Safeguarding employees in Malaysian corporate insolvency: Institutional informant perspectives

Abstract

The Companies Act 2016 introduced corporate rescue mechanisms that moved Malaysian insolvency law beyond a predominantly liquidation-centred framework. The Companies (Amendment) Act 2024 subsequently widened the potential availability of these procedures. Nevertheless, employee protection remains uncertain when rescue fails and winding up follows. Effective recovery may still depend on the nature of secured claims, statutory priority and the assets available for distribution. This article examines how institutional and practitioner informants understand the gap between legal priority and real protection for employees in Malaysian corporate insolvency. The study uses a qualitative socio-legal design based on semi-structured interviews with four institutional informants from the Malaysia Department of Insolvency, Industrial Court, Malaysian Trades Union Congress and Social Security Organisation. The interviews were analysed through a structured six-phase thematic process and interpreted using organisational justice, legal positivism and interpretivism. The findings reveal a persistent gap between statutory recognition and effective employee protection, driven by asset scarcity, the treatment of secured claims, procedural barriers, limited compensation and restricted institutional discretion. The article argues that employee protection in insolvency cannot be secured by statutory priority alone. A more human-centred insolvency framework requires clearer employee communication, stronger institutional coordination, practical access to compensation mechanisms, and serious consideration of wage-guarantee-style protection such as expansion of the current Employment Insurance System. The contribution lies in translating informant-based evidence into policy and practice reform recommendations for a fairer insolvency system.