Malaysia Collection Profile



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World Bank Doing Business
2014: 6/189 countries
2013: 8/189 countries

Complexity of collecting debt:

Notable High Very High Severe

Executive summary

  • Even though the payment behaviour of domestic companies is good, the law provides no framework when it comes to late payment.  As a result, interest rates and collection costs should be considered as part of the contract but often have little impact.
  • Despite recent efforts, the courts' independence and transparency still have margin for improvement and lawsuits - which can be slow and should be avoided whenever possible.  However, recent reforms have seen lawsuits disposed of fast.
  • In the absence of an efficient and working debt restructuration scheme, debtor insolvency would only be dealt with through liquidation proceedings, (and soon judicial management process, once the law comes into force) which generally results in low recovery chances for unsecured creditors.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

Payments in Malaysia take place fairly rapidly: the payment behaviour is good and delays are rare, although likely if the transaction is not secured. The average DSO for 2015 was 35 days.


Late payment interest

As the law provides no particular framework for late payers, late payment interest should be negotiated as part of the contract in order to be applicable.  In practice, such interest is seldom paid and often only consitutes a negotiation too.  For judgment debts, these currently carry an interest rate of 5% per annum.

collection practice 


Orchestrated negotiation first

Amicable settlement opportunities should always be considered as an alternative to lengthy legal proceedings. Prior to commencing formal legal action, obtaining a payment instalment agreement or, at least, a formal debt recognition title is always worthwhile. In addition, verifying whether the company is still in activity and whether the debtor is solvent: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below).

Court Proceeding 


The judicial system in Malaysia is built upon numerous courts, the main of which may be described as follows. At the lower level, justice is rendered by Magistrates Courts and Sessions Courts (amongst other tribunals). At the higher level, two High Courts have jurisdiction to deal with large commercial and insolvency disputes in addition to serving as Appellate Courts for the various claims brought before the subordinate courts mentioned previously. The Court of Appeal considers claims brought against decisions rendered by the High Courts. The Federal Court finally acts as the supreme jurisdiction. The Malaysian legal framework has long been modelled upon to British legal rules, but it has been significantly modernized in the past years. On the one hand, reforms conducted since 2009 have made the judicial system more efficient insofar as specialized courts (including Commercial Courts) have been set up. On the other hand, civil procedure rules have been simplified harmonized so as to be used more efficiently by lower and higher courts alike. Despite such efforts, the courts' independence and transparency still have margin for improvement and lawsuits - which can be very slow - ought to be avoided whenever possible.

The law provides for relatively fast track proceedings if the case is straightforward.  Failing that, full lawsuits would be necessary. Ordinary legal action would usually commence when amicable collection has failed.  The creditor would file a claim with the High Court, or Lower Courts (depending on the size of the claim) and Summons would be served to the debtor who would be required to file a formal appearance in court within a specified deadline.  Failing which, the claimant can proceed to obtain judgment in default.  The courts would normally award remedies in the form of damages, specific performance or injunctions. Punitive damages may be awarded in Malaysia.

insolvency Proceeding 


The Bankruptcy Act of 1967 defines bankruptcy as the legally declared inability of a debtor to pay its creditors. In order to proceed with bankruptcy proceedings or winding up orders, however, the debt owing must exceed MYR 30,000 and MYR 500 respectively (the latter is subject to changes in legislation soon). So far, insolvency in Malaysia has been considered a mere matter of liquidation and proceeds redistribution. However, it is relevant to emphasize that the country is currently undergoing a significant reform process insofar as its corporate insolvency laws might soon come in line with a new approach (embodied in the U.S. Chapter 11) which lately introduced a corporate rescue culture on the international plane. As a result, the Malaysian Corporate Law Reform Committee has developed since 2005 the argument that the current insolvency framework ought to move forward the rehabilitation of fragile but viable businesses, and recently recommended the introduction into Malaysian law of two schemes: a Corporate Voluntary Arrangement, and the Judicial Management System (similar to a judicial restructuration scheme).​


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