More Than 1,200 Companies Forced to Wind Down During Pandemic

According to Prime Minister Datuk Seri Ismail Sabri Yaacob, 1,246 companies were forced to wind down, and 10,317 individuals filed for bankruptcy during the Covid-19 pandemic from March 2020 until July 2021.

About 497 or 39.89% of the forced winding down cases were companies registered in the federal territories. Selangor was second-highest, with 273 cases or 21.91%.

Here are the wind-down cases for other states:

• Johor, with 90 cases (7.22%),

• Penang, with 63 cases (5.06%),

• Perak, with 53 cases (4.25%),

• And Sabah, with 52 cases (4.17%).

The winding down cases climaxed in November 2020 with 144 cases before decreasing and rebounded again in May 2021 with 134 incidents. 

 

Bankruptcies

Selangor had the most bankruptcy incidents with 2,555 cases or 24.76%. The federal territories came second with 1,288 cases or 12.48%.

These are the other states that lead the list:

• Johor, with 792 cases (7.68%),

• Perak, with 628 cases (6.09%),

• Sabah, with 623 cases (6.04%),

• Penang, with 488 cases (4.73%),

• Negeri Sembilan, with 481 cases (4.66%),

• Kedah, with 477 cases (4.62%),

• And Kelantan, with 419 cases (4.06%).

September 2020 was the month with the highest bankruptcy cases recorded during the pandemic, with 1,222 cases. April 2021 came second, with 1,090 cases.

 

Assistance for businesses and individuals

According to the Ministry of Finance's (MoF) input, Ismail Sabri said that the government does not give out specific assistance for business owners who have ended their businesses. 

However, he said the government does provide assistance and incentives to support the continuity of businesses. 

For businesses, the assistance includes:

• The Prihatin Special Grant for SMEs,

• The Wage Subsidy Programme to maintain employment, 

• The Human Resources Development Fund (HRDF) levy exemption, 

• Bank loan moratorium on supporting business cash flow, and

• Microcredit schemes.

For individuals, the government provides:

• Job search allowances,

• Reskilling and upskilling programmes,

• Income loss assistance,

• Cash assistance through Bantuan Prihatin Rakyat and Bantuan Prihatin Nasional,

• The loan moratorium,

• Pension fund withdrawals for Employees' Provident Fund (EPF), and

• Covid-19 Special Aid.

Many companies had to go through the winding up process at the Court.

What is winding up?

Company Act 2016 basically defines winding up as a process in which the company's existence will be ended. The company's assets will be collected and realised. After that, the collected proceeds will be used to discharge the company's accrued liabilities and debts. If there's any remaining balance left, the amount will be distributed among the shareholders based on their entitlement. 

These are the two types of winding up:

• Compulsory winding up by the court, and

• Voluntary winding up (VWU)

 

Compulsory winding up by court

Under the Companies Act 2016, the court can wind up a company on various grounds. 

The most common ground is when a company cannot pay its debts, and its creditor(s) has launched legal action to pursue the money owed. Any disposition of property after the initiation of a winding-up suit is void unless ordered otherwise by the court.

 

Voluntary winding up (VWU)

There are two categories under VWU:

• Section 257: Members' voluntary winding up (MVWU). This situation is when the members voluntarily wind up the company where the directors have believed that the company will be able to pay its debts in full within 12 months after the start of winding up.

• Section 433: Creditor's voluntary winding up (CVWU). This situation is expected when the company cannot pay its debts when they are due for payments.

Source: The Edge Markets

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