Malaysia plans to implement the UNCITRAL Model Law on cross-border insolvency

Following Malaysia´s recent corporate rescue mechanism reform in 2024 through amendments to the Companies Act 2016, Malaysia has now established the Cross-Border Insolvency Working Committee to work on the adoption of the UNCITRAL Model Law on Cross-Border Insolvency and to propose a stand-alone draft law for cross-border insolvency in Malaysia.

The UNCITRAL Model Law serves as one of the underpinning policies of the insolvency law that promotes cooperation and coordination among jurisdictions to ensure the implementation of a single set of insolvency proceedings.

Currently, cross-border insolvency matters in Malaysia are dealt with on the basis of common law principles of recognition, leading to inconsistent and unpredictable outcomes, as well as costly and time-consuming applications to courts in the relevant jurisdictions.

Adopting the UNCITRAL Model Law would be able to provide greater legal certainty and predictability in cross-border insolvency matters in multiple jurisdictions that have similarly adopted the UNCITRAL Model Law. This would avoid the multitude of proceedings initiated in different jurisdictions, thus reducing costs and potentially inconsistent judgments and creditor disputes. Therefore, the UNCITRAL Model Law plays a critical role in facilitating liquidation proceedings under the Companies Act 2016 when a company's assets and liabilities are located in more than one country.

The plan to adopt the UNCITRAL Model Law is an important step towards creating a more predictable and transparent legal framework for cross-border insolvencies in Malaysia, complementing the government's strategy to implement sustainable and competitive economic transformation and attract high-quality investment. The draft of the new law is expected to be tabled in Parliament in June 2025, subject to cabinet approval.