In Malaysia companies Act 1965 ( CA ) . is one of the vital statutes which govern and modulate the formation and operation of a company. All the subdivisions in this codified govern each and every portion of company administration. In this instance subdivision 176 of Companies Act plays a really of import function on agreements and Reconstruction of a company when the company to a great extent burdened with debt. Fiscal crisis is the most unsafe and a serious disadvantage for a company. in such state of affairss companies usually will utilize this proviso to get away and avoid liabilities against their creditors. This subdivision allows the company to do agreement and Reconstruction where they can negociate with the other parties such as creditors sing the debt they owe. Section 176 ( 5 ) of CA. must be read together with subdivision 176 ( 3 ) of CA. where this subdivision emphasis that the order made under subdivision ( 3 ) is non valid until a transcript of the said order is given to the registrar and merely after the order is lodged. the said order will transport a binding consequence from the day of the month of the order lodgement.
On the other manus. if the tribunal find is sensible than the tribunal may find any earlier day of the month as specified in the order. This subdivision fundamentally negotiations about the day of the month and effectivity of the notice which been agreed by members and creditors as per subdivision ( 3 ) of this proviso. 1 Harmonizing to subdivision ( 6 ) . a transcript of the order which made under subdivision ( 3 ) . must be put together or annexed with every individual transcript of the company’s memoranda which is issued after the order made under subdivision ( 3 ) . 2 In the event where the company does non hold a memoranda. than the order should be annexed to all instruments representing or specifying the fundamental law of the company. This is by and large to give cognition to a 3rd party about the understanding between the company and the members or creditors. In this instance the tribunal may and hold power to find the period of clip where the company shall follow to subdivision ( 6 ) .
This can be seen in subdivision ( 7 ) of the same proviso. 3 Any company fail to follow subdivision ( 6 ) will be guilty of an offense against subdivision ( 9 ) of the same proviso where punishment of RM 2. 000. 00 will be imposed. 4 Section 176 ( 10 ) of CA. regulate the power of tribunal to keep proceedings. 5 Here in this subdivision. when there is no declaration or agreement is made by members and creditors with company. the tribunal have power to keep farther proceedings in any action against the company. There are certain things the company has to make one time the company obtains such order from the tribunal. First. the company shall lodge a transcript to Suruhanjaya Syarikat Malaysia ( SSM ) . Second. the company should print the obtained order in newspapers so that all the members and creditors of the company can cognize about the restrain order.
Subsection ( 10A ) says that the tribunal may allow the restrain order for a period of non more than 90 yearss but there are four state of affairss where the tribunals can extent the period of the restrain order for good ground. First. the tribunal must be satisfied that there is a proposal for via media or agreement between the company and the creditors and the creditor who stand foring this must keep one half of the value of all creditors which is fundamentally 50 per centum. Second. the tribunal must experience that the keeping order is of import for the company and the creditors to do agreements or strategy of via media for the blessing of the creditors. Third. a statement in the prescribed signifier must be made before three yearss before of the application of the order. Fourthly. the tribunal must O.K. a nominative individual among the creditors to move as a manager of the company.
These four things must be satisfied by the tribunal for the tribunal to give extension of clip for the restrain order. 6 In the instance of PECD Bhd & A ; Anor v. Merino-ODD Sdn Bhd & A ; Ors the tribunal held that. for the tribunal to allow the extension of clip more than 90 yearss. the company should and must follow the full four things which stated in subdivision ( 10A ) of subdivision 176. 7 About the good grounds. Justice Vincent Ng have stated that the word good ground in subdivision 176 ( 10A ) of CA. refers to the applicants’ bona fide purpose and action to do agreement or strategy of via media in the instance of Metroplex Bhd & A ; Ors V Morgan Stanley Emerging Markets Inc. 8
Section 176 on the CA is really a certain but non a blade. The purpose of subdivision 176 CA is really to assist companies which face some serious fiscal jobs and debts to the creditors. This proviso is must be used by the companies to forestall bankruptcy and as a opportunity to settle the debts to the creditors. However. some companies may misapply this subdivision for their ain enjoyment or benefit which was non and ne’er the purpose of parliament for ordaining this proviso. When companies start to misapply this proviso. the aim of this proviso is misinterpretated. This misunderstanding can be said as one of the ground for fiscal crisis in 1997.
Some companies may utilize these commissariats to rip off the creditors of the company ; in this instance the improper use of this subdivision may take to injustice to creditors. As a decision. subdivision 176 of CA is really of import proviso which should be interpreted as per the original purpose of the passage. This proviso is really helpful for the companies in fiscal troubles and it will supply room for the companies to run their concern and addition net income to get the better of the debts. This proviso besides does non go against the rights of the creditors where by utilizing this proviso the company can non get away the debt but merely can obtain some clip extension to refund it. This subdivision must be used in a good mode so that the company and besides the creditors do non held in unfairness.
