After the amendments of Bankruptcy law in Malaysia, Section 2c(1) Insolvency Act 1967 stated that a debtor can now “propose a voluntary arrangement to his creditors any time before he is adjudged bankrupt.”
Voluntary arrangement under the Insolvency Act 1967 gives an opportunity for one at risk of being declared a bankrupt, to settle his debt without bankruptcy proceedings.
What is a Voluntary Arrangement?
Voluntary Arrangement (VA) is an arrangement where the debtor can negotiate a debt settlement with his creditor before he is adjudged bankrupt. Under s2A Insolvency Act 1967, it clearly defines VA as ‘a composition in satisfaction of a Debtor’s debt or a scheme of arrangement of a Debtor’s affair. VA is not applicable to an undischarged bankrupt and also a limited liability partnership.
Procedure:
- Application of VA (s3C Insolvency Act 1967):
-debtor may propose to the creditor at any time before he is adjudged bankrupt
-debtor shall appoint a nominee to act/to supervise on the VA
-Debtor shall make application to the court for interim order of VA and submit a copy of the application of DGI - What is Interim Order? (s2D Insolvency Act 1967)
-upon receiving the order, the court shall make Interim Order for Voluntary Agreement if satisfied that no previous application has been filed by the Debtor and the Nominee willing to act
-valid for 90 days from the date the order is made. No extension.
-Debtor shall within 7 days notify the Nominee the commencement date
-Nominee shall within 7 days notify all the Debtor’s Creditors of the commencement of the Interim Order - Effect of Interim Order (s2E Insolvency Act 1967)
-When an Interim Order is made, no bankruptcy petition, execution or other legal proceedings may be commenced or continued against the Debtor - Nominee – Condition, Registration, Replacement, Fees
-a nominee must register with the DGI unless he is an officer of a body corporate established under the Central Bank of Malaysia Act 2009 and shall have all the powers and duties as prescribed under s2F Insolvency Act 1967.
-DGI may approve the registration of a nominee if he:
Is a registered charged accountant/A&S/ a person as the Minister may prescribe on the recommendation of the DGI
2. Is not an undischarged bankrupt
3. Does not assign his estate for the benefit of his Creditors or is not under a VA
4. Is not a convict
5. Is not a mental patient
-debtor may at anytime before the VA is concluded, replace the Nominee with another one who shall have the power of previous nominee
-minister may prescribe the scale of fees to be charged by nominee - Meeting of creditors to approve Debtor’s proposal (s2I Insolvency Act 1967)
-When Interim Order is made, Nominee shall summon every Debtor’s creditor to a meeting to approve the VA
-debtor must submit to the Nominee the statement of affairs
-VA may be approved at the meeting/subsequent meeting with or without modifications
-modifications must be consented to the Debtor and not affect any rights of the secured creditors - Report of decision to the court (s2J Insolvency Act 1967)
-report to the court and serve a copy of it which contains terms of VA under the seal of the court to the Debtor and the Creditor - Effect of approval of the VA (s2K Insolvency Act 1967)
-VA shall takes effect and bind person who has notice it
-Interim order cease to have effect at the end of 30 days
-where bankruptcy petition is stayed by an Interim Order which cease to have effect, petition shall be deemed to have been dismissed
-during the effective period of the VA, the debtor cannot enter into a credit facility unless all the Creditors agree - Implementation and Supervision of VA (s2N Insolvency Act 1967)
– the nominee shall supervise the implementation of VA
-any Debtor or Creditor who is dissatisfied by an act, omission or decision of the Nominee may apply to the court to review it
-the court may confirm/reverse or modify any action or decision of the Nominee or give such directs as it thinks fit.
If you are looking to opt for a voluntary arrangement to help with your debts, here are the benefits that you will stand to gain:
- You will only need to pay an agreed percentage of your debt back. The amount that you will need to pay will be agreed upon by your creditors in your VA and no unsecured creditor can take any further action to recover their money, apart from what was stipulated in the VA.
- You will be free of debt in a set time of 3 years.
- Your creditors will stop demanding you for further payments. A VA is legally binding, ensuring that your creditors do not take any further legal action, contact you for payment purposes
- The contractual interest and charges on your unsecured debt will be frozen, so you can pay down your debts faster.
- AKPK will ensure that your monthly VA repayments are within your means as your monthly repayment amount will depend on your specific income and other incidences.
