6 Recent Developments in Restructuring and Insolvency: Malaysia Insolvency Conference 2023


The Malaysia Insolvency Conference 2023 was held on 21 June 2023 and it made a return to a physical setting after 3 years. We saw a record turnout of attendees from the restructuring and insolvency community. I spoke at a panel session titled ‘Landmark Cases: Sharing on Insolvency and Restructuring’ and spoke with fellow insolvency specialists.

I set out a selection of 6 key recent trends we discussed and prepared for the panel discussion. I have also supplemented some of the legal points with additional research I made.

#1:  Detailed Statement of Proposal and Proposed Judicial Manager’s Expert Views

There is this continuing debate. In an application for a judicial management order, whether there must already be a detailed statement of proposal or rescue plan, and whether the proposed judicial manager must tender an expert report or expert affidavit.

This point appears unique to Malaysia unlike judicial management in Singapore and administration in the UK. These requirements first emanated from the High Court decision in Re Biaxis (see this case update). A subsequent High Court decision in Re Federal Power (see this case update) appeared to water down such requirements.

More recent High Court decisions have swung back towards the Re Biaxis approach.

First, in Gigatech Engineering Sdn Bhd v Engreen Sdn Bhd [2022] MLJU 2822, the proposed judicial manager produced a preliminary judicial management proposal report. The Court appeared to examine in-depth and was critical of inadequacies in this report:

  1. “The Proposed Judicial Manager’s proposal does not show how the Applicant is able to survive or secure better returns for the creditors than if the company was left to be wound up.”

  2. “Applicant has not come up with a concrete viable scheme on how to improve the cash flow of the Applicant without new capital injection (White Knight injection) because all new businesses are still at the quotation stage.”

  3. “… the proposed judicial manager should have given his professional opinion on how his plan or proposal would achieve the purposes mentioned in paragraph 405(1 )(b) for this Honourable Court’s consideration.”

  4. “… the proposed judicial manager only provided a general projection statement by stating that in his opinion judicial management is the best option for the Applicant without even setting out the detailed reasons for him having to arrive to that conclusion. With respect, the such kind of open projection statement had seriously weakened the probative force of the Applicant’s case.”

  5. “I am of the considered view that the vague proposal provided by the Applicant on how it is working towards resolving their effort and resources on restructuring and rehabilitation of the Project is full of uncertainty and hence this Honourable Court will not grant the judicial management order as prayed for by the Applicant.”


Second, the decision of Pengangkutan UFO Sdn Bhd v Hap Seng Credit Sdn Bhd [2023] 5 CLJ 628 (grounds of judgment dated 31 January 2023). The High Court considered both the approach in Re Biaxis and Re Federal Power and preferred to adopt the stricter approach of Re Biaxis

Therefore, the High Court dismissed the judicial management application since there was no affidavit or expert report by the proposed judicial manager:

The court in considering whether the proposal is likely to achieve survival and/or better realisation, would similarly have to rely on the nominated JM’s expertise for guidance. His evidence is thus crucial to the application. In this case, there was already a proposed JM named in the application. However, the court did not see any affidavit or an expert report exhibited by the proposed JM and therefore, no satisfactory explanation on the rationale of the averments by the applicant and how it would achieve the goals. Without his expert opinion and verification of the material issues, and ultimately without his expert opinion that he considers the proposal is likely to achieve the goals (‘expert opinion’), there was nothing credible before the court for it to even consider that the proposal would be likely to achieve its goals.


Until the appellate courts have an opportunity to decide on this point, the weight of the first-instance decisions in Malaysia appears to tilt towards requiring a proposed judicial manager affidavit with an expert report, and with a detailed statement of proposal early on.

#2: Restraining Order in a Scheme of Arrangement – Beyond the 12 Months

Under the Companies Act 2016 (CA 2016), the duration of a moratorium in a scheme of arrangement i.e. a restraining order is confined to a total of 12 months (see the wording in section 368(2) of the CA 2016).

Nonetheless, the practice has emerged in Malaysia whereby a restraining order can be obtained beyond that 12 months. Once the initial 12 months expire, a second Court application for a restraining order can be filed (by way of a fresh Originating Summons).

The panel discussed that as long as full disclosure was made to the Court hearing the second Court application, it would then be for the Court to exercise its discretion on granting that fresh restraining order. With full disclosure, the Court can undertake the balancing exercise to see if the moratorium standstill was required in order to still advance a bona fide scheme of arrangement.

See for instance the scheme of arrangement involving the Sapura Energy Berhad Group. The Group of companies obtained its first 12-month restraining orders from 10 March 2022 to 10 March 2023. The Group of companies then obtained a fresh set of restraining orders commencing from 11 March 2023 (see Media Release dated 9 March 2023).

#3: Classification of Related Creditors in a Scheme of Arrangement – The Jury is Still Out

The classification of creditors in a scheme of arrangement is based on the legal rights of the creditors. However, related-party creditors may also be unsecured creditors. Can related-party unsecured creditors then still be in the same classification as unsecured creditors, and would their related-party votes be treated any differently?

The Court of Appeal in MDSA Resources Sdn Bhd v Adrian Sia Koon Leng [2023] 3 MLJ 341 (grounds of judgment dated 10 January 2023) essentially held that related-party creditors (even when unsecured creditors) could not be in the same class as other unsecured creditors. To do so would render the scheme unfair and therefore the Court of Appeal upheld the High Court’s decision to refuse to sanction the scheme of arrangement.

However, the jury is still out on this legal point. On 13 July 2022, the Federal Court granted leave to appeal against this Court of Appeal decision. Some of the questions of law to be determined by the Federal Court are:

“Whether the votes of related-party creditors are to be treated differently from the votes of other creditors in the same class in a scheme of arrangement.”

“If yes, whether the votes of related-party creditors in a scheme of arrangement should be discounted or not be counted altogether.”


The Federal Court concluded hearing the full appeal against the Court of Appeal decision. The Federal Court is due to deliver its decision soon.

#4: Liquidator Applying for Directions – When Is It Appropriate and Is It Appealable?

There have been recent appellate decisions touching on the area of the liquidator’s application for directions. The panel discussed when such an application for directions is appropriate and whether it is appealable.

The starting point is to look at the Federal Court decision in Ooi Woon Chee & Anor v Dato’ See Teow Chuan & Ors [2012] 2 MLJ 713. In the context of the liquidator’s directions from the winding up Court, the Federal Court touched on the situations where the liquidator may seek advice from the court. Where the directions were in the nature of advice, the order making the directions was non-appealable. In that light, once the High Court gave directions to the liquidator, that order could not be appealed against by any party to the Court of Appeal and beyond.

Second, the Court of Appeal decision of Equiticorp Holdings Ltd (In Statutory Management) v Mak Kum Choon & Ors [2020] 6 MLJ 1 (grounds of judgment dated 7 August 2019). The Court of Appeal held that the directions, in that case, were not in the true nature of directions of advice and guidance. It was in the form of final orders affecting the substantive rights of the affected parties. Therefore, such an order purporting to give ‘directions’ was indeed appealable. The Court of Appeal cautioned that the liquidator’s application for directions was not available nor was it suitable when under the guide of directions for general administration but when the application was, in reality, deciding on substantive questions against persons making proprietary claims adverse to the assets of the wound up company.

Third, a similar point was also made in the Court of Appeal decision in Portneka Sdn Bhd & Anor v Mitisa Holdings Sdn Bhd (In Liquidation) [2021] 5 MLJ 460 (grounds of judgment dated 12 July 2021). The Court of Appeal held that the directions order was appealable. The High Court had made findings that had affected the rights of parties and went into the substantive rights of the parties.

Fourth, the Federal Court decision in Tan Kim Chuan v Tan Kim Tian & Ors and another appeal [2022] 6 MLJ 888 (grounds of judgment dated 22 September 2022). While this application touched on the principles of the Ooi Woon Chee decision, an important distinction is that this decision deals with the principles where a creditor or contributory applies to the winding up Court with respect to any exercise or proposed exercise of the liquidator’s powers. Such an order made is indeed appealable.

#5: Liquidator Granting Sanction for a Party to Carry On Legal Proceedings on Behalf of the Wound Up Company

Next, the panel touched on the issue of whether a liquidator of a wound-up company can issue a sanction, or delegate to another person, the liquidator’s power to bring or defend any action or other legal proceedings in the name and on behalf of the wound-up company.

The High Court decision by Azlan Sulaiman JC in Small Medium Enterprise Development Bank Malaysia Berhad v Oren Venture Sdn Bhd & Ors and another case [2022] 12 MLJ 247 suggested that the liquidator does not have the ability to grant such a sanction. Ultimately, a creditor or contributory would have to apply to the winding up Court for an order. I touched on this decision in my earlier case update.

The same Judicial Commissioner Azlan Sulaiman then echoed similar principles in his decision of Small Medium Enterprise Development Bank Malaysia Bhd v Pekan Legasi Sdn Bhd & Ors [2022] 7 CLJ 139  (grounds of judgment dated 25 April 2022).

In contrast, the High Court in Ooi Kim Geik v Ng King Chong & Ors [2022] MLJU 3630 considered and did not follow the Oren Venture and Pekan Legasi cases. Instead, the Court held that the liquidator does have the power to issue a sanction. It appears the reasoning is that applying the Twelfth Schedule of the CA 2016, the liquidator “may bring or defend any action or other legal proceedings in the name and on behalf of the company” (Item (a) of Part I of the Twelfth Schedule) and also to “appoint an agent to do any business which the liquidator is unable to do” (Item (j) of Part I of the Twelfth Schedule).

#6: Estate Costs Rule – Liquidators Beware

Finally, the panel touched on the estate costs rule and its implications for liquidators in Malaysia.

The estate costs rule essentially is a common law rule of priority in the liquidation of companies. The rule provides that a successful litigant against a company in liquidation is entitled to be paid his costs in priority to the other general expenses of the liquidation, including the costs and remuneration of the liquidator. This rule applies in both the situation of where company in liquidation (under the control of the liquidator) brings or continues an action, and also where the company in liquidation (under the control of the liquidator) resists an action.

The estate costs rule was established in the 19th century and can be seen in the English cases such as In re Trent and Humber Ship-Building Company (1869) LR 8 Eq 94 and In re Home Investment Society (1880) 14 Ch D 167 and until the modern day.

With this long-established common law rule, I take the view that the estate costs rule is also part of Malaysia’s laws. I am not aware of the estate costs rule being litigated in Malaysia yet but by virtue of section 3 of the Civil Law Act 1956, Malaysia shall apply the common law of England and the rules of equity as administered on 7 April 1956.

Therefore, costs awarded to successful litigants need not be treated as a pure unsecured debt claim and within the proof of debt regime. That costs order enjoys a form of super priority over all other unsecured creditors, and even the liquidator’s own remuneration.

The second corollary that flows from the estate costs rule is the following situation. Where the liquidator allows for the distribution of proceeds from the company in liquidation and there is now insufficient assets to meet the costs order. The liquidator can then be made personally liable for that outstanding shortfall to satisfy the costs order.

There have been recent Singapore decisions dealing with the estate costs rule, explaining its history and rationale, and upholding the personal liability on the liquidators for any shortfall in meeting the estate costs rule. See the Singapore Court of Appeal decision in Ho Wing On Christopher and others v ECRC Land Pte Ltd (in liquidation) [2006] SGCA 25 and the Singapore High Court decision in Lim Siew Soo v Sembawang Engineers and Constructors Pte Ltd (in compulsory liquidation) [2021] SGHC 32.


Thank you to the organising committee and the professional bodies of the Malaysian Institute of Accountants, the Insolvency Practitioners Association of Malaysia and the Malaysian Institute of Certified Professional Accountants for having us on the panel. We thoroughly enjoyed sharing our perspectives and also keeping ourselves up to date. This is especially with the many questions posed to us at the end and where we could not go cover all the questions.


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