restraining order

Firing Up and Cooling Off the Restraining Order in Schemes of Arrangement

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The Companies (Amendment) Act 2024 came into force on 1 April 2024. With the amendments, we see a strengthening of the restructuring and corporate rescue laws of Malaysia.

Among the different corporate rescue tools, schemes of arrangement had already been the most-used mechanism in Malaysia. The scheme of arrangement allowed for the Court to grant moratorium protection known as the restraining order.

Here, I analyse the changes and challenges relating to the restraining order arising from the new amendments to the Companies Act 2016 (CA 2016).

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9 Key Restructuring Insolvency Changes in Malaysia’s Companies Amendment Bill 2023

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Malaysia’s Companies Amendment Bill 2023 has been tabled before Parliament’s House of Representatives (see Hansard for 10 October 2023). There will be a fuller Parliamentary debate towards the end of November 2023.

This article focuses on the 9 key restructuring and corporate rescue amendments.

All references below will be to the existing and proposed new sections in the Companies Act 2016 as referred to in the Companies Amendment Bill 2023.
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6 Recent Developments in Restructuring and Insolvency: Malaysia Insolvency Conference 2023

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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.

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Case Update: Restraining Order Requires Scheme With More than 50% of All Debts

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The High Court in Asiabio Capital Sdn Bhd v Seacera Group Bhd [2021] MLJU 2598 (grounds of judgment dated 3 November 2021) has emphasised the mandatory pre-conditions for the grant of a restraining order in a scheme of arrangement.

This short decision touches on the importance of showing that the proposed scheme of arrangement must involve more than half of the total debts of the debtor company.

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Case Update: Restraining Order Extended to Guarantor Company and Sanction of Scheme of Arrangement

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The High Court in the case of Re Sentoria Bina Sdn Bhd (grounds of judgment dated 9 July 2021) dealt with scheme of arrangement issues. First, that a restraining order could extend to the corporate guarantor of the applicant’s company. Second, the case dealt with the principles for sanction of a scheme of arrangement.

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Case Update: Scheme of Arrangement Principles for Proof of Debt and Leave to Proceed against Restraining Order

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The High Court in the decision of Top Builders Capital Berhad and two others [2021] 10 MLJ 327 (grounds of judgment dated 30 April 2021) set out certain important principles on scheme of arrangement law. The decision dived deep into issues on assessing the proof of debt for the creditors’ vote in a scheme and how to obtain leave to proceed against a restraining order.

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