Quick Reference Guidelines on Litigation Records Prepared by: CTOS Training Department Version: 1.0 1
Table of Contents (I) Glossary of Terms... 3 (II) CTOS Remarks... 5 (III) Basic Legal Procedure... 6 (IV) Types of Litigation Record in CTOS Report... 7 A. Foreclosure Proceedings... 7 B. Bankruptcy Proceedings... 10 C. Companies with Petition or Winding Up Order Issued... 13 D. Directors of a Company with Winding Up Petition/Order Issued... 16 E. Reference of Dispute to the Cooperative Societies Tribunal... 17 F. Company Restructure/ Equity Reduction... 18 G. Companies under Special Administration... 19 H. Section 308 Power of Registrar to Strike Off Defunct Company from Registration... 20 2
(I) Glossary of Terms No. Legal Terms Definition 1 Adjudication Order A court order that made a debtor bankrupt 2 Charging Order The judgement debtor s shares or stocks can be sold to satisfy the debt through a court order. This order is made known to the company where debtor has the shares 3 Creditor s petition Creditor makes an application to the court to make a debtor bankrupt 4. Defaulter A person or an entity who fails to perform a task or fulfill an obligation, especially failure to meet a financial obligation 5. Defendant The person/ entity who gets sued/ accused in court 6. Garnishee order The judgement creditor can get a court order to attach the debtor s bank accounts or funds owed to the debtor by third parties to satisfy the judgement debt 7. Government gazette A periodic publication that records the business and proceedings of the government and has been authorized to publish public or legal notices 8. Judgement debtor This is an order of the court where the judgement debtor is to appear summons before the court and be cross examined by the creditor s lawyer. The purpose is to assess his assets or funds to determine how the debtor can best satisfy the judgement debt. 9. Liquidation Sale of assets of a business to pay off debts 10. Liquidator Officer appointed when a company is wound up. This officer in charge of collecting all assets of the company and settling all claims against the company 3
11. Personal service Delivering of summon, complaint, notice to quit tenancy or other legal document which must be served by handing it directly to the person named in the document. 12. Petitioner One who signs and/or files a petition 13. Plaintiff A person who brings a legal case against someone in a Court of Law 14. Process Server The procedure by which a party to a lawsuit gives an appropriate notice of initial legal action to another party (such as defendant), court or administrative body. This is to exercise the jurisdiction over the other party so as to enable him or her to respond to the proceedings before the court, body or other tribunal. There are 2 types of service: personal service and substitute service. 15. Prohibitory Order Court order to seize and sell the debtor s landed property 16. Respondent A person against whom a petition is brought 17. Solicitor Lawyer 18. Substituted service Indirect delivery of a legal document through an advertisement in the local newspaper, requesting an individual s presence in court 19. Summon Order to appear in court 20. Winding up A process in which the existence of a company is brought to an end and where assets of a company are collected and sold 21. Writ of Seizure Where the creditor knows that the debtor has movable properties e.g. Stock, furniture, vehicles, fixtures and fittings, he can apply to the court for a writ of seizure 4
(II) CTOS Remarks No. Remarks Definition 1 Action withdrawn, debt fully settled Case settled and action withdrawn 2 Account Regularised Repayment in progress 3 Bankruptcy Annulled, Discharged, Rescinded or Revoked 4. Bankruptcy Creditor s Petition issued Subject discharged/annulled from Bankruptcy Second stage of Bankruptcy action. Subject is not yet a bankrupt 5. Bankruptcy Notice issued First stage of Bankruptcy action. Subject is not yet a bankrupt 6. Bankruptcy, Receiving or Adjudication Order issued Final stage of Bankruptcy action. Subject is a bankrupt 7. Company Winding Up, Petition issued 8. Director of a company with petition or winding up order issued Second stage of winding up action. Subject is not yet a wound up The individual was a director of a company, which is being sued for winding up 9. Petition Struck off Case discontinued 10. Petition Withdrawn Case discontinued 11. Proclamation of Sale under National Land Code/Deed of Assignment 12. Summon, defendant named in suit/party named in suit 13. Company winding up, order issued Auction on a piece of land to pay off a debt Summon case filed on a subject Final stage of winding up action. Subject was wound up 5
(III) Basic Legal Procedure 1. For debt recovery purposes, credit grantors or lenders can pursue legal action. 2. The Limitation Act provides a time frame for seeking relief through courts. All debts have to be within 6 years before any legal action can be taken. 3. Below shows the basic legal procedure that a credit grantor/ lenders have to go through in order to recover a debt. Letter of Demand (LOD) File a Summon Serving Process Personal Service Substituted Service Hearing Trial Non appearance Judgement 4. Upon obtaining judgement, plaintiff can take action to recover the debt. 5. Examples of legal action: - Judgement Debtor Summon - Writ of Seizure - Prohibitory Order - Charging Order - Garnishee Proceedings - Bankruptcy 6
(IV) Types of Litigation Record in CTOS Report A. Foreclosure Proceedings 1. Foreclosure is a legal process where the creditor sell the property of the debtor for the purpose of repaying the debt owed on the property. 2. The Foreclosure process is shown below: Letter of Demand (LOD) LOD is issued to the borrower informing him of his breach (of the loan agreement) to demand the borrower to pay Notice If the borrower fails to satisfy the bank / creditor, a foreclosure notice in Form 16 D of the National Land Code is issued Originating Summon The bank/creditor files an Originating Summon (OS). This will be served on the borrower After the hearing of OS, the Court must be satisfied that the legal documents have been served on the borrower before granting order of sale (sale of property) Proclamation of Sale Once the auction date has been fixed by the court and auctioneer has been appointed, the auctioneer will prepare Proclamation of Sale and advertise this, approximately 2 weeks before the auction date Property sold, Liability Discharged On Auction day, property is sold to the successful bidder 7
3. Examples of Foreclosure Proceedings reflected in CTOS Report, Section D: 8
*Proclamation of Sale under Deed of Assignment- for property without title *Proclamation of Sale under the National Land Code- property with title 9
B. Bankruptcy Proceedings 1. Bankruptcy is a process where debtor is being declared bankrupt upon receiving Adjudication Order made by the High Court. 2. The debt has to be at least RM 30, 000. 3. The legal process starts from summon (refer to basic legal procedure in page 6). 4. Below is the summary of Bankruptcy Proceedings, after obtaining Judgement. Judgement Notice: 1 st Stage of Bankruptcy Petition: 2 nd Stage of Bankruptcy Adjudication Order: Final Stage- Debtor is bankrupt Annulment/ Discharge Debtor no longer bankrupt 10
5. Examples of Bankruptcy records in CTOS Report, Section D: 11
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C. Companies with Petition or Winding Up Order Issued 1. Winding up is a process where a company is brought to an end, where assets of a company are collected. The assets collected are used to pay off the company s debts and liabilities. 2. There are 2 types of winding up: Voluntary Winding Up Winding Up by The Court Voluntary Winding Up: The liquidation of a company where the directors of the company have come to a decision to wound up the company. Winding Up by Court: This is also known as compulsory winding up. It begins with the presentation of petition in Court. Minimum debt to wound up a company: RM 500 3. Below is the summary of Winding Up process: Judgement Petition Order 13
4. Example of companies with Petition or Winding-up Order issued/voluntary Winding-up reflected in CTOS Report, Section D: 14
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D. Directors of a Company with Winding Up Petition/Order Issued 1. If the subject happens to be a director of a company with winding up petition or order issued, it will be reflected in the subject s report, Section D. 2. This legal record is directed on the Company, not the director. 3. Records like this reflect past business behavior of the subject. 4. Example: 16
E. Reference of Dispute to the Cooperative Societies Tribunal 1. Tribunal is an institution set with authority to judge or solve issues or disputes. 2. This type of dispute is settled privately in the tribunal without going to the Court. 3. When parties cannot come to an agreement, the referee (a third party which is legally qualified in helping people to reach an agreement) will make a decision. The referee manage the hearing in a tribunal. 4. In Tribunals, the referee will usually invite the parties into a hearing room at the appointed time and the hearing will be conducted in private. 5. This method of solving disputes is cheaper and less complicated as compared to Court cases. 6. Example: 17
F. Company Restructure/ Equity Reduction 1. This is a process where private or public company reorganize the operational, ownership or other structures of the company for several reasons. 2. Some companies might undergo company restructure for the purpose of making it more organized or profitable. 3. However, for some companies who undergo financial distress or faces cash flow problems, company restructure/ equity reduction can take place. The purpose of this is to help reduce the company s debt and to restore the liquidity of the company. 4. Example of company restructure/equity reduction reflected in CTOS report, Section D: 18
G. Companies under Special Administration 1. Where a company is a borrower and is unable to manage its debts or fulfill its obligations, a third party can be appointed to this company. This third party is called as Special Administrator. 2. The Special Administrator will acquire, manage, finance and dispose of assets and liabilities of the companies. 3. Example of company under special administration in CTOS report, Section D: 19
H. Section 308 Power of Registrar to Strike Off Defunct Company from Registration 1. Strike off under Section 308- It is a process in which the Registrar s exercises his power to strike off the name of a defunct company off the register if the Registrar has reasonable cause to believe: The company is not in operation or is not carrying on business The company has been wound up but no liquidator is acting The liquidator failed to lodge any return The company has no asset or insufficient funds to pay the costs of obtaining an order from the Court to dissolve the company 2. Example: 20