Maintain trust in business
ON Aug 25, Parliament passed the Covid-19 Bill and the Insolvency (Amendment) Bill 2020, which are closely related to the issue of a moratorium on creditors’ actions against companies and individuals. The likelihood of creditors’ actions leading to bankruptcy of the business owner or the closure o...
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| Format: | Article |
| Language: | English |
| Published: |
Star Media Group
2020
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/85712/7/85712_Maintain%20trust%20in%20business%20_%20The%20Star.pdf http://irep.iium.edu.my/85712/ https://www.thestar.com.my/opinion/letters/2020/09/25/maintain-trust-in-business |
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| Summary: | ON Aug 25, Parliament passed the Covid-19 Bill and the Insolvency (Amendment) Bill 2020, which are
closely related to the issue of a moratorium on creditors’ actions against companies and individuals. The
likelihood of creditors’ actions leading to bankruptcy of the business owner or the closure of the
business has been hovering over businesses like a Damocles sword during the lockdown caused by the
Covid-19 pandemic.
There is also a likelihood of personal liability for directors due to section 539 (3) of the Companies Act
2016, commonly known as the “wrongful trading provision”. Under this section, if the director or ofcer
of the company knowingly causes the company to trade or incur debt when there is no reasonable
prospect or reason to expect that the company will be able to pay off its debt when due, he or she is
personally responsible for settling all or part of the company’s debt; and this is in addition to the risk of
imprisonment.
One way of helping businesses is by suspending this law, as is being done in several countries. No doubt,
there must be safeguards against scoundrels taking advantage of these measures. Protection should not
be given where the decision to carry on trading or incur obligations is done with no intention to pay the
company’s debts as this is done to cheat or defraud creditors, customers or employees. Directors who
receive deposits from customers while knowing that services cannot be provided must not be
protected. |
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