Unsecured Creditors Recover Your Debts- Pay Up or Wind Up
In the recovery of your debts, we regard a winding up petition as one of the most effective methods. The sharpest tool in the box.
Unsecured Creditors Get Paid Ahead of the Bankers- the Concept of Pay Up or Wind Up
Many creditors have this idea that if we wind up our debtors, the bankers will be the biggest benefactor… The bankers will be entitled to sell all the assets and pay themselves.
The Remedy: Unless Order
We have to ask for a perfectly ‘timed’ Order, just before the winding up Order is granted. In this Order, the debtors are given an opportunity to pay the debts by a certain deadline otherwise they will be wound up by the Court. We call this the ‘unless order’, or the ‘pay up or wind up’ order.
The concept of an Unless Order first entered the Malaysian Jurisprudence in the year 2003, when Mr Alex Chang appeared in , KTL SDN BHD V. AZRAHI HOTELS SDN BHD [2003] 3 CLJ 49 at page 51, where you can find the following extract from the Original Judgment of Dato Vincent Ng J (as he then was):
Mr. Alex Chang, who appeared for the second supporting creditor, suggested that the Respondent be given an opportunity to resolve the matter, failing which the winding up order be made. In all fairness, he suggested a later date, sometime in mid April 2002. His suggestion was enthusiastically received by Mr. Puspanathan.
The Difficulty
The timing of the request is most crucial, if you make the suggestion too early during the hearing, the Judge may be annoyed as we as counsel (lawyers) may not preempt (forecast) what is on the mind of the Court. The Court may ask us in turn, “…how could you be so sure that the Court will grant the winding up order?”
On the other hand, if we ask a little too late, the winding up order would have already been granted and the Court may not change the order.
What If We Did Not Ask For an Unless Order
If an unless order is not granted, the usual winding up order will be made and the debtor company will be wound up in the usual fashion, that is, the bankers will be paid first. To find out more read click here What happens after compulsory winding-up?
Must I obtain a Judgment BEFORE filing a winding up petition against my debtors?
The general rule is no, to read more click here.
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