During these trying times SME may be faced with uncertainties. The Corporate Recuse Mechanism provided under Division 8 of the Companies Act 2016, allows the Company to carry on its business without the worry of (1) any winding up order made against the Company or (2) enforcement of any charge or security over the Company’s assets or (3) legal proceedings or execution proceedings being commenced against the Company.
- Under S.404 of the Companies Act 2016, a company may apply for it to be placed in judicial management if the following requirements are satisfied:-
1.1 the Company is unable to pay its debts
1.2 there is a reasonable probability of rehabilitating the Company or of preserving all or part of its business.
- From the time when the application for Judicial Management is made until an Order for Judicial Management is granted:-
2.1 no resolution shall be passed or order made to for the winding up of the Company;
2.2 no steps shall be taken to enforce any charge on or security over the Company’s assets or to repossesses any goods in the Company’s possession;
2.3 no other proceedings and no execution or legal process shall be commenced or continued and no distress may be levied against the Company (except with leave of Court).
- Once a Judicial Management Order is granted:-
3.1 the Company shall be placed under the management of a Court appointed Judicial Manager;
3.2 application for a winding up of the Company shall be dismissed;
3.3 during the period of the Judicial Management Order (for a period of 6 months which may be extended):-
(a) no resolution shall be passed for a winding up of the company;
(b) no steps shall be taken to enforce any charge on or security over the Company’s assets or to repossesses any goods in the Company’s possession;
(c) no other proceedings and no execution or legal process shall be commenced or continued and no distress may be levied against the Company (except with leave of Court).
(d) no steps shall be taken to transfer any share of the company or to alter the status of any member of the company except with the leave of the Court.
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