The
general concept between the Malaysian corporate voluntary arrangement and the
company voluntary arrangement in the United Kingdom does not differ widely from
one another. Bearing this in mind, one could not possibly rule out which serves
better in helping the companies which are facing a financial crisis. If we were
to look at things from a procedural point of view, the new Companies Act 2016
gives out the detailed procedure in applying for Corporate Voluntary
Arrangement.

The
concept of Corporate Voluntary Arrangement under the new Companies Act 2016 is
virtually quite similar to the scheme of arrangement mechanism which is
envisioned in the previous Companies Act 1965. The main contrast it has with
the old Companies Act 1965 is that the implementation of the debt restructuring
proposition shall be overlooked by a practitioner of insolvency and will not at
all times be under watch of the court1.

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Since
the Corporate Voluntary Arrangement scheme under the newly enacted Companies
Act 2016 is more or less based on the United Kingdom’s Company Voluntary
Arrangement under their Insolvency Act 1986, the argument is clear that these
two mechanisms are to be considered as equals and on par with one another
rather than to see them as two completely different mechanisms. However, in
terms of the two mechanisms from a procedural point of view, some differences,
though considered minor, ought to be noticed.

DIFFERENCES
IN PROCEDURE

The
first main difference that may be observed is the law which governs the
procedures to successfully execute a Corporate Voluntary Arrangement. The Act
which governs the said issue in Malaysia is the newly enacted Companies Act
2016 while in the United Kingdom; the matter is governed under their Insolvency
Act 1986. Though there is a new Bankruptcy (Amendment) Act 2017 introduced here
in Malaysia, there is no provision in the said Act for a Corporate Voluntary
Arrangement scheme. The entire matter and procedure related to a Corporate
Voluntary Arrangement here in Malaysia is well seated in the new Companies Act
2016 probably because it is a pre-bankruptcy related procedure in which still
does not fall within the new Bankruptcy Act 2017 and is still considered to be
governed by the companies themselves instead.

The
second difference that could be found between these two arrangements is the
person who may propose the arrangement. Section 396 of the new Companies Act
2016 of Malaysia states that the persons who may propose an arrangement
includes the judicial manager (for a company under judicial management), the
liquidator (for a company being wound up), and also the directors (for other
companies). On the other hand, section 1 of the Insolvency Act 1986 of the
United Kingdom states the persons to be the director, the administrator (where
there is an administration order), or the liquidator (for a company being wound
up)2.
The key difference lies with the judicial manager (Malaysia) and the
administrator (United Kingdom) though the circumstances in which these two
groups of persons may apply for the arrangement is quite similar.

The
third significant difference of the two arrangements comes in the form of the
moratoriums. In the new Companies Act 2016, section 398 which corresponds with
the eighth schedule rules out the eligibility of a company to apply for a
moratorium in which the companies which fall within subsection (1) and (2) are
eligible. On the other hand, the Insolvency Act 2000 of the United Kingdom
makes a moratorium completely optional. However, it is to be noted that only
companies falling within the meaning of ‘small companies’ are to qualify for a
moratorium3.

The
next difference between the two arrangements is the existence and availability of
a procedure to challenge the Corporate Voluntary Arrangement. Section 401(4) of
the Companies Act 2016 state that a creditor or any other person is
dissatisfied with the decisions made by the supervisor, the matter may be
brought to the court. Section 401(6) also gives the power to the court to
appoint another qualified person to substitute the existing supervisor. In the
United Kingdom, section 6 of their Insolvency Act 1986 stipulates that the
Company Voluntary Arrangement may be challenged by a person who is entitled to
vote at the meetings and the grounds for challenging the arrangement could be
because there’s been some substantial irregularity in relation to the meeting
of members or creditors or it is unfairly prejudicial4.
The key difference between the two is that section 401(6) does not specifically
state that it is a procedure to challenge the arrangement but rather to
complain on the supervisor’s misconduct.

RECOMMENDATIONS

Since
the two arrangements are quite similar in terms of its applicability, only
minor recommendations could be made to the Malaysian Corporate Voluntary Arrangement.
The first is for the introduction of a modification procedure to the
arrangement as there is no provision that allows one to do so in the Companies
Act 20165.

The
second recommendation that could be made is for the introduction of a method to
challenge the Corporate Voluntary Arrangement if it can be seen that it is
ineffective or prejudicial to the parties of the arrangement. The United
Kingdom’s Insolvency Act 1986 clearly provides its availability and method in
section 6 but in Malaysia, the new Companies Act 2016 does not specifically
provide for it.

1 Elaine
Yap, ‘Malaysia: Two New Corporate Rescue Mechanisms To Become Available In
Malaysia’ (Restructuring.bakermckenzie.com, 2018)

accessed 13 January 2018.

2
Lorraine Conway, ‘Briefing Paper Company Voluntary Arrangements’ (House of
Commons Library, 2015)


accessed 13 January 2018

3 ibid

4 ‘Insolvency
Act 1986’ (Legislation.gov.uk, 2018)
accessed 14
January 2018.

5 Wai
Meng Chan, Company Law In Malaysia (sweet & maxwell 2017) pg 411.