Questions about business disputes in Malaysia: partners and shareholders, unpaid invoices, contracts and company claims.
Yes, an oral loan can still be enforced. You must prove that money was lent (not gifted) and that it was meant to be repaid. Bank transfer records and messages where the borrower admits the debt are key evidence. Send a letter of demand, then sue: small claims up to RM5,000, or the normal court process. Act within six years.
Yes, usually. If you are partners, the Partnership Act 1961 requires partners to render true accounts and account for benefits they take. If you run a company, directors owe duties to the company, and shareholders may have remedies under the Companies Act 2016. Secure the records first, ask for an account in writing, then get advice on a civil claim and, if appropriate, a police report.
Keep the returned cheque and the bank's return slip, note the reason it bounced, and promptly tell the person who gave it to you in writing. Under the Bills of Exchange Act 1949 you can usually sue on the cheque itself, as well as on the debt it was meant to pay. Cheque claims often suit summary judgment. A police report is only for genuine dishonesty.
When you give evidence for your company, you can only speak truthfully from what you personally know, plus what the company's records show, and you must make clear which is which. Documents are usually best proved by the person who made them. Prepare by reading the file, but never fill gaps in your memory with assumptions.
Yes, a member or debenture holder can apply to court where the company's affairs are conducted or directors' powers exercised oppressively or in disregard of members' interests, or where an act or resolution unfairly discriminates against or prejudices them (Companies Act 2016, s.346(1)). The court can make any order it thinks fit to end or remedy the problem, including regulating the company's affairs, cancelling transactions, ordering a share buy-out, or winding up (s.346(2)).
A complainant, such as a member, a former member in some cases, or a director, may with the court's leave bring, intervene in or defend proceedings on behalf of the company (Companies Act 2016, ss.345 and 347). You must give the directors 30 days' written notice before applying for leave, the court considers good faith and whether it is prima facie in the company's best interest, and proceedings must start within 30 days of leave (s.348). The court can order the company to pay reasonable legal costs (s.350).
A company is deemed unable to pay its debts if it owes more than the amount prescribed by the Minister, a creditor leaves a notice of demand at its registered office, and it neglects for 21 days to pay, secure or compound the debt (Companies Act 2016, s.466(1)(a)). The creditor must then file the winding-up petition within six months after the notice expires (s.466(2)). The route is powerful but suits undisputed debts only; a genuinely disputed debt can lead to the petition being restrained and costs against you.
Act within the 21 days. A company can avoid the presumption of insolvency by paying, securing or compounding the debt to the creditor's satisfaction (Companies Act 2016, s.466(1)(a)). If the debt is genuinely disputed on substantial grounds, the company can apply to court to restrain the presentation or advertisement of a petition. Once a petition is presented, dispositions of company property are void unless the court orders otherwise (s.472), so urgent advice on banking and validation orders matters.
Once a winding-up order is made or an interim liquidator is appointed, no action can be continued or started against the company without the court's leave (Companies Act 2016, s.471(1)). Leave is applied for in the winding-up court and served on the liquidator. Many creditors instead prove their debt with the liquidator. Unliquidated damages not arising from contract, promise or breach of trust, such as most tort claims, are not provable (s.523(1)), so leave to sue may matter, especially where there is insurance.
Normally no: a company is a separate legal person, so its debts are its own. But a director can be personally liable where they gave a personal guarantee, where the court declares them responsible for fraudulent trading (Companies Act 2016, s.540(1)), where they are convicted of knowingly contracting a debt with no reasonable expectation that the company could pay and the court makes a declaration (s.539(3) and s.540(2)), or where specific laws impose liability. Liability is decided case by case on evidence.
Directors must act for a proper purpose and in good faith in the company's best interest (Companies Act 2016, s.213), and must not, without consent or ratification by a general meeting, use company property, information, position or opportunities, or compete with the company, to benefit themselves or others or harm the company (s.218). The company can sue for compensation, an account of profits and injunctions. If the wrongdoers control the board, a member or director may seek leave for a derivative action.
The court may wind up a company if it considers it just and equitable to do so (Companies Act 2016, s.465(1)(h)), or where directors have acted in their own interests rather than those of members as a whole, or unfairly to members (s.465(1)(f)). Typical cases involve deadlock or a breakdown of trust in a company run like a partnership. A contributory (shareholder) can petition (s.464). Because winding up ends the business, courts consider whether a buy-out or oppression order is a fairer solution.
If your name is wrongly entered in, or omitted from, the register of members, you may apply to court for rectification, compensation, or both (Companies Act 2016, s.103). A company must register a transfer within 30 days of receiving the instrument unless the Act or constitution allows refusal and the directors pass a resolution with full reasons within 30 days and give notice within 7 days (s.106). If it refuses, the transferee or transferor can ask the court to order registration (s.107).
A partnership can end by agreement, by notice where it is at will, or by court order. The Partnership Act 1961 allows the court to dissolve a partnership on grounds such as a partner's misconduct or persistent breach of the agreement, the business only being carried on at a loss, or where it is just and equitable. Partners owe each other a duty to account for partnership property and profits, and a court can order an account (Rules of Court 2012, Order 43). Urgent injunctions can stop assets being taken.
After the defendant has entered appearance and been served with the statement of claim, a plaintiff can apply for judgment on the ground that the defendant has no defence to the claim or part of it (Rules of Court 2012, O.14 r.1). The application is supported by an affidavit and served within 14 days (r.2). Judgment is given unless the defendant shows an issue that ought to be tried or another reason for trial (r.3). It is not available for defamation, malicious prosecution, false imprisonment and fraud claims, among others.
Goods sold by description must match it, and goods bought from a dealer by description must be of merchantable quality; goods must be reasonably fit for a purpose you made known and relied on the seller for (Sale of Goods Act 1957, ss.15 and 16). Breach of a condition may allow you to reject the goods, but once you have accepted them you are generally limited to damages or a reduction of the price (ss.13, 42 and 59). Whether late delivery is a breach of condition depends on the contract (s.11).
When a party refuses to perform, or disables itself from performing, its promise in its entirety, the other party may put an end to the contract unless it has signified acquiescence in its continuance (Contracts Act 1950, s.40). A party who rightly rescinds is entitled to compensation for damage from non-fulfilment (s.76), assessed under s.74 for losses that naturally arise or were contemplated. Agreed damages clauses are limited to reasonable compensation (s.75). Act clearly and in writing, and take reasonable steps to reduce your loss.
Often, yes. Where a person lawfully does something for another, or delivers something, not intending to do so for free, and the other person enjoys the benefit, the latter must compensate or restore it (Contracts Act 1950, s.71). Courts may also imply a term to pay a reasonable sum. A void agreement can give rise to restoration of benefits (s.66), and money paid by mistake must be repaid (s.73). Proof of what was done, that it was not a gift, and its fair value is key.
A guarantor's liability is co-extensive with the borrower's unless the contract says otherwise (Contracts Act 1950, s.81), and bank guarantees often allow the bank to sue you without first suing the borrower. Possible defences include variation of the loan without your consent (s.86), release of the borrower (s.87), acts impairing your remedies (s.92), and loss of securities (s.94), though many guarantees contain consent clauses. If you pay, you take over the bank's rights against the borrower and can claim indemnity and contribution from co-guarantors (ss.93, 98 and 99).
Yes, in a suitable case. The High Court can grant a Mareva injunction that stops a defendant from removing or dissipating assets before judgment. Applicants generally must show a good arguable case, that the defendant has assets, and a real risk the assets will be dissipated so that a judgment would go unsatisfied. Applications are usually made urgently and without notice under Order 29 of the Rules of Court 2012, which demands full and frank disclosure and an undertaking to pay damages if the injunction turns out to be wrong.
Not automatically, but it is a real risk. A defendant may apply for security for costs where the plaintiff is ordinarily resident outside Malaysia, among other grounds (Rules of Court 2012, Order 23), and against a plaintiff company where there is credible evidence it cannot pay the defendant's costs (Companies Act 2016, s.580A). The court has a discretion and looks at all the circumstances. If security is ordered and not given, the case can be held up.
If a defendant served with a writ does not enter appearance within the time allowed (generally 14 days after service), or does not serve a defence on time, the claimant can usually enter judgment in default under Order 13 or Order 19 of the Rules of Court 2012. For a fixed sum the judgment is final; for damages, the amount is assessed later. Proper service must be proved, and the court can set the judgment aside on terms, so accuracy matters.
An action on a contract debt generally cannot be brought more than six years after the cause of action accrued (Limitation Act 1953, s.6(1)(a)). But if the debtor acknowledges the debt in a signed written document, or makes a payment towards it, time runs afresh from that acknowledgment or last payment (ss.26 and 27). Fraud, concealment or mistake can postpone the start of time (s.29). An action on a judgment has a 12-year limit (s.6(3)).
Usually, yes. A person who receives money paid by mistake must repay it (Contracts Act 1950, s.73). Contact your bank at once with the transaction details, keep the records, and write to the recipient if you can identify them. If they refuse, you can sue in the appropriate court. For a claim based on mistake, time generally runs from when you discovered the mistake (Limitation Act 1953, s.29). Dishonestly keeping money known to be someone else's may also raise criminal issues.
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