Reference no: EM133074235

The State of the Nation: Bankruptcy and winding-up cases continued declining trend in 2020 DATA from the Malaysian Department of Insolvency (MDI) shows that bankruptcy and winding-up cases continued their declining trend in 2020 and in the first four months of this year, likely supported by various government measures. With the pandemic and the intermittent lockdowns throughout the last 1.5 years, one would expect to see a rise in bankruptcy and winding-up cases. After all, unemployment numbers have stayed elevated since the first lockdown in March 2020. Based on the latest available data for May 2021, the unemployment rate stood at 4.5%, a marginal improvement from the 4.6% recorded in April 2021. It marked a fourth consecutive decline for the year but is still high compared with the 3.3% that Malaysia had been familiar with before Covid-19 struck. In 2020, there were 8,351 bankruptcy cases, and for the first four months of 2021, the number of cases amounted to 2,954. Bankruptcy numbers have been on a downward trend since 2016 when 19,588 cases were reported, steadily dropping to 12,051 in 2019, before the pandemic struck. This trend continued despite the job losses reported and the economic recession in 2020. One of the key reasons could be because the minimum threshold for an individual to file as a bankrupt has been increased. The Temporary Measure for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 raised the minimum debt threshold for the presentation of a bankruptcy petition to RM100,000, from RM50,000 previously. This temporary relief measure will remain in force until Aug 31, 2021.

By: Esther Lee

The Edge Malaysia, 26th July 2021

Based on the article above, analyse what are the causes of business bankruptcy?