Picture this: your company hits a rough patch, and debts start piling up. Suddenly, you are hit with a notice of demand – the 466 Notice under the Companies Act 2016.[1]It’s like a ticking time bomb, giving you a mere 21 days to clear your debts or face the threat of winding up. But let’s be real – scrambling to settle debts in just three weeks? Impossible. Creditors wield this deadline like a sword, ready to strike and force your company into winding up.

Here’s the good news! You can seek relief through a Fortuna Injunction. This court order stops your creditor from filing for a winding up petition after issuing a threat (S 466 Notice), where this injunction shields your company from the winding-up process.[2]

The Fortuna injunction is derived from the case of Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VR 83 in which the key principle is that “when a court restrains the presentation of a winding up petition to that court, it exercises part of its inherent jurisdiction to prevent abuse of its process”.

A Fortuna Injunction may be granted under two branches of principles. The first principle is that, when it is evident that the proposed petition has no chance of succeeding as a matter of law and fact and if the filing of the petition poses a risk of causing irreparable harm to the company. Having said this, in order for you to succeed in getting the injunction, you must prove both limbs under this principle.

To prove the limb of No Chance of Success, simply claiming that a debt is disputed is not sufficient to qualify as a genuine (bona fide) disagreement. Instead, you must demonstrate a valid legal defence and provide initial evidence supporting your side of the dispute.[3]

Subsequently, to prove the limb of Irreparable Damage the creditor’s intention to commence a winding-up process over a contested debt, with the potential to inflict irreparable damage on the company, must be evident. Such harm could manifest as disruptions to ongoing projects or detriment to the company’s business and reputation.

Next, the second principle is that, in a scenario where your petitioner intends to submit a petition, they have the option to assert a contested claim through a method that could potentially cause irreparable harm to the company, rather than utilizing a more appropriate alternative procedure.[4] However, it is important to remember that this rule only applies when debts are disputed. In other words, if everyone agrees on the debt, then this principle cannot be relied upon.[5]

An example would be if a supplier claims that your company owes payment for goods that were never received. In response, you dispute the debt, arguing that the goods were defective and unsuitable for sale. When the supplier threatens a winding-up petition, you contest it, asserting the dispute over the debt.

In conclusion, this legal tool demonstrates how important it is for fairness to exist in business. It provides companies with a way to address money problems and tough situations. In a challenging business world, the Fortuna Injunction helps keep companies stable and secure when they are facing difficult times.

[1] S 466 of the Companies Act 2016

[2] https://legaladvice.com.my/fortuna-injuctions/

[3] Lafarge Concrete (Malaysia) Sdn Bhd v Gold Trend Builders Sdn Bhd [2012] 6 MLJ 817

[4] Pacific & Orient Insurance Co Bhd v Muniammah Muniandy

[5] https://fareezlaw.com/winding-up/fortuna-injunction-in-malaysia/

Sabreena Mohd Sab