THERE are currently three corporate rescue mechanisms (CRMs) under The Companies Act 2016 (CA 2016), intended to help struggling businesses restructure and recover in Malaysia:
Scheme of Arrangement (SOA) A court-supervised compromise or arrangement between a company and its creditors or members, mainly used by insolvent entities. A scheme that is approved by at least 75% in value of creditors and sanctioned by the court is binding on all the scheme creditors. Where required, companies may seek relief from legal actions via a moratorium and a restraining order.
Judicial Management A court-driven rescue procedure for companies unable or likely to become unable to pay their debts. Typically initiated upon application by companies, the court appoints an independent Judicial Manager (JM) who assumes control over the management of the company’s affairs, business, and property. There is an automatic moratorium upon an application being made, and a formal moratorium once a JM is appointed. The JM formulates a proposal which is binding on all creditors, upon being approved by at least 75% in value of creditors.
