Prepared by: Sazlinidayu binti Kamarul baharin

Law Reform and Revision

Senior Federal Counsel

WHO CAN INITIATE BANKRUPTCY PROCEEDING?

GOVERNMENT
FINANCIAL INSTITUTION
COMPANY
INDIVIDUAL

HOW TO INITIATE BANKRUPTCY PROCEEDING?

MODE IN BANKRUPTCY PROCEEDING.

BANKRUPTCY NOTICE AND SUBSEQUENTLY BANKRUPTCY
PETITION IS FILED IN THE HIGH COURT.



1. Amount owing by the Debtor is
RM30,000 or more
2. The debtor must have committed an
act of bankruptcy

DEBTOR
CREDITOR
THE OFFICIAL ASSIGNEE
The bankruptcy notice when is served
on debtor acts as DEMAND
Amount must not less than 30,000.00
inclusive interest.


FORMALITIES
Bankruptcy notice is issued by the court
and dated by the registrar and sealed.
The notice must be accompanied by a
request to the registrar to issue a
bankruptcy notice.
The sealed copies of the Bankruptcy
notice are returned to the judgment
creditor to facilitate service on the JD.


Interest due must be quantified up to the
date of issue of bankruptcy notice (BN)
There must be an endorsement upon the
notice if the debtor has any set-off ,
counterclaim or cross demand the debtor
must within the specified period file and
affidavit to that effect in court
In bankruptcy notice must state address
of the creditor within the jurisdiction of the
court whom the debtor is required to pay.
If the address given outside jurisdiction it
will be defective.

Bankruptcy notice valid for 3 month from the date of issue. [r96]
If unable to serve within 3 months the judgment creditor may
apply to the court to extend the BN as it seems fit.

SERVICE OF NOTICE
a. BN must be personally served on the debtor hence cannot be
served through representative or manager.
b. If not possible to served BN within time must apply for
extension of time to serve .
c. If service still not affected the next step creditor must apply
and obtain an order for substituted service.
d. Before the court allowed the order for substituted service , it
must satisfy itself :-
It cannot be effected because the debtor is keeping out of way
to avoid service or in any other cause.



Usually by way :-
Advertising in any national newspaper
Effectively bring the bankruptcy proceeding to
the knowledge of the debtor.
Notice board
Last known address

Order which means that the judgement or
order should be one which finally disposes of
the rights of the parties, otherwise it will be
treated as an interlocutory order.
If the creditor agreed not to commenced
bankruptcy proceeding after obtaining
judgment he will estopped from issuing BN.
If 6 years or more have lapsed since the date of
the judgment may not issue without the leave
of the court

Creditors petition
Condition:-
May be presented either
i. By a creditor or several creditor or
ii. by Debtor himself

Section 5 BANKRUPTCY ACT 1967
No petition can be presented unless :-
a) the debt owing by the debtor to the petitioning creditor, or if two or
more creditors join in the petition the aggregate amount of debts owing to
the several petitioning creditors, amounts to *thirty thousand ringgit;
(b) the debt is a liquidated sum payable either immediately or at some
certain future time;
(c) the act of bankruptcy on which the petition is grounded has occurred
within six months before the presentation of the petition; and
(d) the debtor is domiciled in Malaysia or in any State or within one year
before the date of the presentation of the petition has ordinarily resided
or had a dwelling house or place of business in Malaysia or has carried on
business in Malaysia personally or by means of an agent or is or has been
within the same period a member of a firm or partnership which has
carried on business in Malaysia by means of a partner or partners or an
agent or manager.



Creditor petition must be verified by an
affidavit of the creditor.
Each statement in the petition must be deposed
by someone within whose knowledge.
Must be in prescribed form , dated , signed and
witnessed.
Attestation of the signature of the person
signing the petition is Mandatory requirement.
Must be filed in the court in the Debtor resides.
If the debtor resided in one state and carried on
business in another , petition must be filed
where he has carried on his business.
Petitioning creditor must deposit RM2,000 with
the Official Assignee to cover fees and
expenses. [Bankruptcy Rules 1969 r 103(1)].
Service of Petition
Must be personally served and proved by
affidavit.
Substituted service may be made if the court
satisfies by affidavit or any other evidence on oath
, where personal service cannot be effected because
the debtor is avoiding the service of the petition.
Hearing
Must not be heard until expiration of 8 days from
the service unless there is a good cause shown fro
the hearing at an earlier date.
The date of commission of the act of bankruptcy
must be stated in the petition to show that the act
of bankruptcy was committed within 6 months of
the presentation of petition.

When petition is heard court must satisfied in
Section 6(5) Bankruptcy Act 1967:

Petitioning creditors debt
Commission of an act of bankruptcy
Proof of service if the debtor does not appear
Debtors inability to pay his debt if debtor
adduces evidence of his ability to pay the debt
in full within reasonable time the court will
consider the possibility of a stay , adjournment
or dismissal of petition.
Receiving order
If the debt of the petitioning creditor , the act of
bankruptcy and service of the petition is
proved.
The court will proceed to make a receiving
order followed by the adjudication order.
A receiving and adjudication order may be
made simultaneously.
A receiving order enables the Official Assignee
to take possession , custody or control of the
debtors property.
Official Assignee is constituted the receiver of the
debtors property
NO creditor can initiate or maintain any action
against property or person of the debtor without
the leave of the court.
All pending actions will be stayed.
Receiving order does not make the debtor a
bankrupt nor is he deprived of ownership or
proprietary right over his property. He only
deprived of only possession and control.
OA is the caretaker or manager of the said
property and cannot sell or otherwise deal with
that property.
DISQUALIFICATION
OF A BANKRUPT

DISABILITIES OF A BANKRUPT

When a debtor adjudged
bankrupt , he is disqualified
from holding any of the
following positions of trust
or high office :
a) Member of parliament;
b) Trustee under any written
law including appointment
as administrator of the
estates of the deceased;
c) Director of a limited
company
d) Judicial office such as a
judge or president or
magistrate
A bankrupt who is
undischarged is subject to
certain disabilities:
He will be incompetence to
maintain any action, other
than an action for damages
in respect of personal injury
to his person without the
previous sanction of the OA.
Once in six months tender to
the OA an account and
property acquired during the
preceding 6 months.
Not permitted to leave
Malaysia without the
sanction of OA.

(e) Member of a local or
municipal council;
(f)Justice of peace
Other disqualification :
i. A solicitor cannot
continue to enjoy the
status of having a
practicing certificate;
ii. A shareholder in a
company will not be
given the privilege of his
right in company
matters;
iii. Administrator with letter
of administration of a
deceased estate will have
to be removed and
someone else appointed.
A bankrupt is not
allowed enter into or
carry on any business
alone, partnership or
become a director or
directly or indirectly
involve in management
or control on any
business without the
permission of the OA or
Court.
He may not engage in
the management or
control of any business
run by his family
member or relatives.
When a bankrupt
person can be discharge
for bankrupt?

A bankrupt may apply
any time after being
adjudged bankrupt.
How?
Application must be
made to the court for an
order of discharged.
Section 33-35 of the
Bankruptcy Act 1967
[Act 360] to be read
together with rr 194-203
of the Bankrupcy Rules
application to the court
OA has the discreation
to discharged a
bankrupt once 5 years
has elapsed from the
date a receiving order
and adjudicating order
was made.

Need to produce to
the registrar a
certificate from the
Official Assignee
(OA) specifying the
number of creditors of
whom former has
notice.
Court will appoint a
day for hearing of the
application
28 days before the
hearing of the
application
Need to give notice of
the time and place of
the hearing to OA

The Registrar shall
send a copy of such
notice for insertion in
the gazette
The OA shall send a
copy of such notice to
each creditor who has
proved within 14 days
before the hearing.
If the creditor intends
to opposed the
discharge of a
bankrupt
Notice of the intended
opposition and
stating the reason /
grounds to the OA not
less than 3 days before
the hearing of the
application.
The may require as condition to the order for discharge
Such as payment for any balance or part thereof of the
debts provable under the bankruptcy , does not satisfied at
the date of his discharged.
Court shall fix a date for hearing.
Stating the grounds and reason for
in writing.
Notice application to the debtor not
less than 8 days.
To furnish a copy of the application.
A bankrupt may be discharged from
such except debts by a certificate in
writing of the Minister for Finance, in the
case debt due to the government. [section
35(1), (2) Bankruptcy Act 1967].

The bankrupt shall be released from all
other debts provable in bankruptcy.
[Section 35(5) Bankruptcy Act 1967].

An order for discharge shall be
conclusive evidence of the bankruptcy
and the validity of its proceeding; in any
proceeding that are instituted against a
bankrupt who has obtained of discharge
in respect of any debt from which he is
released by the order, the bankrupt may
plead that the cause of action occurred
before his discharge. [Section 35(5)
Bankruptcy Act].


A discharge shall not release the bankrupt from
any debt, due to the Government of Malaysia.

any provable debt which he incurred in respect of, or
forbearance in respect of which was secured by means of,
any fraud or fraudulent breach of trust to which he was
party.
any person other than the bankrupt from any liability
(whether as partner or co-trustee of the bankrupt or
otherwise) from which the bankrupt is released by the
discharge, or from any liability as surety for the bankrupt
or as a person in nature of such a surety.

Debtor can apply to the court
for rescission of the receiving
order or annulment of the
adjudication order. R155 BA

1. A copy of the application for
rescission and Annulment must be
served to the Official Assignee.
2. Must be served at least 14 days before
the hearing
3. court may make an interim order
staying the proceeding , pending the
hearing of the application.
4. The application must not be heard
until after the completion of public
examination.
Section 105
Where in the courts opinion the
adjudication order ought not to have
been made in the first instance; or
Where it is proved to the court
satisfaction that the Debts have been
paid in full or
Where it appears to the court that
proceedings are pending in Singapore
and distribution ought to be effected
there.