Obtaining a Restraining Order under

Restraining order under S.176(10) A restraining order will only be given by the court when a scheme or an arrangement is proposed to the court under the consideration as accordance to s.176(1)&(3) to prohibits the court in granting any further action towards the said company. However such application must be applied to court before any orders or resolution has been passed by the court to any interested party and after procedures which laid down from s.179(1) to s.179(9) has been closely fulfill. The court’s order to restraint further proceedings can define as to the restriction of any further action to be taken against the company[1] for examples: the action of appointment of a receiver under a debenture. Extension of restrain order under s.176(10A)(a)(b)(c)(d) S.176(10A) of the Act states that the court may grant a restraining order under the powers granted by the Act for a period not more than 90 days. However, the period of time of the said restraining orders is subjected varied as to any good reasons which been provided to the court and the court by its discretion, deems fit, allow if and only if (a) there is a scheme of compromise and tolerance between the company and its creditors or any class of such creditors which consists at least one half of the total creditors; (b) the order of restraining is necessarily to formalize the scheme of compromise for the approval of creditors; (c) statement in the prescribe form as to the affairs of the company made up is not more than 3 days before the lodging of application; (d) court allows a person nominated by the creditors of the application to act as director, if the person is not a director, notwithstanding the provisions of the Act or the memorandum or the articles of the company, appoints such person to act as director[2]. Under the case of Pelangi Airways Sdn Bhd v Mayban Trustee Bhd[3], the court’s decision suggest that the compliance to the requirements under s.176(10A)(a) to (d) is only required when any application for restraining orders of more than 90 days is made. However, this principle was later rebutted by a latter case. In the case of RE PECD Bhd (No2)[4], applicants applied for a 30 days extension over the original granted restraining order of 60 days as accordance to s.176(10A). One of the creditors opposed and objected the application on the reason that s.176(10A)(c),(d) was not followed as there was a statement of the affairs of the company was not lodge together with the application and there was no creditors nominated to act as a director of the said company. The applicant argued that the subsection of s176(10A)(c) and (d) does not apply to them as their application was not exceeding 90 days. The grammatical wordings of ‘if and only if’ and the subsections were argued that it is for ‘a such longer period which the court may for good reasons granted’ and not ‘a period of not more than 90 days’. The court dismiss the application and held that the compliance to s176(10A)(a) to (d) is mandatory as accordance to the real intention of the legal draftsman had intended to[5]. The court also requires a ‘good reason’ when the application of extension of restraining order was applied to the court. Following the case of Metroplex Bhd v Morgan Stanley Emerging Markets Inc; RHB Sakura Merchant Bankers Bhd (Intervenes)[6], it was held that good reason includes: (a) bona fide scheme of arrangement with sufficient details for creditors, (b) the scheme must not be bound to fail, (c) the interest of the beneficiaries (creditors) under the scheme must be safeguard. The consequences of the restraining order granted s.176(10B) to (10G). After the above discussion, according to s.176(10A)(d), a creditor can act as a director and he has the power and rights to access the accounts, records and documents of a company. He is also entitled to have information and explanations from any officer of the said company upon inquiring them[7]. After obtaining the order from the court, any kind of deposition over the properties registered under the company is not allowed. This shall include things in action and any acquisition of property of the company but not properties in the normal course of business. If any deposition was made by the company for such kind of property after the grant of order from the court shall be regard as void, provided the court orders otherwise[8]. Any officer who default in such shall be guilty of an offence, which carries punishment of an imprisonment not more than 5 years or a fine not exceeding RM1 million or in certain cases both applies[9]. By relating to case Intrakota Komposit Sdn Bhd & Anor v Sogelease Advance (M) Sdn Bhd[10], the applicant applied an application under s.176(10C) for the leave of court for the dispose of company’s asset to another company. The court later on granted the leave and allow the applicants to dispose the company’s property to another party, as result freeing the applicants from the liabilities of S.176(10D). As compared to another case, which is Pelangi Airways Sdn Bhd v Mayban Trustee Bhd[11], in this case the Pelangi Airways Sdn Bhd had after the court granting the order of restraint, dispose off certain properties without obtaining the leave of court. Therefore, court rule that Pelangi’s restraint order was held irrgular and to be set aside. The cases comparison shown us that the court took a serious approach in the compliance of s.176(10C), although the non-compliance of such section will not automatically trigger the liabilities under s.176(10D), but it will likely to have the restraint order to be set aside or cancel off. When the order made under s.176(10), company in relation to which the order is being made must within 7 days, either (a) lodge an official copy of order to CCM, and (b) publish a notice of the order in a daily newspaper circulating over Malaysia in order for the members and creditors of the company to have knowledge of the restraint order. This can avoid future court proceeding brought on by the members or creditors that claim that they have no knowledge over the said restraint order. Failure of complying such requirements will result in an guilty of an offence which punishable with a fine not more than RM100 thousand[12].

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[1] Re Artistic Color Priniting Co (1880) 14 ChD 502. [2] S.176(10A) of the Company Act 1965, <https://www.ssm.com.my/acts/fscommand/CompaniesAct.htm>, Accessed on 12th of December 2014. [3] [2001] 2 MLJ 237. [4] [2008] 10 CLJ 486. [5] <https://www.cljlaw.com/Members/DisplayCase.aspx?CaseId=2837776897&SearchId=>, Accessed on 12th of December 2014. [6] [2005] 6 MLJ 487. [7] S.176(10B) of the Company Act 1965. [8] S.176(10C) of the Company Act 1965. [9] S.176(10D) of the Company Act 1965. [10] [2004] 8 CLJ 276, <https://www.cljlaw.com/Members/DisplayCase.aspx?CaseId=2748713473&SearchId=5mmu3>, Accessed on 12th of December 2014. [11] [2001] 6 CLJ 129, <https://www.cljlaw.com/Members/DisplayCase.aspx?CaseId=2658869761&SearchId=6mmu3>, Accessed on 12th of December 2014. [12] S.176(10E) of the Company Act 1965.

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