Debt Collection in Malaysia

Updated on Wednesday 23rd August 2017

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Debt collection in Malaysia is the procedure of demanding undue payments for services or products offered to clients. 

Generally, payments in Malaysia take place honestly and rapidly, the payment behavior is good and delays are occasional, more likely to appear if the transaction is not protected. As a services supplier, you can also be permitted to request penalties for late payments. This is a situation that you might meet in Malaysia, no matter the type of your industry and it is suitable to look for specialized help in order to solve any unwanted payments problems. In this situation, the services provider or the foreign investor needs to know the method to follow in order to recuperate his money, contacting a Malaysian law firm or he can act on his own, trying to recover the sum. 

Collection practices in Malaysia

Friendly settlement openings should permanently be considered as a substitute to prolonged legal measures. Prior to beginning formal legal act, gaining a payment installment agreement or no less than a formal debit recognition title is always valuable.

Our lawyers in Malaysia invite you to watch this video about debt collection:

Late payment importance

When it comes to late payment, however, the law provides no specific background. Therefore, late payment interest must have been discussed as part of the contract in order to be relevant. In practice, such interest is occasionally paid and would only set up a negotiation tool. In the same way, collection costs must be settled upon in writing when negotiating the contract, but they would basically be paid by the creditor upon court demand. 

Therefore, and as for late payment interest, they would principally be used as cooperation tools during pre-legal collection.

Court proceedings in Malaysia

As our Malaysian lawyers remind, the legal system in this country is made upon numerous courts, the main of which may be described as follows. At the lower level, justice is concentrated by Magistrates Courts and Sessions Courts (amongst other tribunals). 

At the higher level, two High Courts have authority to deal with big commercial and bankruptcy arguments in addition to serving as Appellate Courts for the numerous prerogatives brought before the subordinate courts mentioned before. The Federal Court lastly acts as the highest authority. 

The law offers no fast track measures, so that going through full litigations would be essential, despite the debt being undisputed. Regular permitted action would frequently begin when agreeable collection has failed. The creditor would file a claim with the High Court and summons would be served to the borrower who would be asked to act before the court within an indicated time limit. The debtor can decide not to appear in court on the first hearing date, in which situation the court would establish one more hearing date. 

Only if the defendant did not appear to the second hearing, the appellant’s lawyer continues to get a judgement in default. 

Debt recovery methods in Malaysia

Chasing debtors in Malaysia can be time consuming, hard and expensive for foreign creditors from other jurisdictions. 

Here are a few measures regarding the debt recuperation:

•    the background research that contains official business search, individual address search and physical visit check up, credit and insolvency search to access whether it is economical to proceed with the next step;
•    issue letter of demand that serves the latest statement of amounts to the debtor;
•    amount negotiation and method of arrangement on behalf of the creditor with the creditor’s consent;
•    if the negotiation did not end in the favorable way, the creditor will initiate court action.

If you need more details about the debt collection, please feel free to contact our law firm in Malaysia. Our Malaysian attorneys will tell you about the steps of the debt collection process and the documents you need.


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