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On 14 April 2025, The Edge Malaysia<\/span><\/a> published our piece on why Malaysia should adopt the UNCITRAL Model Law on Cross-Border Insolvency<\/span><\/a>. I reproduce the article below.<\/p>\n As capital and commerce increasingly flow across borders, legal systems must adapt to manage financial distress on a global scale. Malaysia has steadily modernised its corporate rescue regime \u2014 strengthening its judicial management and corporate voluntary arrangement framework, improving schemes of arrangement, and adopting US Chapter 11 features such as super priority rescue financing.<\/p>\n Now, Malaysia is poised for its next major reform. In February 2025<\/span><\/a>, the Minister in the Prime Minister\u2019s Department (Law and Institutional Reform), Datuk Seri Azalina Othman Said, announced that Malaysia intends to adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.<\/p>\n This sends a strong message: Malaysia is open for cross-border business, aligned with global best practices, and committed to protecting all stakeholders in restructuring scenarios.<\/p>\n Adopted by UNCITRAL in 1997, the Model Law provides a harmonised legal framework for handling insolvency and restructuring cases involving assets, creditors or legal proceedings across multiple jurisdictions.<\/p>\n It enables a foreign insolvency representative \u2014 such as a liquidator or judicial manager \u2014 \u00a0to apply for recognition of a foreign proceeding in the domestic courts. Upon recognition, the courts may grant a stay or moratorium on proceedings in the local jurisdiction, provide relief to preserve or recover assets, and coordinate effectively with foreign courts.<\/p>\n Over 60 jurisdictions<\/span><\/a> have adopted the Model Law, including the US, the UK, Australia, Japan, South Korea, and Singapore.<\/p>\n Consider this scenario: New Frontier Ltd, a UK-based artificial intelligence company, is placed under administration due to financial distress. Similar to Malaysia\u2019s judicial management, administration involves appointing an administrator to oversee the company\u2019s operations, with the goal of rescuing the business.<\/p>\n New Frontier\u2019s core assets and creditors are in the UK. However, it also holds substantial assets in Malaysia\u2014a large data centre, bank accounts, and trade receivables. It also owes debts to Malaysian banks, local employees, and contractors.<\/p>\n Under the Model Law, the UK-appointed administrator could apply to the Malaysian courts for recognition of the UK administration. The Malaysian courts could grant orders to:<\/p>\n Without the Model Law, the New Frontier administrator would face a far more uncertain path. The administrator would need to rely on untested or limited common law principles to seek similar assistance from the Malaysian courts. These efforts may not succeed or may result in delays and fragmented outcomes. New Frontier might be forced to withdraw from Malaysia or engage in piecemeal litigation, undermining value for all stakeholders.<\/p>\n The Model Law changes this. It offers a transparent, efficient, and internationally accepted mechanism for dealing with cross-border insolvencies.<\/p>\n Adopting the Model Law is not a one-size-fits-all exercise. Its drafting and implementation in Malaysia will require careful calibration to take into account local interests.<\/p>\n Take the New Frontier example. Malaysian banks with secured interests over the data centre or receivables will want clarity on how their rights are preserved. Employees and other preferential creditors need assurance that their debts are not sidelined by a foreign restructuring.<\/p>\n Any transfer or repatriation of New Frontier\u2019s Malaysian assets to another jurisdiction should be subject to Malaysian court supervision. The courts must retain oversight to ensure local creditors are treated fairly.<\/p>\n Ultimately, under the Model Law, the courts act as the important gatekeeper\u2014 deciding on recognition of foreign proceedings, granting relief, balancing the interests of creditors, and determining when asset repatriation is appropriate.<\/p>\n Fortunately, the Model Law already contains built-in safeguards such as the public policy exception and the requirement for adequate protection of creditors. Malaysia can incorporate these protections while tailoring the law to our domestic legal and economic landscape.<\/p>\n Cross-border insolvencies are complex. Without a clear legal framework, they can become fragmented and result in value destruction. Creditors in one country may race for assets while restructuring efforts in another country attempt to preserve value.<\/p>\n The Model Law promotes legal certainty, coordination and efficiency, all of which are vital for investor confidence.<\/p>\n Critically, it does not disadvantage Malaysian creditors. Instead, it brings them into a structured court-supervised process, reducing the risk of fragmented litigation and conflicting outcomes.<\/p>\n For business with global operations, like New Frontier Ltd, the Model Law allows continuity, preserving jobs, operations and long-term investments.<\/p>\n Insolvency law may not grab the headlines, but it quietly underpins economic stability and investor confidence. It determines whether a business failure leads to value preservation or value destruction.<\/p>\n Malaysia\u2019s move to adopt the Model Law is more than a legal reform. It is a strategic investment in the country\u2019s ability to attract and manage cross-border capital.<\/p>\n As ASEAN Chair, Malaysia can lead by example in promoting legal harmonisation across the region. The Model Law aligns with this ambition, fostering greater cooperation in managing cross-border business distress.<\/p>\n In a world where capital is global, legal certainty is essential. By adopting the Model Law, Malaysia takes a bold step into a new frontier \u2013 one of clarity, confidence and cross-border collaboration.<\/p>\n Lee Shih<\/span><\/a> and Nathalie Ker<\/span><\/a> are restructuring and insolvency partners of the law firm Lim Chee Wee Partnership.<\/em><\/p>\n On 14 April 2025, The Edge Malaysia published our piece on why Malaysia should adopt the UNCITRAL Model Law on Cross-Border Insolvency. I reproduce the article below. Case for Malaysia to Adopt Model Law on Cross-Border Insolvency As capital and commerce increasingly flow across borders, legal systems must adapt to manage financial distress on a […]<\/p>\n","protected":false},"author":1,"featured_media":7042446,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[14036,415,134899,134900,158367,158368,17182,26168,56379,56381,12685,204875,56382,204876,18235,15831,1168,158370,204877],"dealstore":[],"offerexpiration":[],"class_list":["post-7042445","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","tag-adopt","tag-case","tag-companies-act-2016","tag-corporate-rescue","tag-corporate-rescue-mechanism","tag-cross-border-insolvency","tag-crossborder","tag-insolvency","tag-judicial-management","tag-judicial-manager","tag-law","tag-lcwp","tag-lee-shih","tag-lim-chee-wee-partnership","tag-liquidation","tag-malaysia","tag-model","tag-model-law-on-cross-border-insolvency","tag-nathalie-ker"],"yoast_head":"\nCase for Malaysia to Adopt Model Law on Cross-Border Insolvency<\/h3>\n
Understanding the Model Law<\/h3>\n
How It Works: A Hypothetical Example<\/h3>\n
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Tailoring the Model Law to Malaysia<\/h3>\n
What the Model Law Means for Malaysian Business<\/h3>\n
Conclusion<\/h3>\n
Related<\/em><\/h3>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"