The company law landscape in Malaysia has witnessed a significant change in its insolvency law with the adoption of two new corporate rescue mechanisms, the corporate voluntary arrangement and judicial management under the Companies Act 2016 (CA 2016), which has repealed the Companies Act 1965 (CA 1965). Previously, the insolvency laws under the CA 1965 were based on the traditional pro-creditor laws of winding up and receivership, which embodied the liquidation culture. This article examines the transition of the insolvency laws in Malaysia from a liquidation culture under the CA 1965 to a corporate rescue culture under the CA 2016. It also reviews the necessary changes to the pro-creditor laws, which are preserved under the CA 2016 in order to accommodate the pro-debtor laws with the introduction of the corporate rescue mechanisms, which came into force on March 1, 2018.Through comparative and critical analysis of similar laws in the United Kingdom and Singapore, this article argues that while the corporate rescue mechanisms are regarded as pro-debtor however the review reveals that the position of secured creditors are impeding its application and reforms ought to be considered.
The main features incorporated in the Schemes of Arrangement (SOA) in Malaysia under the Companies Act 2016 were designed over more than a century ago. For the first time, the company law framework has embraced corporate rescue laws with the introduction of two tailor-made corporate rescue mechanisms, Corporate Voluntary Arrangement and Judicial Management. This paper argues that the SOA, notwithstanding the presence of the corporate rescue mechanisms, may still be employed to achieve the objective of advancing corporate rescue for financially distressed private companies in Malaysia.
This paper aims to provide an examination of the theories that underpin corporate insolvency as developed in the US and the UK, and apply that to the two novel corporate rescue mechanisms; the corporate voluntary arrangement and judicial management, which are embedded in the Companies Act 2016 (CA 2016) of Malaysia. This paper adopted a doctrinal and theoretical approach to law. The tension in the corporate rescue mechanisms in the CA 2016 between creditors and other stakeholders of a company affected the objectives on corporate insolvency in Malaysia. This paper identified the theories that are reflected in the corporate rescue mechanisms in the CA 2016– a gap within the provisions which was left out in the process that ranged from consultancy and leading up to the drafting of the CA 2016. In addition, the objectives of introducing the corporate rescue mechanisms were identified. These findings may pave the way to reform the corporate rescue law in order to enhance its conformity with the objectives of corporate rescue in Malaysia. This in turn would facilitate the recovery of financially distressed companies and the minimisation of the loss of employment.
Purpose In response to the housing needs of its people, Malaysia has allowed private housing developer companies to build houses on a sell-then-build basis. Despite having legislation designed to protect the interests of purchasers, insolvent housing developers have left behind many uncompleted housing projects with their land charged to financial institutions. Consequently, the affected purchasers will lose their houses when those financial institutions foreclose on the land in the housing projects. In addition, those purchasers remain legally obligated to repay loans taken to finance their house purchase. The housing development laws lack provisions to rehabilitate abandoned housing projects. The purpose of this paper is to explore the viability of rescue mechanisms in the Companies Act 2016, being corporate voluntary arrangement (CVA), judicial management (JM) and schemes of arrangement (SOA), to aid in the rehabilitation of abandoned housing projects in Peninsular Malaysia. Design/methodology/approach Doctrinal research is adopted in this paper. Findings This research highlights the flexibility of the SOA as a tool to rehabilitate abandoned housing projects. This research also reveals the potential of CVA and in particular, JM with its “public interest” feature, as useful rehabilitation mechanisms once the proposed reforms are adopted. Originality/value The authors are hopeful that the suggested reforms will enhance the value of all three rescue mechanisms as rehabilitation tools for abandoned housing projects so as to alleviate the plight of house purchasers.
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