Abuse of Winding Up Proceedings as a Debt Recovery Mechanism in Malaysia and the Judicial Control

Abstract

The process of winding up implies the termination of the existence of the company’s assets being collected, realized and distributed to its creditors. Winding-up is generally considered as a financial collapse of the company. The main objective of this paper is to discuss the abuse of the winding up proceeding as a method of debt recovery mechanism by the judiciary in Malaysia. The analysis presented here will highlight different types of abuse found in winding up proceedings especially when they are utilized for exerting commercial pressures over the debtor companies rather than dealing with their insolvency problems. It also discusses the extent to which the concept of judicial controls can be implemented to curb all these challenges. Qualitative approach was adopted as research methodology with both doctrinal and comparative approaches employed to analyze primary sources (legislations and case laws) together with other secondary source materials namely book and journal articles. Findings revealed that though Malaysian courts had played a great role in curtailing the filing of the abusive petitions as well as misuses of insolvency processes through applying some mechanisms like bona-fide-dispute principle & fortuna jurisdiction, however there are still some measures required to ensure effectiveness of the application of winding-up proceedings as a collective remedies by giving more consideration to judicial interventions.