Malaysia’s Cross-Border Insolvency Bill 2025: Restructuring Without Borders

Scope and Key Features of the Bill

The Bill will only apply to insolvency proceedings involving corporate debtors (incorporated or formed in or outside Malaysia) excluding limited liability partnerships, foreign limited liability partnerships and certain types of entities specified under Part I of the Schedule of the Bill such as persons licensed under financial statutes.

Access of Foreign Representatives and Foreign Creditors to Malaysian Courts

Under the Bill, a foreign representative (defined as a person or body appointed, and authorized in foreign proceedings to administer the reorganization or liquidation of a debtor’s property or affairs or to act as a representative of the foreign proceedings) may apply directly to the Malaysian Court:

• to commence or participate in the proceedings under Malaysian insolvency law; or
• for the recognition of foreign proceedings or for any relief or assistance provided.

In addition, foreign creditors will also have the same rights regarding the commencement of, and participation in, proceedings under Malaysian insolvency law as creditors in Malaysia. For example, the claims of a foreign creditor shall not be ranked lower than general unsecured creditors solely by reason that the creditor is a foreign creditor. Moreover, where notification is required to be given to creditors in Malaysia under Malaysian insolvency law, such notification must likewise be provided to all known foreign creditors who do not have addresses in Malaysia.

Recognition of Foreign Proceedings and Reliefs

As stated above, a foreign representative may apply to the High Court in Malaysia for recognition of foreign proceedings in which the foreign representative has been appointed and such application for recognition shall be determined by the High Court at the earliest possible time. For context, “foreign proceedings” is defined under the Bill to mean, among others, collective judicial or administrative proceedings in a foreign State under the insolvency law in which the debtor’s property and affairs are subject to control or supervision by a foreign court, for the purposes of reorganization or liquidation.

Upon recognition of foreign proceedings, where necessary to protect the debtor or the interests of the creditors, the High Court may, on the application of the foreign representative, grant any appropriate relief as the Court thinks fit, including, among others, the following orders:

• staying the commencement or continuation of any individual proceedings concerning the property, rights or obligations of the debtor;
• staying any execution against the property of the debtor;
• suspending the rights to transfer, encumber or dispose of any property of the debtor;
• entrusting the administration or realization of the whole or any part of the property of the debtor located in Malaysia to the foreign representative (or such other person as the Court may appoint); and
• other orders that may be available to a Malaysian insolvency office-holder under the laws of Malaysia.

Cooperation and Coordination with Foreign Courts and Foreign Proceedings

Given that multiple states are involved in the insolvency proceedings that fall within the scope of the Bill, it is important to prevent conflicting or inconsistent orders granted by the Malaysian High Court and the foreign courts over the insolvency proceedings.

In this regard, the Bill empowers the High Court to cooperate to the maximum extent possible with foreign courts or foreign representatives, and to communicate directly with, or request information or assistance directly from, foreign courts or foreign representatives. Subject to the Court’s supervision, similar powers to cooperate and communicate with foreign courts and foreign representatives are also conferred upon Malaysian insolvency office-holders. The manner of such cooperation is non-exhaustive and it may be implemented by any appropriate means, including the following:

• coordination of the administration and supervision of the property and affairs of the debtor; and
• coordination of concurrent proceedings regarding the same debtor.

In respect of the concurrent proceedings regarding the same debtor, for example, insolvency proceedings brought against the debtor in Malaysia and in a foreign state, the Bill sets out some provisions for the Court to decide on the applicable reliefs to be granted which will depend on the status of the Malaysian insolvency proceedings compared against the status of the application for recognition of foreign proceedings before the Malaysian High Court. This is to, amongst others, foster decisions that would best achieve the objectives of multiple proceedings and seek to prevent overlap in proceedings and the grant of remedies.

When the insolvency proceedings in Malaysia are taking place at the time the application for recognition of foreign proceedings is sought, any relief granted must be consistent with those granted in the Malaysian proceedings.

However, when the Malaysian insolvency proceedings are only commenced (i) after the filling of the application for the recognition of foreign proceedings, or (ii) after such recognition has been granted, the Malaysian High Court may review, vary, or even set aside the relief granted if they are inconsistent with the Malaysian insolvency proceedings, provided however that, where the foreign proceedings recognized are of foreign main proceedings (i.e. a type of foreign proceedings distinguished by the Bill as taking place in a foreign state where the debtor has its “centre of main interests”), the Malaysian insolvency proceedings will be limited to the debtor’s Malaysian-based assets only.

If multiple foreign proceedings are brought against the same debtor and recognition for such proceedings are sought before the High Court of Malaysia, then further analysis will need to be carried out on the nature of the foreign proceedings to determine on the consistency of the reliefs granted by the High Court of Malaysia with the other foreign courts. Creditors are also subject to equitable payment rule and precluded under the Bill from “double-dipping” and receiving disproportionate payments in Malaysia if they have already been partially paid in foreign insolvency proceedings, subject to its security claims and legal rights against the world at large (i.e. rights in rem).

Conclusion

When the Bill receives Royal Assent and comes into force, the cross-border insolvency regime in Malaysia is expected to be aligned with that of more than 60 jurisdictions that have adopted the Model Law. The Bill is significant for all local and foreign insolvency practitioners, creditors and corporate debtors, where the relevant debtor in question has assets in Malaysia. In particular, creditors and their restructuring professionals should review their enforcement strategies against the aforesaid corporate debtors in light of the Bill.