Tax & AccountingFinanceComplianceLegalAugust 17, 2022

The impact of the COVID-19 pandemic on business and corporate laws

The article was written by the authors of the Principles of Business and Corporate Law Malaysia (4th Edition). Purchase via the Wolters Kluwer CCH Malaysia bookstore.

Dr Loganathan Krishnan, Monash University Malaysia
Assoc. Prof. Anne Chrishanthani Vergis, Reading University Malaysia
Parimaladevi Rajoo, Taylor’s University

The pandemic of Covid-19 hit the Malaysian shores in January 2020, resulting in the government having to issue the Movement Control Order (MCO). The MCO restricts the movement of persons unless they are engaged in essential services.

The outbreak of the pandemic is an unfortunate and unprecedented crisis in modern times. Moreover, the continuous MCOs led to the standstill of many sectors crippling the economy and affecting businesses and individuals. Statistics showed that 37,415 businesses have pulled down their shutters because of the pandemic. Additionally, the pandemic brought to light the deplorable housing and living conditions that employees/workers, in the estates, construction, and manufacturing sectors had to endure, on a daily basis. Some organisations took drastic measures such as retrenchment or downsizing their business operations. This inevitably impacted the livelihood of those employees. As for legal contracts, there were commercial uncertainties regarding the inability to proceed with contractual obligations and the implication of the force majeure clause.

The government had to return to the drawing board to address the aforementioned issues. Consequently, the government introduced various laws and regulations to deal with these changed circumstances. Failure by the government to do so would bring about absurd and unfair results to businesses and individuals. Hence, kudos to the government as the changes resulted in some breathing space for businesses and individuals. Observably, the government took a leaf from other countries to best address the complexity of the issues. Hence, there is a new norm for doing business due to the impact of the pandemic. The credit goes to the revised laws and regulations which are intended to reduce the impact brought about by the pandemic.

The changes brought about by the legal regime governing businesses and individuals were the enactment of the Temporary Measures to Reduce the Impact of Coronavirus Disease Act 2019 (Covid-19) Act 2020 (known as the Covid Act) and amending existing legislation such as the Workers’ Minimum Standards of Housing and Amenities Act 2019, the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990, the Industrial Relations (Amendment) Act 2020 and Minimum Wage Order. The changes certainly provide some form of respite for parties who are gravely impacted by the pandemic. Further ongoing reviews include the amendments to the Employment Act 1955 and the Anti-Sexual Harassment Bill 2021. The Employment (Amendment) Bill 2021 has been passed in Dewan Negara (Senate) on 30 March 2022 and it will come into effect on 1 September 2022. The Anti-Sexual Harassment Bill 2021 has been passed by the Dewan Rakyat on 20 July 2022. Furthermore, significant changes have also been made to Companies Act 2016 and Consumer Protection Act 1999. The coming into force of Division 8 of the Companies Act 2016 on 1 March 2018, which introduced the Corporate Rescue Mechanisms is extremely timely in light of businesses facing financial distress due to the pandemic.

It is hoped that these new laws and regulations will be able to address the issues that have arisen due to the pandemic. Otherwise, the impact of the pandemic will linger and eventually cause more damage to businesses and individuals. Business and Corporate Laws have to be in tandem with the changes in the business circumstances, especially where the change is caused by externalities of factors. The swift action by the government in introducing new laws and revising existing laws are certainly commendable. Nevertheless, if the changes in the laws and regulations does not achieve their purpose and objective, the legislators would have to return to the drawing board and re-examine them. In that way, a thorough study may be conducted in enacting an effective legal regime. As Malaysia has transited to an endemic phase, it is worth reassessing further the suitability of the laws and regulations.

Principles of Business and Corporate Law, Malaysia (4th Edition) incorporates new and revised legislation, as well as relevant case law relating to the impact of the Covid-19 pandemic on businesses and companies. This edition also discusses various initiatives introduced by the government that has either created new precedents or amended prior ones to provide relief to parties who have been severely impacted by the Covid-19 pandemic.

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