TABLE OF CONTENT

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1 CHAPTER 1: INTRODUCTION
1.1(a) DEFINITION
1.1(b) EXAMPLE OF BANKRUPTCY CASES 4-7
1.2 HOW DOES BANKRUPTCY HAPPEN?

2 CHAPTER 2: CURRENT ISSUE

2.1 BANKRUPTCY ON MALAYSIAN TOURISM SECTOR 8 - 10
2.2 BANKRUPTCY ON SWITZERLAND TOURISM SECTOR

3 CONCLUSION 11

4 REFERENCES 12

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INTRODUCTION TO BANKRUPTCY
1.1(a) DEFINITION
In this Covid-19 epidemic era, it is common to hear, read, or watch news on
radio, newspapers, and television about individuals or large corporations
experiencing bankruptcy, becoming insolvent, and having to bear significant losses.
Bankruptcy refers to a process in which a debtor is declared bankrupt through a
court order on the petition of the creditor or the petition of the debtor himself. All
unsecured assets belonging to the bankrupt are vested in the Director General of
Insolvency (DGI) and DGI is responsible for producing all such assets. Proceeds
from the sale of property will be distributed to creditors who have filed a proof of debt
form and the proof of debt has been certified by DGI.
Furthermore, it is a process by which an individual debtor who owes money to
a creditor is declared bankrupt following a court order known as a Sentencing Order
from the High Court against the individual. The following are the criteria that will
cause an individual to be declared bankrupt in Malaysia. First, not being able to
settle debts amounting to not less than RM50,000. Second, a period of time of more
than 6 months of unpaid debt. Third, the individual has been resident in Malaysia for
at least one year.
An individual can be declared bankrupt without his knowledge through the
following means, legal documents are sent to the old address. The declaration of
bankruptcy is submitted through an alternate service procedure. The individual did
not appear in court. The individual did not accept or did not open the legal
documents that had been sent to him. Alternate service procedure means that the
declaration of bankruptcy has been submitted through an advertisement in a
newspaper or through a notice board in court. In a situation like this, an individual
who has been declared bankrupt may not know that bankruptcy proceedings have
been filed against him. An alternate delivery procedure will occur if the individual in
question cannot be traced. You can conduct a bankruptcy examination to check your
status at the headquarters of the Insolvency Department of Malaysia Putrajaya and
will be charged a fee of RM10.

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1.1(b) EXAMPLE OF BANKRUPTCY CASES
Under this law, there are some cases that we can refer on how individual or
firm facing with insolvency. The first case is, Lim Cheng Pow v Maybank Investment
Bank Berhad & Anor on first voluntarily arrangement for personal bankruptcy.
Regarding this case, According to Shih, (2020) Top 5 Restructuring & Insolvency
Cases in Malaysia for 2020, debtor outstanding well in excess of RM100 million to
Maybank Investment and Maybank. The banks had initiated bankruptcy proceedings
against the debtor. Lim Cheng Pow had fail to make full disclosure. Particularly,
Section 2D (2)(a) of the Insolvency Act 1967 states that the court must be fulfilled
that “no earlier application has been filed by the debtor”. This would lengthen to
include any previous application of similar nature, like a debtor’s petition for
restructuring his debts. The court could at primary stage evaluate whether the
proposed scheme under the voluntary arrangement was reasonable and fair or not.
The court assessed the propose scheme in this case, found it to be inherently
damaged, defective and injudicious.

1.2 HOW DOES BANKRUPTCY HAPPEN?

Being declared bankrupt means that the individual will be subject to various
obstacles. Here is what will happen after an individual has been declared bankrupt.
First, under the supervision of the Director General of Insolvency. Once declared
bankrupt, the individual will be under the supervision of the Director General of
Insolvency. GDI will administer all of those individual assets and handle them to pay
off debts. So after bankruptcy, all individual assets will be placed under the control of
GDI. Second, travel limits a bankrupt individual is not allowed to leave the country
without written permission from GDI or before obtaining a court order authorizing him
or her to leave the country. Third, limited credit. Existing bank accounts will be
deactivated and bankrupt individuals are prohibited from making any withdrawals
from existing bank accounts. Apart from that, bankrupt individuals are also not
allowed to spend more than RM1,000 using a credit card or get credit for more than
RM1,000 from any creditor.
Fourth, all assets were confiscated. After being declared bankrupt, all assets
belonging to the bankrupt individual will be handled by GDI. For example, the house

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and car belonging to the bankrupt individual will be taken and managed by GDI to be
used to pay the debt. Fifth, employment limits. Bankrupt individuals are not allowed
to work in certain professions that have restrictions imposed by professional
associations or authorities. Examples of jobs that bankrupt individuals cannot work
are lawyers, surveyors, accountants and doctors.
Apart from that, a bankrupt individual also cannot be appointed as a director
of the company. A bankrupt individual cannot own a business or be part of a
business owner. After bankruptcy, the individual cannot do any business. Aside from
that, creditors, debtors, and the official receiver will assemble for the First Creditor's
Meeting. If the debtor fails to present an acceptable debt repayment plan, the court
may declare the debtor bankrupt. After then, an Adjudication Order will be issued,
declaring the debtor bankrupt. His property will therefore be vested in his bankruptcy
trustee, who will amass it and allocate it to all those lenders who have proven their
debts.
Changes to the bankruptcy act that were raised in 2016, changes to the
bankruptcy act have now been in effect since 6 October 2017. The minimum
bankruptcy limit is raised. Previously, an individual could be declared bankrupt if he
had a debt of RM30,000 or more. However, the amount has been increased to
RM50,000 which means that if a person has such or more debts, he can be declared
bankrupt. Next, automatic release. Prior to this, individuals who have been declared
bankrupt can only get relief from that status after making an appeal in Court or after
being given a certificate of relief from the Director General of Insolvency. In addition,
relief can only be considered after 5 years from the date the individual is declared
bankrupt. But now under the changes that have taken effect, automatic release is
now introduced. This means that an individual who is bankrupt can get automatic
relief after 3 years from the date of submission of his statement of affairs. According
to Datuk Abdul Rahman Putra Taha, Director General, Insolvency Department
Malaysia. Enforcement of the newly amended bankruptcy law begins this year. If
they meet our criteria, eligible borrowers will be automatically released from
bankruptcy status three years from the date of filing of the Statement of Affairs.
Avoid bankruptcy through voluntary arrangements. Under the amendment to
the bankruptcy law, it also gives individuals who will be declared bankrupt the
opportunity to settle their debts without bankruptcy proceedings continuing under
voluntary arrangements under the Insolvency Act 1967. With this voluntary
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arrangement, debtors can negotiate to restructure their debt payments to avoid being
declared bankrupt. Yet debtors have to abide by the payment amount that has been
agreed between the creditors and they also have to file a statement of their pay slips
and expenses every six months over a period of three years. Finally, the exemption
of Social Guarantors from Bankruptcy Proceedings. Unfortunately, one of the
reasons Malaysians are called bankrupt is that they have become guarantors. But
with this latest change, the situation will no longer apply. This is because creditors
cannot initiate any bankruptcy action against social guarantors such as, guarantors
for loans, scholarships or grants for education.
Bankruptcy will affect current or future employment. Bankruptcy does not
prevent someone from working. If a person is declared bankrupt, it will not deny the
right to continue the current job or get a new job. However, a bankrupt needs to
check whether there are any stipulations in the employment contract or company
documents. It is subject to the terms and conditions in the employer's employment
contract. For example, if the condition states that it is necessary to inform the
employer of the bankruptcy status, they must inform the employer of that status.

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2. CURRENT ISSUES
Since the Covid-19 cases spikes vigorously all over the world, it has taken
down many sectors like banks, airlines companies, small and medium industries,
offshore companies and the most affected is tourism sector. So, in this summary,
writer will explain more about the latest issues regarding travel and tourism sector
facing with bankruptcy. Every country take a precautionary steps to prevent the virus
from spreading by implementing travel restrictions and movement control order. All
the borders has been closed, planes on the ground, take away at restaurants and
only essential sectors can be operated during that time. To illustrate, healthcare
services, defences organizations, food and beverage, and personal care supplies
and personal products as well.
To be more specific, in the past ten years, tourism sector was one of the
sectors that growth fast in economic sectors globally. According to Aref, (2020) How
Covid-19 Impacted Travel & Tourism Sector Globally, tourism sector perceived a
59% growth in international tourist’s arrivals from 1.5 billion in 2019 as compared to
2009 which is only 880 million. To conclude, in 2019 this sector has contributed to
$8.9 trillion to the global GDP equaling a contribution of 10.3% approximately.
Tourism sector itself shows that 1 in 10 jobs globally is in tourism, resulting 330
million jobs. Unfortunately, the strong historical growth has been paused in 2020
during the global Covid-19 pandemic. This pandemic has cut international tourist
arrivals in the first quarter of 2020 to a fragment of what they have achieved in the
past decades.
The issues concerning bankruptcy on tourism sector has been a hot subject
during this pandemic. The owner of hotels and travel agencies had to suffer with a
huge losses and bear with unsolve debt as the travel restrictions has been
implemented. The union of this sector often seek for the best way to overcome this
issue. Government also trying their best to assist this sector as they also one of the
sector that brings profit to stabalize the country’s economy.

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2.1 BANKRUPTCY ON MALAYSIAN TOURISM SECTOR

At this particular period, Malaysia has achieved herd immunity through

vaccination programme held by the government In the past 2 months which involved
more than 90% fully vaccinated citizens. But still, the tourism sector in this country
got affected and not fully recovered from the previous cases.
According to thesundaily, (2020) Another Covid-19 wave will bankrupt
tourism sector, the chairman Association of Tourism Attractions Penang (ATTAP)
Ch’ng Huck Teng, he stated that another wave of the Covid- 19 virus would result
the tourism industry to dive into bankruptcy. He also said, the standard operating
procedures (SOP) must be adhered by all tourism service providers when receiving
tourists into their buildings.
It consists, by starting investing in advance technology and establish extra
preventive steps although there are signs that the Health Ministry is enablement up
on the requirements during the recovery movement control order (RMCO) stage.
Tourism companies have to invest time, money and effort to make sure that hygiene
is often kept every time eventhough it will cause increase in operating cost for them.
The chairman also said “If we become complacent, the virus may strike
again.We cannot afford another outbreak”. The best measure that can commence by
the tourism industry is through operative modification. As for the complex process for
the customer to enter the premise which they have to record temperatures, indeed,
they need to be patient to ensure their safety and security by obeying to the law
implemented at the same time prevent the cases from keep rising day by day.

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2.2 BANKRUPTCY ON SWITZERLAND TOURISM SECTOR

Apart from that, it is not tourism sector in Malaysia only affected by the virus,
the other countries also facing with this crisis. This shows that, tourism sectors are
experience decrease in their economic growth globally. On this part, writer want to
illustrate precisely on Switzerland tourism sector. According to The Business Times,
(2021) Half of Swiss hotels, restaurants risk bankruptcy: employer group, the Swiss
sector’s emloyer group warned that almost half of Switzerland’s hotels and
restaurants are in risk of bankruptcy. This is because, many of them are failing to
pay their outstanding debt also lack of financial support to weather Covid-19
shattering procedures.
Besides, the extend in the closure of bars, restaurants and leisure facilities
across the country are expected by the Swiss government to manage and strictly
control the stubbornly high amount of case and death numbers due to the harmful
virus.
Furthermore, in a statement by industry federation GastroSuisse, nearly half
of the business involved in tourism sector could go winding-up in the nick of time. It
will be occur if the industry done it without providing significant finacial provision to
cover those expenses and unsettled debt of the business owners.
After the polled process by GastroSuisse, it determined that 98% of them are
already in urgent need of financial assist. It consist about 4000 restaurant and hotel
owners who burdenly experience the same problems. GastroSuisse president
Casimir Platzer stated “The very existence of them is threathened”. So, it will be
difficult for this industry to survive and continue to run the business smoothly. Sadly,
the criticism that support during succeeding occasional shutdown made by
Gastrosuisse has been lagged. Fortunately, when lockdown decreased partially in
Switzerland, the Swiss government take an initiative by providing financial support to
restaurants and other business to help the recovery in their contry’s economic
growth.

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3. CONCLUSION

Tourism sector has been experienced such a long day with a lot of crisis due
to Covid-19. Some of them still survive, the rest have to accept the fate that their
company went belly-up. Employees been terminated, employers can’t pay sufficient
salary, the fact they have to hardly swallow.
The hard days passed off, a lot of countries begin to reopen the border for
international tourists. Lockdown slowly ending in every country, vaccination
programme went well. At the same time, every country’s government are still
advising againts “nonessential” international travel to prevent the entire world facing
such a disaster of outbreak again.
As a result for the reducing in Covid-19 cases, World Travel and Tourism
Council (WTTC) awarding global safety and hygiene stamps to countries that are
practicing their commitment in order to reopen the tourism sector as the world are
slowly recover from the coronavirus outbreak. This shows that, this industry serious
in taking measures to ensure that people fell safe towards travelling and enabling
tourism once again.
In a nutshell, as initiative taken by WTTC, which is inventing The Safe Travel
Stamp to allow tourists to recognize governments and companies from the entire
world which have adopted health and hygiene global standardized protocols. As a
result, ‘Safety Travels’ could be experienced by the consumers and the world
economy will healing while people practicing new-norms in their daily life.