Liabilities of Directors under Malaysian Insolvency Laws and Recovery of Assets during Corporate Insolvency

Abstract

Under the legal regime governing Malaysian companies, insolvency is defined as a state ofaffairs where the company is unable to meet its financial obligation namely to pay its debt. A board of director is usually entrusted with the responsibilities. Liabilities can in certain circumstances be attached to the directors when the company goes into liquidation. In such situation, the rights of creditors emerge which gave rise to legal issues in relation to duties of directors to creditors. These liabilities can take in the form ofpersonal liabilities for all of the debts or some forms of debts of the company. The director can also be held criminally liable for any failure to observe statutory requirements or for dishonesty and fraudulent conduct with respect to the company. This paper will evaluate the extent of the directors1 duties and liabilities during insolvency and issues on recovery of assets and claims by creditors during insolvency.