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Here are the Most Frequently Asked Questions which we gathered from our clients and the public.
To make legal service accessible to all, we have complied the questions and answers for your reference. If you need further assistance on your legal matter, feel free to reach out to us.
Debt Recovery
To put it simply, winding up is the process of closing down a company, selling off the company’s assets and distributing the proceeds to its creditors and shareholders.
At this point, we will advise our clients not to rush into such decision without carefully considering the following:
1. In the case of winding up, the proceeds will be distributed firstly to the secured creditors like banks, and the unsecured creditors are ranked almost the last. If you are a supplier or contractor, and is not a secured creditor, you might want to consider whether there will be any remaining to cover the sum owed to you after distribution to other creditors of higher rank.
2. Is the amount of your debt worth the cost of winding up? Bear in mind the winding up process does not only involve lawyer, you will also need to appoint a liquidator to do the ground work.
It is not uncommon when clients come to us telling us that they have minimal documents to support their claim. That doesn’t mean that you have no chance to succeed in your claim anymore. Here are the 3 things you can look out for in absence of a written agreement:
- Any discussion between the parties on WhatsApp or other instant messaging apps regarding the transaction, or any letter stating the agreement reached between both parties as a result of verbal discussion?
- Any document to show that payment has been made?
- Any evidence to prove the delivery of goods / provision of services?
The general rule is that you are not allowed to sue a debtor to recover debt that has been outstanding for more than 6 years.
Here’s the good news – there’s still something else you can do and stand a chance to recover your debt!
You can issue a letter to the debtor seeking to recover the debt or suggesting a repayment plan. If any of the following happens, congratulations, you are now entitled to sue again because your limitation period has refreshed:
a) The debtor acknowledges the debt in his reply
b) The debtor makes part payment to the debt
- Check if the claim is barred by limitation, as there is a time limit of 6 years from the due date of payment to take legal action.
- Make sure that there is adequate evidence to support the claim, including agreements, invoices, statements of account, and relevant correspondence. In the event that you do not have any written agreement, check if the communication between you and the debtor clearly shows that there is an arrangement between both parties.
- Identify the correct debtor to avoid being struck out and determine the appropriate enforcement methods depending on whether the debtor is an individual, partnership, or company.
- Check the contract for any alternative dispute resolution clauses or other steps to be exhausted before commencing legal action.
- Consider the value of the debt and weigh it against the potential costs of recovery before pursuing a claim.
It is recommended to seek legal advice before proceeding with any debt recovery action. Who knows, your lawyer might have a more cost-effective option for you!
It is advisable that one firstly issue letter of demand to recover the outstanding sum owed by the debtor. If the debtor comes forward to propose a repayment plan, you are encouraged to negotiate with them on the repayment terms. Try to settle out of court instead of litigate as the latter would be more costly. To protect yourself in a settlement, you are advised to put all the negotiation and agreement reached between both parties in writing.
In the event that the debtor ignores your letter of demand, you may seek for a lawyer to assist you to initiate a lawsuit against the debtor in court.
If you require any legal assistance in respect of debt recovery, kindly fill up this form and get connected with our lawyer.
After you file an action in court against the debtor and the debtor fails to appear in court, or the court is of the opinion that it is a clear-cut case that can be decided based on the documents before the court, then it may take around 3 months to obtain the court order.
However, if you matter is highly complex that requires witnesses to testify in court, then the matter may take somewhere between 1 to 2.5 years.
Don’t forget you’ll need to execute the judgment to recover your debt if the debtor is not complying with the court order, in which case, you’ll need another 3 months. If you are looking to wind up a company or bankrupt an individual, it will take a longer time to do so.
Enforcement of judgment refers to the process of using legal means to collect or recover a debt or a monetary award granted in a court judgment. It involves taking steps to compel the judgment debtor to satisfy the judgment by paying the amount owed or fulfilling some other obligation as ordered by the court.
Here are a few methods to execute the monetary judgment besides winding up or bankruptcy proceeding:
1. Judgment Debtor Summons (JDS)
With a JDS, a debtor will be compelled to appear before the court to disclose their financial status and set up a repayment plan.
2. Garnishee Proceeding
If you have the bank account numbers of the debtor, you can obtain a court order to recover your money directly from the debtor’s accounts.
3. Writ of Seizure and Sale
The court can seize and sell the debtor’s assets to repay the debt.
4. Charging Order
If the debtor has securities, you may request a charging order from the court to create a lien on assets such as stocks, bonds, or dividends. that belong to the debtor.
Contracts
Short answer is the validity of an agreement and the rights of parties under the agreement shall not be affected merely because it is unstamped but only a stamped agreement is admissible in court. An unstamped agreement is also not a triable issue for a summary judgment application as it does not go to the root or validity of the document itself.
Having said so, in order for an agreement to be admissible in court, the court will order the parties to bring the agreement for stamping first, and by that time, a penalty will be imposed as the general rule is that an agreement shall be stamped within 30 days after signing.
The signing of witness is not required for commercial agreements or contracts. These agreements will be valid so long as they are duly signed by all parties to the agreements.
However, here’s a non-exhaustive list of legal documents where signing by a witness is required as prescribed by the law:
- Statutory forms under Companies Act 2016, National Land Code and Moneylenders Act 1951
- Statutory forms with the phrase “in the presence of”
- Power of attorney (which can only be attested by eligible person such as a lawyer, commissioner of oaths etc)
- Will (which needs to be signed and witnessed by at least two witnesses)
Take note that the non-compliance of such requirement may result in the contract to be invalid and unenforceable.
Shareholders' Rights & Interest
The purpose of a general meeting or shareholder meeting is for shareholders to internally discuss the affairs and business of the company and make important decisions concerning the company.
A notice of meeting is a document containing the details of the general meeting being called, including the agendas and resolutions which will be discussed during said meeting. Notices of meetings may be accompanied by circulars or statements setting out the proposed business of the meeting. Shareholders should be aware of the timeframe for notice distribution and the requirement of sufficient information in the notice to enable a prudent member to determine his attendance at the meeting.
There are two types of resolutions in general, namely the ordinary resolution and the special resolution. Members with voting rights or proxies appointed by the members are entitled to vote on both resolutions. A simple majority, which means more than half of the total number of votes cast, is required to pass an ordinary resolution. On the other hand, a special resolution requires at least 75% of valid votes in its favor.
Yes, shareholders of a company may appoint proxies to attend general meetings on their behalf if they are unable to attend. Proxies are third parties appointed to act on behalf of the absent shareholder and essentially hold similar rights as any other shareholder at the meeting, namely to attend, speak and vote.
If a company fails to provide proper notice of a general meeting to its shareholders, concerned members may be able to invalidate the proceedings at the meeting. However, the court is generally reluctant to do so unless substantial injustice was caused to the members.
Yes, shareholders have the power to remove directors with poor performance or those who disregard the interest of the company. In private companies, shareholders may exercise this power by passing an ordinary resolution even before the expiration of the director’s tenure of office. In public companies, shareholders must observe certain requirements when removing a director.
Yes, shareholders are entitled to question the board of directors and the business decisions made by them during a general meeting. This is a right conferred by statute and provides members with the opportunity to voice their concerns and ask questions about the company’s affairs.
Directorship
- Duty to act in good faith and in the best interest of the company.
- Duty to exercise care, skill and diligence in carrying out their duties.
- Duty to avoid conflicts of interest and to disclose any conflicts of interest that may arise.
- Duty to act within the scope of their authority and powers.
- Duty to exercise independent judgement.
- Duty to maintain confidentiality.
- Duty to act in compliance with applicable laws and regulations.
- Duty to act honestly and fairly in dealings with the company and its stakeholders.
- Duty to ensure that the company maintains proper books and records.
- Duty to ensure that the company complies with its obligations to file returns and other documents with the relevant authorities.
You are advised to check out the Companies Act 2016 to understand the duties of a director, or seek for legal advice from your lawyer on your circumstances which will be assessed on case-to-case basis.
Section 221 of the Companies Act 2016 requires that every director of a company who is in any way interested in a contract or proposed contract with the company shall declare the nature of his interest at a meeting of the board of directors as soon as is practicable after the relevant facts have come to the director’s knowledge.
Disclosure of interest by a director in a contract effectively displaces the repercussions of the no-conflict rule. In other words, by effectively disclosing their interest, the director has avoided facing the consequences of a conflict of interest.
However, this does not absolve the director from their duty to act in good faith in the best interest of the company and its purposes. It is important to note that a director must provide full and frank disclosure with regard to interests that concern the company, and whether such disclosure is sufficient or effective is a question of fact, taking into consideration the circumstances of each case.
Directors can be personally liable in the following situations:
- Failing to make contributions to the Employers’ Provident Fund (EPF) for employees, which can result in personal liability for all outstanding amounts.
- Failing to pay tax owed by the company, even if the director was unaware of the tax due. Directors are presumed to be aware of necessary taxes that need to be paid.
- Assisting in the transportation of unlicensed foreign workers, which is considered a criminal offense.
- Breaching statutory duties, including avoiding conflicts of interest, declaring interests in any company undertaking, not making loans to other directors, not misusing or disseminating insider information, not making false statements or reports, and not misrepresenting the nature of any contract or making false promises. Any failure to adhere to these duties can result in personal liability for any fines or even criminal liability.
- Failing to lodge statutory documents with the Companies Commission of Malaysia, including company accounts, annual returns, notice of change of directors, and notice of change of registered office, which can result in personal liability for any fines.
Section 221 of CA 2016 provides that a director has the duty to disclose material interests and transactions that are significant to a company. To determine whether an interest is material or not, one may examine the following:
- How the company’s business is organised;
- The subject matter;
- The connection between the subject matter and the company;
- The director’s role in the matter; and
- The contractual terms that govern the parties involved.
The Court of Appeal’s decision in Delta-Pelita Sebakong Sdn Bhd v. Wong Hou Lianq & Ors And Other Appeals [2020] MLRAU 41 held that when a director is in doubt, disclose.
Reach out to a lawyer and learn about how to protect your interests as a director.
Non-executive directors and sleeping directors have the same duties and responsibilities as executive directors, including an obligation to stay informed about the company’s operations and to challenge executive directors’ decisions. If they turn a blind eye to their duties, they would not have any defence in any claim for breach of duty.
Taxation
There is no capital gain tax imposed on disposal of shares in Malaysia at the moment. If you are not in the business of shares trading, then the disposal of shares will not be taxable.
However, when you execute the shares transfer document, an ad valorem rate of 0.1% of the consideration (shares sale price) will be imposed.
Although the re-tabled Budget 2023 sees the government plan to introduce a Capital Gain Tax for disposal of shares of unlisted company starting from 2024, the plan has yet to be implemented and has attracted many criticisms from the tax experts, particularly on the potential outflow of foreign funds since the country is struggling to attract investments after the pandemic and political turmoil.
- Your company’s effective tax rate is much lesser than statutory tax rate
- Information received from third party, such as your former employees or business partners
- High related party transactions in a company
- Reliefs claimed for a group of companies
- Withholding tax imposed in a company
You are encouraged to disclose the left out item as the government will provide 100% penalty waiver on additional taxes for those who declare unreported taxes from 1 June 2023 until 31 May 2024 under the Special Voluntary Disclosure Program.
- Timeline for filing of a tax appeal – If you wish to challenge an assessment by IRB, you can make an appeal within 30 days from the day you receive the assessment. Not to worry if you have exceeded the timeline, you can still apply to extend the time for appeal.
- Despite the appeal you have filed or you will be filing, you are still required to pay the outstanding tax stated on the notice of assessment within 30 days from the service of the notice of assessment. If you fail to do so, the amount of taxes will be increased by 10%.
There are generally two routes of tax appeals:
- Appeal to the Special Commissioner of Income Tax, where you get to negotiate with the IRB on the amount of payable tax and potentially settle the matter out of court;
- Application for judicial review in court where the taxpayer can seek for the court to review the government’s decision when the subject matter raises and important question of law or gives rise to issues pertaining to breach of natural justice
There are generally two routes of tax appeals i.e. appeal to the Special Commissioner of Income Tax (SCIT) and application for judicial review. You can either have a lawyer or a tax agent to represent you in the appeal before SCIT, but you need a lawyer for the judicial review proceeding in court.
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