Winding Up
1. What is Winding Up?*
Winding up is a process in which the existence of a company is brought to an end, where assets of a company are collected and realised. The proceeds collected are used to discharge the company’s debts and liabilities and the remaining balance (if any) will be is distributed amongst the contributories according to their entitlement.
Two modes of Winding Up
(a) Voluntary winding up (VWU); and
(b) Compulsory i.e. Winding up by Court
Voluntary Winding Up
Voluntary winding is divided into 2 categories, namely members’ voluntary winding (MVWU) and Creditors’ voluntary winding up (CVWU):
- Section 257 of the CA 1965 define members’ voluntary winding (MVWU) up as the liquidation of a solvent company where the directors have formed an opinion that the company will be able to pay its debts in full within the period of 12 months after the commencement of winding up.
- Section 433 of the CA 2016 further defines (MVWU) as A winding up in the case of which a directors’ declaration under section 443 has been made; and a winding up in the case of which such a declaration has not been made is a “creditors voluntary winding up”.
Company Winding Up by Court
Winding up by Court is also known as a compulsory winding up. It begins with the presentation of a petition in Court. The petitioners include creditors, liquidator, the SSM of companies or the Official Receiver under section 217(1) of the CA 1965 or section 464 of the CA 2016.
2. Criteria to commence a Members’ Voluntary Winding Up?
- Solvent (Assets > Liabilities)
- Submitted latest Annual Return & Audited Financial Statement to SSM & LHDN
- Obtained consent from majority/all shareholder(s) of the company
- To appoint a liquidator
3. Process for a Members’ Voluntary Winding Up involves?
- Board Meeting on commencement of winding up
- Appointment of liquidator
- Pass Ordinary Resolution by majority shareholder(s)
- Submission to SSM, Unit Insolvency & LHDN
- Publication notices of commencement of winding up on two (2) nationwide newspapers.
- Change bank signatories
- Obtain tax clearance letter from LHDN
- Calling for final meeting
- Publication notices of final meeting on two (2) nationwide newspapers
- Closing of tax files
- Submission of final lodgement of return
- Purchase company profile to confirm dissolved status of company
4. How long does a Members’ Voluntary Winding Up needed?
Minimum 10 months.
5. When does the process of a company’s Members’ Voluntary Winding-up commence?*
Pursuant to Section 441 CA 2016 (Section 255(6) CA 1965), a voluntary winding-up commences:
- on the date of the lodgement of the statutory declaration /Form 65A with the SSM where a provisional liquidator / Interim Liquidator is appointed before the resolution for the voluntary winding-up is approved; or
- where no provisional liquidator is appointed, the date of winding-up commences on the date the winding-up resolution is approved.
6. In the process of a voluntary winding-up, must the liquidator be appointed from a group of approved persons?*
Section 433 (2) CA 2016 (Section 10 (2) CA 1965) states that any person may be appointed as a liquidator in a voluntary winding up provided that his or her appointment must be approved by members of the company or the majority of creditors of the company.
However, if a person is appointed as a provisional liquidator, Section 433 CA 2016 requires such person to be an approved liquidator before he or she is qualified to act as the provisional liquidator.
7. What is the primary function of a liquidator?*
The primary function of a liquidator is to wind-up the company by collecting and realizing all the assets of the company, settle all creditors’ claims and distributes the surplus assets (if any) to the shareholders in accordance with their respective entitlements. It is the duty of the liquidator to ensure that at the end of the process, the company is dissolved completely.
Once a winding up commences, directors of the company cease to have any power to manage the affairs of the company and all matters are taken over by the liquidator immediately upon the commencement of the winding up
8. If a voluntarily wound-up has been dissolved, will the SSM issue a certificate of dissolution?*
There is no provision in the Companies Act that requires the SSM to issue a certificate of dissolution. Section 459 CA 2016 provides that, a company shall be dissolved on the expiration of the period of three months from the date of the lodgement of the return with the SSM.
9. Under what circumstances can a company be wound-up by the Court?*
Under what circumstances can a company be wound-up by the Court? Section 465 CA 2016 sets out the circumstances in which a company may be wound-up by the Court:
The Court may order the winding up if:
- the company has by special resolution resolved that the company is to be wound up by the Court;
- the company defaults in lodging the statutory declaration under subsection 190(3);
- the company does not commence business within a year from its incorporation or suspends its business for a whole year;
- the company has no member;
- the company is unable to pay its debts;
- the directors have acted in the affairs of the company in the directors’ own interests rather than in the interests of the members as a whole or acted in any other manner which appears to be unfair or unjust to members;
- when the period, if any, fixed for the duration of the company by the constitution expires or the event, if any, occurs on the occurrence of which the constitution provide that the company is to be dissolved;
- the Court is of the opinion that it is just and equitable that the company be wound up;
- the company has held a licence under the Financial Services Act 2013 or the Islamic Financial Services Act 2013, and that the licence has been revoked or surrendered;
- the company has carried on a licensed business without being duly licensed or the company has accepted, received or taken deposits in Malaysia.
10. Who can be appointed as a liquidator in a winding-up by the Court?*
Only an approved liquidator or the Official Receiver may be appointed as a liquidator in a Court winding up.
*Quoted from ssm.com.my
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