This research explores the delicate balance between ensuring business continuity and protecting the rights of unsecured creditors within the context of Malaysia's compulsory winding-up process. It examines the challenges unsecured creditors face, who often lack collateral to secure their claims for debt repayments during the compulsory winding up of the company. The study's findings highlight the essential vulnerabilities of unsecured creditors, who frequently find themselves in an unwarranted position during compulsory winding-up processes. Unsecured creditors are typically called the lowest priority in debt settlement, emphasising the urgent need for comprehensive legal protections. Using a qualitative research approach and drawing upon a doctrinal legal research methodology, this study analyses primary and secondary data sources, including books and journal articles, to better understand the legal landscape. This research introduces a proposed mechanism to safeguard unsecured creditors’ rights. This mechanism seeks to rectify existing disparities, emphasising the crucial role of unsecured creditors in facing financial distress within Malaysia’s legal framework.