Effect of the Exemption Order No. 2

What if you are owed money by another company and the company can’t or won’t pay you? This is a very important issue, more so during these tough economic times where every company seeks to conserve cash, the lifeblood of any business. It is either the debtor (company owing you money) dies or you die.

Normally, you would seek to wind up the debtor company. Under Section 466 of the Companies Act, you can start winding up proceedings against the debtor if he fails to pay 21 days after you serve him a notice a demand.

On April 23, the Minister of Domestic Trade and Consumer Affairs KPDNHEP made a written order - Companies (Exemption) (No. 2) Order 2020 – replacing the 21 days with 6 months!

This is now being challenged by a construction company. That the minister had acted beyond his powers without going through Parliament.

A company is not like a bank, which has access to deposits to fund its business. If a company does not receive payments for goods and services rendered, it will die. A fast death. If the order was meant to give breathing room to companies like the 6 month bank loan moratorium, then its consequence is to save the debtor but kill the creditor.

We await the court’s judgment.

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