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The best way would be to make a
search either yourself or through a Credit Search company at the Official Assignee’s
office and obtain a certified copy.
The Official Assignee takes about three weeks for an
official search to be done, and this should provide sufficient information on whether a
person is a bankrupt or not.
There are situations where
the name of the person who is a bankrupt may be similar but the identity card number is
not available. In this case, you may have to use other evidence to prove that you are
different from the bankrupt.
There are Credit Agencies
in Malaysia providing information to banks, financial institutions and other business
entities on companies or people against whom a summons is filed or judgment obtained.
These Credit Agencies also provide names of individuals or companies against whom a
creditor petitions, or what people commonly refer to as a bankruptcy petition or a
winding-up petition is filed. |
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Even after
filing a creditor’s petition, it does not automatically make a debtor a bankrupt. A
date of hearing for a creditor’s petition will be fixed and before an order can be
made, the petition must be served and advertised. When the petition comes up for hearing,
a receiving order and adjudication order will be made if all the requisite conditions are
met. Only at this point is the debtor adjudged a bankrupt.
It would be wrong for the
bank to consider a person a bankrupt on the basis that a creditor’s petition has been
filed against him without taking further steps to ascertain whether an adjudicating order
has been made or whether the petition has been withdrawn or is still pending. |
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The new
regulations introduced which came into effect on January 1st 1999 will reduce
the chance of innocent people being declared bankrupt due to mix-ups in names. The
Official Assignee’s Office now requires lawyers to state the identity card number of
a person in their applications for bankruptcy searches.
They also have to use the
Official Assignee’s standard form for each applicant, unlike in the past when they
could submit a letter listing any number of applicants. Any application which failed to
abide by the format would not be entertained by the Official Assignee.
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It is not an
offence if a person is insolvent. If a person is insolvent but is able to meet demands for
payment as and when they are due can carry on business as usual.
However, when demands for such
payment are not met, the insolvent may be made bankrupt in the case of an individual and
be liquidated in the case of a company. Such liquidation is commonly referred to as
“winding up”.
In the case of an individual,
bankruptcy action is instituted under the Bankruptcy Act. For companies, similar action
could be instituted in commencing winding up proceedings under the Companies Act. |
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Winding up is a
process by which a company is prepared for dissolution. In a winding up situation, the
assets of a company will be applied to discharge its liabilities and returning any surplus
to those who are entitled to it, subject to the costs of doing so, provided there are any
excess remaining. Effectively, it means the company is bankrupt.
There are many reasons why a
company is wound up. For example, a company may become insolvent or the company may seek
to minimise the loss by closing down and selling all its assets.
There are varying grounds which
a company may wound up by different people. This include situations where the company
resolves to be wound up, members reduced to below two, directors acting in the affair of
the company in their own interest or in any other manner which appears to be unfair or
unjust.
However, the most common ground
on which a company is wound up is because it is unable to pay its debts to creditors.
Malaysian Companies Act provides
for two ways in which a creditor can demonstrate that a company is unable to pay its
debts.
(1) A creditor who
is owed more than RM500 can serve on the company a statutory demand that the company pay
the debt within three weeks. Neglect to pay the sum or to secure or compound for it to the
reasonable satisfaction of the creditor leads to a statutory presumption that the company
is unable to pay its debts.
(2)
A company is
also deemed to be unable to pay its debts if execution or other process is issued or a
judgement, decree, or order of any court in favour of a creditor is returned unsatisfied
in whole or part.
Once a company is deemed to be
unable to pay its debts, the creditor can petition to the court for winding up of the
company. On the date fixed for hearing, unless the court is satisfied to the contrary or
for any other legitimate reason disallows the petition, a winding up order will be made. |
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No. A creditor
may not attached all the properties of a bankrupt.
When a judgment debtor’s
house is attached, not all chattels on the premises can be seized and auctioned off
because not all of them belong to the debtor. Some of the property may belong to his wife
or other family members or tenants.
Section 3(1) Debtors Act 1957
provides that:
‘Subject to and in
accordance with any rules of court, any sum
of money payable under the judgement of a court may be recovered in case of default or
failure of payment thereof forthwith or at the time or times, or in the manner thereby
directed by execution whether legal or equitable against the property movable or immovable
of the party against whom the judgement was obtained.”
However, there are a number of
items which are not liable to attachment, seizure or sale in an execution and this is
provided for in the provision to s.3 (1) Debtors Act 1957.
· The clothes, cooking vessels, beds or bedding of the judgment debtor, his wife and children, and the tools and implements of
his trade to the value of RM200 in all;
· The tools of artisans or, where the judgment debtor is an agriculturalist,
his implements of husbandry and such cattle and seed-grain of produce as may in the
opinion of the court be necessary to enable him to earn his livelihood;
· Houses and other buildings (with the materials and the sites thereof and the
land immediately appurtenant thereto and necessary for their enjoyment) belonging to an
agriculturalist and occupied by him;
· Books of account; and
pension, gratuity or allowance granted by the Government or such other
public body as the Yang di-Pertuan Agong may by notification in the gazette designate.
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Banks have a
common practice to have bankruptcy searches made on borrowers. After the bank has granted
a loan to a borrower, the banker’s solicitors are requested to prepare the relevant
security documents and simultaneously conduct a bankruptcy search on the borrower at the
Official Assignee’s Office. Normally, the bank’s loan release procedure depends
very much on the outcome of the bankruptcy search results proving that the borrower is not
a bankrupt. If the borrower is shown to be a bankrupt the bank reserves its rights to
terminate the loan.
In reality, the banks do approve
the loans applied for, but do not release the loan sum until the borrower is proved not a
bankrupt and subject further to the security documents having been duly executed, stamped
and where necessary presented at the relevant land office for registration. |
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It is a common
misconception that once a person becomes a bankrupt he is no longer able to make a
contract with another part, because the Official Assignee has taken over the management of
the bankrupt’s property.
However, the Bankruptcy Act does
not have any provisions that expressly prohibit a bankrupt from contracting with third
parties, nor are there any provisions which say that he can contract.
Where a bankrupt, who has not
obtained his discharge, enters into transactions in respect of property acquired after the
bankruptcy, then, until the trustee intervenes, all such transactions, with any person
dealing with the bankrupt bona fide and for value, and whether with or without knowledge
of the bankruptcy, are valid as against the Official Assignee. |
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