Malaysia’s Bankruptcy Act 1967 is the next piece of legislation in line for an overhaul. The Bankruptcy (Amendment) Bill 2016 was tabled in Parliament on 21 November 2016.

In addition to a new name (the Bankruptcy Act 1967 will be renamed the Insolvency Act 1967 once the amendments are passed), some notable key changes are:

  • Threshold for commencement of bankruptcy  proceedings will be raised from RM30,000 to RM50,000


  • Automatic discharge of bankruptcy after 3 years where certain conditions are made. Currently, there is no automatic discharge of bankruptcy in Malaysia – a bankrupt has to apply for a discharge, and can do so only after 5 years


  • No bankruptcy proceedings can be brought against a social guarantor, that is, a person who provides not-for-profit guarantees for loans, scholarships, education and research grants, hire-purchase transaction for non-business use, or housing loans for personal dwelling.


  • Even for other non-social guarantors, permission from court must be obtained to commence bankruptcy proceedings and the creditor must show the Court that he has exhausted all modes of execution and enforcement to recover from the principal debtor.


  • Introduction of the “voluntary arrangement”, a pre-bankruptcy rescue mechanism – the debtor can appoint a nominee, and attempt to obtain the approval of its creditors (more than 50% of the creditors, or those holding at least 75% in value) for the proposed arrangement, before he is adjudged a bankrupt.


What are the takeaways from this development?

Although it is unclear how long it will take for the amendments to be passed and the new Act to come into force, clients should nonetheless keep the proposed changes in mind in assessing their own credit evaluation and risk mitigation procedures.


CCLC Disputes and Litigation represents clients in all stages of a dispute from pre-Court negotiations, to filing an action in court and conducting the matter all the way through to trial and final judgment. We also assist in execution proceedings, and provide general advisory. Our team is ready to be of service to you.