A Guide on Closure of Company – Members’ or Creditors’ Voluntary or Compulsory Winding-up in Malaysia
Companies can be closed down either by “Striking Off” or “Winding Up/Liquidation“. Winding up and striking off both result in a company ceasing to exist. However, they are very different processes and should not be confused with each other.
Striking off is a more straightforward process whereas Liquidation can be categorized into 3 different types namely Members’ Voluntary Liquidation, Creditors’ Voluntary Liquidation and Court Winding Up. When a company is in Liquidation, the Liquidator takes control of the company.
The company must cease to carry on its business except so far as is in the opinion of the Liquidator required for the beneficial disposal or winding up of the business.
Reasons for Liquidation
- Company has ceased all business activities;
- Management deadlock;
- Oppression – shareholders dispute Section 181 of the Companies Act, 1965;
- Corporate or financial restructuring of the group to which the company belongs;
- Minimise tax liabilities or maximise tax advantages for the group to which the company belongs;
- Breach of statutory provisions, including offences committed;
- Company acting outside its scope of activities.
Our Liquidators have experience in handling all modes of closing down of a company, namely:
Striking Off – Solvent Company
For striking-off, the directors will each have to make a declaration stating that the Company has either not commenced business since incorporation or have ceased business, have no assets and liabilities as well as do not have any dues to the authorities. Thereafter, the directors will proposed and the shareholders will approve the application to strike-off the company. The whole process from the date of submission of documents to SSM will take about 6 to 12 months subject to the approval from SSM Malaysia.
A company can be restored within 15 years from the date of striking off. A person who would like to restore the company will need to obtain a Court Order to restore the struck off company.
For details on Strike Off Company.
Members’ Voluntary Liquidation (“MVL”) – Solvent Company
The company’s contributories (also known as members or shareholders) may pass a resolution that the company be wound up and that a liquidator be appointed.
The liquidation commences at the time of passing the resolution appointing the liquidator. It is adopted where the company is able to pay its debts in full within 12 months after the commencement of winding up.
A MVL is a winding-up process to be initiated by the shareholders. The directors will need to execute a Declaration of Solvency at the Board of Directors’ Meeting and lodge the same with the SSM. Thereafter, the shareholders will appoint a liquidator to wind up the company’s affairs and to file the necessary notifications required under the Companies Act with SSM and Official Receiver. The Liquidator will also have to arrange for publications regarding the appointment of liquidator and final meeting in a newspaper circulating generally throughout Malaysia. The Liquidator is to distribute/dispose all assets, settle all liabilities and obtain clearances from IRB, EPF, SOCSO, Customs, etc and if the MVL continues for more than 1 year, to convene a general meeting of the company. The entire MVL process may take about 2 years to complete and very much depends on the receipt of official clearances from the relevant authorities.
Anybody with the capacity to perform the duty of liquidator can be appointed as the Liquidator (e.g. Director). Where a company has been dissolved, the Court may at any time within 2 years after the date of dissolution, on application of the liquidator of the company or of any other person who appears to the Court to be interested, make an order declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.
Our fees to assist you in MVL is from RM15,000 (W/GST RM15,900). Our fees quoted is excluding out-of-pocket expenses (i.e. newspaper advertisement, courier, assist in closure of bank account, final tax submission, auditing of final account and etc if required) and any additional fees to be incurred in the event of out of norm circumstances such as additional assets/liabilities not cleared prior to commencement of liquidation, any claim by any party or creditors that there are any outstanding matters/payment due to them, court order filed by any interested party to reverse the liquidation process, etc.
Creditors’ Voluntary Liquidation – Insolvent Company
If the company is not able to meet its liabilities, the company can convene a meeting with its creditors to consider its proposal for a voluntary winding up of the company.
If a resolution is passed in favour of the winding up, the company will appoint a liquidator, subject to any preference the creditors may have as to the choice of liquidator.
Contact us for more information.
Compulsory Winding Up – Insolvent Company
Under section 217 of the Companies Act, 1965 the company itself, creditors, contributories, liquidator or the Minister may present a winding up application to the High Court.
Section 218(1) of the Companies Act, 1965 states all the grounds under which the Court may liquidate a company. The common grounds for a company to be wound up by the Court include: Inability to pay its debts, Just and Equitable.
The liquidation of an insolvent company is a process of collective enforcement of debts for the benefit of general body of creditors. Although it is not a process of execution because it is not for the benefit of a particular creditor, it is nevertheless akin to execution because its purpose is to enforce, on a pari passu basis, the payment of the admitted or proved debts of the company. Therefore, when a company goes into liquidation, a process is initiated which, for all creditors, is similar to the process which is initiated, for one creditor, by execution.
Notification of Government body
A company must notify the following authorities once winding-up commences:-
- Companies Commision of Malaysia / Suruhanjaya Syarikat Malaysia (CCM/SSM)
- Official Receiver
- Employees Provident Fund (EPF)
- Inland Revenue Board (IRB)
- Social Security Organization (SOCSO)
- Royal Malaysian Customs Department (Customs)
- Relevant Licensing Authorities
What is the role of a liquidator in compulsory liquidation?
The powers of a liquidator for a compulsory winding up are set out in section 269 of the Companies Act, 1965.
The role of the liquidator includes the following:
- Investigate into the affairs and assets of the company, the conduct of its officers and the claims of creditors and third parties
- Recover and realise the company’s assets in the most advantageous manner to the company
- Adjudicate the claims of the creditors and ensure an equitable distribution of the company’s assets in accordance to the provisions of the Companies Act.