Written by Anis Hadirah
The much-anticipated Cross-Border Insolvency Bill (‘the Bill’) was officially passed by the Dewan Rakyat on 29 July 2025, marking a milestone in Malaysia’s legal and commercial development. After an engaged debate involving Members of Parliament from both sides of the political aisle, the Bill received broad support for its potential to modernise the way Malaysia handles cross-border financial disputes.
For years, Malaysia operated without a specific legal structure to handle cases of insolvency or bankruptcy that crossed international boundaries. In these circumstances, when determining whether to recognise a foreign bankruptcy judgement, courts mostly depended on informal collaboration and mutual understanding with foreign courts. This unofficial system frequently led to ambiguity. While jurisdictional issues were being resolved, court procedures were delayed, especially in cases involving corporate restructuring or winding up. Additionally, the lack of explicit regulations made it simpler for company assets to be moved or hidden during the process.
By introducing the Cross-Border Insolvency Bill, Malaysia seeks to close these gaps and provide a clear, structured mechanism to manage insolvency cases involving multiple jurisdictions. Ultimately, the Bill strengthens Malaysia’s position in the global financial arena and ensures that cross-border insolvency matters are resolved with greater clarity, fairness, and efficiency.
The Cross-Border Insolvency Bill introduces a clear legal framework to help Malaysian courts handle insolvency cases that stretch across international boundaries. It provides structured procedures for foreign creditors and representatives to take part in local proceedings and empowers Malaysian courts to recognise and grant relief in connection with foreign bankruptcy cases.
More importantly, the Bill promotes cooperation between Malaysian and foreign courts, ensuring that multi-jurisdictional cases can be managed in a coordinated and efficient manner. Its provisions reflect the principles of the UNCITRAL Model Law on Cross-Border Insolvency, an international benchmark designed to promote transparency, fairness, and effectiveness in handling cross-border insolvency matters.
Key Highlights
Several important sections in the Bill set out how it will work in practice:
Section 3(2)
The Bill does not apply to individuals, sole proprietors in Sabah and Sarawak, limited liability partnerships (LLPs) (both local and foreign), and other 17 categories listed in Part 1 of the Schedule.
Sections 5(2) & 7
The courts have full discretion to reject or refuse recognition of any foreign insolvency proceedings if they threaten Malaysia’s public interest, economic stability, capital markets, national security, consumer confidence, or public policy.
Section 8
Clarifies that Malaysian courts and insolvency officers are not restricted from assisting foreign representatives, as long as such assistance complies with local laws.
Section 17
Requires the courts to recognise foreign proceedings as quickly as possible, helping avoid unnecessary delays.
Section 19
Allows the court to grant urgent temporary relief to foreign representatives while waiting for their recognition application to be decided. This ensures that the debtor’s property or creditors’ interests are protected from being misused or dissipated.
Significance
The passage of the Cross-Border Insolvency Bill marks a major advancement for Malaysia’s legal and business landscape. In an increasingly globalised economy, many companies operate across borders and hold assets in multiple jurisdictions. The absence of clear cross-border insolvency laws has long created uncertainty, often leading to delays and complications for both creditors and debtors.
By enacting this Bill, Malaysia aligns itself with numerous other jurisdictions that have adopted the UNCITRAL Model Law, signalling the nation’s commitment to managing international commercial disputes with greater efficiency and transparency. Beyond protecting the rights of creditors, the Bill enhances business confidence and strengthens Malaysia’s reputation as a reliable and secure destination for trade and investment.
A copy of the Cross-Border Insolvency Bill can be accessed here and a copy of the UNCITRAL Model Law on Cross-Border Insolvency can be accessed here.
Published on 27 October 2025