Duly registered with the Malaysian Bar Council
Didaftarkan dengan Badan Peguam Malaysia
B2B Debt Collection Services In Malaysia
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Malaysian Bar registered Law Firm • Established 2016 • 3,000+ debt matters handled since 2016.
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How We Approach Corporate Debt Recovery
A firm but gentle touch is often more effective than brute force. Directors are generally shielded from personal liability, while a company that is trading and cash flow positive is especially vulnerable to legal action. We weigh all of this when taking on a case, so we can advise which of the steps below to use.
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Letter of demand: A formal demand from our firm setting out the amount owed, a deadline for payment and the legal action that follows if it's ignored
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Negotiation and settlement: Where a debtor company wants to pay but can't settle in full, we structure an instalment plan that protects your interests
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Statutory demand: A company owing RM50,000 or more can be served a statutory demand and if the debt isn't paid within 21 days, the company is presumed unable to pay its debts, opening the way to winding-up
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Civil litigation: Where the debt value and circumstances justify it, we file a claim in the appropriate court
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Judgement enforcement: If a judgement is obtained, we can enforce it by garnishing the debtor company's bank account, seizing and selling its assets, or a judgment debtor summons against company officers
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Bankruptcy: If your debtor is a sole proprietor or partnership and the debt is at least RM100,000, we can pressure them with bankruptcy proceedings
In our experience, most solvent and operational corporate debtors would much rather negotiate, and where possible we structure a plan that gets our client paid while allowing the debtor company to manage its cash flow and keep trading.
Who We Serve
We act for businesses of every size owed money by other businesses, including:
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suppliers, vendors and distributors
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manufacturers and trading companies
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logistics and freight companies
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professional service firms, including tax, accounting and consulting firms
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IT and technology providers
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agencies and other service businesses
Contract Terms Review
Many businesses recovered outstanding debts more easily or avoid them altogether with the right terms in place. We review and revise your terms of trade, quotations and engagement letters with enforceability in mind, focusing on:
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personal guarantee clauses so the person signing on behalf of a company is personally liable if the company fails to pay
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late payment interest at a rate reasonable enough for courts to uphold
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retention of title clauses to let suppliers reclaim goods that are not paid for
Out-Of-Court Settlement Negotiations
For corporate debtors juggling payroll, overheads and other creditors, a well-structured settlement agreement is often the fastest way to get paid, and we push for three client protections in every one:
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Late payment interest, which encourages the debtor to keep to the repayment plan and compensates our client if they don't
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Post-dated cheques, which make each instalment easy to collect and identify the debtor's bank accounts early, in case a garnishee order is needed
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A consent judgment, which turns the agreement into a court order so any default can be enforced immediately, without a full trial
Compulsory Winding-Ups
For a solvent, trading company, few legal steps carry as much weight as a winding-up petition. Any undisputed debt of RM50,000 or more allows us to serve a statutory demand, and if it goes unpaid for 21 days, we can petition the High Court to wind the company up. Before recommending this route, we assess if:
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there is a genuine dispute over the debt which can prevent a winding-up
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the company is still trading and has assets, and so has something to lose
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a winding-up would realistically lead to payment
Regarding that last point, in practice, actually winding up a company is rarely an effective way to recover money. A company that allows itself to be liquidated is often already weighed down by other debts, including secured creditors who are paid first, so by the time the liquidator reaches unsecured creditors, there may be little or nothing left.
A statutory demand is most effective as a tool to pressure solvent companies into paying, since they have the most to lose from a petition.
Our Past Cases
Unpaid invoices are one of the most common issues we help Malaysian businesses with. As our clients have delivered what they were contracted to provide, only to be met with silence or repeated promises of payment, we take great pride in helping them recover what they are owed. Below, we share some of our more significant cases.
1. Threatening Debtor with Imprisonment
Debt value: RM180,000
Total recovery: RM180,000 (100%), paid in one lump sum
Background
Our client, a business owner, was owed RM180,000 for services rendered. Reminders by email and WhatsApp went unanswered, and the debtor ignored every attempt at settlement. The evidence was limited to a quotation and informal WhatsApp messages in which the debtor acknowledged the debt.
While not ideal, it was enough to build a recovery strategy.
Escalation
We issued a notice of demand, which was ignored, and then filed a writ of summons. The debtor failed to enter an appearance or file a defence, and we obtained judgment in default for the full RM180,000.
After several unsuccessful attempts to enforce the debt, we turned to a judgement debtor summons under the Debtors Act 1957. Compelled by the court to attend, the debtor was ordered to pay RM10,000 a month toward the judgment debt. After paying the first instalment, the debtor defaulted again.
Resolution
We filed a committal application asking the court to imprison the debtor for failing to comply with the payment order. Faced with the real prospect of jail, the debtor paid the full RM180,000 in one lump sum, a day before the committal hearing.
2. A Success Based Arrangement
Debt value: RM100,000 across 3 debtors
Total recovery: RM70,000 recovered in full from 2 debtors; remaining RM30,000 filed as a proof of debt
Background
A well-known real estate agency was owed RM100,000 in commissions by three property owners. The commissions were earned through completed sub-sales, but the owners bypassed our client and refused to pay the invoices, despite benefiting from the deals. We acted on a success fee basis, with no upfront legal fees unless we recovered.
Escalation
The first debtor owed RM30,000, outstanding since 2020 with only 1 year left before the 6-year limitation period expired. As a search revealed the owner had been declared bankrupt years earlier, we helped our client file a proof of debt and provided the documentation to claim a tax relief.
The second debtor, owing RM35,000, reacted as soon as we made contact on behalf of the agency. Five missed calls in a row were followed by a message asking which account to pay into, and the debt was settled in full in 48 hours.
The third debtor, also owing RM35,000, ignored our notice of demand and two weeks of follow-ups. We prepared a writ of summons, and one day before it was due to be filed, the debtor sent proof of full payment.
Resolution
Our client recovered RM70,000 without having to go to court and paid legal fees only on the amounts recovered. The one uncollectible debt was properly documented, allowing the agency to close its books on all 3 files.
3. Enforcing a Personal Guarantee
Debt value: RM300,000
Total recovery: RM300,000 (100%), paid the day after our response
Background
A mid-sized tax advisory firm kept losing large fee payments to shell companies with no assets. Once dormant, they were effectively judgment-proof, and their directors simply walked away from the unpaid invoices.
We reviewed and revised the firm's standard terms of engagement, adding a personal guarantee clause that makes the person signing the agreement personally liable if the company fails to pay.
Six months later, the clause was put to the test.
Escalation
A client owed the firm RM300,000, and the company, an RM2 Sdn Bhd, was clearly a shell. Knowing there were no assets to seize, its director told us to go ahead and wind up the company.
Resolution
Instead, we informed the director that we would not be winding up the company, and would be enforcing the personal guarantee against them personally as the signatory. The next day, a cheque for the full RM300,000 arrived.
Client Testimonials
FAQs
1. Should I use a debt collection agency or a law firm for my business? A debt collection agency can chase payment, but it cannot file a court claim, serve a winding-up petition or represent you in court. A law firm can handle every stage, so there's no handover if the debtor refuses to pay.
2. Does Rule & Co work on a no win, no fee basis? For suitable cases, lawyers in Malaysia are permitted to act on a success fee basis, but whether it applies to your situation requires a case assessment!
3. Does Rule & Co offer debt collection services for small businesses? Yes. We cater to businesses of all sizes and strive to make the recovery costs proportionate to the amount owed.
3. Is there a minimum debt amount? We are happy to assess any B2B debt recovery case worth RM5,000 and above.
6. What is a statutory demand? A statutory demand is a formal notice under section 466 of the Companies Act 2016, requiring a debtor company to pay a debt of RM50,000 or more within 21 days. If it doesn't, the company is presumed unable to pay its debts and a winding-up petition can follow, which is why solvent companies facing one usually pay.
7. Can I recover a company's debt from its director? Generally only if the director signed a personal guarantee, or in cases of fraudulent trading. This is why personal guarantee clauses in your terms of trade are so valuable.
8. What if the debtor company has no assets? Pursuing the company itself may not be worthwhile, but there may be other routes, such as enforcing a personal guarantee against a director. Where a debt truly can't be recovered, we can provide the documentation to write it off as a bad debt and claim tax relief.
9. What happens if the debtor company goes into liquidation? You'll need to file a proof of debt with the liquidator to be included in any distribution of the company's assets. Unsecured creditors are paid only after secured creditors and certain priority debts, so recovery may be partial.
10. Can you handle multiple debtors at once? Yes. We regularly help businesses dealing with multiple overdue accounts.
11. How long do I have to recover a business debt? Most claims must be filed within 6 years of the date payment was due, under the Limitation Act 1953. A written acknowledgement of the debt or a part payment can restart the clock.
FREE Case Assessment
We'll assess your case, free of charge.
Whatsapp us at +6 010 202 8095
Email us at rudi@rulecolaw.com
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