This article first appeared in The Edge Malaysia Weekly on April 27, 2026 - May 3, 2026

NOTICES of winding up petitions against companies have long been treated as obituaries — a sign that the business is insolvent and headed for shutdown. However, that is not necessarily the case as the current legal framework offers an avenue for troubled companies to “take a breather” and recalibrate.

The real risk is not just that businesses are not doing well, but that business owners wait too long to get help, according to Kumarakuru Jai Prakash Krishnan, managing partner of corporate recovery and restructuring at Baker Tilly Insolvency PLT.

“When people hear the word ‘insolvency’, many think of failure or collapse. That had always been the narrative, but it is no longer accurate today,” he tells The Edge in an exclusive interview.

Significant reforms have been undertaken under the Companies Act 2016 and subsequent enhancements under the Companies (Amendment) Act 2024, marking a continuing shift from a liquidation-driven approach to a more rescue-driven approach for distressed companies under the Malaysian insolvency framework.

“Today, the legal framework we have is effectively an economic tool — a mechanism to rescue companies using commercial solutions.

“Previously, it was straightforward — you owe me money, I wind you up. You owe the bank, a receiver steps in. Receivership is essentially an orderly asset realisation — dispose of assets quickly, repay the bank and exit. There is no genuine intention to rehabilitate,” he explains.

Today, under Malaysia’s insolvency framework, traditional insolvency tools like liquidation and receivership are available but there are also rescue mechanisms — scheme of arrangement (SOA) under Section 366, judicial management (JM) under Sections 403 to 430, and corporate voluntary arrangement (CVA) under Section 396.

JM is a court-supervised process where the judicial manager is accountable to the court, and significant decisions or actions during the restructuring require court consideration and approval.

CVA, on the other hand, is a lighter-touch, faster process, with less court supervision that allows a restructuring plan to be tabled quickly. Additionally, CVA is generally a cheaper alternative compared to other rescue mechanisms.

However, CVA prior to 2024 had a key limitation — it was not applicable to companies that had created a charge over their property. In reality, almost every business has some form of borrowing supported by collaterals, so this limited its use significantly.

Kumar highlights that Baker Tilly was involved in one of the first successful CVA cases in Malaysia — for bakery chain operator The Loaf.

“It was a challenging engagement given the relative novelty of the framework at the time, including the need to address practical implementation issues as certain prescribed forms and processes were still being finalised.”

The CVA was ultimately carried through on the strength of creditor support, with money owed to creditors being settled in full (dollar-for-dollar) under the proposal. Notably, the company had no bank borrowings or charged assets, which allowed the CVA mechanism to be utilised, which was quite uncommon for many small and medium enterprises (SMEs).

Nevertheless, with the Amendment Act 2024, some of the CVA’s limitations were addressed. It is now applicable to companies with secured creditors, making it more relevant as a quicker restructuring option.

Meanwhile, some of the restrictions on a JM were also lifted. Previously, it was not applicable to public-listed companies (PLCs). That restriction has now been removed, except for entities governed under the Capital Markets and Services Act 2007 (CMSA) and licensed financial institutions under Bank Negara Malaysia.

“This is important because PLCs are increasingly facing financial distress but previously had limited restructuring tools. Before the amendment, their primary option was an SOA, which also had its own limitations,” says Kumar.

Previously, a major drawback of the SOA was the absence of automatic protection for companies. When a company initiated an SOA, it did not immediately benefit from a moratorium. Instead, it had to apply separately for a restraining order.

“This lag meant that, once the court application was filed, the market and creditors became aware, and creditors could move to enforce their rights before protection was granted, putting significant pressure on the company and potentially undermining its restructuring efforts.

“However, under the Amendment Act 2024, this limitation has been addressed. Now, automatic protection is available — an interim moratorium is granted when the restraining order is applied for, providing immediate relief and safeguarding the restructuring process from premature creditor action,” Kumar elaborates.

In contrast, JM has since its inception provided an automatic interim moratorium of 60 days upon application.

“This gives immediate breathing space while the court considers the case. If the court is satisfied, the JM order is granted and the process continues,” he says.

Another key difference is control. The SOA is company-led and management remains in control, supported by external advisors. In comparison, the JM is practitioner-led and control is placed in the hands of the insolvency practitioner.

“SOA remains popular, alongside JM. These mechanisms are now largely applicable to PLCs, except for entities governed under the CMSA. This was clarified under the Amendment Act 2024.

“Previously, we could only restructure subsidiaries — for example, in the Scomi Group Bhd case, we worked on the subsidiaries but could not ‘touch’ the listed holding company. That created structural challenges,” says Kumar.

A key issue in Malaysia with corporate insolvency and restructuring is the stigma. According to him, there is still a perception that entering any of these processes means “game over”.

“But recovery dynamics have changed. A quick sale does not necessarily maximise value. In some cases, restructuring delivers better outcomes, especially when you consider the broader social impact — jobs, suppliers and tax revenues.

“We are seeing banks becoming more open-minded and taking more control of JM appointments. Baker Tilly Malaysia currently has some large, bank-led JM cases — but it took years of engagement to shift that mindset,” says Kumar.

Another challenge is timing. Companies tend to seek help too late, when value has already eroded.

“A simple principle applies — restructure if viable, liquidate if necessary. Both tools must exist. These tools are powerful, but they work best when companies act early — when distress first emerges. Transparency and early engagement with stakeholders are critical,” he says.

Historically, says Kumar, those who came forward were always the companies themselves, be they directors or shareholders.

“But when they come to us, it is usually at the tail end. By then, there is very little left to restructure because the value has already deteriorated, and negotiations become difficult,” he adds.

In recent times, however, there is greater maturity and understanding of these tools.

“Banks and creditors are now approaching us and saying, ‘Let’s not wind them up, let’s not appoint a receiver. There may still be value here — can we explore judicial management?’ That’s how we secured a number of recent mandates,” he says.

Kumar further says that previously, a company might have a single factory — if it defaulted, the factory would be sold and the proceeds would be recovered.

“Today, structures are far more complex. You have syndicated loans, cross-border assets, layered debt structures, shareholder disputes. For example, you may have land charged to one bank, while different plants and equipment on that land are financed by other banks.

“In liquidation, these would be sold piecemeal. But under a rescue framework, we can look at the business holistically, preserve operations and maintain it,” he says.

When a company is selling a functioning business rather than fragmented assets, the value is significantly higher.

“These tools give us that flexibility — although everything is still subject to court oversight, as this is a highly litigious space,” Kumar adds.

According to him, Baker Tilly’s approach in receivership is to assess first — not immediately dispose. If preserving the business enhances value, the firm will pursue that route upon obtaining consent from the debenture holder.

“Our objective is to maximise recovery for creditors — particularly unsecured creditors such as purchasers, suppliers and employees,” he says.

Corporate distress is typically not a sudden collapse but a gradual deterioration — a slow burn, says Kumar.

The key driver is cash-flow pressure. Ongoing trade tensions, including those linked to global geopolitical developments, have added strain. Many companies have also not fully recovered from the Covid-19 pandemic and have been depleting cash reserves.

Certain sectors were particularly affected — hospitality, tourism and property development. More recently, logistics may also come under pressure due to the US-Iran war.

That said, not all cases are due to external factors. There are also instances of mismanagement or governance issues.

“In the current environment, many companies are under pressure due to external factors rather than internal failings. Giving them a chance to restructure can lead to better outcomes for all parties.

“Of course, not every case is salvageable. Where recovery is not viable, we will advise accordingly and transition to liquidation or receivership.

“But at the very least, the process ensures that an attempt at rehabilitation has been made. And that, in itself, is important,” says Kumar.

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