Parliament has now tabled Malaysia’s long-awaited Cross Border Insolvency Bill 2025, marking a landmark step in the country’s insolvency reform.
With this move, Malaysia signals its adoption of the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) and joins more than 60 jurisdictions in implementing a harmonised framework for managing cross-border restructuring and insolvency proceedings.
I had earlier co-written an article on the case for Malaysia’s adoption of the Model Law.
This article outlines 10 key features of the Bill and its expected impact on Malaysia’s insolvency landscape.
#1: Applies to Corporate Debtors Only
The Bill applies to corporate debtors, defined as any body corporate formed, incorporated, or existing in or outside Malaysia.
The definition of “debtor” adopts the definition of “corporation” under section 3 of the Companies Act 2016, but excludes limited liability partnerships and foreign LLPs.
The Bill expressly excludes individuals and personal bankruptcy (Clause 3(2)(a) of the Bill), as well as certain business entities like sole proprietors and certain persons listed in Part I of the Schedule (dealt with further below under the carve-outs).
Given the definition of “debtor”, business trusts and REITs likely fall outside the scope of the Bill. This is similar to the approach in Re Tantleff, Alan [2022] SGHC 147 under Singapore’s Model Law framework.
#2: Definition of Foreign Proceedings
The Bill mirrors the Model Law in defining “foreign proceedings” as a “collective judicial or administrative proceedings in a foreign State, including interim proceedings, under the law relating to insolvency in which proceedings the property and affairs of the debtor are subject to control or supervision by a foreign court, for the purposes of reorganization or liquidation”,
Unlike Singapore’s Model Law, Malaysia does not use the wider phrase of “law relating to insolvency and the adjustment of debt”.
As a result, Malaysian courts will need to interpret whether non-insolvency restructurings fall within this definition. These proceedings may include foreign schemes of arrangement, solvent liquidations or just and equitable liquidations, or other forms of rehabilitation.
That said, the terms of “Malaysian insolvency law” and “Malaysian insolvency office-holder” in Clause 2(1) of the Bill adopt a wide definition to include voluntary winding up, corporate voluntary arrangement, judicial management, and schemes of arrangement.
Therefore, there is support for a similar wide reading for “foreign proceedings”.
#3: No Reciprocity Requirement
Malaysia has chosen not to impose a reciprocity requirement.
This liberal approach promotes international cooperation and enhances Malaysia’s accessibility as a venue for cross-border insolvency assistance.
#4: Carve-Outs and Regulatory Safeguards
The Bill includes two levels of carve-outs, set out in the Schedule of the Bill.
Part I of the Schedule sets out complete carve-outs.
The Bill shall not apply to any proceedings concerning any person specified in Part I of the Schedule. In summary:
- Certain licensed entities and institutions under the Financial Services Act 2013, the Islamic Financial Services Act 2013, the Development Financial Institutions Act 2002, and the Malaysia Deposit Insurance Corporation Act 2011.
- Any exchange holdings company and its subsidiaries as approved under the Capital Markets and Services Act 2007.
- The central depository as approved under the Securities Industry (Central Depositories) Act 1991.
- Licensed banks, insurers and various licensed entities under the Labuan Financial Services and Securities Act 2010 and the Labuan Islamic Financial Services and Securities Act 2010.
Part II of the Schedule provisions cater for certain limits. Even if the Bill applies, courts are prohibited from granting recognition or relief if doing so would interfere with certain regulatory measures issued by the Central Bank of Malaysia, the Securities Commission Malaysia, or the Labuan Financial Services Authority.
These carve-outs preserve regulatory oversight and financial stability.
#5: Recognition of Foreign Proceedings
A foreign representative may apply under Clause 15 (equivalent to Article 15 of the Model Law) for recognition of foreign proceedings, supported by specified documents.
A foreign representative is essentially a person or body authorised in foreign proceedings to administer the reorganization or liquidation of a debtor’s property or affairs.
If the foreign proceedings are recognised:
- The proceedings are categorised as foreign main or foreign non-main proceedings. (Clause 17(3) of the Bill).
- The foreign representative may apply for relief and engage with local proceedings (Clauses 17, 21, 24).
#6: Direct Access for Foreign Representatives
Foreign representatives have direct standing to apply to the Malaysian courts (Clause 9(1) of the Bill).
There is no need for diplomatic channels or letters of request, ensuring speed and efficiency in cross-border recognition and cooperation.
Foreign representatives may either apply in Court in person or apply through a Malaysian lawyer.
#7: Automatic Relief on Recognition of Foreign Main Proceedings
Where a proceeding is recognised as a foreign main proceeding (i.e. the debtor’s centre of main interests lies in that foreign jurisdiction), a form of automatic moratorium applies (Clause 20 of the Bill).
This includes:
- Stay of legal proceedings;
- Suspension of enforcement and asset transfers.
The scope of this stay mirrors a Malaysian winding-up (Clause 20(2) of the Bill) and includes carve-outs for secured creditors, hire-purchase rights, regulatory enforcement, and set-offs (Clause 20(3)–(4) of the Bill).
#8: Judicial Cooperation and Communication
The Bill empowers Malaysian courts to:
- Cooperate and communicate directly with foreign courts or representatives (Clause 25),
- Malaysian insolvency office-holders to do the same (Clause 26),
- Implement cooperation via appropriate means, including cross-border protocols (Clause 27).
These provisions are crucial for group insolvency cases and parallel proceedings across jurisdictions.
#9: Public Policy Safeguard
Malaysian courts may refuse recognition or relief if it is contrary to the public policy of Malaysia (Clause 7 of the Bill).
Malaysia has opted not to adopt the higher threshold of “manifestly contrary” used in the Model Law. This gives the Court wider discretion to guard against abuse or incompatible outcomes.
#10: Repatriation and Local Creditor Protection
Where a foreign representative seeks to transfer Malaysian assets abroad, the Bill has included certain express protections.
First, leave of court is required. The Court shall only grant leave if the Court is satisfied that the interests of creditors in Malaysia are adequately protected (Clause 21(2) of the Bill).
Second, the Court must be satisfied that there is a certification or guarantee confirming that the claims of Malaysian creditors, up to a prescribed threshold, have been met or provided for from the property proposed to be transferred out of Malaysia (Clause 21(3) of the Bill).
This provision appears aimed at protecting small-value Malaysian creditors by ensuring that local assets are first used to satisfy their claims. It seeks to strike a balance between facilitating cross-border asset transfers and safeguarding the interests of local creditors with modest claims.
Conclusion: A Modern, Harmonised Framework
Malaysia’s Cross-Border Insolvency Bill 2025 aligns with the Model Law while incorporating certain specific safeguards. It offers predictability and cooperation for cross-border debt resolution.
As the Bill moves through Parliament, it marks a pivotal development in Malaysia’s insolvency framework.
