MALAYSIA Law and Practice Contributed by: Shelina Razaly Wahi and Vincent Chan Siew Onn, Abdullah Chan & Co
• a creditors’ voluntary winding-up – when the com - pany is insolvent and the liquidator is appointed by the creditors at a creditors’ meeting. There are three corporate restructuring mechanisms: • a scheme of arrangement; • a corporate voluntary arrangement; and Any company or a creditor of a company, and a liqui - dator if a company is in the process of being wound up, and a judicial manager if a company is in judi - cial management, may initiate a scheme of arrange - ment. The applicant seeks an order of court to con - vene meetings of the members and various classes of creditors of the company. The voting threshold to achieve agreement to the terms of a scheme is 75% of the total value of creditors or class of creditors and members, or class of members present and voting at the court-convened class meeting. • a judicial management. Scheme of Arrangement The court may grant restraining orders of an initial period of three months, which may be renewed for a period of up to a further nine months. While a restrain - ing order is in force, the company is not permitted to dispose of any property or to acquire any new prop - erty other than in the ordinary course of its business, and if it does, the disposition or acquisition will be void. Corporate Voluntary Arrangement The Corporate voluntary arrangement (CVA) is only available to private companies, excluding companies that are holders of licences issued under the Financial Services Act 2016 (FSA 2016) and the Capital Markets and Services Act 2007 (CMSA 2007), and a company that has created a charge of its assets. A company under judicial management may make a CVA proposal through the judicial manager. A liquidator of a com - pany under liquidation may also make a proposal. The CVA process starts with the appointment of a nomi - nee, who must be a licensed insolvency practitioner. It is a requirement that the proposed CVA and a state - ment of affairs must be submitted to the nominee. The nominee is required to monitor the company’s affairs during the moratorium and to form an opinion as to
whether the proposed arrangement has a reasonable prospect of being approved and implemented, and whether the company will have sufficient funds dur - ing the moratorium to enable it to carry on business. Judicial Management Either the company or a creditor may make an applica - tion for the appointment of a judicial manager. Besides inability to pay debts, the applicant must show that there is a reasonable probability of preserving all or part of the company as a going concern, and that the interests of creditors would be better served than with a winding-up. A debenture holder may object to the application, and if it signals that it intends to appoint a receiver, or receiver and manager, the court must dismiss the application unless public interest requires that the court should override the debenture holder’s objection. The appointment of a judicial manager displaces the directors. The judicial manager manages the business and must within 60 days (which can be extended by the court) present a proposal to the creditors of the company. The judicial manager has to summon a meeting of creditors to consider and vote on the pro - posal. The voting threshold is 75% in value of credi - tors whose claims have been accepted by the judicial manager. Any proposal that is approved is binding on all creditors. The judicial manager oversees the implementation of the proposal. If a proposal is not approved at the creditor meeting, the court would nor - mally discharge the judicial management order, and either receivership or liquidation would occur. Receivership Receivership involves debenture holders appointing a receiver to realise company’s assets in their inter - est. It is not concerned with the economic viability of the company; the focus is on getting the debt back as soon as possible. The right to appoint a receiver is usually derived from a debenture, save where the court makes an order for such appointment. Howev - er, courts are only able to appoint receivers pursuant to applications of the aggrieved parties. The right to appoint a receiver is not a cause of action and cannot stand on its own.
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