# Difference Scheme of Arrangement, Judicial Management and Corporate Voluntary Arrangement

> Compare the scheme of arrangement, judicial management and CVA under Malaysia's Companies Act 2016: eligibility, moratoriums, approvals, binding effect.

Canonical URL: https://www.cecolaw.com/scheme-of-arrangement-judicial-management-cva-malaysia/
Published: 2020-05-06
Updated: 2026-07-27
Author: Cecilia Lim (Associate), Ching, Elaine & Co — Advocates & Solicitors, Malaysia
Reviewed by: Lim Ching Yong (Partner)

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*Updated 27 July 2026 to reflect the Companies (Amendment) Act 2024, in force 1 April 2024, which opened judicial management to public listed companies and removed the fixed cap on extending a judicial management order.*

We have summarised below the key differences between the remedies available to a distressed company which is unable to pay monies to its creditors: the scheme of arrangement, the corporate voluntary arrangement (“CVA”) and judicial management (“JM”) under the Companies Act 2016 (“CA 2016”). For a broader overview of the options available to companies in financial distress, see our guide to [corporate rescue, receivership, winding up and schemes in Malaysia](https://www.cecolaw.com/corporate-rescue-receivership-winding-up-schemes-malaysia/).

## Corporate rescue mechanisms at a glance

| Aspect | Scheme of arrangement | Corporate voluntary arrangement | Judicial management |
| --- | --- | --- | --- |
| Availability | All companies, solvent or insolvent | Private companies only, subject to the exclusions in section 395 | Available to all companies, including public listed companies. Excluded: licensed institutions and operators of designated payment systems 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 (section 403, as amended by the Companies (Amendment) Act 2024) |
| Moratorium | Not automatic — a restraining order must be sought (section 368) | Automatic upon filing (section 398(1)) | Automatic from filing until disposal of the application, and while the order is in force (sections 410 and 411) |
| Maximum moratorium period | Three months, extendable for not more than nine months | Twenty-eight days, extendable up to sixty days | Six months, extendable at the court’s discretion (section 406, as amended in 2024 — the former cap of one further six-month extension has been removed) |
| Who manages the company | The directors remain in control | The directors remain in control; a supervisor oversees implementation of the arrangement | A court-appointed judicial manager exercises the powers of the board |
| Creditor approval | 75% of the total value of creditors present and voting, plus court sanction | 75% of the total value of creditors present and voting; no court approval of the plan is required | 75% of the total value of creditors whose claims have been accepted by the judicial manager, present and voting |

## Purpose of each mechanism

### Scheme of arrangement

Schemes of arrangement are not exclusively intended for insolvent companies and are widely utilised by solvent entities. Nevertheless, the scheme of arrangement process is commonly used by insolvent companies for purposes of restructuring, while receiving the benefit of court-supervised restraining orders restricting various forms of recovery and enforcement actions against the company. A scheme of arrangement allows for the court-approved scheme to be imposed on dissenting creditors and members, provided the statutory voting majorities have been obtained.

### Corporate voluntary arrangement

The CVA is a newly introduced corporate rescue mechanism under the CA 2016. It provides a consensual statutory restructuring tool that is available to private companies only. The CVA process enables a company experiencing financial difficulties to enter into a plan or an arrangement with the creditors without the need to have the plan or arrangement approved by the Court.

### Judicial management

Judicial management is another of the new corporate rescue mechanisms under the CA 2016 that allows for the appointment by the Malaysian High Court of a judicial manager over an insolvent corporate debtor, in circumstances where it can be shown that there is a reasonable prospect of, inter alia, preserving all or part of the company as a going concern and where the interests of creditors would be better served than on a winding up.

## Which companies can use each mechanism?

### Scheme of arrangement

A scheme of arrangement is available to all companies.

### Corporate voluntary arrangement

Under section 395 of the CA 2016, a CVA shall not be applicable to:

1. a public company;

2. a company which is a licensed institution or an operator of a designated payment system regulated under the laws enforced by the Central Bank of Malaysia;

3. a company which is subject to the Capital Markets and Services Act 2007; and

4. a company which creates a charge over its property or any of its undertaking.

### Judicial management

Section 403 of the CA 2016 was amended by the Companies (Amendment) Act 2024, which came into force on 1 April 2024. Judicial management is now available to all companies, **including public listed companies**. Before the amendment, the exclusion of any company “subject to” the Capital Markets and Services Act 2007 was read as shutting listed companies out of the regime.

JM remains unavailable only to:

1. a company which is a licensed institution or an operator of a designated payment system regulated under the laws enforced by Bank Negara Malaysia; and

2. a company which is licensed, approved or registered under the Capital Markets and Services Act 2007 or the Securities Industry (Central Depositories) Act 1991.

## Pre-conditions before starting the process

### Scheme of arrangement

No specific pre-conditions are prescribed for a scheme of arrangement.

### Corporate voluntary arrangement

Under paragraph 9 of the Guidelines for Corporate Rescue Mechanism Under Division 8 Part III of the Companies Act 2016 issued by the Companies Commission of Malaysia (“Guidelines”), to ensure other due processes are in compliance with the relevant provisions in the CA 2016, an applicant must ensure that a company in the striking off process shall not initiate a CVA.

Under paragraph 10 of the Guidelines, before a proposal for a CVA can be made, the applicant must ensure that:

1. there is no pending query with SSM (the query status is available at the [SSM e-Query portal](https://www.ssm.com.my/Pages/Quick_Link/e-Query.aspx)); and

2. all of the company’s information with SSM is up to date.

### Judicial management

Under paragraph 9 of the Guidelines, to ensure other due processes are in compliance with the relevant provisions in the CA 2016, an applicant must ensure that a company in the striking off process shall not initiate a JM process.

Under paragraph 10 of the Guidelines, before making an application for a JM order, the applicant must ensure that:

1. there is no pending query with SSM (the query status is available at the [SSM e-Query portal](https://www.ssm.com.my/Pages/Quick_Link/e-Query.aspx)); and

2. all of the company’s information with SSM is up to date.

Under section 405(6) of the CA 2016, a JM order shall not be made in relation to a company after the company has gone into liquidation.

Under section 404 of the CA 2016, an application for an order that a company should be placed under a judicial management and for an appointment of a judicial manager may be made to the Court by the company or its creditor if the company or its creditor considers that:

1. the company is or will be unable to pay its debts; and

2. there is a reasonable probability of rehabilitating the company or of preserving all or part of its business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up.

## Who can propose or apply?

### Scheme of arrangement

Under section 366 of the CA 2016, an application for a scheme of arrangement may be made to court by:

1. the company;

2. any creditor or member of the company;

3. the liquidator, if the company is being wound up; or

4. the judicial manager, if the company is under judicial management.

### Corporate voluntary arrangement

Under section 396 of the CA 2016, the application for a voluntary arrangement may be proposed by:

1. the directors of a company other than a company which is under a JM order or is being wound up;

2. in the case of a company under a judicial management order, the judicial manager; and

3. in the case of a company being wound up, the liquidator or Official Receiver.

### Judicial management

Under section 404 read together with section 405 of the CA 2016, the application for a JM order may be made to the court by:

1. a company or its directors, under a resolution of its members or the board of directors; or

2. a creditor, including any contingent or prospective creditor,

or all or any of those parties.

## Management of the company

### Scheme of arrangement

Under section 367 of the CA 2016, the Court may, on an application, appoint an approved liquidator to assess the viability of the scheme proposed for the compromise or arrangement, and the approved liquidator appointed shall prepare a report for submission to the applicant to be tabled at the meeting of creditors or members.

### Corporate voluntary arrangement

Under section 396(2) of the CA 2016, a nominee will be appointed as a trustee or supervisor for the purpose of supervising the implementation of the CVA.

Under section 396(3) of the CA 2016, a judicial manager, if a company is under a judicial management order, or a liquidator, if a company is being wound up, may be the nominee.

Under section 396(4) of the CA 2016, in the case where the liquidator is the Official Receiver, the nominee shall be an insolvency practitioner.

### Judicial management

Under section 405(3) of the CA 2016, the Court shall direct that the affairs, business and property of the company shall be managed by a judicial manager appointed by the court.

Under section 407(1) of the CA 2016, in any application for a JM order, the applicant shall nominate a person who is an insolvency practitioner, who is not the auditor of the company, to act as a judicial manager.

Under section 407(2) of the CA 2016, the Court may refuse the nomination of the applicant and may appoint another person who is an insolvency practitioner as the judicial manager.

## Court orders in the process

### Scheme of arrangement

Under section 366(1) of the CA 2016, the Court may on application order a meeting.

Under section 367(1) of the CA 2016, the Court may, on an application under this Subdivision, appoint an approved liquidator to assess the viability of the scheme proposed for the compromise or arrangement.

### Corporate voluntary arrangement

Under section 401(1) of the CA 2016, the nominee or insolvency practitioner, who shall be known as the supervisor, would be responsible for the implementation of the proposal.

Under section 401(4) of the CA 2016, creditors or any person dissatisfied by any act, omission or decision of the supervisor may appeal to court.

Section 581 of the CA 2016 confers on the court the power to grant relief.

### Judicial management

Under section 405 of the CA 2016, the Court may make a judicial management order upon application and appoint a judicial manager.

Section 581 of the CA 2016 confers on the court the power to grant relief.

## Moratorium against creditor action

### Scheme of arrangement

Under section 368 of the CA 2016, on the application in a summary way of the company or any member or creditor of the company, the court may grant a restraining order.

Unlike in a CVA and JM, there is no automatic moratorium. When there is no restraining order in place, the company may sell its assets in the ordinary course of business.

If no order has been made or resolution passed for the winding up of a company and a compromise or arrangement has been proposed between the company and its creditors or any class of those creditors, the court may grant a restraining order to restrain proceedings against the company on the application of the company if:

1. the Court is satisfied that there is a proposal for a scheme of compromise or arrangement between the company and its creditors or any class of creditors representing at least one-half in value of all the creditors;

2. the Court is satisfied that the restraining order is necessary to enable the company and its creditors to formalise the scheme of compromise or arrangement for the approval of the creditors or members under section 366;

3. a statement of particulars as to the affairs of the company made up to a date not more than three days before the application is lodged together with the application; and

4. the Court approves the person nominated by a majority of the creditors in the application by the company under subsection (1) to act as a director or, if that person is not already a director, appoints that person to act as a director notwithstanding the provisions of the CA 2016 or the constitution of the company.

### Corporate voluntary arrangement

Under section 398(1) of the CA 2016, the moratorium commences automatically upon filing to the court the documents set out in section 398(1), without the court’s order.

### Judicial management

Under section 411 read together with section 410 of the CA 2016, the moratorium applies automatically from the filing until the disposal of the judicial management application and also while the judicial management order is in force.

## Duration of the moratorium

### Scheme of arrangement

Under section 368(2) of the CA 2016, the Court may grant a restraining order to a company for a period of not more than three months, and the Court may, on the application of the company, extend this period for not more than nine months.

### Corporate voluntary arrangement

Under paragraph 3 of the Eighth Schedule of the CA 2016, the moratorium shall remain in force for twenty-eight days. The period may be extended for up to a maximum of sixty days counted from the commencement of the moratorium, subject to consent given by the nominee and members of the company, and obtaining a 75% majority in value of creditors who are present and voting either in person or by proxy at the meeting.

### Judicial management

Under section 406(1) of the CA 2016, a JM order remains in force for six months from the date it is made, unless the judicial management is otherwise discharged. The court may, on the application of the judicial manager, extend that period on such terms as it thinks fit. Following the Companies (Amendment) Act 2024, that extension is no longer capped at one further period of six months — the duration is now a matter for the court’s discretion.

## Can the directors continue to operate the business?

### Scheme of arrangement and corporate voluntary arrangement

There are no provisions prohibiting the directors from continuing the operation of the business and creating further indebtedness.

### Judicial management

Under section 411(1) of the CA 2016, upon the appointment of a judicial manager, any receiver or receiver and manager shall vacate the office and any winding-up application shall be dismissed.

Under section 405(3) of the CA 2016, the powers conferred and duties imposed on the board of the directors shall be exercised by the judicial manager upon his or her appointment.

The Ninth Schedule of the CA 2016 lists the powers of a judicial manager, which include the power to borrow money and the power to carry on the business of the company.

## Disposal of the company’s assets

### Scheme of arrangement

Under section 368(4) of the CA 2016, unless the court orders otherwise, any disposition of the property of the company made after the grant of the restraining order by the court shall be void.

### Corporate voluntary arrangement

Under paragraph 17 of the Eighth Schedule of the CA 2016, no legal proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied against the company or its property, except with leave of court.

### Judicial management

Under section 426(2) of the CA 2016, a transfer or assignment of the company’s property to a trustee for the benefit of all its creditors shall be void.

Under section 410 of the CA 2016, during the period beginning with the making of an application for a judicial management order and ending with the making of such an order or the dismissal of the application, no other proceedings and no execution or other legal process shall be commenced or continued and no distress may be levied against the company or its property except with leave of the Court and subject to such terms as the Court may impose.

Under section 411(4) of the CA 2016, upon the making of a judicial management order, no other proceedings and no execution or other legal process shall be commenced or continued and no distress may be levied against the company or its property except with the consent of the judicial manager or with the leave of the Court and, if the Court grants leave, subject to such terms as the Court may impose.

## Approval from creditors and members

### Scheme of arrangement

Under section 366(3) of the CA 2016, the compromise or arrangement shall be binding if it is agreed by a majority of seventy-five per centum of the total value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting or the adjourned meeting, and has been approved by order of the Court.

### Corporate voluntary arrangement

Section 400(2) of the CA 2016 requires 75% of the total value of the creditors present and voting at the meeting, either in person or by proxy, to approve a proposal for a CVA.

Under section 400(4) of the CA 2016, a meeting summoned under section 399 shall not approve any proposal which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the secured creditor concerned.

Section 400(3) of the CA 2016 requires a simple majority to pass a resolution to approve the proposal for a CVA in a meeting of members.

### Judicial management

Under section 421(2) of the CA 2016, the proposal shall be approved by 75% of the total value of creditors whose claims have been accepted by the judicial manager, present and voting at the meeting either in person or by proxy.

## Modification of the proposal

### Scheme of arrangement

Under section 366(4) of the CA 2016, the court may make alterations or conditions to a compromise or arrangement as the Court thinks just.

### Corporate voluntary arrangement

Under section 400(6) of the CA 2016, a modification in respect of the proposal shall not be allowed to be made in any of the meetings under section 399.

### Judicial management

Under section 421(2) of the CA 2016, the proposal may be approved with modifications, subject to the consent of the judicial manager to each modification.

## Binding effect of the proposal

### Scheme of arrangement

Under section 366(3) of the CA 2016, the compromise or arrangement shall be binding on:

1. all the creditors or class of creditors;

2. the members or class of members;

3. the company; or

4. the liquidator and contributories, if the company is being wound up.

### Corporate voluntary arrangement

Under section 400(5) of the CA 2016, the proposed voluntary arrangement shall take effect and be binding on all creditors of the company, whether or not the creditors have voted in favour of the proposal.

### Judicial management

Under section 421(3) of the CA 2016, the proposal, with or without modifications, shall be binding on all creditors of the company, whether or not the creditors have voted in favour of the proposal.

## The requirement of fairness by the court

### Scheme of arrangement

In relation to schemes of arrangement, although the CA 2016 does not contain any provision in relation to the fairness of a scheme or arrangement, the case of *Sham Chin Yen & Ors v Mansion Properties Sdn Bhd* illustrates that:

> The court is not a mere rubber stamp and it will look at the arrangement to ensure that it is a reasonable one. If the court concludes that there is an objection to the arrangement, such that a reasonable person might not approve it, then the court may refuse to approve the arrangement. The court must be satisfied that the proposal is at least so fair and reasonable that an intelligent and honest person who is a member of the class of the security holders bound by the arrangement, acting alone in respect of his or her interest as such security holder, might approve it.

### Corporate voluntary arrangement

There are no provisions in the CA 2016 that subject a CVA to the requirement of fairness.

### Judicial management

Section 425 of the CA 2016 allows creditors to apply to the court for an order if the company’s affairs, business and property are being managed in a manner that is unfairly prejudicial to the interest of the creditors.

## Related reading

- [Corporate rescue, receivership, winding up and schemes in Malaysia](https://www.cecolaw.com/corporate-rescue-receivership-winding-up-schemes-malaysia/)

- [The law of undue preference in Malaysia](https://www.cecolaw.com/the-law-of-undue-preference-in-malaysia/)

- [When a share transfer is void in a winding up in Malaysia](https://www.cecolaw.com/share-transfer-void-winding-up-malaysia/)

*For an overview of how we advise companies in financial distress, see our [corporate restructuring and insolvency practice](https://www.cecolaw.com/restructuring-insolvency-lawyer-malaysia/).*

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This commentary is general in nature and is not legal advice.
Ching, Elaine & Co, a boutique corporate law firm in Malaysia — https://www.cecolaw.com/ · info@cecolaw.com · +60 3-7664 2141