1 October 2020
Malaysia

On 22 September 2020, Malaysia’s Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Bill (“COVID Bill“) was passed by the Dewan Negara and will come into force once Royal Assent is received and gazetted. The COVID Bill is part of the measures taken by the Malaysian Government to stem the fallout from the COVID-19 pandemic.

This article will highlight some of the key areas of the COVID Bill, the purpose of which is to introduce temporary measures to help reduce the impact of COVID-19.

The COVID Bill comprises 19 parts and the temporary measures can be broadly divided into three categories:

  • Addressing the inability to perform contractual obligation – Part II
  • Modification to Malaysian legislation – Part III to Part XVIII
  • Addressing the inability to perform statutory duties or obligations or to conduct statutory meetings – Part XIX

The COVID Bill shall generally remain in operation for two years from the date of publication. However, the COVID Bill provides for specific periods of operation for the relevant Parts. In addition, the Prime Minister has the power to extend the operation of the COVID Bill, a power which can be exercised more than once.

Part II – Inability to perform contractual obligations

Section 7 provides that if any party is unable to perform any contractual obligation under contracts specified in the COVID Bill due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988, the non-defaulting party or parties to the contract cannot exercise their rights under the contract. The specified categories of contracts are:

  • Construction work contract or construction consultancy contract and any other contract related to the supply of construction material, equipment or workers in connection with a construction contact.
  • Perform bond or equivalent that is granted pursuant to a construction contract or supply contract
  • Professional services contract.
  • Lease or tenancy of non-residential immovable property.
  • Event contract for the provision of any venue, accommodation, amenity, transport, entertainment, catering or other goods or services including, for any business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering or sporting event, for the participants, attendees, guests, patrons or spectators of such gathering or event.
  • Contract by a tourism enterprise as defined under the Tourism Industry Act 1992 and a contract for the promotion of tourism in Malaysia.
  • Religious pilgrimage-related contract.

Part II operates retrospectively from 18 March 2020 until 31 December 2020. However, if a contract has already been terminated, any deposit or performance bond forfeited, any damages received, any legal proceedings, arbitration or mediation commenced, any judgement or award granted and any execution carried between 18 March 2020 and the date of publication will not be affected by section 7.

We have separately published our views on Part II which can be found here.

Summary of the modification to the key legislations

The COVID Bill modifies 16 pieces of legislation altogether.

A summary of the key measures and practical effect of the modifications are set out below.

Part III – Limitation Act 1953

Part III (Modifications to the Limitation Act 1953), of the COVID Bill seeks to extend the limitation periods for bringing an action to 31 December 2020, if the expiry of the limitation periods (mentioned in section 6) falls between 18 March 2020 and 31 August 2020 (“Applicable Period”).  For example, section 6(1) of the Limitation Act provides that where a relevant cause of action has arisen six years or more from the date of when the cause of action arose, an action cannot be brought. Pursuant to the COVID Bill, if such expiry date falls within the Applicable Period, an action can still be brought up to 31 December 2020.

The period of operation for this Part is 18 March 2020 until 31 December 2020.

Part IV – Sabah Limitation Ordinance and Part V – Sarawak Limitation Ordinance

The Limitation Act 1953 only applies to West Malaysia. Accordingly, similar provisions are set out in sections 14 and 15 of the COVID Bill to extend the limitation period for instituting a suit in Sabah and Sarawak respectively, to 31 December 2020 where the expiry of the limitation period falls within the Applicable Period.

The period of operation for both Parts is the same as for West Malaysia.

Part VII – Insolvency Act 1967

During the period of operation of this Part, i.e. from the date of publication of the COVID Bill up to 31 August 2021, a creditor shall not be entitled to present a bankruptcy petition against a debtor unless the amount of debt owing by the debtor to the petitioning creditor or creditors (if two or more creditors join in the petition), in aggregate is at least RM100,000. This is an increase from the current threshold of RM50,000.

This increased threshold similarly applies to a creditor seeking to proceed with bankruptcy proceedings against a debtor who has failed to comply with any of his obligations under a voluntary arrangement. In such a case, any creditor bound by the voluntary arrangement may only file or proceed with a bankruptcy petition against the debtor where the amount of debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition (after deducting any amount already paid under the voluntary arrangement) is in aggregate at least RM100,000.

However, any proceedings, actions or other matters required to be done under the Insolvency Act 1967 which are still pending before the publication of the COVID Bill shall be dealt with under the Insolvency Act 1967 as if it had not been modified by the COVID Bill.

Part VIII – Hire-Purchase Act 1967

Section 16 of the Hire Purchase Act 1967 sets out the rights and power of an owner with regards to repossession of goods under a hire-purchase agreement. The modification in the COVID Bill suspends this right to possess for any default of payment of instalment during the period from 1 April 2020 to 30 September 2020.

However, if an owner has already exercised his power of taking possession of the relevant goods before the date of publication of the COVID Bill, his action will be deemed to be validly exercised and there will be no suspension of his rights to take possession.

Part IX – Consumer Protection Act 1999

The COVID Bill modifies the two sections of the Consumer Protection Act 1999. The first modification is to section 24v which is in relation to credit sale agreements. In the event of a default of two consecutive instalments by a purchaser under a credit sale agreement, the credit facility provider can issue a notice to the purchaser to settle the overdue instalment under the agreement and the late payment charges. Within 21 days, the purchaser has to elect one of the following:

  • whether to pay the overdue instalments;
  • make an early settlement of the total amount outstanding; or
  • terminate the credit sale agreement and surrender the goods.

While previously the credit facility provider could recover the total amount outstanding through legal proceedings if the purchaser failed to make an election, the COVID Bill no longer allows the credit facility provider to commence any legal proceedings to recover the total outstanding amount payable. However, this modification only applies if the credit sale agreement was entered into before 18 March 2020 and if the purchaser had no overdue instalments before 18 March 2020.

Again, there are saving provisions where legal proceedings which have already commenced to recover, or any judgement or award obtained for the outstanding amount payable by the purchaser during the period from 18 March 2020 until the date of publication of the COVID Bill are not affected.

The second modification is to extend the limitation period under section 99(2) of the Consumer Protection Act 1999.  Section 99(2) provides that the jurisdiction of the Tribunal to hear consumer claims is limited to causes of action which have accrued within three years of the claim. The COVID Bill extends the period for the Tribunal to hear consumer claims to 31 December 2020 if the jurisdiction expires between 18 March 2020 and 15 June 2020.

Part X – Distress Act 1951

Section 5 of the Distress Act 1951 gives a landlord the right to apply ex parte to a Judge or Registrar for a warrant of distress to distrain, i.e. seize the property of the tenant at the relevant premises in order to recover rent due or payable by a tenant for a period not exceeding 12 completed months of the tenancy immediately preceding the date of the application.

While the COVID Bill does not preclude a landlord from applying for such warrant of distress, the warrant shall exclude the distrain of the arrears in rental for the period between 18 March 2020 and 31 August 2020.

Any warrant of distress that was issued before the date of publication of the COVID Bill shall be dealt with under the Distress Act 1951 as if it has not been modified by the COVID Bill.

Part XI – Housing Development (Control and Licensing Act) 1966

We have separately published a summary of the modifications to this Act and the potential effect of such modifications which can be found here.

Alternative arrangement for statutory meetings

Section 59(1) empowers any Minister with the responsibility of any Act to publish an order providing for alternative meeting arrangements where the Minister is of the opinion that during period between 18 March 2020 and 9 June 2020 i.e. the Movement Control Order period and Conditional Movement Control Order:

  • it was not possible to convene, hold or conduct any statutory meeting in the manner provided in the Act; and
  • this was due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988.

However, before the making of such order, if any statutory meeting is convened, held or conducted in a manner that does not correspond with the relevant Act, it shall still be deemed valid.

Commentary

The COVID Bill has tried to address as many areas as possible that have been affected by the pandemic. However, it has been criticised as being too little and too late for the measures to have any impact in relieving the burden the pandemic has caused. Even though the modifications to the various Malaysian legislation generally apply retrospectively, the savings provisions highlighted above have the effect of watering down their intended purpose.

Nonetheless, the introduction of the COVID Bill is still a step in the right direction in these unprecedented times. Further amendments may be needed along the line once the Act is implemented to further improve or add to the prescribed measures to deal with the various issues arising from the pandemic.

If you have any questions or require any additional information, you may contact Khoo Yu Lin or the ZICO Law partner you usually deal with.


This alert is for general information only and is not a substitute for legal advice.