KUALA LUMPUR: The Companies Commission of Malaysia (SSM) has permanently raised the indebtedness threshold for companies from RM10,000 to RM50,000 effective April 1.

Domestic Trade and Consumer Affairs Minister Datuk Seri Alexander Nanta Linggi in a statement yesterday said the initiative was in the wake of the global and domestic economic situation, which may take longer to recover from the slowdown due to the COVID-19 pandemic.

He said the move to maintain the indebtedness threshold at RM50,000 which was introduced as a temporary measure on April 23, 2020, was aimed at reducing the burden and impact on companies facing cash flow problems to prevent them from winding up.

"The increase in the company indebtedness threshold is expected to further reduce the number of winding-up petitions, and the companies will be able to continue doing business with confidence and still comply with the law," he said.

Nanta said the RM50,000 indebtedness threshold was considered appropriate, as it was not too low, forcing companies to wind-up due to small amounts of debt, nor was it too high, which could burden smaller creditors for not being able to take action against companies in debt.

On March 17, Prime Minister Tan Sri Muhyiddin Yassin announced that the indebtedness threshold would be permanently raised from RM10,000 to RM50,000.

SSM had previously raised the threshold value under Section 466 of the Companies Act 2016 from RM10,000 to RM50,000 from April 23, 2020 to March 31, 2021, to assist companies affected by the COVID-19 pandemic.

According to Nanta, the implementation of the initiative saw only 665 winding-up petitions submitted to SSM from April to December last year compared to 1,760 in 2019 and 1,533 the previous year.

"This decline also proves that the initiative has been able to help keep companies afloat in the wake of the challenges posed by the COVID-19 pandemic," he said.

-- BERNAMA