With the recent passage of the Cross-Border Insolvency Bill 2025 through Parliament, Malaysia takes a bold step toward aligning its insolvency framework with international best practices. Upon being gazetted and once the Minister appoints the commencement date, the Cross-Border Insolvency Act will come into force, ushering in a comprehensive regime for dealing with cross-border insolvency. This development promises greater legal certainty for multinational businesses and foreign creditors, more efficient administration of restructuring and liquidation proceedings, and clearer collaboration between Malaysian courts and their overseas counterparts.
The new Act mirrors the UNCITRAL Model Law on Cross-Border Insolvency of 1997, yet tailors its approach to Malaysia’s legal landscape. The key aspects:
1. Foreign insolvency office-holders and creditors gain direct standing in the High Court of Malaya or Sabah and Sarawak. They may initiate or participate in Malaysian insolvency proceedings on equal footing with local counterparts, subject only to ranking rules under Malaysian law.
2. A structured application process allows a foreign representative to seek recognition of foreign main or non-main proceedings. Once recognized, relief such as a stay of local actions, stay of execution against property of the debtor and suspension of transfer or charge or disposal of debtor’s property shall be automatic pursuant to Section 20 of the Act.
3. From the filing of an application for recognition, the Court may issue provisional relief to safeguard at-risk assets under Section 19 of the Act such as staying any execution against property of the debtor, entrusting administration of property of debtor to the foreign representative to protect or preserve the value of the property.
4. The Act obliges Malaysian courts and insolvency office-holders to cooperate directly with foreign courts and representatives. This encompasses information sharing, joint case management, and coordination of concurrent proceedings to avoid conflicts or unnecessary duplication of effort.
5. Where foreign and Malaysian insolvency proceedings run in parallel, the Act confines local proceedings to assets within Malaysia unless broader cooperation is required. Courts can modify, extend, or set aside relief orders to ensure consistency across jurisdictions.
6. Financial institutions, capital-market entities, certain Labuan entities, and transactions vital to systemic stability are carved out or subject to prior approvals by agencies such as Bank Negara, the Securities Commission, or Labuan Financial Services Authority. A public policy exception allows the Court to refuse recognition or relief if it conflicts with fundamental Malaysian principles.
With the Cross-Border Insolvency Bill 2025 set to become law, corporations operating across multiple jurisdictions must recalibrate their risk, finance and governance strategies to harness the new framework and to guard against unintended exposure.
Mapping Centres of Main Interests and Establishments
Under the new Act, where a debtor’s “centre of main interests” (COMI) lies determines whether foreign proceedings qualify as main or non-main. Corporations must therefore document, at entity level, the precise location of their COMI and of each establishment where non-transitory economic activity occurs. This strategy mapping feeds directly into risk registers, restructuring playbooks and international insolvency filings. Without a clear COMI registry, recognition applications risk delays or challenges that could expose assets to creditor action in Malaysia. In the absence of any evidence to the contrary, the debtor’s place of registered office is presumed to be its COMI under Section 16(3) of the Act.
Embedding Early Warning Triggers in Finance Agreements
Lenders can now rely on statutory stays once proceedings are recognized as foreign main. From a debtor’s perspective, embedding cross-border triggers into loan covenants and bond documentation will help stop enforcement measures before they take root. Automated covenant-monitoring dashboards should flag any foreign main proceeding filings or recognition orders, ensuring treasury teams react promptly with evidence packages and certified translations. In this way, corporations turn the Act’s protections into proactive shields rather than reactive crisis-control measures.
Refining Governance and Global Restructuring Teams
The Act empowers foreign office-holders and, under certain carve-outs, even foreign creditors to participate directly in Malaysian insolvency processes. With foreign office-holders , overseas creditors potentially appearing unexpectedly, corporations must therefore recalibrate their internal escalation protocols to assign clear roles in cross-border distress scenarios. For instance, the playbook should specify who coordinates translations and certifications of foreign-court documents and which senior executives or in-house teams are alerted the moment a foreign representative seeks recognition in the Malaysia court to ensure no deadlines slip and no conflicting orders.
Setting up a global restructuring committee by bringing together country legal leads, finance directors and external advisers will further ensure a more seamless response by stress testing these protocols and running mock distress scenarios before any real crisis hits.
Harnessing Provisional and Protective Relief
One of the Act’s most powerful features is the availability of provisional relief from the moment an application for recognition is filed. Malaysian courts can stay execution against assets, enjoin transfers and even entrust perishable or high-value assets to foreign office-holders for safekeeping. Corporations must prepare sworn translation, certified COMI statements and asset valuation reports in advance to accelerate interim orders. A well-prepared application containing all necessary supporting documents ready can shield sensitive assets from devaluation or dissipation while the court considers the recognition request.
Navigating Regulatory Exceptions and Carve-Outs
While the Act offers broad cross-border remedies, it expressly excludes certain sectors and transactions. Financial-services affiliates, capital-market entities and specific Labuan vehicles fall outside its scope or require prior approvals from Bank Negara Malaysia, the Securities Commission or the Labuan Financial Services Authority. In practical terms, corporate compliance teams must overlay entity-level risk matrices with regulator-approval checklists. Early engagement with regulator-via pre-application briefs or umbrella notifications reduces the risk of insolvency-relief applications being stalled for want of regulatory sign-off.
Strengthening Stakeholder Communications
Transparency lies at the heart of modern restructuring. The Act mandates that known foreign creditors receive the same notifications as local creditors, including claim-filing deadlines and venues. Corporations should centralize creditor databases, confirm multilingual contact points and craft clear notices that comply with Malaysian procedural requirements. Real-time updates not only fulfil statutory duties but also bolster creditor confidence, reducing the likelihood of surprise objections or parallel filings in other jurisdictions.
Embedding Cross-border Insolvency into Corporate Playbooks
Making the provisions of the Cross-Border Insolvency Act 2025 work in a crisis requires more than ad-hoc responses. Corporations should integrate these new rules into their standard restructuring playbooks: updating governance charters, refining escalation triggers, mapping sector-specific carve-outs, and scheduling regular tabletop exercises. This continuous preparedness transforms the Act’s complexity into competitive advantage and allowing value preserving restructuring to proceed smoothly across borders.
Preparing for Concurrent Proceedings
The Act anticipates situations where Malaysian and foreign proceedings run in parallel. Local cases will be confined to assets in Malaysia unless broader coordination is needed. Boards and advisers must therefore maintain dual case-management trackers that align timelines, relief orders and evidence-gathering protocols. A harmonized concurrent proceeding will minimize duplication, avoid conflicting orders and ensure assets in each jurisdiction are administered under a coherent global plan.
As the Act takes effect, every corporation with cross-border footprints should treat these changes as a strategic imperative. Updating internal playbooks, training global restructuring teams and stress-testing processes today will definitely pay off when financial pressures intensify tomorrow. The era of seamless, value-focused cross-border insolvency in Malaysia has arrived and the winners will be those best prepared to navigate its new pathways.
About the authors
Tan Poh Yee
Senior Associate
Insolvency
Halim Hong & Quek
pohyee.tan@hhq.com.my
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