# Corporate Rescue in Malaysia — Before You Close the Company

> The three statutory rescue mechanisms in the Companies Act 2016 — judicial management, schemes of arrangement and corporate voluntary arrangement — what each one restrains, who can veto it, and what the Companies (Amendment) Act 2024 changed.

- Category: business
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/business/corporate-rescue-malaysia

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Ask most Malaysian business content what to do about a company that cannot pay
its debts and you get one answer: close it. The Companies Act 2016 built an
entire Division for the other answer, and the Companies (Amendment) Act 2024
rebuilt large parts of it. Almost none of that reaches the pages founders
actually read.

The reason this matters is a single subsection. **Section 405(6): a judicial
management order shall not be made in relation to a company after the company has
gone into liquidation.** Rescue is a door that closes. Every week spent deciding
whether to wind up is a week spent walking towards it.

## The three mechanisms at a glance

| | Scheme of arrangement (ss.366–368) | Judicial management (ss.404–430) | Corporate voluntary arrangement (ss.395–402) |
| --- | --- | --- | --- |
| Who runs the company | Existing management | Court-appointed judicial manager | Existing directors, supervised by a nominee |
| Court involvement | Central — Court orders the meeting and approves | Central — Court makes the order | Minimal — filing and reporting only |
| Protection from creditors | Restraining order under s.368 | Automatic moratorium under s.411(4) | Moratorium under s.398 and the Eighth Schedule |
| Duration of protection | 3 months, extendable by 9 | 6 months, extendable | 28 days, extendable by 60 |
| Approval threshold | Court approval after the s.366 meeting | Creditors' meeting on the s.420 proposal | 75% by value of creditors, simple majority of members |
| Secured creditors | Bound only as the scheme provides | Restrained, but see s.409 | Cannot be affected without consent (s.400(4)) |
| Blocked by | — | Opposition by a secured creditor (s.409) | Regulated-entity exclusions in s.395 |

## Scheme of arrangement — the court-driven route

Section 366(1), as substituted by Act A1701, lets the Court order a meeting of
creditors or members on the application of the company, a creditor or class of
creditors, a member or class of members, **a liquidator where the company is
being wound up, or a judicial manager where it is under judicial management**.
The last two are new — a scheme is now expressly available inside a liquidation
or a judicial management, not only as an alternative to them.

New s.366(2A) requires every meeting ordered under s.366(1) to be **chaired by an
insolvency practitioner** appointed under s.367(3), or by a person elected by the
majority in value of the relevant class where none has been appointed.

Section 367 was substituted entirely. The Court **may** appoint an insolvency
practitioner to assess viability and table a report at the meeting, and **shall**
do so where the company applies under the new ss.368B, 368D or 369C, or a related
company applies under s.368A. That practitioner has a right of access to all the
company's records.

### The restraining order, and what changed

Section 368(1) now allows the Court to grant a restraining order for **not more
than three months**, with s.368(2) permitting an extension of **not more than
nine months**. That much survived the amendment.

Three things are new and consequential:

- **Automatic interim protection (s.368(1A)).** From the filing of the
  application until it is decided, or **two months** from filing, whichever is
  earlier, no winding-up order or resolution, no receiver appointment, no
  proceedings, no execution, no enforcement of security, no repossession under
  hire-purchase or retention-of-title, and no re-entry or forfeiture under a
  lease — each of the last four subject to leave of the Court. Previously the
  company was exposed during the gap between filing and hearing.
- **A menu, not a block grant (s.368(3A)).** The Court may include one or more of
  those same restraints in the order it eventually makes, rather than all of them
  automatically.
- **A twelve-month bar (s.368(3B)).** No restraining order may be granted if one
  was already granted to the company under s.368(1), s.368B, s.368D or s.369C, or
  to a **related company** under s.368A, within the preceding twelve months. Act
  A1701 added definitions of "related company" and "subject company" to s.365
  specifically to make that bar work across a group.

## Judicial management — and the veto everyone forgets

Section 404 lets the company **or a creditor** apply where the company is or will
be unable to pay its debts **and** there is a reasonable probability of
rehabilitating it, preserving all or part of the business as a going concern, or
otherwise serving creditors better than a winding up would. The Court may make
the order under s.405(1) if satisfied on inability to pay debts — using the s.466
definition — and that the order would likely achieve the survival of the company
or its undertaking, the approval of a s.366 compromise, or a more advantageous
realisation of assets. The order directs that the affairs, business and property
be **managed by a judicial manager** (s.405(3)).

Then s.409 does the damage. **The Court shall dismiss the application** if
satisfied that a receiver or receiver and manager has been or will be appointed,
**or that the making of the order is opposed by a secured creditor** — subject
only to s.405(5), which preserves the Court's power where the public interest so
requires. A single opposing debenture holder ends the application. Any realistic
judicial management plan starts with the secured lender, not the Court.

**Duration.** Section 406(1) as amended keeps the initial term at **six months**
from the date of the order, but replaces the old fixed single extension of
another six months with a power for the Court, on the judicial manager's
application, to **extend the period** subject to such terms as it imposes. The
judicial manager must notify all directors, members, creditors and anyone
entitled to appoint a receiver (s.406(2)), and notify the Registrar of the
application (s.406(3)).

**Effects.** From the making of the order, s.411(1) requires any receiver to
vacate office and any winding-up application to be dismissed. During the order,
s.411(4) bars winding up, receiver appointments, proceedings, execution, distress,
enforcement of security, repossession under hire-purchase or chattels leasing,
and share transfers, except with the judicial manager's consent or leave of the
Court. Act A1701 added s.411(5), letting a secured creditor — after notifying the
judicial manager — enforce security over **movable** property or repossess goods
where the judicial manager confirms they are not needed, where the order puts them
at high risk, or where their value is falling.

**The clocks.** Order to the Registrar and company within **7 days**, newspaper
notice in both languages, notice to known creditors within **30 days** (s.418(1)).
The company's statement of affairs within **14 days** of receiving the order,
extendable to no more than **60 days** (s.418(2)). The judicial manager's
statement of proposals to the Registrar and all creditors within **60 days**, laid
before a creditors' meeting on not less than 14 days' notice (s.420).

**Rescue financing.** New s.415A lets the Court grant super priority: rescue
financing paid immediately after the winding-up costs in s.527(1)(a),
notwithstanding s.527(1), or secured over unencumbered property or by a
subordinate security interest. It is what makes lending into a Malaysian judicial
management commercially thinkable.

## Corporate voluntary arrangement — light, fast, and narrower than it looks

A CVA is the closest thing Malaysia has to a debtor-in-possession restructuring.
The directors of a company that is neither in judicial management nor being wound
up may propose an arrangement to the company and its creditors (s.396(1)), and
the proposal must include the appointment of a **nominee** as trustee or
supervisor. A judicial manager or liquidator may also propose one under s.396(3).
The nominee opines under s.397(2) on whether the arrangement has a reasonable
prospect of approval and implementation, whether the company will have funds to
trade through the moratorium, and whether the meetings should be summoned.

**The moratorium starts on filing, not on an order.** Section 398(1) commences it
automatically from the time the company files the specified documents with the
Court — the terms, the statement of affairs, a statement of eligibility, the
nominee's consent and statement, and disclosure of any previous CVA attempts.

Its length is the catch. Under paragraph 3 of the Eighth Schedule the moratorium
runs **28 days**, extendable at a meeting — with the nominee's and members'
consent and a **75% majority in value of creditors** present and voting — by
**not more than 60 days**. Paragraph 17 bars winding-up petitions and resolutions,
judicial management applications, forfeiture by re-entry, new security,
repossession, proceedings, execution, distress and share transfers except with
leave.

**Approval.** Section 400(2) requires **75% of the total value of creditors
present and voting** in person or by proxy; s.400(3) requires only a simple
majority of members. Once approved, s.400(5) binds **all** creditors, whether or
not they voted in favour. But s.400(4) prevents any proposal that affects a
secured creditor's right to enforce, without that creditor's concurrence — and
s.400(6) forbids modifications at the meeting, so the proposal must be right
before it is tabled.

Act A1701 added s.398A, letting a secured creditor take possession of secured
**movable** property during the moratorium — with notice to and the consent of
the nominee — where it is not required for the arrangement, where the moratorium
puts it at high risk, or where its value is falling.

### The s.395 change, and the schedule nobody amended

Before 31 January 2025, s.395 excluded public companies, regulated financial
institutions, companies subject to the Capital Markets and Services Act 2007, and
— the killer — **any company which creates a charge over its property or any of
its undertaking**. Since virtually every trading Sdn Bhd with a bank facility has
registered a charge, the exclusion emptied the mechanism of most of its intended
users.

Act A1701 s.14 substituted s.395 with a much shorter list: Bank Negara licensed
institutions and designated payment system operators, entities approved,
registered, licensed or recognised under the specified Parts of the CMSA 2007,
and companies approved under Part II of the Securities Industry (Central
Depositories) Act 1991. The public-company and charge-creating exclusions are
gone. That provision commenced on **31 January 2025**, separately from the main
body of A1701, which commenced on **1 April 2024**.

**Here is the part no commentary mentions.** Paragraph 1 of the Eighth Schedule —
which governs eligibility for the **moratorium**, not for the arrangement itself —
still reads that a company is eligible if it is a private company, is not a Bank
Negara licensed institution or designated payment system operator, is not a
financial market institution under the CMSA 2007, **or** has not created a charge
over its property or any of its undertaking. Act A1701 does not amend the Eighth
Schedule anywhere. The moratorium is the only reason to use a CVA rather than a
private workout, so treat the availability of the moratorium to a charge-creating
or public company as an open question and take advice before filing.

## What else Act A1701 added

**Protection for essential goods and services (new Division 9, s.430A).** An
insolvency-related clause in a contract for the supply of essential goods and
services — a clause allowing automatic termination or variation merely because
the company enters a compromise, a voluntary arrangement or judicial management —
**cannot be exercised against the company**. A supplier who wants to preserve
those rights must communicate that intention in writing at least **30 days**
before exercising them. The supplier keeps every other right, including the right
to be paid. Essential goods and services are those specified in the new Ninth A
Schedule.

That provision quietly solves the oldest problem in Malaysian restructuring: the
utility or key supplier who terminates on day one and ends the rescue before it
starts.

## Common mistakes

- **Deciding to wind up before testing rescue.** Section 405(6) bars a judicial
  management order once the company is in liquidation, and s.396(1) excludes a
  company being wound up from proposing a CVA through its directors.
- **Filing for judicial management without speaking to the secured lender.**
  Section 409(b) makes the application fail on the lender's opposition alone.
- **Assuming the restraining order protects you from the day you file.** It now
  does, but only for **two months** and only under s.368(1A). If the application
  is not decided in that window, the protection lapses before the order arrives.
- **Applying again within twelve months.** Section 368(3B) bars a repeat, and it
  reaches related companies through the new s.365 definitions.
- **Reading a pre-2024 guide.** Anything written before 1 April 2024 describes a
  materially different Division 8, and anything written before 31 January 2025
  describes a CVA that excluded charge-creating companies.
- **Expecting a CVA to bind a secured creditor.** Section 400(4) does not permit
  it without that creditor's concurrence, however the vote goes.

## What's next

Establish two facts this week: whether a secured creditor will oppose, and how
long the company can trade. Those two answers select the mechanism far more
reliably than any comparison table. If the business is not viable and only the
shell remains, the correct pages are **creditors' voluntary winding up** where
the company cannot pay its debts, and **members' voluntary winding up** where it
can. And if you are a director still placing orders while this is being decided,
read the personal-liability section of the creditors' winding-up page first.

## Sources

- Companies Act 2016 (Act 777), reprint as at 1 August 2022, Part III Division 8 and the Eighth Schedule — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM)
- Companies (Amendment) Act 2024 (Act A1701) — https://www.ssm.com.my/Pages/Legal_Framework/Document/A1701%20BI.pdf (SSM)
- Frequently Asked Questions — Companies (Amendment) Act 2024 [Act A1701] — https://www.ssm.com.my/Pages/Legal_Framework/Document/FAQ%20CA%20(Amendment)%202024.pdf (SSM)

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