CNUDMI - A-CN.9-1221-Add.1

United Nations A/CN.9/1221/Add.1

General Assembly

Distr.: General 17 June 2025

Original: English /Spanish

V. 2 5-09020 (E) 300625 010725

2509020

United Nations Commission on International Trade Law Fifty-eighth session Vienna, 7 –25 July 2025

Compilation of comments on the draft texts on asset tracing and recovery in insolvency proceedings

Contents Page

II. Comments received (continued ) ............................................... 2

C. Malaysia .............................................................. 2

D. Paraguay .............................................................. 5A/CN.9/1221/Add.1

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II. Comments received (continued)

C. Malaysia

[Original: English] [12 June 2025]

A. Introduction

1. The Government of Malaysia, through the Malaysia Department of Insolvency

(MdI), in consultation with relevant stakeholders involved in insolvency matters in Malaysia, extends its appreciation to the Secretariat and the Working Group for the opportunity to submit preliminary observations on the revised draft “Toolkit for Expedited Asset Tracing and Recovery in Insolvency Proceedings” and its accompanying background notes (A/CN.9/WG.V/WP.201).

2. Malaysia welcomes this timely and forward -looking initiative, which addresses the increasing complexities faced by jurisdictions in responding to financial misconduct, asset concealment, and digital-era challenges within insolvency proceedings, particularl y in a cross -border context.

3. We note that the toolkit and background notes serve as non -binding guidance, offering legal, procedural, and institutional tools to expedite the identification, protection, and recovery of assets. Malaysia appreciates the modular and adaptable

proceedings, particularl y in a cross -border context.

3. We note that the toolkit and background notes serve as non -binding guidance, offering legal, procedural, and institutional tools to expedite the identification, protection, and recovery of assets. Malaysia appreciates the modular and adaptable nature of these instruments and the emphasis placed on procedural safeguards, proportionality, and fairness.

B. General support for the toolkit

4. Malaysia supports the overarching objectives of the toolkit, particularly in enhancing international cooperation, promoting the effective administration of insolvency estates, and expediting the recovery of assets. The flexibility and modularity of the toolkit, coupled with its attention to safeguarding fundamental legal principles, resonate with Malaysia’s broader efforts to modernize its insolvency regime.

C. Specific comments on the toolkit and background notes

5. Malaysia respectfully submits the following comments for the consideration:

(a) Document: Main document Topic: Glossary of Terms – Definition of COMI (at page 6/83)

The definition of the “centre of the debtor’s main interests (COMI) ” is a cornerstone concept in cross -border insolvency proceedings. To ensure uniformity and avoid divergent interpretations across jurisdictions, Malaysia recommends that the definition closely align with the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI) Guide to Enactment and Interpretation. The current draft’s definition, while broadly accurate, could benefit from greater specificity to reflect the MLCBI’s emphasis on the debtor’s regular administration of interests and creditor ascertainability. Therefore, Malaysia proposes the following revision: “ The location (a) where the debtor conducts the administration of its interests on a regular basis and (b) which is ascertainable by third parties, particularly creditors, in accordance with the MLCBI Guide to Enactment and Interpretation.” This revision ensures consistency with the MLCBI framework, which has been widely adopted globally. The inclusion of a rebuttable presumption for corporate entities provides legal

and (b) which is ascertainable by third parties, particularly creditors, in accordance with the MLCBI Guide to Enactment and Interpretation.” This revision ensures consistency with the MLCBI framework, which has been widely adopted globally. The inclusion of a rebuttable presumption for corporate entities provides legal certainty while allowing flexibility for exceptional cases.A/CN.9/1221/Add.1

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(b) Document: Toolkit

Topic: I. Asset tracing and recovery measures generally – Safeguard No.2 (at page 16/83)

The term “ judicial review ” may be less suitable in this context, as it typically refers to the review of administrative or legislative actions by courts, rather than the reconsideration of judicial decisions. Using this term could potentially lead to misunderstanding, particularly in jurisdictions where judicial review has a distinct constitutional meaning. Therefore, Malaysia proposes the following revision: “In case of a challenge, a prompt hearing should be held to determine whether the ATR measure should be modified or terminated. Affected parties should have the right to present evidence and arguments before the court issues its decision. ” This revision clarifies the procedural right to challenge an ATR measure without invoking the technical concept of judicial review and emphasizes due process by ensuring that affected parties are given an opportunity to be heard.

(c) Document: Toolkit

Topic: I. Asset tracing and recovery measures generally – Features No.1 (at page

17/83)

The current text suggests that courts should independently identify urgent ATR requests. While the intention is commendable, this approach may prove administratively impractical, given that courts often manage high caseloads and may not be positioned to pr oactively prioritize cases without a formal mechanism. Malaysia therefore proposes the following revision: “A procedural mechanism should be established to enable expedited consideration of urgent applications for disclosure and information measures. Such a mechanism may include: (a) a designated filing

not be positioned to pr oactively prioritize cases without a formal mechanism. Malaysia therefore proposes the following revision: “A procedural mechanism should be established to enable expedited consideration of urgent applications for disclosure and information measures. Such a mechanism may include: (a) a designated filing procedure for urgent requests; (b) clear criteria for determining urgency (e.g., risk of asset dissipation); and (c) timelines for court decisions.” This structured mechanism would enhance efficiency while preserving judicial discretion, and the inclusion of specific criteria would offer practical guidance to both applicants and the courts.

(d) Document: Toolkit Topic: II. Specific asset tracing and recovery in insolvency proceedings measures

• Safeguard No.8 (at page 18/83)

ATR measures often involve the handling of sensitive data, and the current text does not expressly reference the need to comply with data protection laws, which are essential in many jurisdictions, including under Malaysia’s Personal Data Protection Act 20 10. To address this, Malaysia proposes the following revision: “The collection, processing, and storage of data under ATR measures shall comply with all applicable national legal frameworks, including data protection statutes, privacy laws, and jurisprudential safeguards governing personal and sensitive data. ” This proposed wording promotes alignment with international data privacy standards and serves to mitigate potential legal risks associated with data misuse or non-compliance.

(e) Document: Toolkit Topic: II. Specific asset tracing and recovery in insolvency proceedings measures.

• C. Asset recovery measures, Features No.5 & No.6 (at page 19/83)

The entrustment of powers to foreign representatives is a sensitive matter, as it requires balancing the need for effective cross-border cooperation with the protection of domestic legal interests. The current text does not explicitly refer to judicial oversight or safeguards for local stakeholders. Malaysia therefore proposes the following revision: “Upon recognition of a foreign proceeding, the distribution of all or part of the debtor’ s assets located in the recognizing State may, subject to such

of domestic legal interests. The current text does not explicitly refer to judicial oversight or safeguards for local stakeholders. Malaysia therefore proposes the following revision: “Upon recognition of a foreign proceeding, the distribution of all or part of the debtor’ s assets located in the recognizing State may, subject to such terms and conditions as the court may consider just, be entrusted to the foreign representative or another person designated by the court. In determining whether to grant such entrustment, the court shall consider: (a) the protection of local creditors’ interests ; (b) the feasibility of supervision; and (c) the foreign representative’ s compliance with local laws. ” This formulation maintains judicial discretion whileA/CN.9/1221/Add.1

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embedding necessary safeguards to protect the interests of local creditors and ensure proper oversight.

(f) Document: Toolkit Topic: II. Specific asset tracing and recovery in insolvency proceedings measures -C. Asset recovery measures, Safeguard No.3 (Page 19/83)

The current text outlines specific factors for courts to consider when evaluating transactions between enterprise group members. While helpful, this approach may unintentionally constrain judicial discretion by suggesting that the listed factors are exhaustive. To preserve the flexibility necessary for courts to assess each case based on its unique facts, Malaysia proposes the following revision: “For avoidance of a transaction that took place between enterprise group members or between an enterprise group member and other related persons, the court may consider all relevant circumstances, including but not limited to: (a) the relationship between the parties; (b) the degree of integration; (c) the purpose of the transaction; (d) its contribution to group op erations; and (e) whether it granted undue advantages. ” The inclusion of the phrase “ including but not limited to ” ensures that courts can fully exercise their discretion and consider a broader range of relevant circumstances.

(g) Document: Background notes Topic: II. Asset tracing and recovery in insolvency proceedings - related

inclusion of the phrase “ including but not limited to ” ensures that courts can fully exercise their discretion and consider a broader range of relevant circumstances.

(g) Document: Background notes Topic: II. Asset tracing and recovery in insolvency proceedings - related provisions in a law relating to insolvency. (A. Domestic context – 1. Preventive measures) Paragraph 30(c) (at page 35/83)

The term “ business justification ” as currently used is somewhat vague and may not adequately capture the fiduciary duties expected of directors under corporate law. To enhance clarity and legal robustness, Malaysia proposes revising the standard to: “… unless it is a business judgment made in good faith, for a proper purpose, without material personal interest, and based on a reasonable belief that the decision is informed and in the best interests of the company.” This formulation is consistent with the wi dely recognised business judgment rule, which is designed to protect directors who act responsibly and in accordance with their duties, while mitigating the risk of hindsight bias in insolvency proceedings. It also ensures greater alignment with internatio nal corporate governance standards.

(h) Document: Background notes Topic: II. Asset tracing and recovery in insolvency proceedings - related provisions in a law relating to insolvency. (A. Domestic context – 1. Obligations of the debtor) Paragraph 59 (at page 41/83)

The deterrent effect of sanctions could be strengthened by providing greater specificity in the current text. To strengthen this aspect, Malaysia proposes including illustrative examples that clearly demonstrate the seriousness of non-compliance. The sugge sted revision states: “ Sanctions may include civil penalties (e.g., fines, disqualification), criminal sanctions (e.g., imprisonment, confiscation of assets), or other measures deemed appropriate by the court, depending on the severity of the breach. ” Providing explicit examples not only enhances clarity but also underscores the potential consequences of misconduct, thereby reinforcing the intended deterrent impact.

D. Conclusion and recommendations

other measures deemed appropriate by the court, depending on the severity of the breach. ” Providing explicit examples not only enhances clarity but also underscores the potential consequences of misconduct, thereby reinforcing the intended deterrent impact.

D. Conclusion and recommendations

6. Malaysia recognizes the practical value of the draft Toolkit and its accompanying background notes as a comprehensive reference for States seeking to enhance asset tracing and recovery practices within insolvency proceedings.

7. While non -binding, the Toolkit offers jurisdictions a clear framework to assess existing legal, institutional, and procedural gaps and to pursue tailored reforms that support the expeditious recovery of insolvency assets and greater cross-border cooperatio n. For Malaysia, the Toolkit will serve as a reference point as we considerA/CN.9/1221/Add.1

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reforms to strengthen our national insolvency infrastructure, including potential adoption of the MLCBI.

8. Accordingly, Malaysia respectfully submits the following recommendations:

(a) Ensure definitional consistency across UNCITRAL texts, particularly regarding COMI and avoidance provisions. (b) Promote procedural flexibility and judicial discretion in implementing ATR measures. (c) Clarify safeguards and ensure alignment with domestic due process, data protection, and privacy laws. (d) Strengthen guidance on enforcement, including criminal and civil sanctions. Malaysia reaffirms its support for the important work of UNCITRAL Working Group V and remains committed to contributing constructively to the refinement of the Toolkit and other related instruments.

D. Paraguay

[Original: Spanish] [13 June 2025] Al respecto, esta Misión Permanente tiene a bien transmitir los comentarios realizados por la Procuraduría General de la República tras el análisis del documento A/CN.9/WG.V/WP.201, relativo al Grupo de Trabajo V (Régimen de Insolvencia) y demás materiales conexos.

por la Procuraduría General de la República tras el análisis del documento A/CN.9/WG.V/WP.201, relativo al Grupo de Trabajo V (Régimen de Insolvencia) y demás materiales conexos. En ese sentido, la referida institución informa que no se formulan observaciones al contenido revisado y ha manifestado “estimar y valorar positivamente las correcciones y precisiones introducidas por el Grupo de Trabajo durante su 65° periodo de sesiones (diciembre de 2024), que reflejan un enfoque técnico y actualizado en torno a la localización y recuperación de bienes en procedimientos de insolvencia, con perspectiva transfronteriza y global.” Asimismo, ha subrayado la importancia de: • Fomentar la cooperación internacional en la aplicación equilibrada del lex fori concursus; • Avanzar en la construcción de un marco normativo robusto, adaptado a los desafíos de la economía digital y la inteligencia artificial; • Preservar la integridad de los sistemas de resolución de disputas; y • Promover programas de capacitación en materia de insolvencia transfronteriza.