Making global companies pay up

The Star

29-07-2025

PUTRAJAYA: A cross-border insolvency legal framework will ensure that Malaysia is equipped to handle insolvency cases involving multiple countries, says the government.
The Legal Affairs Division (BHEUU) of the Prime Minister's Department said the Cross-Border Insolvency Bill 2025 aims to facilitate foreign access to Malaysian courts, recognise international proceedings and foster judicial cooperation.
Once passed, companies with debts to be paid will not only have its local entity be liable, but its foreign branches too.
The law would also apply to foreign companies in debt overseas but with branches in Malaysia.
Currently, companies can claim they are unable to pay their debts, despite having assets and cash in other countries.
The Bill was tabled for its first reading yesterday in the Dewan Rakyat by Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said.
BHEUU deputy director-general of the law reform section, Thiyagu Ganesan said that without a clear system, dealing with assets and creditors across borders can become messy, unfair and unpredictable.
'Most of the time, when disputes occur, companies would transfer their assets here and there. With such a law in place, business operators would know where to go to settle their disputes.
'Apart from allowing creditors to collect their dues, this law would also enable companies to preserve necessary assets to ensure continuity of businesses.
'In today's global economy, businesses often operate in many countries. This creates challenges when they face financial trouble.
'To ensure stability, to protect investors and handle business failures smoothly, a fair and efficient process is essential,' said Thiyagu.
The Bill, however, explicitly excludes individual bankruptcies, limited liability partnerships, non-commercial government-­related entities, and specific financial sector entities already governed by specialised regulations.
'There are safeguards for national interest assets, for example utilities or energy-related assets which may cause a shutdown of the country,' he added.
Thiyagu, who is also the Chair of the Cross-Border Insolvency Reform Working Committee, said that MPs from both government and opposition parties have been briefed and consulted prior to the tabling of the Bill.
He said that Malaysia felt the urgent need to reform its cross-border insolvency laws in line with international standards.
It is also proof of Malaysia's intentions to prioritise ease of doing business.
'The Bill is a mirror of the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency.
'Historically, Malaysia's framework relied on Common Law, leading to inconsistencies that this comprehensive statutory framework will address.
'This internationally recognised framework provides a clear, predictable and fair process for handling insolvency cases invol­ving multiple countries,' he added.
Thiyagu said the Bill is expected to bring significant benefits, including enhanced legal certainty through consistent rules, stronger international cooperation between Malaysian and foreign courts and insolvency representatives.
'This will reinforce creditor protection (for both domestic and international parties) and boost investor confidence.
'The streamlined processes will minimise cost and do away with inconsistent multi-jurisdictional proceedings.'
He said any conflicting provision shall be subject to prevailing Malaysian laws on corporate insolvency.
He added the High Court will be the central authority for all cross-­border insolvency matters.
The High Court will also have discretion to reject recognition or relief if it conflicts with Malaysia's 'public policy', a flexible concept left undefined to adapt to evolving national interests, security or fundamental legal principles.
'High Court permission will be mandatory before Malaysian assets of an insolvent company can be transferred to foreign jurisdictions.
'The Court will also have the discretion to allocate a portion of these assets for local creditors, particularly small and medium enterprises, for claims below a yet-to-be-determined threshold, acknowledging their vital role in Malaysia's economy.
'While initially focused on corporate insolvency, the law is intended to expand to individual insolvency in a phased approach, if it is needed,' said Thiyagu.
The Bill will undergo its second reading today.