By
Ranjan N Chandran, Partner (Commercial & Construction Department)
Chandni Anantha Krishnan, Associate (Commercial & Construction Department)
Harneshpal Karamjit Singh, Associate (Commercial & Construction Department)
From: 2020 2MLRA XV
It has been a month since the Coronavirus disease (“COVID-19”) was declared a Pandemic by the World Health Organization (“WHO”). There have already been two Movement Control Orders (“MCO”) imposed by the Government pursuant to the Prevention and Control of Infectious Diseases Act 1988 and a third already in place crippling business activities for almost 2 whole months. Barring any further extensions, various business owners would have lost six (6) weeks-worth of income, which is approximately 11.5% of their annual earnings.
There may be possible breaches of contracts by the business owner resulting in the risk of termination of contracts with serious consequences of execution by way of Bankruptcy or Winding-Up Petitions knocking on their door. For the business owner, visits to the Courts is going to be the “the New Norm” post COVID-19 and much time will be consumed with unnecessary litigation, which will consume time and cost, instead of focusing on urgent revival of business.
Despite the Government’s sincere efforts in having introduced various stimulus packages which ensure for the benefit of these business owners and the Small to Medium Enterprise (“SME”), possible legislative reforms have surprisingly been unspoken.
The Authors in this article intend to explore on these possible Legislative Reforms in the various aspects of a business owner, with the fervent hope of assisting business owners specifically and the business community in general. It is hoped that with a COVID-19 legislation in Malaysia, the current hardships and predicaments of the business owner will be eased during the current COVID-19 Pandemic and MCO period, as well as post COVID-19.
The Authors have noted that on 26th March 2020, the Coronavirus Act 2020 (“CA 2020”) became law in the United Kingdom (“UK”), five days later, on 31st March 2020, Act XII of 2020 on the Containment of Coronavirus (“CC Act 2020”) became law in Hungary and, one week thereafter on 7th April 2020, the COVID-19 (Temporary Measures) Act 2020 (“CTM 2020”), became law in Singapore. Other Governments are earnestly looking to introduce new COVID-19 legislative laws, to help the business owner and the citizens of their countries.
The cries of the business owner in Malaysia is loud and clear and it has an echo. A reform is mandated and it is imperative for the intervention of the Malaysian parliament to pass a legislation expeditiously, so as to alleviate the plight of the business owner/business community to ensure their continued survival and existence.
The Reforms suggested by the Authors will be divided into the following broad headings as follows:-
The proposed Malaysian Covid-19 Act should provide temporary reliefs for Inability to Perform contract for loan facilities, performance bonds, hire-purchase agreements, event contracts, tourism-related contracts, construction contracts and lease of immovable non-residential properties for a moratorium period of six (6) months.
The proposed Malaysian Covid-19 Act should spells out the proposed commencement dates from which the said contracts are provided relief by the proposed legislation for example Contracts only after 1st February 2020.
The proposed Malaysian Covid-19 Act should enlarge the limitation periods, and legal proceedings are to be stayed during this moratorium period of six (6) months.
The proposed Malaysian Covid-19 Act should provide relief to Developers by ignoring Liquidated Ascertained Damages (LAD) computations for the six (6) months period.
The proposed Malaysian Covid-19 Act should provide relief against eviction and/or Distress proceedings proceedings of any form by a landlord.
The Authors have noted that on 10th April 2020, the Companies Commission Malaysia (“CCM”), announced a few positive and welcomed changes to cope with the COVID-19 Pandemic as follows:-
All the above changes should be codified in the proposed Malaysian COVID-19 Act to give it the force of law.
It is proposed that there should be similar time extensions and enlargements in respect of Bankruptcy proceedings, to increase the current threshold for Bankruptcy from RM 50,000.00 to RM 100,000.00 to address the problems of the possibility of many Malaysians being adjudged a Bankrupt due to the hardships of post COVID-19 in terms of loan repayments, and honoring of contractual terms.
The Judicial Management moratorium for ailing companies should be further extended from the current six (6) months to nine (9) months from the date of the passing of the contemplated Malaysian COVID-19 Act to afford the much-needed time to revive and restructure.
The proposed Malaysian Covid-19 Act should provide for alternative arrangements for meetings where impracticable by the Minister ordering meetings to be conducted by electronic form, notice for a meeting, quorum to be reduced, electronic and/or proxy voting.
On 10th April 2020, the CCM announced that companies due to hold Annual General Meetings (AGM) would be able to get an extension up to three (3) months after the end of the MCO provided the said companies make an application. This should be codified in the proposed Malaysian Covid-19 Act of Parliament.
The proposed Malaysian Covid-19 Act should provide for any accused person or any witness in any court proceeding to appear and give evidence by means of a live video or live television link in relation to criminal proceedings.
The notification by the Chief Registrar of the Federal Court stating that in order to ensure access to justice throughout the MCO, parties could apply to Court to conduct online hearing through video conferencing, email or the existing e-Review system for all civil matters if all parties agree and the Court exercises its discretion.
Provisions in the proposed Malaysian Covid-19 Act for the conduct of Court proceedings for a specified period after the MCO is important as the visits to the Court may be the business owner’s “new normal” and it is best to keep his/her safety and the safety of his/her legal representatives as paramount importance.
The Inland Revenue Board of Malaysia (“IRB”) had deferred all tax instalment payments for the tourism sector such as tour agencies, hotel owners and aviation companies for a period of six (6) months from 1st April 2020 to 30th September 2020. The IRB also extended all filings of tax return forms between March 2020 to June 2020, by two (2) months for both individuals and companies. The tax payments are accordingly extended by thirty (30) days after the filing of the tax return forms. The deferrement and extensions for tax should be incorporated in the proposed Malaysian Covid-19 Act and the Executive working hand-in-hand with the Legislature in providing a viable tax framework in the proposed legislative.
The legislation enacted by Singapore, UK and Hungary captures the very importance of doing the necessary to protect the citizens of its respective country including the business owner.
The temporary reliefs as provided by these respective legislations as highlighted above are all timely to the business owner and the commercial world at large. It is the respectful views of the Authors that these temporary reliefs will go a long way to pay homage to the liquidity of the commercial market post the COVID-19 Pandemic.
It can be observed that the Singapore, UK and Hungary legislations afford the business owner the much-needed moratorium and innovation in diverse areas of laws which they may be faced with pressing issues and problems post COVID-19.
With Singapore, UK and Hungary leading the World by codifying law in this difficult COVID-19 Pandemic period, the time is right for the Malaysian legislature to step up and enact similar laws to combat this COVID-19 Pandemic as well as possible future viral disease outbreak.
It is the views of the Authors that, Laws tackling a Pandemic are very important. In recent times, the World has been hit by the Severe Acute Respiratory Syndrome outbreak from 2002 to 2004, Swine Flu Pandemic in 2009, Camel Flu outbreak in 2012, Western African Ebola virus epidemic from 2013 to 2016 and the Zika Virus Epidemic from 2015 to 2016.
These are but grim reminders to the Malaysian Legislature to consider a Malaysia COVID-19 Act or a Malaysian Pandemic Act to not only safeguard the public health and safety of its citizens but safeguard the economy and liquidity of the nation.
NB This Article is a Sequal to the Article titled “Can Force Majeure and Frustration be of Avail to Avoid Contractual Obligations due to the Coronavirus (COVID-19) Pandemic?” published by the Malaysia Law Review (Appellate Courts) Journal and is cited as [2020] 2 MLRA i