Judicial Management in Malaysia: Are Unsecured Creditors left without a Voice?

29 October 2025

Introduction
 
Judicial Management (“JM”) is a corporate rescue mechanism provided under Division 8, Part III of the Companies Act 2016 (“CA 2016”) as well as the Companies (Corporate Rescue Mechanism) Rules 2018 (“CRM 2018’). It enables a financially distressed company to be placed under the temporary supervision of an independent professional, known as a judicial manager, who will be appointed by the Court.
 
The objective of JM is to provide the company some “breathing space” to reorganise its affairs, settle its debts, or formulate a viable plan for continued operations rather than proceeding directly to liquidation. Once a company is placed under judicial management: 

• the judicial manager assumes control of the company and exercises all powers and functions of the directors; 
• a statutory “moratorium” automatically comes into effect upon the filing of the application for JM, whereby no creditor can start or continue legal action, enforcement, or winding-up proceedings against the company without leave of the Court; and 
• the judicial manager will prepare a proposal detailing how the company’s business or assets may be preserved, restructured, or realised in a way that benefits all creditors. 

In short, JM is a temporary lifeline for companies facing financial distress. It is used as a rescue tool to prevent the immediate collapse of a company that could otherwise harm creditors, employees, and shareholders alike and to maximise value for all parties involved.
 
In practice, however, not all creditors are supportive of JM applications, particularly secured creditors who hold security over the company’s assets which can be realised to satisfy their outstanding debts. This is because a JM order imposes a moratorium that prohibits the enforcement or realisation of such assets without leave of the Court. Many unsecured creditors may also prefer liquidation as it may provide a quicker avenue for repayment. Some creditors are also concerned that the JM may delay recovery efforts, erode asset value during the moratorium period, or result in an uneven distribution of benefits among creditors. Consequently, applications for JM orders are frequently met with strong resistance from both secured and unsecured creditors.
 
Secured Creditor’s Right to Intervene and Oppose a JM Application
 
The right of a secured creditor to intervene and oppose a JM application is expressly recognised under both the CA 2016 and the CRM 2018: 

• Rule 13 of the CRM 2018 permits any person who has appointed, or is or may be entitled to appoint, a receiver or receiver and manager under Section 408(1)(b)(ii) of the CA 2016, or any secured creditor referred to in Section 409(b), to appear at the hearing of a JM application to oppose it; and 
• Section 409(b) of the CA 2016 provides that, subject to Section 405(5), the Court shall dismiss an application for a JM order if it is satisfied that the making of such order is opposed by a secured creditor. This is commonly referred to as the secured creditor’s right of veto. 

While this veto power is not absolute as the Court retains discretion under Section 405(5)(a) of the CA 2016 to consider overriding public interest justifying the granting of a JM order, the right to intervene and oppose afforded to secured creditors in JM applications remains clear, unequivocal, and firmly entrenched in law.
 
But how about the unsecured creditor?
 
Unsecured Creditor’s Right to Intervene and Oppose the JM
 
An unsecured creditor’s right to intervene and oppose a JM application is not expressly provided for in either the CA 2016 or the CRM 2018. Consequently, case law reflects two divergent schools of thought on whether an unsecured creditor may be heard in JM proceedings.  This reasoning was subsequently adopted by Azmi Ariffin J (as he then was) in Million Westlink Sdn Bhd v Maybank Investment Bank Berhad & Ors [2019] MLJU 1721 (“Million Westlink”), where His Lordship held that an unsecured creditor has “no legal standing to express their objection to the making of the judicial management order”.  Since the CA 2016 does not expressly prohibit any creditor from being heard in JM proceedings, the Court held that Rule 13 of the CRM 2018, although it appears to limit participation in JM applications to secured creditors, cannot override the parent statute i.e., the CA 2016. Accordingly, the Court held that unsecured creditors are entitled to intervene and be heard in JM proceedings, including for the purpose of opposing a JM application.
 
The principle established in Goldpage Assets was subsequently followed in Best Re (L) Ltd v Chubb Samaggi Insurance Public Co Ltd [2021] MLJU 310, Maju-TH Sdn Bhd (Lembaga Tabung Haji, proposed intervener) [2025] 8 MLJ 875, and Novabrite Lighting Sdn Bhd v Emrail Sdn Bhd (Balaranee Construction, proposed intervener) [2025] 11 MLJ 275.
 
It is also pertinent to note that the High Court’s decision in Million Westlink was overturned by the Court of Appeal on 21 July 2020 (unreported), where the Court of Appeal held that unsecured creditors do have sufficient interest to be heard in JM applications.
 
Based on these authorities, it appeared for a time that the law had settled in favour of recognising an unsecured creditor’s right to intervene and be heard in JM proceedings.  At the material time, CME was already facing a winding-up petition filed by another unsecured creditor, Bellajade Sdn Bhd (“Bellajade”), arising from CME’s failure to comply with a statutory demand under Section 466 of the CA 2016.
 
Following the JM application, the winding-up proceedings were automatically stayed. Bellajade, as the petitioning creditor, applied to intervene and oppose the JM application, citing a direct legal and pecuniary interest based on its judgment and its status as a petitioning creditor. The High Court allowed Bellajade’s intervention on 15 March 2023.
 
However, on appeal, the Court of Appeal allowed Desa Tiasa’s appeal on 4 December 2024, holding that an unsecured creditor such as Bellajade has no right to intervene in a JM application by virtue of Rule 13 of the CRM 2018.
 
This decision creates a direct conflict at the appellate level: while the Court of Appeal in Million Westlink (unreported) held that unsecured creditors have standing to intervene, the Court of Appeal in Desa Tiasa held otherwise, effectively barring unsecured creditors from participating in JM proceedings.  Following the Court of Appeal’s decision, Bellajade filed an application for leave to appeal to the Federal Court. On 29 July 2025, the Federal Court granted leave to appeal on the following questions pertaining to the legal standing and rights of unsecured creditors in JM proceedings: 

• Question 1: Whether an unsecured creditor may intervene and be heard in JM proceedings filed by another unsecured creditor pursuant to Section 405 of the CA 2016 read together with Rule 13 of the CRM 2018? 
• Question 2: Whether an unsecured judgment creditor holding a not appealable final judgment may be heard in proceedings to appoint a judicial manager over a judgment debtor? 
• Question 3: Whether Rule 13 of the CRM 2018 can be read to give preference to the rights of one unsecured creditor over the rights of another unsecured creditor? 
• Question 4: Whether Rule 13 of the CRM 2018 prohibits the involvement of all unsecured creditors in JM proceedings, regardless of whether the said unsecured creditor is in support of or objects to said proceedings? 

Conclusion

The leave questions before the Federal Court, particularly the first question, are critical in determining the extent of an unsecured creditor’s legal standing in JM applications. While Section 405(1) of the CA 2016 allows any creditor, be it secured, unsecured, contingent, or prospective, to apply for a JM order, the unsecured creditor’s right to intervene and oppose such an application remains unsettled due to the conflicting Court of Appeal decisions in Million Westlink and Desa Tiasa.
 
Given the increasing number of companies resorting to JM as a restructuring tool, it is timely for the Federal Court to issue a definitive ruling on the position and rights of unsecured creditors in JM proceedings. Such guidance would provide much-needed certainty and assist creditors in formulating their recovery strategies against financially distressed companies seeking for rehabilitation under JM.
 
Stay tuned !
 
 
Article by Claudia Cheah (Partner) and Anson Liow (Associate) of the Restructuring and Insolvency Practice of Skrine.
 
 
This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.