Companies (Amendment) Bill 2023 passed in Senate, amendments to improve corporate governance framework and corporate rescue mechanism
30 January 2024
On 13 December 2023, the Companies (Amendment) Bill 2023 (“Bill”) was passed by the Senate (Dewan Negara). The Bill will be presented for Royal Assent and subsequently gazetted into law. The proposed amendments aim to improve existing provisions relating to the corporate governance framework, schemes of compromise or arrangement, and corporate rescue mechanisms. The Bill also seeks to introduce new provisions relating to the reporting framework and the disclosure of beneficial ownership information.
Summary of key amendments introduced by the Bill
- Enhancement of the definition of “beneficial owner” to recognise that a beneficial owner may exist in situations of ownership of share and company.
- Introduction of provisions relating to the reporting framework and disclosure of beneficial ownership information.
- Empowering the Registrar to extend time for circulation of financial statements and reports upon application by private companies.
- Clarification of provisions relating to the independence of auditors and duties of an approved liquidator.
- Inclusion of provisions relating to the scheme of compromise or arrangement framework as follows:
- Insertion of definitions of “related company” and “subject company”.
- Clarification on which parties may apply to the court for the approval of a scheme of compromise or arrangement, and requirement that all meetings held pursuant to an order of the court shall be chaired either by an insolvency practitioner or a person elected by the majority in value of the creditors or members.
- Amendments on the appointment and duties of an insolvency practitioner in relation to a proposed scheme of compromise or arrangement.
- Clarification on the existing process of restraining order application such as power of the court in granting a restraining order, including introducing a moratorium period upon the filing of a restraining order and providing protections that can be accorded to a company when the restraining order has been granted.
- Introduction of provisions to facilitate a scheme of compromise or arrangement for a group of related companies.
- Introduction of provisions relating to the power of court to, among other things, order revote, approve compromise or arrangement without meeting of creditors, and clarify any terms of the compromise or arrangement.
- Expansion of provisions relating to corporate rescue mechanisms and judicial management as follows:
- Amendment to provide that corporate voluntary arrangement and judicial management provisions shall apply to all companies (including companies which have created a charge over its properties or public listed companies) except for certain companies listed under the proposed section 395 of the Bill.
- Secured creditors are allowed to recover secured movable property during the moratorium period of corporate voluntary arrangement under certain circumstances. This also applies to certain circumstances while a judicial management order is still in force.
- A company under judicial management is allowed to obtain rescue financing and that rescue financing is given greater priority ranking in the event of winding up.
- Empowering the court to extend the period of judicial management order beyond six months subject to terms as the court may impose.
- Introduction of a new Ninth A Schedule relating to the protection for essential goods and services.
- Granting the Minister authority to make regulations relating to beneficial ownership information, scheme of compromise or arrangement, corporate voluntary arrangement, judicial management, liquidation and receivership.