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Resolving Insolvency in

Malaysia

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Malaysia to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 81.3
    Proceeding BizBank can initiate receivership proceeding by applying to the Court to appoint an identified receiver to enforce its security interest as the debenture holder. Bizbank in the meantime does not have to fund the operation while the Receivers and Managers could go out to look for interested buyers with the objective of disposing the hotel as a going concern hence 100% recovery to Bizbank. It will result in a higher recovery for BizBank through sale of the business as a going concern receivership
    Outcome Selling the hotel as a going concern will fetch better value than selling its assets piecemeal. Therefore the appointed Receiver and Manager has no reason not to sell the hotel as a going concern. going concern
    Time (in years) The in court receivership procedure until BizBank is repaid some or all of the money owed will take approximate 1 year. 1.0
    Cost (% of estate) The costs associated with the case would amount to approximately 10% of the value of the debtor's estate. Main components of the cost include Receiver and Manager fees and small portion for attorneys' fees. 10.0
    Answer Score
    Strength of insolvency framework index (0-16) 6.0
    Commencement of proceedings index (0-3) 2.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may file for liquidation only 0.5
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor may file for liquidation only 0.5
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 2.0
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? No 0.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? No 0.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? No 0.0
    Does the insolvency framework assign priority to post-commencement credit? (c) No priority is assigned to post-commencement creditors 0.0
    Reorganization proceedings index (0-3) 0.0
    Which creditors vote on the proposed reorganization plan? N/A 0.0
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 2.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? Yes 1.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? No 0.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? Yes 1.0