In the recent World Bank Doing Business 2019 report, Malaysia has improved its rankings from 24th up to 15th in the world. This confirms Malaysia’s place within the top-20 countries for business regulations and ease of doing business.
In particular, Malaysia has made significant improvement in one of the World Bank metrices, being Resolving Insolvency. As seen from the Doing Business 2016 – 2018 reports, Malaysia’s Resolving Insolvency rankings were between 45th and 46th. For the recent 2019 report, Malaysia has improved its global insolvency rankings to 41st position.
The World Bank Doing Business report commented that “Malaysia made resolving insolvency easier by introducing the reorganization procedure.” This led to Malaysia’s improvement in its insolvency ranking.
The reorganisation procedure is the corporate rescue mechanism under the Companies Act 2016. The corporate rescue has been long planned and was already incorporated in the Companies Act 2016 and eventually came into force on 1 March 2018. It allows companies to have reorganisation options through corporate voluntary arrangement and judicial management.
As Malaysia builds up its capabilities in corporate rescue, and continues to modernise its insolvency framework, it is hoped that we will see continued improvement in its World Bank global insolvency rankings. I think this will also require further fine-tuning of the existing laws and procedures.
As an example, with corporate voluntary arrangement (CVA), large swathes of companies are excluded from utilising the CVA mechanism. This is because any company that has created a charge over its property or undertaking will be excluded. That will exclude many financially distressed companies. Another example would be where judicial management cannot seemingly be utilised by public listed companies. That cuts off judicial management from being utilised by the larger companies.
- First Judicial Management Decision in Malaysia.
- Corporate Rescue Mechanism in force 1 March 2018.
- Malaysia’s New Corporate Rescue Laws: Borrower Gain, Lender Pain?