Tay Partners

Covid-19 (15 April 2020)


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Over the past weeks, governments across the globe raced to roll out fiscal policies aimed at alleviating the economic impact of COVID-19. Stimulus packages – mostly in the form of tax relief, waivers, cheap loans and debt moratoriums – were implemented to help struggling businesses weather the pandemic storm. Following the stimulus measures, we now see many countries taking the next step to make or propose changes to their laws to provide interim protection to businesses and individuals from a deluge of insolvency and bankruptcy claims. This article looks at these non-fiscal modes of assistance implemented by different governments to keep businesses afloat as we navigate through one of the most tumultuous periods in recent economic history.


The UK Government announced that it would introduce changes to their insolvency laws to help financially distressed businesses avoid liquidation. Whilst the Government plans to bring forward the legislation “at the earliest opportunity”, no such legislation has been published at the time of writing as the Parliament is currently in recess until 21 April 20201.

The proposed amendments to the UK insolvency laws are:

  1. Suspension of wrongful trading

    A temporary suspension of wrongful trading provisions is to be applied retrospectively from 1 March 2020 for three months and may be extended beyond the initial timeframe to ease company directors from the threat of personal liability set out in Sections 214 and 246ZB of the Insolvency Act 1986. The proposed amendment allows directors to continue trading even if there is no reasonable prospect of preventing liquidation. The legislation is hoped to “give UK company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, without the threat of personal liability should the company ultimately fall into insolvency”.2 From a macroeconomics point of view, this would help stretch the lives of struggling businesses and most importantly, preserve jobs. Nevertheless, laws relating to fraudulent trading or general duty for directors to act in good faith remains in place.3

  2. Moratorium / Restructuring Plan

    Back in August 2018, the Government announced new restructuring procedures to improve corporate rescue mechanisms for businesses in the UK with a view to maintain business operations and employment while ensuring the interest of creditors is protected. In light of the pandemic, Business Secretary, Alok Sharma announced that the Government is fast-tracking the proposals which will include measures from binding dissenting creditors to a new restructuring plan on a voting majority of 75% to a temporary moratorium for businesses undergoing restructuring. The latter includes protection of supplies and raw materials to maintain company trading.4

  3. Additional measures:

    The Chancellor of the Exchequer, Rishi Sunak, unveiled a series of financial support in an effort to prevent businesses from going into liquidation and to avoid mass unemployment as the economic fallout from the coronavirus outbreak escalates. These measures include the Coronavirus Job Retention Scheme (“the Furlough Scheme”)5, Self-Employed Support Scheme6, Coronavirus Business Interruption Loan Scheme7 and option to defer Value-Added Tax (VAT) from 20 March 2020 until 30 June 20208. However, these fiscal policies would not be discussed in detail in this article.


The Australian Federal Government introduced laws to provide temporary relief for financially distressed businesses affected by the coronavirus crisis. Similar to the UK’s proposed amendments, Australia’s measures consist of changes to insolvency laws, safeguards from insolvent trading and temporary flexibility in the Corporations Act 2001 (the “Corporations Act”).9 The interim legislation will provide a six-month “breathing space” for businesses from 23 March 2020 and allows for further extension, if necessary. Amongst the interim measures are:

  1. Temporary increase of thresholds and time period to respond to creditor demands

    Statutory demands issued by a creditor against a company has been increased to AUD$20,000 from the previous AUD$2,000 and a minimum of 6 months to respond to the demand or set aside the application must be allowed as compared to the previous 21 days.

  2. Temporary amendments to laws on bankruptcy proceedings

    Under the Bankruptcy Act 1966, creditors may initiate bankruptcy proceedings against an individual with debts over AUD$5,000 in which they will have 21 days to respond. Under the temporary laws, a Bankruptcy Notice may only be issued to individuals with debts over AUD$20,000 and the period to respond will be extended to 6 months to allow opportunity for repayment arrangements.

    For debtors who want to make a declaration of intention to present a debtor’s petition, unsecured creditors are now prohibited from taking further action to recover debts for 6 months instead of the previous 21 days. This extended protection will allow debtors more time to explore viable options as opposed to entering voluntary bankruptcy.

  3. Temporary relief in insolvent trading

    To encourage companies to continue trading, company directors will be temporarily relieved of their duty to prevent insolvent trading in respect of debts incurred whilst dealing with the COVID-19 pandemic. However, acts of dishonesty or fraud in abuse of the temporary protection will still be subject to criminal liability. Directors are advised to be cognisant in their duties and take into account the impact on creditors of the company that is continuing to incur debts. It is inevitable that some businesses will not survive the crisis and it is the duty of the director to use this temporary protection to provide a realistic assessment of the company.10

  4. Treasurer empowered to make modifications on the operations of the Corporations Act

    The Federal Treasurer is empowered to provide relief in the form of modification from specified obligations under the Corporations Act or a total exemption of such obligations. This comes after the COVID-19 pandemic has affected businesses’ ability to comply with the provisions under the Corporations Act.

    The power to grant relief will apply for 6 months from 25 March 2020 and any relief granted under this power will apply for 6 months from the date it is made. The Treasurer must be satisfied that failure to comply with such provisions is reasonably expected or that the modification or exemption is necessary to lessen the economic impact of the virus on Australian businesses.

    Though this mechanism is welcomed, the extent of the Federal Treasurer’s powers under the Corporations Act is unclear.11


On 7 April 2020, the Singapore Parliament has passed an emergency legislation, the COVID-19 (Temporary Measures) Act 2020 (the “Act”) with an objective to provide temporary relief and protection to individuals and businesses to fulfil their contractual obligations associated with the COVID-19 pandemic.12 The Act is intended to provide cash-flow relief to those affected who may otherwise have to pay damages or risk having their deposits or assets forfeited. The contracts that are covered under the Act are:


  1. Leases or licences for non-residential immovable property;

  2. Construction contract or supply contract;

  3. Contracts for the provision of goods and services for events;

  4. Certain tourism contracts for goods or services for visitors to Singapore (domestic and international);

  5. Certain loan facilities granted by a bank or a finance company to small medium enterprises with a turnover of not more than SGD$100 million in the latest financial year.


    1. Legal Prohibitions


      The Act prohibits the following legal actions against a non-performing party for cases applicable under the Act


      • Court and insolvency proceedings;
      • Enforcement of security over immovable property as well as movable property that is used for the purposes of business or trade;
      • Call on a performance bond given pursuant to a construction contract;
      • Termination of commercial leases due to non-payment of rent.


      Additional relief will also be given in the form of refund of deposits. For example, if a party has to postpone an event due to COVID-19, the venue provider will be prohibited from forfeiting the deposit but this is subject to the assessor’s determination to either forfeit the whole deposit or part of it (i.e. if the person cancels the booking entirely).


    2. Assessors as Safeguards

      As an added layer of protection, assessors will be appointed to resolve disputes arising from the application of measures under the law where decisions will be final and not appealable. The assessors will make decisions on whether the inability to perform contractual obligations was a direct result of the COVID-19 pandemic and subsequently, have the power to grant a “just and equitable” relief in each circumstance. There will be no orders as to costs and parties will not be allowed to be represented by lawyers.

    3. Increase in Monetary Limits for Insolvency and Relief for Directors

      Laws relating to insolvency will be relaxed in order to give more leeway and prevent mass liquidation of companies whereby the monetary threshold to commence insolvency proceedings will increase from SGD$10,000 to SGD$100,000. As for individuals, the monetary limit for bankruptcy will increase to SGD$60,000 from the previous SGD$15,000.

      The statutory period to respond to creditor’s demands will also be extended. Similar to the UK and Australia, company directors will also come under protection as they will be temporarily relieved from their obligations to prevent company trading whilst insolvent if the debts are incurred in the company’s ordinary course of business, although they will be criminally liable if such debts are incurred fraudulently.

      The proposed law will cover contractual obligations that are to be performed on or after 1 February 2020 and contracts that were entered or renewed before 25 March 2020. The Act will be in effect for a period of 6 months and may be extended up to a year from the date of commencement.


Apart from the 2020 Economic Stimulus Package announced by Prime Minister, Tan Sri Muhyiddin Yassin on 26 March 2020 and the Additional Stimulus Package aimed at helping SMEs unveiled on 6 April 2020, Malaysia has yet to emulate the progressive step of introducing emergency legislation or propose amendments to its corporate, insolvency and/or employment laws to help businesses survive.

There is a desperate plea from the business circle, particularly the small and medium enterprises, that Malaysia ought to have its own COVID-19 emergency bill to address the urgent need to protect bona fide parties who are inadvertently in breach of their contractual obligations as a result of COVID-19. Some of the non-fiscal recommendations include having an automatic statutory force majeure clauses, protection of directors from insolvent trading, suspension of the limitation period to commence legal action, increasing timeframes and monetary thresholds to defer winding up and bankruptcy proceedings, moratoriums on tenancy eviction and changes to employment law for protection of employees’ welfare13.

As at the time of writing, the Companies Commission of Malaysia (“CCM”) has announced the following initiatives in an effort to reduce winding up petitions by creditors14:

  1. Raising the threshold of indebtedness, i.e. the definition of “inability to pay” from RM10,000.00 to RM50,000.00 until 31 December 2020; and

  2. Extending the period for companies to respond to statutory notices from 21 days to 6 months

    It would only be natural for the threshold to commence bankruptcy proceedings against individual debtors, currently at RM50,000.00, be consistently increased in days to come to compliment these interim measures.

With the Movement Control Order being further extended to 28 April 2020, these initiatives are timely and crucial to the survivability of businesses. While the CCM’s move is laudable, the legal concern is whether the CCM can implement such changes without amending section 466 of the Companies Act 2016 or passing an emergency legislation.


As Parliament seeks to reconvene on 18 May 2020, would it be too late for some businesses and individuals when Malaysia’s emergency bill, if there is one, eventually sees the light of day?











10 https://corrs.com.au/insights/covid-19-and-the-suspension-of-insolvent-trading-laws-directors-potentially-still-liable-on-other-grounds

11 https://www.gtlaw.com.au/insights/corporations-act-relief-under-coronavirus-economic-response-package

12 https://www.mlaw.gov.sg/news/press-releases/temporary-relief-for-inability-to-perform-contractual-obligations-due-to-coronavirus-disease-2019-covid-19-situation

13 https://www.thestar.com.my/business/business-news/2020/04/06/malaysia-too-need-a-covid-19-bill; www.malaymail.com/news/what-you-think/2020/04/08/protecting-the-people-and-businesses-emergency-legislative-and-policy-propo/1854658

14 https://www.thestar.com.my/news/nation/2020/04/1-/mco-companies-commission-raises-debt-threshold-of-companies

Wong Weng Yew
T: +603 2050 1944


Farina Hanim
T: +603 2050 1883