MAJU-TH SDN BHD PENCELAH LEMBAGA TABUNG HAJI

Case Significance

Illustrates the strict proof required for a judicial management order under section 405 of the Companies Act 2016 — the applicant must establish a real prospect that the company will survive as a going concern or that assets will be better realised than on a winding up — failing which the application will be dismissed.

This High Court decision in the Commercial Division at Kuala Lumpur concerns an application for a judicial management order under sections 404 and 405 of the Companies Act 2016. The applicant, MAJU-TH Sdn Bhd, was a joint-venture company whose majority shareholder held 51% and whose minority shareholder, Lembaga Tabung Haji, held 49%; its major asset was a parcel of land said to be worth about RM59 million. The company sought to be placed under judicial management, putting forward a revised debt-settlement proposal, against the background of a pending winding-up suit.

The court set out the statutory pre-conditions: that the company is or is likely to become unable to pay its debts, and that a judicial management order would be likely to achieve one of the statutory objectives — the survival of the company as a going concern under section 405(1)(b)(i), or a more advantageous realisation of its assets than on a winding up under section 405(1)(b)(iii). It emphasised that the applicant bore the burden of proving, by strict proof, a real prospect that one of these objectives would be achieved, the threshold being whether the objective was more probable than not rather than merely arguable, and it tested the revised debt-settlement proposal against that standard.

On the evidence the court found that the applicant had not discharged that burden under either limb: it had not shown a real prospect of surviving as a going concern, and, that limb having failed, the "better realisation of assets" limb was not made out either. The court accordingly dismissed the application with costs of RM20,000.00. As a postscript it observed that the ultimate outcome for the company might be a winding up, which could be the more appropriate remedy given the apparent irretrievable breakdown between the shareholders, though that was a matter for the winding-up suit. The judgment illustrates the strict proof required to obtain a judicial management order.