Myth Buster

Scenario

Kathy is a supplier for a company known as ABC Sdn Bhd which is owned by Dennis. Unfortunately Kathy has yet to receive any payment from ABC Sdn Bhd which has led to a debt of RM 25,000.00. Kathy now wants to initiate an action against the ABC Sdn Bhd by way of court-ordered winding up. Kathy’s friend informed her that the debt of RM 25,000.00 is insufficient in order to file for a winding up petition against the company because according to the Bankruptcy Act 1967, a creditor must prove a debt exceeding RM 30,000.00. Is this true?

Mythbusted.

Since Kathy wants to sue the company and not Dennis as an individual, the Bankruptcy Act 1967 is not applicable. This Bankruptcy Act only refers to a declaration of bankruptcy of an individual and does not apply to company.

According to Section 217 in conjunction with Section 218 of the Companies Act 1965, Kathy as a creditor may raise the presumption of insolvency of non-payment by the debtor’s company, having been served with a ‘statutory demand’ for payment. A statutory demand being a notice setting out a debt worth at least RM 500.00 due and payable by the company to the creditor within three weeks.

According to the Companies Act 1965, a company is presumed to be insolvent if it fails to comply with a statutory demand.

So, how much did you know about this Legal Myth?

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