Corporate Restructuring & Insolvency Lawyers in Malaysia
Ching, Elaine & Co advises Malaysian companies and their boards on corporate rescue, restructuring and insolvency — schemes of arrangement under section 366 of the Companies Act 2016, judicial management under Part III Division 8, corporate voluntary arrangements under section 395, capital reductions, amalgamations, and winding up under section 464. We act from our offices in Petaling Jaya and Setia Alam for companies in financial distress, from private companies through to companies listed on Bursa Malaysia Securities Berhad.
Which rescue mechanism fits your company?
Malaysian law offers four principal routes out of financial distress. They differ in who stays in control, whether a moratorium arises automatically, the creditor majorities required, and which companies may use them. The table below sets out the practical differences.
| Scheme of arrangement | Corporate voluntary arrangement | Judicial management | Winding up | |
|---|---|---|---|---|
| Statutory basis | Section 366, CA 2016 | Section 395 and Twelfth Schedule, CA 2016 | Part III Division 8 (sections 403–430), CA 2016 | Section 464 onwards, CA 2016 |
| Availability | All companies, solvent or insolvent | Private companies only, subject to the exclusions in section 395 | All companies, including public listed companies. Excluded: institutions regulated by Bank Negara Malaysia, and companies licensed, approved or registered under the CMSA 2007 or SICDA 1991 (section 403, as amended in 2024) | All companies |
| Who controls the company | The directors remain in control | The directors remain in control; a supervisor oversees implementation | A judicial manager displaces the board | A liquidator displaces the board |
| Moratorium | Not automatic — a restraining order must be applied for under section 368 | Automatic on filing | Automatic from the application, and throughout the order | Not applicable |
| Creditor approval required | 75% in value of each class present and voting, plus court sanction | 75% in value of creditors present and voting | 75% in value of creditors approving the judicial manager’s proposals | Not applicable |
| Court involvement | Extensive — convening order, meetings, sanction | Minimal — documents are filed in court | An application for a judicial management order | Court-ordered or members’ voluntary |
| Typical use | Complex debt compromises, group restructurings, listed companies | Smaller private companies with straightforward creditor profiles | A viable business needing independent management and breathing space | No viable business to rescue |
What changed under the Companies (Amendment) Act 2024
The Companies (Amendment) Act 2024 came into force on 1 April 2024 and materially widened the corporate rescue framework:
- Judicial management opened to public listed companies. Section 403 previously excluded any company “subject to” the Capital Markets and Services Act 2007, which was read as shutting listed companies out. The exclusion is now confined to institutions regulated by Bank Negara Malaysia and companies licensed, approved or registered under the CMSA 2007 or the Securities Industry (Central Depositories) Act 1991.
- No fixed cap on extending a judicial management order. Under the amended section 406, the court may extend a judicial management order on such terms as it thinks fit, rather than for one further period of six months.
- Safeguards for secured creditors. New sections 398A and 411(5) allow secured creditors to recover secured movable property in defined circumstances during a corporate voluntary arrangement or judicial management moratorium.
The practical effect is that judicial management is now a realistic option for listed companies that previously had to reach for a scheme of arrangement with a restraining order.
How we advise companies in distress
We act for the company and its board. Our work typically covers:
- Assessing the options — whether a scheme, corporate voluntary arrangement, judicial management or solvent restructuring best fits the company’s creditor profile, timetable and commercial objectives.
- Obtaining breathing space — restraining orders under section 368, and the moratoria that arise on a corporate voluntary arrangement or judicial management application.
- Classifying creditors and convening meetings — class composition is where schemes most often fail; getting it wrong invites a challenge at the sanction hearing.
- Scheme documents and court process — convening applications, explanatory statements, creditor meetings and the sanction hearing.
- Capital reductions — whether by court confirmation or the solvency statement procedure, including reductions to set off accumulated losses.
- Amalgamations and group simplification — consolidating subsidiaries under the amalgamation provisions of the CA 2016.
- Debt settlements and asset disposals — negotiated settlements with major creditors, including set-off arrangements involving the disposal of assets.
- Directors’ duties in the zone of insolvency — advising boards on their exposure as solvency deteriorates, and on when continued trading becomes a personal risk.
- Winding up — where there is no viable business to rescue, and in defending petitions where there is.
Listed companies and PN17
For companies listed on Bursa Malaysia Securities Berhad, a restructuring is also a listing-requirements exercise. A company triggering the PN17 criteria must announce, appoint advisers and submit a regularisation plan within the prescribed period. We advise on regularisation plans alongside the underlying scheme or capital reduction, and on the announcements and circulars the exercise requires — work that sits naturally alongside our corporate finance and capital markets practice.
Selected experience
- Amalgamation of a retail group. Advised on the merger, by way of amalgamation, of eleven wholly-owned subsidiaries of a group operating apparel and textile outlets in Malaysia.
- Debt settlement with asset disposal. Advised a company listed on the Main Market of Bursa Malaysia Securities Berhad on a proposed settlement of debt of approximately RM50.76 million, together with a disposal of land to partly set off that debt.
Common questions
Can a public listed company apply for judicial management in Malaysia?
Yes. Since the Companies (Amendment) Act 2024 came into force on 1 April 2024, judicial management is available to all companies including public listed companies. Only institutions regulated by Bank Negara Malaysia, and companies licensed, approved or registered under the Capital Markets and Services Act 2007 or the Securities Industry (Central Depositories) Act 1991, remain outside the regime.
How long does a moratorium last?
A restraining order under section 368 may be granted for up to three months and extended for up to a further nine months. A judicial management order runs for six months and may be extended by the court on such terms as it thinks fit. A corporate voluntary arrangement moratorium runs for twenty-eight days, extendable to sixty days.
Do the directors stay in control?
In a scheme of arrangement and in a corporate voluntary arrangement, yes — the board remains in office, with a supervisor overseeing implementation in a corporate voluntary arrangement. In judicial management, a judicial manager takes over the management of the company and the directors’ powers are suspended.
What majority do creditors have to approve?
A scheme of arrangement requires 75% in value of each class of creditors present and voting, followed by court sanction. A corporate voluntary arrangement and a judicial manager’s proposals each require 75% in value of creditors present and voting.
When should a company take advice?
Earlier than most boards do. The rescue mechanisms all assume there is still a viable business and enough liquidity to run a process. Once a winding-up petition has been presented, the options narrow sharply — and dispositions of property after presentation may be void under section 472(1) unless the court orders otherwise, as we discuss in our note on share transfers and winding-up petitions.