High Court Decision on Interaction between Judicial Management and Insolvency

The High Court in Exxobrite Sdn Bhd v Worth Moreover Industries Sdn Bhd (grounds of judgment dated 29 July 2022) dealt with the moratorium impact of a judicial management purchase and the insolvency repercussions arising from the judicial administration procedure.

Summary of the Choice and Significance
Grounds by: Nadzarin bin Wok Nordin J

The corporation, Benefit As well as, was positioned into judicial management. As portion of the judicial administration method, the judicial supervisor had carried out the proof of credit card debt training and drew up the judicial manager’s Statement of Proposal. The creditor, Exxobrite, experienced its debt admitted in the judicial administration procedure.

While the judicial management purchase was still subsisting, Exxobrite issued a winding up statutory desire for the sum of roughly RM73,000.00.

Subsequently, Exxobrite filed a winding up petition centered on each part 466(1)(a) and 466(1)(c) of the Companies Act 2016 (CA 2016). Part 466(1)(a) is where there is the presumption of the inability to shell out credit card debt when the statutory demand is not complied with. Section 466(1)(c) is where by the incapability to shell out personal debt is after using into account the contingent and prospective liabilities of the business.

Initially, the Court held that the statutory need was defective as the issuance of the need was a graduation of a legal process all through the period of the judicial administration get. This was opposite to segment 411(4)(c) of the CA 2016 where “no … other lawful process shall be commenced …against the enterprise … other than with the consent of the judicial manager or with the depart of the Court docket …

2nd, the Courtroom continue to granted the winding up order primarily based on the alternate ground of portion 466(1)(c) of the CA 2016. There was an admitted personal debt by the judicial manager’s admission of the evidence of credit card debt. The judicial manager’s Assertion of Proposal also confirmed that Benefit Plus’ present liabilities far exceeded its existing property. This was proof of Price Plus’ industrial insolvency. For that reason, getting into account the contingent and possible liabilities of the firm, the Courtroom found that Price Furthermore was unable to satisfy its existing money owed.

Background Details

On 16 February 2021, a judicial management buy (JM Purchase) was granted above Price Moreover. The JM Buy lasted for 6 months and was then prolonged till 15 February 2022.

Throughout the JM Get, the judicial manager carried out the evidence of credit card debt physical exercise. The judicial manager admitted the credit card debt of around RM73,000 owing to Exxobrite via a Notice of Admission dated 24 November 2021.

On 25 January 2022, Exxobrite issued a statutory desire against Price Moreover for the payment of the debt within just 21 times.

On 15 February 2022, the JM Buy lapsed.

On 15 June 2022, Exxobrite filed its winding up petition towards Benefit In addition primarily based on, among the some others, sections 466(1)(a) and 466(1)(c) of the CA 2016.

Benefit Moreover filed an software to, among the other people, strike out the winding up petition. This is on the floor that the statutory demand from customers was invalid as it was in breach of the moratorium less than the JM Buy.

The Courtroom proceeded to listen to the winding up petition together with the hanging out software.


Initially, the Courtroom regarded as whether the statutory demand from customers was defective and invalid.

Exxobrite argued that the statutory need was not the commencement of a legal approach and therefore did not contravene portion 411 of the CA 2016. The argument was that a authorized process intended a summons, writ, warrant, mandate or other process issued from a court.

The Courtroom referred to the Superior Court of Justice in Northern Island scenario of Fulton and an additional v AIB Team (Uk) plc [2014] Nich 8 concerning administration, being an equal approach like judicial management. The circumstance held that a statutory demand was a lawful method for the reasons of a moratorium in administration.

The Courtroom held that the expression “legal process” for a moratorium in judicial administration need to include a statutory demand for winding up. It is the statutory desire issued below portion 466(1)(a) of the CA 2016 which triggers the correct to file or start a winding up petition premised on part 465(1)(e) examine with section 466(1)(a) of the CA 2016.

Further more, the moratorium in judicial management was drafted vast more than enough to go over the conditions “other proceedings”, “execution” and “or other authorized process”. Parliament would have intended the moratorium to be relevant above not only legal proceedings in the typical sense (i.e. programs, proceedings or issues in Court docket) but also a wider spectrum of ‘legal processes’.

The moratorium is supposed for the fundamental intent of the corporate rescue mechanism, currently being the survival of the company or the rehabilitation of the company. The statutory desire would definitely put strain on the organization to make payment to the creditor and the creditor, Exxobrite, would for that reason receive an gain more than other creditors.

Nevertheless, in deciding whether to strike out the winding up petition, the Courtroom pointed out that the petition was also based on the alternate floor of part 466(1)(c) of the CA 2016. It would not be a plain and evident case for striking out.

Next, the Court proceeded to hear the petition by itself and made a decision to wind up the organization.

Exxobrite was by now an admitted creditor by way of the judicial administration approach. The judicial supervisor had accepted Exxobrite’s evidence of personal debt.

Up coming. the judicial manager’s statement of proposal mirrored the company’s present-day liabilities at RM19.4 million but with present assets only at RM8.7 million. The Court docket applied the check of commercial insolvency in regardless of whether the firm is able to meet up with its present-day debts.

Last but not least, the Courtroom also took into account the numerous really serious allegations of misappropriation of money and dissipation of belongings. The property of the corporation were being in jeopardy. There was a tumble-out involving the unique factions of the directors and shareholders. The Courtroom identified that there was an overpowering proof of the company’s commercial insolvency and that the company was now paralysed and in a state of defunct. It was just and equitable that the firm be wound up.


This final decision does exhibit the large safety presented by a moratorium in judicial management. This circumstance was made a decision in a situation of the moratorium immediately after the JM Get is granted. But this would in the same way apply to the initial moratorium following the filing of the judicial administration software beneath part 410(c): “no other proceedings and no execution or other legal process shall be commenced … in opposition to the firm“.

Even so, wherever the judicial management approach is unsuccessful, it does expose the enterprise to the immediate threat of winding up.

Immediately after all, even the filing of a judicial administration application have to be where by the Court docket considers that “the corporation is or will be unable to fork out its debts” (under segment 404(a) of the CA 2016) i.e. where the organization is effectively bancrupt.

If the judicial manager is appointed, the judicial supervisor would have to determine and acknowledge to the existence of the money owed owed to the lenders.

The Statement of Proposal would also acknowledge to the economic placement of the business, and where by it is likely that the organization would be cashflow bancrupt and stability sheet insolvent.

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