High Court: detailed proposal statement not required for application for judicial management order


The High Court on 25 May 2022 granted the applications for judicial management orders (“JM Apps”) filed by three wholly owned subsidiaries of Jerasia Capital Berhad (“JCB”), namely Jerasia Apparel Sdn Bhd (“JASB”), Jerasia Fashion Sdn Bhd and Canteran Apparel Sdn Bhd (“CASB”) (collectively the “Candidates”).

The High Court granted the JM claims despite opposition from two significant unsecured creditors of the claimants. Although the High Court acknowledged that the three-pronged plan proposed in the JM applications appeared to be incomplete / lacking in certain details, the High Court also held that it was premature to deal with the plan in detail at this stage. , because it can be improved/completed once the Legal Officer has been appointed.

Claudia Cheah (Partner) and Janice Ooi (Senior Partner) of Skrine Restructuring and Insolvency Practice represented the plaintiffs.

Background Facts

Each of the JM demands are part of the broader plan to restructure the debt of JCB, a public limited company listed on the main market of Bursa Malaysia Securities Berhad (“Sotck exchange”), and its group of companies. JCB itself was classified as a PN 17 issuer on January 28, 2022 after triggering paragraph 8.04 and paragraph 2.1(a) of Bursa Practice Note 17. In this regard, JCB’s equity on a consolidated basis is 25% or less of its share capital (excluding treasury shares) and such equity is less than RM40,000,00.00. JCB intends to place the Claimants in receivership, where the Claimants and JCB will then undertake a proposed three-pronged plan which involves the following:

I. Disposal of assets by JASB and CASB;

ii. Exercise of capital raising by rights issue and/or private placement by JCB; and

iii. Diversification of business by JCB by venturing into the glove manufacturing industry.

JM’s claims were contested by two major unsecured creditors on the grounds, among other things, that:

I. the proposed three-pronged plan is not viable as JCB’s proposed business diversification was already announced a few years ago and yet the proposed diversification has not materialized;

ii. the assessment report of the situation presented by the Petitioners simply indicates the estimated recovery rate for the unsecured creditors in the event of liquidation, without indicating the estimated recovery rate in the event that the JM Applications are authorized;

iii. the applicants have also not indicated the amount that should be raised through the capital raising exercise;

iv. the plaintiffs are hopelessly insolvent; and

v. given the objection of the two unsecured creditors whose combined debt exceeds more than 25% of the total debts owed by the Applicant concerned, the exercise of judicial management will be futile because the Applicants would not be able to guarantee the required creditors . approval of their proposal.

In response, the Petitioners argued, among other things, that the JM Motions are a genuine attempt by both the Petitioners and JCB to rehabilitate themselves. In this regard, JCB had taken various steps to diversify the proposed business and liquidate the assets of JASB and CASB. Based on the available documents, the Petitioners have satisfied the requirements for a judicial management order to be issued. The applicants further submitted that a detailed statement of the proposal is not required at this stage. A full proposal statement would be prepared and filed by the court official in due course, and creditors could then vote on it.

High Court decision

The High Court found it possible that the applicants could be rehabilitated and, on this basis, the JM applications were granted. The High Court was aware that it is normal for a proposed plan to lack detail at the application stage and JM’s applications should not be dismissed on this ground.

The High Court’s decision is in line with an earlier ruling by the same court in Federal Power Sdn Bhd v Dara Consultant Sdn Bhd [2022] 7MLJ 563 (“Federal power”) where the High Court granted an application for a judicial management order despite the opposition of an intervener on the grounds, inter alia, that it was not supported by any expertise and that no concrete plan had been proposed. By accepting the request for judicial management in Federal powerthe High Court held that “the actual recovery plan must be properly and completely prepared by the proposed judicial manager when obtaining the judicial management order.”

The decision of the High Court in this case and the case of Federal power are interesting because it seems to deviate from the High Court’s earlier decision in Re biaxial [2022] 7MLJ 443 (“Re biaxial”), which establishes strict requirements for filing an application for judicial management. In this regard, the High Court of Re biaxial considered that the plaintiff and/or the designated legal official must demonstrate that they have done their best to, among others, make the proposal as close as possible to its final form. This suggests that the draft proposal statement should be substantial even at the application stage.


Following the decision of Re biaxial, it is common for nominees for judicial management to prepare a detailed draft proposal statement at the time of application filing, or at least for the proposed nominee for judicial management to confirm an affidavit in support of the nomination. This even though there is no such requirement under the Companies Act 2016, as recognized by the High Court in Federal power. With this recent decision as well as the decision in Federal powerit will be interesting to see if the courts take a more lenient approach to deciding whether or not to allow a request for judicial management despite the lack of a detailed/complete draft proposal.

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