MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
Scheme of Arrangement A scheme of arrangement is a court-ordered statu- tory mechanism that allows a company to restructure its debts, requiring the approval of 75% of the total value of creditors or members. Once sanctioned, the arrangement becomes binding on all creditors, all members, the company, or the liquidator, if the com- pany is being wound up. The company continues to retain management control in a scheme of arrange- ment. Judicial Management Judicial management is a court-supervised rescue plan that places the management of a company under a judicial manager appointed by the court. It is avail- able where the company is, or is likely to become, unable to pay its debts, and there is a reasonable prospect of rehabilitating the business, preserving it as a going concern, or achieving a better outcome for creditors than through winding-up. The judicial manager prepares and implements a workable pro- posal with the approval of 75% of the total value of the creditors. Corporate Voluntary Arrangement A corporate voluntary arrangement is a formal mecha- nism that enables a financially distressed company to propose an agreement with its creditors to restructure its debts and avoid insolvency, without requiring prior approval from the court. Management remains in con- trol, but the mechanism is supported by independent oversight from a nominee, who is often an insolvency practitioner. The directors or official receiver must pre- pare and submit the terms of the proposed voluntary arrangement and a statement of the company’s finan- cial affairs, which the nominee oversees. 7.5 Risk Areas for Lenders Undue Preference The Companies Act provides that a preference given to a creditor within six months prior to the commence- ment of winding-up may be set aside if it had the effect of granting that creditor a preference, priority or advantage over other creditors, unless the transfer or conveyance of the property was made for valuable consideration and without any actual notice of that undue preference.
Invalid Floating Charge A floating charge over a company’s assets, created within six months prior to the commencement of the winding-up, will be invalid unless it can be proved that the company was solvent immediately after the crea- tion of the charge. However, funds actually advanced to the company in consideration of the charge (and interest to the extent recognised in practice) are typi- cally protected. Inability to Recover Full Amount Lenders’ recoveries depend on asset realisations and ranking of claims among creditors; secured creditors may still face shortfalls if the proceeds are insufficient or if applicable statutory priorities affect the waterfall. Project finance in Malaysia continues to be a pre- ferred structure for capital-intensive developments. The most active sectors include energy transition (particularly solar and hydropower) and large-scale infrastructure projects. More recently, project financ- ing has expanded into digital infrastructure, including data centres and fibre optic networks. 8.2 Public-Private Partnership Transactions In Malaysia, public-private partnerships (PPPs) serve as a mechanism for the government and private sec- tor to jointly undertake and deliver projects related to public infrastructure. First introduced through the Malaysia Incorporated Policy and Privatisation Policy in the 1980s, PPPs are now facilitated by the Public Private Partnership Unit, Prime Minister’s Department, with guidelines and successive frameworks such as PPP 2.0 and PPP 3.0, and most recently, the Public- Private Partnership Master Plan 2030 (“PIKAS 2030”). PIKAS 2030 aims to: • increase private investment to MYR78 billion; • generate a GDP contribution of MYR83 billion; and • create 900,000 new employment opportunities by 2030. 8. Project Finance 8.1 Recent Project Finance Activity It introduces a refined PPP definition, new classifi- cations (concession, privatisation, alternative mode),
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