(a) In relation to each type of insolvency procedure available in the legal system of this economy, what types of claims of creditors are properly admissible for payment in the context of that procedure? (for example liquidated debts, future debts, contingent claims, secured claims, unliquidated claims for damages, interest claims, costs of administration or of legal proceedings, periodical payments, debts owed by guarantors of the business organization.)

 

(a) Payments to creditors are generally only made in the context of liquidation. The following types of claims of creditors are properly admissible under Malaysian law for payment in the course of liquidation:-

• unliquidated damages for breach of contract and breach of trust;
• all debts and liabilities (other than unliquidated claims not mentioned in (a)) whether present or future, certain or contingent (and an estimated value shall be placed on all debts that does not bear a certain value);
• without derogating from the above, salary, wages, rent, interest and liquidated damages.

 

(b) At what date are the amounts of admissible debts computed?

 

The amounts are computed as at the date of the winding up order.

(c) By what method are claims of creditors proven by those creditors in the context of each type of insolvency procedure?

 

Claims are proven by the filing of a proof of debt, for which there is a procedure for rejection by the liquidator and an appeal to the High Court against such rejection. Secured creditors need only prove for the balance after realising their security.

(d) How are disputed claims made by creditors adjudicated upon? (for example by the administrator, or by a Court.)

 

Disputed claims can be adjudicated by the High Court under Rules 91 - 100 of the Companies Winding Up rules 1972.

(a) In relation to each type of insolvency procedure available in the legal system of this economy, what principles apply to the division of available assets of the corporate debtor among those of its creditors entitled to payment? Is there a basic principle of equality of payment, or are rights of priority of payment enjoyed by secured creditors, or by certain classes of creditors over others? (for example costs of the administration, claims for taxes owed by the debtor, amounts owed to employees of the organization.)

 

The same principles as to the division of available assets of the corporate debtor apply to all forms of insolvency procedure in Malaysia, with liquidation being the best example of how these principles are applied. Secured creditors' rights are preserved and given primary recognition under section 291(2) of the Companies Act 1965. After secured creditors, certain creditors are deemed as preferential under section 292 and enjoy primacy over unsecured creditors. All unsecured debt is subject to the pari passu principle.

(b) Give a brief account of the order of priorities, if any, of payment of creditors prescribed by the legal system of this economy.

 

The order of priorities prescribed by law in Malaysia through sections 191, 291 and 292 of the Companies Act 1965 as regards payment of debts in a liquidation are:

I. secured debts;

II. preferential such as costs of the winding up, salary and wages, workers' compensation, remuneration in respect of vacation leave, contributions to superannuation or provident funds and lastly Federal (i.e. Malaysian Federal Government) taxes;

III. unsecured debts

IV. shareholders.