application is made and for the duration
of any judicial management order, a
moratorium will be in force to prevent
any winding up order or any other legal
proceedings against the company without
leave of court, including enforcement
proceedings by secured creditors. (A
moratorium is a period in which no legal
proceedings can be taken against the
company.)
The application for a judicial
management order will be allowed if
the company is or will be unable to pay
its debts and if there is a reasonable
probability of rehabilitating the company.
Secured creditors have the power
to apply for a judicial management
order and seek to proceed with the
appointment of a receiver or receiver and
manager, subject to the following:
to make a judicial management order
if public interest requires and, if
appropriate, to appoint an interim
judicial manager, and
from the time an application is made
for a judicial management order until
the grant or dismissal of the order.
its unsecured creditors for a voluntary
arrangement, and the implementation of
the debt restructuring proposal will be
supervised by an insolvency practitioner
with minimal court supervision.
The proposal for a corporate voluntary
arrangement has to be accompanied
by a statement of a nominee indicating
whether or not, in his or her opinion,
reasonable prospect of being approved
and implemented; whether the company
is likely to have sufficient funds
available for the company during the
proposed moratorium to enable the
company to carry on its business; and
whether a meeting of the company and
its creditors should be held to consider
the proposal.
The process of the Corporate
Voluntary Agreement commences once
the applicant has filed the proposal and
all the documents (as provided in Section
398 of Companies Act 2016) at the court,
whereupon a moratorium on actions by
creditors commences automatically.
Within 28 days of the commencement,
a meeting will be held among the
company's shareholders and creditors
to vote on the proposal. Approval of
a simple majority of the shareholders
and 75 percent of the total value of the
creditors must be obtained.
Once approved, the proposal becomes
binding on all creditors and members,
and the nominee or another insolvency
practitioner functions as the supervisor
of the voluntary arrangement to see to its
implementation.
However, by virtue of section 395 of
Companies Act 2016, this mechanism
does not apply to several types of
companies such as:
institution or an operator of a
designated payment system regulated
under the laws enforced by the
Central Bank of Malaysia;
Markets and Services Act 2007; and
over its property.
Management and Corporate Voluntary
Arrangement mechanisms are new moves
towards bringing Malaysia's insolvency
laws up to the same international
standards as many other countries in
the region. Both of the mechanisms are
likely to come into effect in 2018.