(a) Where a corporate borrower is in financial difficulty and an unsecured debt has become due, would it be usual or customary for an unsecured creditor (particularly, a bank creditor) and/or the corporate borrower to attempt to negotiate some suitable arrangement for repayment of the debt before the creditor invokes legal recovery methods?

 

It is more likely that an unsecured creditor might attempt to negotiate some form of arrangement for repayment of the debt before the unsecured creditor resorted to legal proceedings.

(a) What mechanisms are available under the legal system of this economy for unsecured creditors to collect debts owed to them by the corporate debtor?

 

The principal method of recovery of unsecured debt is through legal proceedings.

(b) In practice, which method(s) of recovery of unsecured debts are most commonly employed by unsecured creditors of a corporate debtor?

 

In practice, the method most employed by unsecured creditors is getting judgment for the debt and then executing on the judgment or winding up the corporate debtor.

E3. Effectiveness of judicial system

(a) How effective is the judicial and court system for the purposes of debt collection?

 

The judicial system is relatively effective for the purpose of enforcing secured property rights. The main qualification to the foregoing statement is the fact that there may at times be considerable delays in obtaining hearing or trial dates.

(a) What effect, if any, does the commencement of insolvency proceedings against a corporate debtor have on debt recovery proceedings?

 

Commencement per se of insolvency proceedings in a court would not affect the continuation of legal proceedings against the corporate debtor by the unsecured creditor (except for special administration as to which see below). However, execution of a judgment would not be possible without leave of court. Leave is unlikely to be given to an unsecured creditor as this would enable that creditor to steal a march, as it were, on the other creditors.

(b) What effect, if any, does the formal pronouncement of an insolvency administration in respect of the corporate debtor have on debt recovery proceedings?

 

There is no concept of formal court based insolvency administration in Malaysia. The effect of special administration under the Pengurusan Danaharta Nasional Berhad Act 1998 is considered in Section I below.