Introduction
The Cross-Border Insolvency Bill 2025 (“Bill“) passed its first reading on 28 July 2025 in the Dewan Rakyat. The Bill has since passed its second and third reading in the Dewan Rakyat on 29 July 2025. The legislation aims to align Malaysia with the UNCITRAL Model Law on Cross-Border Insolvency (“Model Law“), establishing a clear legal framework for managing multi-jurisdictional corporate insolvency cases.
Background and Legislative Intent
On 21 April 2025, Datuk Seri Azalina Othman Said, Minister in the Prime Minister’s Department (Law and Institutional Reform), announced that the Government intended to introduce legislation modelled on the Model Law during the current Parliamentary session. The proposed law is aimed at facilitating the enforcement and recovery of debts, and the winding-up of insolvent companies with assets and liabilities across jurisdictions. It will also support the rehabilitation of local companies undergoing corporate rescue mechanisms.
The introduction of the Bill marks a significant step forward in aligning Malaysia’s insolvency framework with international best practices. By adopting the Model Law, the Bill establishes a robust legal mechanism for cooperation between Malaysian courts and courts in foreign jurisdictions in insolvency matters, enhancing transparency, predictability, and fairness in cross-border insolvency proceedings.
Key Features and Implications for Malaysia
The framework set out under the Bill promotes collaboration between courts, insolvency practitioners, and regulators across borders, ensuring smoother coordination in complex multi-jurisdictional insolvency cases. The framework ensures fair and efficient administration of insolvency cases, safeguarding the rights of creditors, debtors, and other stakeholders. By enabling timely recognition of foreign proceedings and access to local courts, the law helps preserve the value of distressed businesses and assets and promotes restructuring efforts that can save jobs and investments. Businesses and investors will benefit from greater clarity and consistency in how cross-border insolvency cases are handled, reducing legal risks and fostering confidence in Malaysia’s financial and legal systems. This legislation will strengthen Malaysia’s position as a competitive and reliable hub for international trade and investment.
Next Steps
Please feel free to reach out to our team set out on this page should you wish to discuss the potential implications of this legislative development for your organisation or operations.
Contribution Note
This Legal Update is contributed by the listed Contact Partners.
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