SSM Permanently Sets Companies' Indebtedness Threshold at RM50,000
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The Companies Commission of Malaysia (SSM) has permanently increased the indebtedness threshold for companies from RM10,000 to RM50,000 starting April 1, 2021.
Domestic Trade and Consumer Affairs Minister Datuk Seri Alexander Nanta Linggi said the initiative was due to the global and domestic economic situation, which can take longer to heal from the slowdown caused by the COVID-19 pandemic.
He said the action to hold the indebtedness threshold at RM50,000 reduced the impact and burden on businesses facing cash flow issues to prevent them from winding up.
He expects the increase in the company indebtedness threshold would further reduce the number of winding-up petitions. Companies can continue doing business with confidence and still comply with the regulations.
Not too high, not too low
Nanta said the indebtedness threshold set at RM50,000 was considered appropriate. The amount was not too low to force companies to wind up because of small amounts of debt, and it was not too high to burden smaller creditors for not being able to take action against businesses in debt.
SSM had previously increased the threshold value from RM10,000 to RM50,000 from April 23, 2020, until March 31, 2021, to help companies affected by the COVID-19 pandemic.
Nanta said that the initiative's implementation saw only 655 winding-up petitions sent to SSM from April to December 2020 compared to 1,760 in 2019 and 1,533 in 2018.
He said that the decline also proves that the initiative has been able to help keep businesses afloat in the wake of the challenges posed by the global pandemic.
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This action will prevent more companies from winding up.
Indebtedness threshold
Under the Companies Act 2016, the courts may order a company to undergo wind-up for several reasons. One of the reasons is that the company fails to settle its debts.
According to Section 466 (1)(a) of the Companies Act 2016, a company shall be deemed unable to settle its debts if it fails to meet a demand for a sum exceeding a minimum amount that the Minister prescribed.
The debtor company has 21 days to respond to the statutory demand. After the period has expired, the creditor can file a winding-up petition.
Last year, SSM assisted companies by increasing the indebtedness threshold to RM50,000 and extended the period to comply with the notice of demand to six months.
This action helped companies restructure and stabilise their financial flow during the six months and prevent them from winding up.
On March 17, 2021, Prime Minister Tan Sri Muhyiddin Yassin announced that the SSM would permanently increase the indebtedness threshold from RM10,000 to RM50,000.
Source: The Edge Markets, SSM
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