SSM National Insolvency Conference 2017 Session 1: The World Bank s Perspective on Debtors and Creditors Rights

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1 Session 1: The World Bank s Perspective on Debtors and Creditors Rights By: Nor Azimah Abdul Aziz Deputy CEO (Regulatory & Enforcement) Companies Commission of Malaysia

2 Source: MPC and PEMUDAH

3 Source: MPC and PEMUDAH

4 Source: MPC and PEMUDAH

5 Source: MPC and PEMUDAH

6 Source: MPC and PEMUDAH

7 STRENGTH OF INSOLVENCY FRAMEWORK INDEX (0-16) IN MALAYSIA AND COMPARATOR ECONOMIES Source: MPC and PEMUDAH

8 STRENGTH OF INSOLVENCY FRAMEWORK INDEX (0-16) IN MALAYSIA INDICES SCORES POTENTIAL SCORES UNDER NEW CA Commencement of proceedings (0-3) Management of debtor's assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) 2 3 TOTAL 6 14

9 WHAT DO THE INDICATORS ON THE STRENGTH OF THE INSOLVENCY FRAMEWORK MEASURE? INDICES SCORES POTENTIAL SCORES CA Commencement of proceedings (0-3) i. Whether debtors can initiate both liquidation and reorganization proceedings ii. Whether creditors can initiate both liquidation and reorganization proceedings iii. What standard is used for commencement of insolvency proceedings 2 3

10 WHAT DO THE INDICATORS ON THE STRENGTH OF THE INSOLVENCY FRAMEWORK MEASURE? INDICES SCORES POTENTIAL SCORES CA Management of debtor's assets index (0-6) i. Whether the debtor (or an insolvency representative on its behalf) can continue performing contracts essential to the debtor s survival. ii. Whether the debtor (or an insolvency representative on its behalf) can reject overly burdensome contracts. iii. Whether transactions entered into before commencement of insolvency proceedings that give preference to one or several creditors can be avoided after proceedings are initiated. 2 6

11 WHAT DO THE INDICATORS ON THE STRENGTH OF THE INSOLVENCY FRAMEWORK MEASURE? INDICES SCORES POTENTIAL SCORES 2 Management of debtor's assets index (0-6) iv. Whether undervalued transactions entered into before commencement of insolvency proceedings can be avoided after proceedings are initiated v. Whether the insolvency framework includes specific provisions that allow the debtor (or an insolvency representative on its behalf), after commencement of insolvency proceedings, to obtain financing necessary to function during the proceedings. vi. Whether post-commencement finance receives priority over ordinary unsecured creditors during distribution of assets. 2 6

12 WHAT DO THE INDICATORS ON THE STRENGTH OF THE INSOLVENCY FRAMEWORK MEASURE? INDICES SCORES POTENTIAL SCORES CA Reorganization proceedings index (0-3) i. Whether the reorganization plan is voted on only by the creditors whose rights are modified or affected by the plan. ii. Whether creditors entitled to vote on the plan are divided into classes, each class votes separately and the creditors within each class are treated equally. iii. Whether the insolvency framework requires that dissenting creditors receive as much under the reorganization plan as they would have received in liquidation. 0 2

13 WHAT DO THE INDICATORS ON THE STRENGTH OF THE INSOLVENCY FRAMEWORK MEASURE? INDICES SCORES POTENTIAL SCORES CA Creditor participation index (0-4) i. Whether creditors participate in the selection of an insolvency representative. ii. Whether creditors are required to approve the sale of substantial assets of the debtor in the course of insolvency proceedings. iii. Whether an individual creditor has the right to access financial information about the debtor during insolvency proceedings, either by requesting it from an insolvency representative or by reviewing the official records. iv. Whether an individual creditor can object to a decision of the court or of the insolvency representative to approve or reject claims against the debtor brought by the creditor itself and by other creditors. 2 3 TOTAL 6 14

14 Q & A