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Corporate Voluntary Management (cva) Moratorium in Malaysia

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A Corporate Voluntary Management (CVA) moratorium generally provides the company additional time to defer repayment and to carry on its business to facilitate the recovery from the debts owned, rather than to resort to liquidation immediately. CVA is useful to companies where time is needed to negotiate with its creditors or to find a reliable and dependable solution to save the company from being wound up.

With the introduction of CVA under the Companies Act 2016, the company now may enter into a binding compromise or arrangement with its creditors without the need for the compromise or arrangement to be approved by the court. The fundamental difference is that the implementation of the debt restructuring proposal will be assessed and monitored by an insolvency practitioner with minimal intervention from the courts. A moratorium on the action by the creditors will automatically commence from the time of filing of the proposal to the court by the applicant, who can either be directors of the company, the liquidator or a judicial manager. A meeting of the company and its creditors must be convened by the insolvency practitioner, who has agreed to act as the nominee.

This voluntary arrangement proposal requires the approval of 75% in value of the company’s creditors present and the voting at such meeting may be either in person or by an appointed representative which is the proxy, and a simple majority of the members of the company. Once the proposal is approved, the proposed voluntary arrangement will take effect and bind all the creditors of the company. Unlike in the present Scheme of Arrangement procedure, the Act requires a qualified insolvency practitioner which is known as the nominee, to conduct an initial assessment of the viability of the proposed CVA. Once the nominee has considered the proposed CVA, he will then submit to the directors a statement indicating whether or not in his opinion: a) The proposed CVA has reasonable prospect of being approved and implemented; b) The company has the probability to have enough funds available for it during the proposed moratorium to allow the company the company to proceed with its business; and) The meetings of the company and creditors should be summoned to take consider the proposed CVA. When the nominee provides a positive statement regarding the proposed CVA, the directory file to the court a document stating out the terms of the proposed CVA and other required documents. In contrast to the Judicial Management, the Act sets out the eligibility of the CVA moratorium which shall remain in force for a period of 28 days to 60 days from the time of filing of the required documents namely (the proposed voluntary arrangement, statement of company’s affairs, statement from the nominee) during which the company cannot wound up, a judicial manager cannot be assigned, no shares can be transferred etc.

In comparison with the Judicial Management, in CVA, the secured creditor may appoint a receiver to deal with its secured property during the moratorium. During the moratorium is in force, the nominee shall convene a meeting of the company and meeting of its creditors as he thinks fit. Thus, the implementation of the new corporate rescue mechanism provides more flexibility in dealing with debts while avoiding the probability of winding up. Similarly to the scheme of arrangement, CVA allows the director to propose such to its company and creditors. However, the implementation of the arrangement will be the responsibility of the nominee, who will either act as a trustee or otherwise for the purpose of supervising its application. In conclusion, the CVA is seemingly to be the best option for a company to opt for in the case of avoidance the inevitability of being wound up. The aforementioned are the ongoing efforts undertaken to recalibrate the insolvency law in Malaysia to be in line with the international standards.

Most importantly, the current reform has introduced new corporate rescue mechanism into the insolvency law in granting the directors more flexibility to deal with the company facing distress so that the company may still remain in business and to avoid being trapped in a winding-up scenario. In doing so, Malaysia’s new insolvency laws continue the international trend towards focusing on the preservation of value for the benefit of all stakeholders.

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Corporate Voluntary Arrangement. (2018, May 16). GradesFixer. Retrieved March 24, 2023, from
“Corporate Voluntary Arrangement.” GradesFixer, 16 May 2018,
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