankruptcy must be stated in the petition to show that the act of bankruptcy was committed within 6 months of the presentation of petition.

When petition is heard court must satisfied in Section 6(5) Bankruptcy Act 1967:

Petitioning creditor’s debt Commission of an act of bankruptcy Proof of service if the debtor does not

appear Debtor’s inability to pay his debt if debtor

adduces evidence of his ability to pay the debt in full within reasonable time the court will consider the possibility of a stay , adjournment or dismissal of petition.

Receiving order If the debt of the petitioning creditor , the

act of bankruptcy and service of the petition is proved.

The court will proceed to make a receiving order followed by the adjudication order.

A receiving and adjudication order may be made simultaneously.

A receiving order enables the Official Assignee to take possession , custody or control of the debtor’s property.

Effect of receiving order Official Assignee is constituted the receiver of

the debtor’s property NO creditor can initiate or maintain any action

against property or person of the debtor without the leave of the court.

All pending actions will be stayed. Receiving order does not make the debtor a

bankrupt nor is he deprived of ownership or proprietary right over his property. He only deprived of only possession and control.

OA is the caretaker or manager of the said property and cannot sell or otherwise deal with that property.

DISQUALIFICATIONOF A BANKRUPT DISABILITIES OF A BANKRUPT

When a debtor adjudged bankrupt , he is disqualified from holding any of the following positions of trust or high office :

a) Member of parliament;b) Trustee under any written

law including appointment as administrator of the estates of the deceased;

c) Director of a limited company

d) Judicial office such as a judge or president or magistrate

A bankrupt who is undischarged is subject to certain disabilities:

He will be incompetence to maintain any action, other than an action for damages in respect of personal injury to his person without the previous sanction of the OA.

Once in six months tender to the OA an account and property acquired during the preceding 6 months.

Not permitted to leave Malaysia without the sanction of OA.

(e) Member of a local or municipal council;

(f)Justice of peace Other disqualification :i. A solicitor cannot

continue to enjoy the status of having a practicing certificate;

ii. A shareholder in a company will not be given the privilege of his right in company matters;

iii. Administrator with letter of administration of a deceased estate will have to be removed and someone else appointed.

A bankrupt is not allowed enter into or carry on any business alone, partnership or become a director or directly or indirectly involve in management or control on any business without the permission of the OA or Court.

He may not engage in the management or control of any business run by his family member or relatives.

DISCHARGED OF BANKRUPT

When a bankrupt person can be discharge for bankrupt?

A bankrupt may apply any time after being adjudged bankrupt.

How? Application must be

made to the court for an order of discharged.

Section 33-35 of the Bankruptcy Act 1967 [Act 360] to be read together with rr 194-203 of the Bankrupcy Rules

application to the court OA has the discreation to

discharged a bankrupt once 5 years has elapsed from the date a receiving order and adjudicating order was made.

Need to produce to the registrar a certificate from the Official Assignee (OA) specifying the number of creditors of whom former has notice.

Court will appoint a day for hearing of the application

28 days before the hearing of the application

Need to give notice of the time and place of the hearing to OA

The Registrar shall send a copy of such notice for insertion in the gazette

The OA shall send a copy of such notice to each creditor who has proved within 14 days before the hearing.

If the creditor intends to opposed the discharge of a bankrupt

Notice of the intended opposition and stating the reason / grounds to the OA not less than 3 days before the hearing of the application.

The court shall take into consideration

report of the OA as to the bankrupt’s conduct and affairs

including a report as to the conduct of bankrupt during the

proceeding under the Act .

Condition for order for discharged.

The may require as condition to the order for dischargeSuch as payment for any balance or part thereof of the debts provable under the bankruptcy , does not satisfied at the date of his discharged.

An application by the OA

Court shall fix a date for hearing.Stating the grounds and reason for in writing.Notice application to the debtor not less than 8 days.To furnish a copy of the application.

Effect of order of discharged A bankrupt may be discharged from such

except debts by a certificate in writing of the Minister for Finance, in the case debt due to the government. [section 35(1), (2) Bankruptcy Act 1967].

The bankrupt shall be released from all other debts provable in bankruptcy. [Section 35(5) Bankruptcy Act 1967].

An order for discharge shall be conclusive evidence of the bankruptcy and the validity of its proceeding; in any proceeding that are instituted against a bankrupt who has obtained of discharge in respect of any debt from which he is released by the order, the bankrupt may plead that the cause of action occurred before his discharge. [Section 35(5) Bankruptcy Act].

Condition when discharged shall not :A discharge shall not release the bankrupt from— any debt, due to the Government of Malaysia.

any provable debt which he incurred in respect of, or forbearance in respect of which was secured by means of, any fraud or fraudulent breach of trust to which he was party.

any person other than the bankrupt from any liability (whether as partner or co-trustee of the bankrupt or otherwise) from which the bankrupt is released by the discharge, or from any liability as surety for the bankrupt or as a person in nature of such a surety.

RESCISSION AND ANNULMENTDebtor can apply to the court for rescission of the receiving order or annulment of the adjudication order. R155 BA

1. A copy of the application for rescission and Annulment must be served to the Official Assignee.

2. Must be served at least 14 days before the hearing

3. court may make an interim order staying the proceeding , pending the hearing of the application.

4. The application must not be heard until after the completion of public examination.

Grounds of annulment

Section 105Where in the court’s opinion the adjudication order ought not to have been made in the first instance; orWhere it is proved to the court satisfaction that the Debts have been paid in full or Where it appears to the court that proceedings are pending in Singapore and distribution ought to be effected there.