Malaysia Passes Cross-Border Insolvency Law 2025

New law empowers Malaysian creditors to recover debts from insolvent companies across ASEAN. Learn how it boosts cross-border debt collection.

Malaysia Passes Cross-Border Insolvency Law to Boost Debt Recovery Across ASEAN

Effective debt recovery just got a major upgrade. In a significant development for creditors and investors, Malaysia’s Dewan Rakyat has passed the Cross-Border Insolvency Bill 2025, allowing local creditors to pursue debts from insolvent companies across ASEAN more effectively.

This new legislation aligns with the UNCITRAL Model Law on Cross-Border Insolvency, creating a modern, transparent legal framework for handling cross-border debt collection cases.

What This Means for Creditors and Debt Recovery

According to Minister in the Prime Minister’s Department (Law and Institutional Reform), Datuk Seri Azalina Othman Said, the bill aims to:

• Strengthen Malaysia’s insolvency system

• Build investor confidence

• Facilitate the recovery of cross-border debts

This is especially good news for Malaysian creditors chasing unpaid debts from companies that operate in multiple countries.

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High Court Gets Greater Power to Protect National Interests

While the law enables cross-border recovery, it also includes protections. Under sub-clause 5(2), the Malaysian High Court may refuse recognition of foreign insolvency proceedings if they threaten:

• National security

• Economic stability

• Capital markets

• Consumer confidence

• Public interest

This ensures that debt collection efforts remain aligned with Malaysia’s national priorities.

Implementation and Stakeholder Training Underway

To enforce the new law smoothly, the government has begun:

• Amending the Rules of Court 2012

• Providing training for legal stakeholders

• Conducting special training sessions for High Court judges in civil and commercial matters, in partnership with the Malaysian Judicial Academy

  
  

How the New Insolvency Law Helps with Cross-Border Debt Collection

Here’s what creditors need to know:

• If a Malaysian company has branches overseas, those branches can now be held liable for debts.

• If a foreign company owes debts but operates in Malaysia, its Malaysian branches can be targeted in insolvency actions.

• This creates a clear path for enforcing debt recovery across borders — a game-changer for businesses with international dealings.

  
  

Why This Matters to Creditors and Debt Collection Professionals

This law empowers creditors, collection agencies, and legal professionals to recover debts that were previously difficult or impossible to claim across jurisdictions.

If you're a business facing unpaid invoices from companies with foreign branches, this law opens new legal channels for enforcement — especially within ASEAN countries like Singapore, Thailand, Indonesia, and Vietnam.