The Malaysian Airline System Berhad (Administration) Bill 2014 (the “Bill”) was passed on 27 November 2014 by the House of Representatives and is scheduled to be tabled at the Senate at the forthcoming sitting. The legislation will be in force for a period of 5 years from the date of coming into operation or until the listing and quotation of the shares of Malaysia Airlines Berhad (“NewCo”)on the official list of Bursa Malaysia Berhad, whichever is earlier.

The Bill provides special laws for the administration of Malaysian Airline System Berhad (“MAS”), its wholly owned subsidiary companies and its partially owned subsidiary companies which are providing goods or services or both which are essential to the operations of MAS (collectively referred to as the “Administered Companies”). The Bill also provides for the appointment of an administrator which will have powers to administer and manage the Administered Companies (the “Administrator”) and further provides for the establishment of a new entity, NewCo, which will replace MAS as the national carrier.

The Administrator is given powers under the legislation to manage the property, business, liabilities and affairs of the Administered Companies which includes the disposal of property and liabilities and to make any arrangements or compromise on behalf of the Administered Companies with their creditors and has the power to transfer any property, business or liabilities of the Administered Companies to the NewCo or any of the NewCo’s subsidiary companies. A moratorium period of 12 months shall apply when the Administrator is appointed and no steps may be taken to create, perfect or enforce any security over any property of the Administered Companies and to re-possess any property in the possession, custody or control of the Administered Companies except with the prior written consent of the Administrator during this period. The Administrator is not liable to an action or other damages in respect of a refusal to give this consent. The moratorium period can be extended for a further 12 months under certain circumstances.

Immunity is also granted to the Administrator, amongst others, against any action, suit, proceeding or prosecution for any loss or damage in respect of any act or matter offer in good faith in the exercise of any power conferred under the Bill.

Whilst the Bill provides assurance that the implementation of a proposal by the Administrator shall not release or discharge any security provided by any person to secure any duty or liability owed by the Administered Companies to any of its creditors, it is unclear at this stage what the consequences would be if the creditors do not agree with the Administrator’s arrangements or accede to the Administrator’s requests during the re-negotiation of the terms and conditions in the existing contracts.

Yip Jia Hui
Partner
jiahui.yip@taypartners.com.my

Lynette Yee
Associate
lynette.yee@taypartners.com.my