Insolvency Law at Malaysia
In Malaysia, insolvency law is primarily governed by the Insolvency Act 1967 (Act 360), which provides the legal framework for both corporate and personal insolvency matters. The Act has undergone significant amendments through the Insolvency (Amendment) Act 2023, which came into force on October 6, 2023. These amendments aim to streamline bankruptcy procedures, enhance the welfare of bankrupt individuals, and expedite the discharge process. (The Amendments to the Insolvency Act 1967 (Act 360) – Sidek Teoh Wong & Dennis, Insolvency (Amendment) Act 2023 – Shook Lin & Bok)
🧾 Key Amendments in the Insolvency (Amendment) Act 2023
1. Automatic Discharge of Bankrupts
Shortened Discharge Period: Bankrupt individuals may now be automatically discharged within three to five years, contingent upon meeting specific conditions set by the Director General of Insolvency (DGI). (Insolvency Act amendment allows two new categories of bankrupts to qualify for discharge, says law minister - Selangor Journal)
Payment Conditions: The DGI has the discretion to determine the payment amount based on the bankrupt's financial capabilities, considering factors such as income and debt levels. (The Amendments to the Insolvency Act 1967 (Act 360) – Sidek Teoh Wong & Dennis)
Suspension of Discharge: The DGI can suspend the automatic discharge for up to two years if the bankrupt fails to comply with their obligations under the Act. (Insolvency (Amendment) Act 2023 – Shook Lin & Bok)
2. Expansion of Categories Eligible for Discharge
Two additional categories of bankrupt individuals are now eligible for discharge through a certificate from the DGI, without the need for creditors' objections: (Insolvency (Amendment) Act 2023 comes into force tomorrow)
Individuals with Mental Disorders: Those certified by a government psychiatrist as incapable of managing their affairs due to mental illness. (2 new groups qualify for bankruptcy discharge after amendment to Insolvency Act | MalaysiaNow)
Individuals Aged 70 and Above: Those deemed by the DGI as incapable of contributing to the administration of their estate. (Insolvency (Amendment) Act 2023 – Shook Lin & Bok)
These provisions apply retrospectively to bankrupts adjudged before the amendment came into effect. (How The Insolvency Act, 1967 Got A Makeover: A Brief Analysis On The Insolvency (Amendment) Act, 2023 And Its Implications | Thomas Philip Advocates and Solicitors, Kuala Lumpur, Malaysia)
3. Use of Remote Communication Technology
Electronic Service of Notices: Notices and documents can now be served electronically, provided the recipient consents. (How The Insolvency Act, 1967 Got A Makeover: A Brief Analysis On The Insolvency (Amendment) Act, 2023 And Its Implications | Thomas Philip Advocates and Solicitors, Kuala Lumpur, Malaysia)
Virtual Creditors' Meetings: Meetings may be conducted using remote communication technology, making them non-mandatory and more accessible. (How The Insolvency Act, 1967 Got A Makeover: A Brief Analysis On The Insolvency (Amendment) Act, 2023 And Its Implications | Thomas Philip Advocates and Solicitors, Kuala Lumpur, Malaysia)
4. Streamlining of Creditors' Meetings
The requirement for a mandatory first creditors' meeting has been removed. Meetings will now be held only upon request or if deemed necessary by the DGI, reducing administrative burdens. (Insolvency (Amendment) Act 2023 – Shook Lin & Bok)
🏛️ Administration and Enforcement
Director General of Insolvency (DGI): The DGI oversees the administration of bankrupt estates, ensuring compliance with the Act and facilitating the discharge process.
Retrospective Application: The amendments apply to bankruptcy cases managed before the enactment of the Insolvency (Amendment) Act 2023, aiming to benefit a significant number of individuals currently under bankruptcy. (Insolvency (Amendment) Act 2023 comes into force tomorrow)
📌 Summary of Key Changes
Amendment
Details
Automatic Discharge Period
Reduced to 3–5 years, based on financial capability.
Suspension of Discharge
DGI can suspend discharge for up to 2 years for non-compliance.
New Discharge Categories
Includes individuals with mental disorders and those aged 70 and above.
Remote Communication
Allows electronic service of notices and virtual creditors' meetings.
Creditors' Meetings
Made non-mandatory; held only upon request or necessity.
These reforms reflect Malaysia's commitment to modernizing its insolvency framework, balancing creditor interests with the welfare of bankrupt individuals. For more detailed information or specific inquiries, consulting with a legal professional specializing in Malaysian insolvency law is advisable.
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