All You Need to Know About Restructuring Businesses in Malaysia

Posted by We Corporate on April 27th, 2021

With the current economic climate in Malaysia, many Small Medium Enterprises (SMEs) have experienced a significant drop in income and many business owners are considering to wind up or close down the business entirely due to increasing pressure from creditors on outstanding payments and staff payroll commitments.

WeCorporate have outlined several methods to rescue a business (other than winding up) through our high level summary on the restructuring and corporate rescue options below.

In Malaysia, there are 6 key restructuring and corporate rescue options  contained in the Companies Act 2016 (CA 2016). We have outlined the 6 key options below in this article:
1. Corporate voluntary arrangement
2. Judicial Management
3. Scheme of Arrangement
4. Members voluntary winding up
5. Creditors voluntary winding up
6. Compulsory winding up

1. Corporate voluntary arrangement (“CVA”) (only For Private Companies with no Secured Debt)

CVA is a new corporate rescue mechanism made available under CA2016 and it is a quick out of court process. The process is as such:

• Initiated by the directors of the company who will make a proposal for CVA to the creditors, and to appoint a nominee to act as trustee/supervisor for the implementation of the CVA.
• Once the CVA is approved by the creditors, the nominee shall notify the Court and the company shall be able to implement the CVA.
• Upon filing of the application to the Court, the company is entitled to delay performing certain legal obligations or to delay payment for 28 days to 60 days (Moratorium period) subject to the consent of the nominee, shareholders of the company and 75% in value of the creditors.
• During the moratorium period, creditors do not have power to act against a company.

However, CVA only applies to private companies and does not extend to companies regulated under the purview of the Central Bank of Malaysia or the Capital Markets and Services Act 2007. Further, it is also not available to companies with secured debt (e.g. property or undertaking charged to creditors). As such, this limits the use of CVA amongst businesses in Malaysia.

Read more about restructuring and corporate rescue options for businesses in Malaysia on this WeCorporate blog.