Malaysia legislation
Section 19
Section 19
The principal Act is amended by inserting after section 415
the following section:
“Super priority for rescue financing for judicial management 415a. (1) Where a company is under a judicial management order, the Court may, on an application by the judicial manager of the company, grant one or more of the following orders:
(a)
an order that if the company is wound up, notwithstanding subsection 527(1), the debt arising from any rescue financing obtained by the company shall be paid immediately after the costs and expenses of the winding up of the company as referred to in paragraph 527(1)(a) are paid;
(b)
an order to secure a debt arising from any rescue financing which otherwise would not have been able to be obtained by the company unless the debt is secured by—
(i)
a security interest on property of the company that is not subject to any security interest;
or
(ii)
a subordinate security interest on property of the company that is subject to an existing security interest; or
(c)
an order to secure a debt arising from any rescue financing to be obtained by the company by a security interest of the same priority as or a higher priority than an existing security interest on property of the company, if—
(i)
the company would not have been able to obtain the rescue financing from any person unless the debt arising from the rescue financing is secured in the manner referred to in this paragraph; and
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(ii)
the interests of existing security interest holder are adequately protected.
(2)
A judicial manager who makes an application under subsection (1) shall send a notice of the application to each creditor of the company.
(3)
Any creditor of the company may oppose an application under subsection (1).
(4)
The reversal or modification on appeal of an order under paragraph (1)(b) or (c) does not affect the validity of any debt so incurred, or any security interest that was granted pursuant to the order, or the priority of that security interest, if the debt arising from rescue financing intended to be secured by that security interest was provided in good faith, whether or not with knowledge of the appeal, unless the order was stayed pending the appeal before the rescue financing was provided.
(5)
For the purposes of subparagraph (1)(c)(ii), the interests of an existing security interest holder is adequately protected if—
(a)
the Court orders the company to make one or more cash payments to the holder, the total amount of which is sufficient to compensate the holder for any decrease in the value of the holder’s existing security interest that may result from the making of the order under paragraph (1)(c);
(b)
the Court orders the company to provide to the holder additional or replacement security of a value sufficient to compensate the holder for any decrease in the value of the holder’s existing security interest that may result from the making of the order under paragraph (1)(c); or
(c)
the Court grants any relief, other than compensation, that will result in the realisation by the holder of the indubitable equivalent of the holder’s existing security interest.
Companies (Amendment)
(6)
Where a company that has two or more super priority debts is wound up, the super priority debts—
(a)
rank equally in priority among all of the super priority debts; and
(b)
are to be paid in full or, if the company has insufficient property to meet the debt, shall rank pari passu and shall be paid in equal proportion among all of the super priority debts.
(7)
Sections 426 and 528 shall not affect any priority conferred, any security interest or relief granted, or any payment made, pursuant to and in accordance with an order granted under subsection (1).
(8)
The judicial manager shall, within seven days after the date of an order granted under subsection (1), lodge an office copy of the order with the Registrar.
(9)
In this section—
(a)
“rescue financing” means any financing that satisfies one or more of the following conditions:
(i)
the financing is necessary for the survival of a company that obtains the financing, or the whole or any part of its undertaking as a going concern;
(ii)
the financing is necessary for the Court’s approval under subsection 366(4) or subsection 369c(5)
of a compromise or arrangement referred to in subsection 366(1) or subsection 369c(1), as the case may be, involving a company that obtains the financing;
(iii)
the financing is necessary to achieve a more advantageous realisation of the assets of a company that obtains the financing, than on a winding up of that company;
(b)
“security interest” means any mortgage, charge, pledge, lien or other type of security interest recognized by law;
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(c)
“super priority debt” means a debt, arising from any rescue financing obtained or to be obtained by a company, that is to have priority, pursuant to an order under subsection (1), over all the preferential debts specified in paragraphs 527(1)(b) to (f) and all other unsecured debts, if the company is wound up.”.
New Division 9