The Amendments to the Insolvency Act 1967 (Act 360)

Syed Fadzil Alhabshi
Partner
E: syed@stwd.com.my

Aimee Lee Kim Moong
Senior Associate
E: aimee@stwd.com.my

The amendments to the Insolvency Act 1967 (“the Act”) which were passed earlier this year come into effect today, 6 October 2023 (“the Amendments”).

The Amendments seek to streamline and provide more effective discharge of bankrupts within a shorter period of time. The Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said stated that the “second chance policy” aims to release 130,000 bankrupts within a year, which represents about half of the total number of cases presently managed by the Department of Insolvency.

Highlights of the Amendments are as follows: –

1. Amendment to Automatic Discharge Provision
   
   One of the key amendments to the Act involves changes to the automatic discharge provision. Automatic discharge will be attainable within a shorter period of time under s 33C where the conditions provide more flexibility to the Director General of Insolvency (“DGI”) to consider the bankrupt’s financial capability in determining payment conditions. The DGI also has wider discretion in suspending discharge and also in obtaining further financial information from a bankrupt.

2. Additional Categories of Bankrupt Individuals to be Discharged
   
   The Amendments introduce additional categories of bankrupt individuals who can seek discharge without objections being able to be made by creditors. Individuals over the age of 70 and persons certified as suffering from mental disorders will be able to obtain discharge, subject to the satisfaction of the criteria.

3. Use of remote communication technology in administering bankruptcy cases
   
   Another welcome amendment is the addition of remote communication technology in definitions portion of the Act which would possibly enable bankruptcy administration to be carried out via online communication. We may also see the introduction of digital administration and e-filing in the future which would reduce costs and save time for all parties involved in the administration of a bankrupt’s estate.

4. Meeting of Creditors
   
   The mandatory requirement for the DGI to hold the first meeting of creditors has also been removed, which will provide greater flexibility and costs savings in the administration process.

5. Minister’s discretion
   
   Finally, various amendments in the Act also permit the Minister’s discretion to prescribe certain monetary values to be varied without amendment to the principal act such as in the definition of “wage earner”, administration of summary judgment for small bankruptcies and the value of tools of trade and personal effects.

To read about the Amendments in detail, please see our Insolvency Update No. 2/2023.