The Companies (Amendment) Bill 2023 – Upcoming Amendments to the Judicial Management Regime

The Companies (Amendment) Bill 2023 tabled on 10.10.2023 also proposes several amendments to the judicial management regime which was first introduced in the Companies Act 2016 (“CA 2016”). Here is a summary of the changes being introduced: 

1. Duration of Judicial Management Order (JMO)
   First, the new bill will amend Section 406 to allow the Court to extend the JMO for a period of 6 months or longer, subject to any terms the Court may impose. In other words, the new section will allow JMO to remain in force beyond 12 months (per the previous regime). However, applications for extension are still subject to the discretion of the Court, and the initial JMO is still fixed at 6 months. 

2. Right to Repossess Movable Property Whilst a JMO is in Effect
   Further, Section 411 of the CA 2016 is being amended with the addition of a new subsection (5) to allow secured creditors to recover secured movable property, or enforce security over the company’s movable property, or repossess any goods in the company’s possession under any hire purchase agreement, leasing agreement or retention of title agreement while a judicial management order is still in force.
   
   According to the new subsection, secured creditors may, upon giving notification to the judicial manager, enforce security over the company’s movable property or repossess any goods in the company’s possession, if any of the 3 following conditions are satisfied: 

1. 1. The judicial manager confirms that the goods or movable property are not required by the company which is under the JMO; 
   2. The JMO poses a high risk to the existence of the goods or movable property; or 
   3. The value of the goods or movable property decreases due to the JMO.
   In the event the secured creditor does not meet the conditions in the new Section 411(5), they would still have the option under Section 411(4)(d) to seek a court order to repossess the company’s movable property.

3. Super Priority for Rescue Financing for Judicial Management
   Under a new Section 415A, super priority for rescue financing for judicial management is introduced. On an application to the Court by the judicial manager, the Court may order that a debt arising from any rescue financing obtained by the company shall be ranked in priority over all other preferential debts specified under Section 527(1)(b) to (f) (i.e. wages or salary of the employees of the company, federal tax, etc) and all other unsecured debts, in the event the company is wound up.
   
   This addition is in line with the super-priority introduced in the Bill for rescue financing under a scheme of arrangement. 

To read more about the other amendments introduced in the new bill, and in particular, the changes to the restraining order and scheme of arrangements mechanism, click here.