Q1: Are they any plans and/or initiatives by the Government to assist companies and/or enterprises as part of Pakej Rangsangan Ekonomi Prihatin Rakyat due to this Covid – 19 pandemics? 

1A. Answer:

• In total, there are seven initiatives proposed by the Minister of Domestic Trade and Consumer Affairs (KPDNHEP) who oversees the governance of SSM as announced on 10.4.2020, to reduce the burden of companies and enterprise that have been affected by the COVID-19 pandemic :-

• The first measure is a part of Pakej Rangsangan Ekonomi Prihatin Rakyat (PRIHATIN) where SSM will grant a moratorium of 30 days from the end of the Movement Control Order (MCO) to lodge all affected statutory documents with SSM.

• The second measure which is also a part of Pakej Rangsangan Ekonomi Prihatin Rakyat (PRIHATIN) where SSM will grant an extension of time (EOT) of three months for companies to lodge their financial statements to SSM.

• Meanwhile, the additional measure proposed by SSM in support of the government’s effort to ease the burden of companies and enterprises are:

• to extend the compliance period of Section 241 of Companies Act 2016 for company secretaries to fulfil their CPE requirements, until December 31, 2020, subject to certain terms and conditions.

  • to increase the value of indebtedness under Section 466 of the Companies Act 2016 from RM10,000 to RM50,000 until December 31, 2020, to reduce taking winding up action against companies. Additionally, companies will also be given a period of six months from the current 21 days, to respond to a notice of demand.

  • to extend the deadline of the “2020 Compliance Campaign of the Companies Act 2016” to June 30, 2020, in which SSM will provide a maximum compound reduction rate of 90 per cent from the original value of the compound for common offences under Companies Act 1965 and Companies Act 2016;

  • to introduce an exemption from obtaining approval from Minister or Registrar for solicitation of donation from the public to help those affected by the Covid-19 pandemic, by Companies Limited By Guarantee (CLBG). 

  • to grant EOT for the holding of the Annual General Meeting (AGM) until three months after the MCO ends. However, in order to ensure that there is no abuse of the EOT, companies will be required to apply for the EOT to SSM. The companies involved will be exempted from paying the RM100 fee for EOT.

Q2: For the 1st measure, is the moratorium of 30 days proposed by SSM comes with exemption of fees? 

2A. Answer:

• This moratorium will give exemption of fees to any company who has missed the filing deadlines of statutory document to SSM due to MCO period. However, it must be noted that the companies must complete the lodgement of the statutory documents within 30 days after the MCO is lifted.

• Based on Companies Act 2019 , the Registrar of SSM has the discretion to extend the period of lodgement of documents, meanwhile, the Minister may exempt any fees or charges as it deems fit. Hence, this initiative is doable as the Ministry of KPDNHEP has the discretion to do so on its own, however, the exemption of fees is pending for its codification by way of Practice Directive to be issued by SSM.

Q3: What if there is already delay in filing the statutory documents even before MCO was enforced, would the fees will also be exempted?

3A. Answer:

• Unfortunately, there is no explanation by the SSM whether the prolonged delayed pre-MCO shall be entitled to the exemption of fees. However, as the initiatives are to ease the burden of companies and enterprises affected by COVID-19 pandemic, presumably it would only be applicable for delay of filing due to the current MCO.

Q4: For the 2nd measure, will the fees on the delay of the lodgement of financial statement will be exempted as well?

4A. Answer:

• Based on Companies Act 2019 , the Registrar of SSM has the discretion to extend the period of lodgement of documents, meanwhile, the Minister may exempt any fees or charges as it deems fit. Based on the initiatives, SSM has issued a Practice Directive to waive the fees.

Q5: How is the 3 months extension for the lodgement of financial statement being calculated and do companies have to apply to be entitled with such extension?

5A. Answer:

• The SSM has issued a Practice Directive No. 6/2020 whereby the actual calculation for extension of time shall be based on 90 days period and be applicable follows:

• To grant an extension of time to companies having financial year ending AFTER 31 August 2019 to 31 December 2019 to lodge financial statements and reports for a period of 90 days in accordance with the powers under section 259(2) of CA 2016; 

• To grant an extension of time to companies having financial year ending AFTER 31 August 2019 to 31 December 2019 to circulate its financial statements and reports for a period of 90 days in accordance with the powers authorised to SSM; 

• (or lodgement of financial statements and reports, the 90 days period will be effective from the date the financial statements and reports were supposed to be lodged with the Registrar; 

• for circulation of financial statements and reports, the 90 days period will be effective from the date the financial statements and reports were supposed to be circulated.

• A company MUST apply for the extension of time as it is not automatically granted by following Appendix A which can be found in the Practice Directive No.6/2020 at SSM website and must be submitted before 30.6.2020 to be eligible with the Extension of Time. Meanwhile, the submission must be emailed to eot@ssm.com.my.

Q6: My company has to get an extension of time to hold the Annual General Meeting due to the MCO. Please explain how the initiative works for my application.

6A. Answer:

• The Practice Directive No.6/2020 issued by SSM has explained on the Extension of Time application based on the initiatives announced by SSM as follows:-

  • To grant an extension of time for companies affected by the MCO to hold an AGM for a period of 90 days in accordance with the powers under Companies Act 2016; and

  • the 90 days period will be effective from the date the AGM was supposed to be held.

• A company MUST apply for the extension of time as it is not automatically granted by following Appendix A which can be found in the Practice Directive No.6/2020 at SSM website and must be submitted before 30.6.2020 to be eligible with the Extension of Time. Meanwhile, the submission must be emailed to eot@ssm.com.my.

• The fees of RM100.00 for such application will also be exempted.

Q7: Please explain on one of the Government’s incentives which is extending the period to respond a Statutory Notice of Demand from 21 days to 6 months. 

7A. Answer:

• According to the Companies Act 2016 , the company which has been served with the Statutory Notice of Demand in pursuant of Section 466(1)(a) of Companies Act 2016 shall respond in 21 days after service. However, from 23.4.2020 to 31.12.2020, the Government has extended the 21 days period to 6 months period.

• We are of the view that the Government’s move to extend the 21 days period to 6 months for a company to respond to Statutory Notice of Demand is to avoid the companies that have been affected by COVID-19 pandemic from being threaten with winding up procedure from creditors.

Q8: My company has been served with the Statutory Notice of Demand under Section 466(1)(a) of Companies Act 2016 before the MCO, is my company eligible for the extension of time to response to the said notice? 

8A. Answer:

• The Government has recently gazetted by way of Government Gazette in pursuant of Section 615 of Companies Act 2016 to EXEMPT any company which has been served with the Statutory Notice of Demand under Section 466(1)(a) during the period from 23.4.2020 to 31.12.2020 but neglect to respond to the same within 21 days after the service of the demand from being deemed to be unable to pay its debts to the satisfaction of creditors.

• This exemption is subject to condition that a company shall be deemed to be unable to pay its debt if the statutory notice of demand was neglected within 6 months after the service of the notice.

• In short, any company who has been served with statutory notice of demand in pursuant of Section 466(1)(a) of Companies Act within the period from 23.4.2020 to 31.12.2020 has 6 months to respond to the notice before the said company can be deemed to be unable to pay its debt.

• Therefore, as your company was served with the Statutory Notice of Demand before 23.4.2020, the aforesaid exemption is not applicable to your company, thus your company has reply within 21 days after the service of the demand.

Q9: Meanwhile, how about the threshold value of indebtedness, would it remain RM10,000.00 or increase to RM50,000.00 following the incentives by SSM?

9A. Answer:

• The threshold value of indebtedness is not being specified in the Act, instead, the Act authorised the Minister who oversees and in charge of the companies which would be the KPDNHEP to prescribe the value of indebtedness.

• The Minister has recently issued a direction by exercising its power under Section 466(1)(a) that the threshold value of indebtedness shall be in the amount exceeding RM50,000.00 with effect from 23.4.2020 until 31.12.2020.

Q10: How about the rest of the initiatives, has any Practice Directive being issued?

10A. Answer:

• There is no Practice Directive has been issued on other initiatives. Thus, we are not in the position to confirm whether other initiatives are lawfully enforceable.

Q11: As the threshold value of indebtedness has been increased, how can it helps a company?

11A. Answer:

• The MCO period is still ongoing after a few months and the impact of it can cause financial loss to companies which are not part of essential service, thus are not allowed to operate.

• Hence, with the higher threshold value of indebtedness, companies will worry less in sustaining their operation despite the MCO and managing their debt after the MCO is lifted.

• In addition, companies can also prioritise their financial resources or financial reserves to pay the employees’ salary instead of paying debt to creditors during the MCO period.

Q12: With the extension of time to respond to the statutory notice of demand from 21 days period up to 6 months, would there be any benefit to the company which has been served with the notice?

12A. Answer:

• The extension for 6 months will give more time to the company either to satisfy the debt or file injunction to restrain the creditor from filing the Winding Up Petition. With the extension of 6 months, a company can also exercise any corporate rescue mechanisms available under the Companies Act 2016 during that period of time. In other words, it will be harder for a creditor to wind up a company.

• Consequently, there will be fewer companies be subjected to winding up with such extension as most companies which are not considered as essential service are not allowed to operate during the MCO.

Q13: As far as the creditor’s perspective, would the extension of time from 21 days to 6 months on the Statutory Notice of Demand have any adverse effect to the creditor?

13A. Answer:

• In our opinion, the effect can be seen in two lights:

• In a positive way, with the extension of time, the debtor might have sufficient time to come up with enough fund to settle the debt or propose a settlement by way of Corporate Rescue Mechanism;

• However, in contrast, the debtor might abuse the extension of time to transfer the company’s assets or emptying the company’s assets without the knowledge of the creditor so that the creditor would be left with nothing once the debtor is being wound up;

• Further, to file a Winding Up Petition after the 21 days period upon service of Statutory Notice of Demand is the lawful and statutory right of a creditor, and for such right to be taken away would be unfair to the creditors.

Q14: Do all the initiatives propose by the SSM is permanent or temporary during the COVID 19 pandemic?

14A. Answer:

• Some initiative has provided specific period of enforcement for example the increment of value of indebtedness from RM10,000.00 to RM50,000.00 shall be applicable until 31.12.2020 only, but some of it has not or has yet to be specified on the period of enforcement. Hence, without any passing of law or codification of the other initiatives by the government which specified until when shall be enforceable, we are not in the position to confirm whether such initiatives are permanent or temporary.

Q15: If it is temporary, would be any practical difficulties for creditor to enforce the rights later? 

15A. Answer:

• As the Government has issued specific codification of law on the extension of Notice of Statutory of Demand and the increment on the threshold value of indebtedness, the creditors who intended to initiate winding up procedure against a company have to follow the current law which is enforceable from 23.4.2020 to 31.12.2020. Hence, as long as the creditors observe the current enforceable law (from 23.4.2020 to 31.12.2020) , there will be no difficulties for the creditors to enforce their rights within the said period.

THIS FAQS ARE PREPARED AND PUBLISHED BY MESSRS GAN & ZUL, ADVOCATES & SOLICITORS, KUALA LUMPUR.

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