NOVEMBER 29 — As part of the massive restructuring plans for Malaysia Airlines (“MAS”), the Malaysian Airline System Berhad (Administration) Bill 2014 was tabled before Parliament on 26 November 2014 (click here for the full Bill).
As a general overview, I will just touch on some of the interesting aspects of this Bill.
A new entity, the similar-sounding Malaysia Airlines Berhad (“MAB”), will be incorporated under the Companies Act 1965.
The Bill proposes for its provisions to apply for 5 years or upon the successful listing of the shares of MAB on the official list of Bursa Malaysia, whichever is earlier.
It appears that the MAS companies, being MAS and its subsidiaries listed in the Bill, will be placed under administration. Malaysia does not have a formal administration regime like in the UK but this is the mechanism referred to in the Bill. It effectively allows MAS and its subsidiaries to be placed under the management and control of an Administrator, and the Administrator will, among others, have the power to manage the business and operations, manage the assets, assume all the powers of management, and to make any arrangement or compromise over the MAS companies.
An Administrator need not hold a liquidator license but merely needs to be an approved company auditor (as under the Companies Act 1965) and one who is, in the opinion of the appointer, capable of performing the duties of an administrator.
Upon the appointment of the Administrator over any of the listed companies, a very wide moratorium will apply. This will essentially prevent any form of legal proceedings to be taken against MAS and its subsidiaries if they are placed in administration. The moratorium will apply for a period of 12 months, unless the administration is terminated. The 12-month moratorium can be extended by the Minister.
Undue preference would apply on the appointment of the Administrator and with the effective date being the date of the coming into force of the eventual Act. This could pose difficulties and uncertainty for the creditors of the MAS companies, with a possible clawback period of 6 months before the coming into force of the Act.
Interestingly, there is some scope to ‘cherry-pick’ the assets or liabilities to be transferred into the new MAB entity and to leave other assets or liabilities behind. This will be carried out through a vesting order under the eventual Act. The Administrator has the power to re-negotiate existing contracts of the MAS companies.
Further, MAB has the sole discretion to offer employment to the employees of the MAS companies, on the terms and conditions as MAB may determine. It is made very clear that MAB is not deemed to be a successor employer in any way. This allows MAB to make a very clean break from the MAS employment contracts as MAB will not be liable for any obligation of the MAS companies relating to any retirement plan or other post-employment benefits. There is also a specific provision to deal with MAB negotiating with trade unions and associations.
There can be no Court Orders which stays, restrains or affects the powers of the Administrator or which compels the Administrator to do or perform any act.
The provisions of the Bill appear to be very specific in targeting some of the possible issues that MAS faces in its restructuring. As part of its restructuring, MAS may find that it needs to extricate itself from certain commercial contracts and employment contracts.
The Bill will provide the Administrator with very wide powers and with a wide array of options in attempting to restructure MAS.
Hopefully, the new entity of MAB will be able to take flight, like a phoenix soaring up again. Nonetheless, a balance must be struck in order to protect the interests of the MAS creditors and employees. — loyarburok.com
* Lee Shih is a law firm partner.
** This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail Online.