MALAYSIA Law and Practice Contributed by: Shelina Razaly Wahi and Vincent Chan Siew Onn, Abdullah Chan & Co
2.9.3 Co-Ordination, Recognition or Relief in Connection With Overseas Proceedings There is no provision under the Companies Act 2016 for cross-border assistance or co-operation relating to Malaysian insolvency proceedings with a foreign dimension. Malaysia has not incorporated the UNCI - TRAL Model Law on Cross-Border Insolvency into domestic legislation. 2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney The Malaysian courts have held that if a power of attorney has not been revoked, its validity is not affected by any insolvency or bankruptcy. 2.9.5 Other Effects of a Lessee’s Insolvency If the liquidator determines that the lease is an “unprof - itable contract” then the liquidator may, with leave of the court or the committee of inspection, disclaim such contracts, at any time within 12 months after the commencement of the winding-up or such extended period as is allowed by the court. Malaysia made a declaration under the Aircraft Pro - tocol, that it shall apply Article XI, Alternative A of the Protocol in its entirety to all types of insolvency pro - ceedings, and that the waiting period for the purposes of Article XI(3) of that Alternative shall be 40 working days. This is subject to whatever commercial terms may be reflected in the lease. Assets that are subject to a lease are not deemed part of the lessee’s property so long as the owner of the asset is able to evidence their/its rights of ownership over the asset. If the lessor’s rights are secured (eg, where there is a registered charge or mortgage), then the lessor will have priority over unsecured creditors, to the extent of their security interests. 2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent In insolvency proceedings, secured creditors will have priority over unsecured creditors to the extent of their security interests. If a lender’s rights against a bor - rower, a guarantor or an entity providing security are
not registered accordingly, then other secured credi - tors will have priority over the lender. 2.9.7 Imposition of Moratoria in Connection With Insolvency Proceedings There is no automatic moratorium or similar stay for insolvency proceedings. However, the corporate res - cue mechanisms may permit moratorium periods if the applicable conditions are met: • scheme of arrangement – up to three months, with an extension up to nine months; • corporate voluntary arrangement – 28 days, with extension up to 60 days; and • judicial management – up to six months, with extension for another six months. 2.9.8 Liquidation of Domestic Lessees A domestic lessee may be liquidated via a compulsory or voluntary winding-up. Please refer to 2.9.2 Over- view of Relevant Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership . In a receivership, an insolvency practitioner is appoint - ed as a receiver, or as a receiver and manager, by a secured creditor under the terms of a security docu - ment, usually a debenture containing a fixed or float - ing charge or both. 2.9.9 Ipso Facto Defaults Ipso facto defaults are recognised during insolvency proceedings, to the extent the right to repossess on such ipso facto default is specifically provided for. 2.9.10 Impact of Domestic Lessees’ Winding-Up There is no impact on the aircraft per se if a domestic lessee is wound up. However, a mortgagee or lessor can technically repossess an aircraft by exercising their respective enforcement powers in the mortgage/ lease. A liquidator may disclaim the lease contract on the basis of it being an “unprofitable contract”. In the case of AirAsia X Berhad v BOC Aviation Lim- ited and 14 Others [2021] 1 LNS 188, the High Court declared, inter alia, that lessors are unsecured credi -
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