Insolvency Proceedings between foreign creditors & Malaysian corporate debtors

On 28th August 2026, the Cross-Border Insolvency Act 2026 (Act 877) officially came into force in Malaysia.

Why was this Act needed?

Based on the UNCITRAL Model Law on Cross-Border Insolvency, it creates a specific mechanism for handling insolvency proceedings involving debtors, assets, creditors, or proceedings in more than one jurisdiction. In short, this Act will improve the efficiency of managing cross-border insolvency cases.

Who does the Act apply to?

The Act applies to corporate debtors under the Companies Act 2016 and Labuan Companies Act 1990, including GLCs

The Act does NOT apply to individuals, regulated financial institutions (ie banks), Limited Liability Partnerships (LLPs), Sole proprietorships / businesses registered under Registration of Businesses Act 1956 or statutory bodies.

What this Act Means for Foreign Investors — In Short

There is now a clear procedure to protect your Malaysian assets.

• Direct access: As a foreign liquidator, you can go straight to the Malaysian High Court to get your foreign insolvency case recognised. You don't have to submit to full Malaysian jurisdiction.

• Fast decision: The court must decide your application at the earliest possible time.

• Automatic freeze: Once your main case is recognised, all lawsuits and enforcement against the debtor's Malaysian assets are automatically stopped. This stops local creditors from grabbing assets first.

• More help if needed: You can also ask the court to hand over Malaysian assets to you, or to order witnesses to be examined and evidence to be produced.

• Fair treatment: Foreign creditors are treated the same as local unsecured creditors.

• Limits to know:

o The court can refuse if it goes against Malaysian public policy.

o Scope of the Act is limited to Malaysian based assets only.

o Regulated entities like banks and insurers are excluded and need regulator approval.