MULTIMEDIA UNIVERSITY

LAW OF INSOLVENCY UIS4612

LECTURE 5

4.12 Composition or Scheme of Arrangement - s18-25 1A 1967

1. Composition is an offer to pay the debts by a certain percentage of the debt owing or by
full settlement.
2. Scheme of Arrangement – plan or proposal to settle the debts on certain terms within a
certain period or with the help of someone else.
3. Procedure:
a) A proposal may be made at the 1st. creditor’s petition or any subsequent meeting.

b) To be binding it must be passed by a majority of at least ¾ of the creditors who

have proved their debts.

c) s.18(2) It has then to be approved by court.

d) Once the creditors have accepted it and approved it cannot be retracted.

e) The court’s approving order shall be in Form 57 of the Rules.

f) Should the debtor default on any payment under the Deed a creditor may apply to
court to enforce payment by affidavit in Form 59.

g) Court may then make an order either annulling the Deed or order final judgment.
Any disobedience of such order shall be a contempt of court.

4.13 Payment by Third Party

1. s.61(g) DGI shall make compromise or arrangement only on debts proved under the
bankruptcy.

2. DGI shall not give written authorization to the bankrupt to negotiate with any creditor.

3. S.115 any creditor who obtains , receives money , property, security etc. as inducement for
forbearing to propose shall be punished with a fine upt o 3 times the value of such inducement
received.

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MULTIMEDIA UNIVERSITY
LAW OF INSOLVENCY UIS4612

4. Financial institutions should cease to receive third party settlements:

 Ting Nguk Yong v Bank Utama (Malaysia) Bhd. [1999]1 – full settlement was made
by a third party after issue of RO & AO. Debtor applied for annulment and DGI
opposed as debts not settled.
HC – annulment discretionary – need to prove special circumstances. Only one
judgment creditor had written to DGI that payment had been made and debt satisfied.

 Ketua Pengarah Insolvensi, Bagi Harta Goh Ah Kai, Bankrap v Goh Ah Kai and
Parkway Hospitals Singapore Pte Ltd. J-01(IM)-296-08/2014 CA: creditor cannot
accept payment from third party. All payments must be made through DGI.

4.14 Disclaimer of Onerous Property by DGI

1. s.59(1) DGI may disclaim any onerous, unprofitable, unsaleable property – notice in writing
r252 where debtor remains in possession of leasehold property, the lease may be disclaimed
where:-
 Maximum rent recoverable is less than RM4,800 p.a.
 Estate is administered summarily under s.106
 OA serves the lessor with notice of intention to disclaim and the lessor does not within 7
days of service respond.

2. s.59(2) DGI may at any time disclaim such property by writing signed by him. Upon such
disclaimer, anyone having an interest may apply to court for relief.

4.15 Duties & Responsibilities of DGI

1. s.71(1)These are 2 fold – administration of the estate of the bankrupt as well as the general
conduct of the bankrupt.

2. r.254 Upon the death of the DGI his authority and duties shall vest in his successor.
r.255 Upon his appointment shall furnish the debtor with a copy of instructions on the
preparation of the Statement of Affairs

3. Duties of DGI:-
1) s.73(1)(a) Receiver of the debtor’s estate.
2) s.73(1)(b) He can raise money or make advances where it appears to be in the interests of the
creditors.
3) s.73(1)(c) he may summon and preside over all meetings.
4) s.73(1)(d). can issue proxy forms for use at creditors meetings.

1
[1999]1CLJ 173

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MULTIMEDIA UNIVERSITY
LAW OF INSOLVENCY UIS4612

5) s.73(1)(e) reports to the creditors on debtor’s proposals if any on mode of liquidating his
affairs
6) s.73(1)(f) has to advertise the debtor’s RO, date of his public examination and any other
matters
7) r. 62 He may admit or reject the Proof of Debt that has been filed and rank them for the
declaration and distribution of dividends. The proof of debt has to be filed and used at the
1st. creditor’s meeting for the examination and grounds of the debt. The DGI may admit the
or reject the proof in whole or in part.

Acting as a Company Director during Bankruptcy: Court imposes Fine

The Kuala Lumpur Sessions Court has fined a 37-year-old housewife RM8,000 (or four months
imprisonment in default) for acting as a company director while she was still a bankrupt. She was convicted
under section 125(1) of CA1965

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MULTIMEDIA UNIVERSITY
LAW OF INSOLVENCY UIS4612

TUTORIAL QUESTIONS

QUESTION 1

On 15 March 2017 BBB obtained Judgment against Borrower at the Melaka High Court for the
sum of RM 350,000/- with interest and costs. On 5 June 2017 personal service of Notice of
Bankruptcy was effected on Borrower. As Borrower did not respond to the bankruptcy Notice,
BBB proceeded to apply for a creditor’s petition, served it on 15 Nov. 2017. Borrower, by
borrowing from various family members paid BBB a sum of RM150,000/- and was seeking time
to pay the balance on the basis that he was trying to sell of certain property that he has in Singapore
that was valued at more than RM1 million. Meanwhile bankruptcy order were made against
Borrower on 23 Dec. 2017. Borrower seeks your advise on setting aside the bankruptcy order as
he was not aware of its service since he was busy in Singapore arranging for the sale of his
property.

Advise Borrower.

QUESTION 2 (CLP OCT. 2008)

On 5.5.2017 Cekap Sdn. Bhd.(CSB) obtained judgment against Victor for the sum of RM300,000/-
together with interest and costs. On 21.5.2017 CSB filed and served a bankruptcy notice on Victor
for the judgment sum. Victor ignored the notice although it was served on him personally.

On 9.6.2017 CSB filed and served a Creditor’s Petition together with affidavit verifying the
petition which was dated 6.6.2016. the Creditor’s petition was attested by a Solicitor from Kota
Kinabalu , Sabah. The Creditor’s Petition is fixed for hearing in the KL HC on 15 July 2017.

Advise Victor whether he may oppose the Creditor’s Petition and the procedure for it.

* Special acknowledgement to Dr. Gita, the senior lecturer for this subject, for the useful of this
lecture outline and tutorial questions.

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