Cross-Border Insolvency Bill 2025
31 July 2025
CROSS-BORDER INSOLVENCY BILL 2025
The Cross-Border Insolvency Bill 2025, tabled and passed by the House of Representatives (Dewan Rakyat) on 29th July 2025, contains provisions aimed at providing effective and global mechanism for cooperative border insolvency proceedings based on UNCITRAL Model Law on Cross-Border Insolvency.
We summarise in this Client Alert some of the key features of the Bill, as follows:-
(1) Application
The Bill is applicable to corporations as defined under the Companies Act 2016 (except for limited liability partnership and foreign limited liability partnership) and the Labuan Companies Act 1990. However, it does not extend to individual insolvency and bankruptcy, registered or licenced businesses under specific statutes, limited liability partnership and foreign limited liability partnership under the Limited Liability Partnerships Act 2012, and entities specified in Part I of the Schedule, including but not limited to financial institutions, exchange holding companies and central depositories.
(2) Recognition of Foreign Proceedings
Where there is a collective judicial or administrative proceedings in a foreign State, including interim proceedings under insolvency law where the debtor’s assets and affairs are subject to control or supervision by a foreign court, for the purposes of reorganization or liquidation (known as “foreign proceedings”), a foreign representative (means a person or body appointed, including a person or body appointed on an interim basis, 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 to the High Court for recognition of the same.
The Malaysian Court may refuse to take any action or grant any order or relief under the Bill if the taking of such action or granting of such order or relief would be contrary to public policy of Malaysia.
(3) Effects and Reliefs
(i) Foreign main proceedings – means foreign proceedings taking place in a foreign State where the debtor has its centre of main interest.
Subject to the provisions of the laws of Malaysia, the recognition of foreign proceedings as foreign main proceedings shall result in:-
(a) a stay of individual action or proceedings in relation to the property, rights, obligations or liabilities of the debtor;
(b) a stay of execution against the property of the debtor; and
(c) a suspension of any right to transfer, encumber or otherwise dispose of any property of the debtor.
The stay and suspension shall not affect the rights of, amongst others, any person to take any steps to enforce any security over the property of the debtor or to repossess goods in the possession of the debtor under a hire-purchase agreement and to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor.
(ii) Foreign non-main proceedings – means foreign proceedings other than foreign main proceedings taking place in a foreign State where the debtor has an establishment. Establishment means any place where the debtor has property, or any place of operations where the debtor carries out a non-transitory economic activity with human means and property or services.
Upon the recognition of foreign proceedings as a foreign non-main proceeding, discretionary reliefs including those in (i) (a) to (c) above may be granted by the Malaysian Court, on the application of the foreign representative, where necessary to protect the property of the debtor or the interests of the creditors.
(iii) Interim measures / other reliefs
On the application of the foreign representative, the Malaysian Court may also grant provisional reliefs, from the filing of an application for recognition of foreign proceedings until the disposal of the application, for the preservation/protection of the property of the debtor or the interests of the creditors.
(iv) Actions to avoid acts detrimental to creditors
Further, upon recognition, a foreign representative will also have the locus standi to apply to Court for reliefs under specific provisions of, inter alia, the Companies Act 2016, such as an application for scheme of arrangement under Section 366, an application for avoidance of dispositions of property under Section 472, and an application to challenge transactions for undue preference under Section 528 or fraudulent trading under Section 540, and Section 20 of the Labuan Companies Act 1990 to challenge ultra vires transactions.
(v) Intervention by foreign representative
Upon recognition of foreign proceedings, a foreign representative may, subject to compliance with the requirements under the Companies Act 2016, the Labuan Companies Act 1990 or any other applicable written laws, intervene in any proceedings in which the debtor is a party.
This article is intended for general information of the clients of our Firm. It should not be regarded as legal professional advice. If you need advice based on specific facts, please feel free to contact us.
| Ng Hooi Huang Partner Banking and Finance Litigation Dispute Resolution Tel: +603-20311788 (Ext. 376) [email protected] |
Tan Wey May Associate Banking and Finance Litigation Dispute Resolution Tel: +603-20311788 (Ext. 297) [email protected] |