Malaysia’s Cross-Border Insolvency Bill 101: A Practical Guide

Introduction

Malaysia’s Cross-Border Insolvency Bill 2025 (“Bill“) marks a significant advancement in aligning the country’s insolvency framework with international standards. By adopting the UNCITRAL Model Law on Cross-Border Insolvency (“Model Law“), Malaysia aims to enhance legal certainty and facilitate cooperation in cross-border insolvency matters. The Model Law is intended to address cases of insolvency involving assets and creditors located in more than one country, with the aim of encouraging collaboration and consistency between jurisdictions. We previously reported the passing of the Bill in our July 2025 Legal Update titled “Cross-Border Insolvency Bill Passed in Parliament – Malaysia Moves Toward Adoption of the UNCITRAL Model Law“. 

This Update outlines the key features of the Bill and examines how case law from other jurisdictions may influence Malaysian courts’ interpretation of the Bill once it becomes law. 

Understanding Centre of Main Interests (“COMI”)

In any discussion of the Model Law, the concept of COMI is central. It refers to the jurisdiction where the debtor primarily conducts its business and is most easily identifiable by creditors. COMI determines whether a foreign insolvency proceeding qualifies as a foreign main proceeding, which has important implications for recognition and relief that may be granted by the courts. 

How COMI is Determined

Courts generally start with the presumption that a debtor’s COMI is at its registered office. In Re Fullerton Capital Ltd (In Liquidation) [2025] SGCA 11, the Singapore Court of Appeal clarified that this presumption may be rebutted by identifying a more appropriate jurisdiction and showing the debtor’s stronger connection to it. It is not enough to simply show a lack of ties to the registered office. The COMI is assessed at the time of the recognition application, and the burden of proof lies with the party challenging the presumption. The decision offers a clear and practical framework that Malaysian courts may find useful when applying the forthcoming cross-border insolvency regime.

Key Features of the Bill

1. Scope of Application

The Bill applies exclusively to corporate debtors, excluding individuals and limited liability partnerships. This mirrors Singapore’s approach under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA).

The Bill includes important carveouts that limit when the law can be used. These carveouts are similar to those found in the UK and Singapore, where certain types of proceedings are excluded to protect the role of financial regulators. In Malaysia, the Bill does not apply to cases started under laws enforced by Bank Negara Malaysia, the Securities Commission, or the Malaysia Deposit Insurance Corporation. These regulators have powers under their own laws to investigate and take action against companies, and the new insolvency law cannot be used to pause or interfere with those proceedings.

2. Recognition of Foreign Proceedings

Foreign proceedings may be recognised as either main or non-main proceedings which in turn affects the reliefs that may be granted. Recognition of a foreign main proceeding triggers automatic reliefs such as a stay on creditor actions, whereas recognition of a non-main proceeding allows the court to grant discretionary reliefs, for example permitting a foreign representative to examine witnesses or access information related to the debtor’s local operations.

3. Public Policy Exception

Malaysia adopts a lower threshold for the public policy exception by omitting the term “manifestly”, which appears in the original Model Law provision allowing refusal of recognition only if it would be “manifestly contrary to public policy”. By removing this qualifier, Malaysia – like Singapore – grants courts broader discretion to deny recognition of foreign insolvency proceedings. This approach was illustrated in Re Zetta Jet Pte Ltd and others [2018] 4 SLR 801, where the Singapore High Court refused recognition of a foreign officeholder appointed in breach of a Singapore injunction, finding that recognition would undermine the administration of justice and condone non-compliance with local court orders. Ultimately, however, the scope and application of the public policy exception will vary from one jurisdiction to another, reflecting each country’s legal values and priorities.

4. Protection of Local Creditors

Malaysia enhances creditor protection beyond the Model Law by requiring certification that local debts are accounted for before asset transfers abroad. Clause 21(3) of the Bill mandates that foreign representatives certify or guarantee that debts owed to local creditors up to a defined threshold amount have been deducted from the assets or funds sought to be transferred. This reflects the principles seen in Akers v Deputy Commissioner of Taxation [2014] FCAFC 57, where the Australian Federal Court held that leave for assets within the local jurisdiction to be turned over to the foreign main proceeding should be granted only where the Court is satisfied that the interests of local creditors are adequately protected.

5. No Reciprocity Requirement

Malaysia does not require reciprocal recognition of foreign proceedings, making it more accessible for foreign representatives. This follows the stance taken by leading common law jurisdictions and aligns with international best practices.

Conclusion

The Bill positions Malaysia as a forward-looking jurisdiction in international insolvency law. By drawing on Singapore’s experience and case law, Malaysian courts are well-placed to interpret and apply the new Act effectively. This development offers greater legal certainty and strategic advantages for businesses, financial institutions, and legal practitioners involved in cross-border insolvency.

Should you require further information or any advice on the above, please feel free to reach out to any member of our team.