Liquidation - Creditors' Voluntary Winding up

Updated: Jun 27

Circumstances in which company may be wound up voluntarily


A company may be wound up voluntarily if the company resolves by special resolution.


A company shall—


(a) within seven days after the passing of a resolution for voluntarily winding up lodge a printed copy of the resolution with the Registrar; and

(b) within ten days after the passing of the resolution give notice of the resolution in a newspaper circulating generally throughout Malaysia.


Where the directors of a company have made a statutory declaration in the prescribed form which has been lodged with the Registrar—


(a) that the company cannot by reason of its liabilities continue its business; and

(b) that meetings of the company and of its creditors have been summoned for a date within one month of the date of the declaration,

the directors shall appoint an approved liquidator to be the provisional liquidator.


A provisional liquidator shall have and may exercise all the functions and powers of a liquidator in a creditors' winding up subject to limitations and restrictions.


The appointment of a provisional liquidator shall continue for one month from the date of his appointment or until the appointment of a liquidator (whichever first occurs).


Notice of the appointment of a provisional liquidator together with a copy of the declaration lodged with the Registrar shall be advertised within fourteen days of the appointment of the provisional liquidator in some newspaper circulating generally throughout Malaysia.


A provisional liquidator shall be entitled to receive such salary or remuneration.


Date of commencement of winding up

A voluntary winding up shall commence—


(a) where a provisional liquidator has been appointed before the resolution for voluntary winding up was passed, at the time when the declaration was lodged with the Registrar; and

(b) in any other case, at the time of the passing of the resolution for voluntary winding up.


Effect of voluntary winding up

The company shall from the commencement of the winding up cease to carry on its business, except so far as is in the opinion of the liquidator required for the beneficial winding up, but the corporate state and corporate powers of the company shall notwithstanding anything to the contrary in its articles, continue until it is dissolved.

Any transfer of shares, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members made after the commencement of the winding up, shall be void.


Meeting of creditors


The company shall cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for voluntary winding up is to be proposed, and shall cause the notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.


The company shall convene the meeting at a time and place convenient to the majority in value of the creditors and shall—

(a) give to the creditors at least seven clear days' notice by post of the meeting; and

(b) send to each creditor with the notice a statement showing the names of all creditors and the amounts of their claims.


The company shall cause notice of the meeting of the creditors to be advertised at least seven days before the date of the meeting in a newspaper circulating generally throughout Malaysia.


The directors of the company shall—


(a) cause a full statement of the company's affairs showing in respect of assets the method and manner in which the valuation of the assets was arrived at, together with a list of the creditors and the estimated amount of their claims to be laid before the meeting of creditors; and (b) appoint one of their number to attend the meeting.


The director appointed and the secretary shall attend the meeting and disclose to the meeting the company's affairs and the circumstances leading up to the proposed winding up.


The creditors may appoint one of their number or the director appointed to preside at the meeting.


Liquidators

The company shall and the creditors may at their respective meetings nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company, and if the creditors and the company nominate different persons the person nominated by the creditors shall be liquidator, and if no person is nominated by the creditors the person nominated by the company shall be liquidator.

Where different persons are nominated any director, member or creditor may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors.

The committee of inspection, or if there is no such committee the creditors, may fix the remuneration to be paid to the liquidator.

On the appointment of a liquidator all the powers of the directors shall cease, except so far as the committee of inspection, or if there is no such committee the creditors, approve the continuance.


Committee of inspection

The creditors at any meeting may, if they think fit, appoint a committee of inspection consisting of not more than five persons, whether creditors or not and if such a committee is appointed the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any time subsequently in general meeting, appoint such number of persons but not more than five as it thinks fit to act as members of the committee.

The creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection and, if the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to act as members of the committee, and on any application to the Court the Court may, if it thinks fit, appoint other persons to act as such members in place of the persons mentioned in the resolution.


Distribution of property of company


Subject to the provisions relating to the preferential payments, the property of a company shall, on its winding up be applied equally in satisfaction of its liabilities, and shall subject to that application, be distributed among the members according to their rights and interests in the company, unless the constitution otherwise provides.


Remuneration of liquidators in voluntary winding up


A liquidator shall be entitled to receive salary or remuneration as prescribed in the rules.


Powers of liquidator in a voluntary winding up


The liquidator may exercise any power and duty specified under the Eleventh Schedule in a voluntary winding up.


Power of liquidator to accept shares, etc., as consideration for sale of property of company


Where it is proposed that the whole or part of the business or property of a company is to be transferred or sold to another corporation, with the sanction of a special resolution of the company conferring either a general authority on the liquidator or an authority in respect of any particular arrangement, the liquidator of the company may—


(a) receive in compensation or part compensation for the transfer or sale of the shares, debentures, policies or other like interests in the corporation for distribution among the members of the company; or


(b) enter into any other arrangement whereby the members of the company may, in lieu of receiving cash, shares, debentures, policies or other like interests or in addition to the arrangement, participate in the profits of or receive any other benefit from the corporation, and any such transfer, sale or arrangement shall be binding on the members of the company.


If any member of the company expresses his dissent in writing addressed to the liquidator and delivered to the registered office of the liquidator within seven days from the passing of the resolution, the member may require the liquidator to either to abstain from carrying the resolution into effect or to purchase his interest at a price to be determined by an agreement or by arbitration.


If the liquidator elects to purchase the member’s interest, the purchase money shall be paid before the company is dissolved and be raised by the liquidator in such manner as is determined by special resolution.


For the purposes of this arbitration, the Arbitration Act 2005 [Act 646] shall apply as if there were a submission for reference to two arbitrators, one to be appointed by each party and the appointment of an arbitrator may be made by the liquidator, or if there is more than one liquidator then by any two or more of the liquidators.


The powers of the liquidator shall not be exercised except with the approval of the committee of inspection.


Annual meeting of members and creditors


If the winding up continues for more than one year, the liquidator shall summon a meeting of members of the company and the meeting of creditors, at the end of the first year from the commencement of the winding up and of each succeeding year or not more than three months after the succeeding year, and shall lay before the meeting an account of the acts of the liquidator and dealings and of the conduct of the winding up during the preceding year.


The liquidator shall cause the notices of the meeting of creditors to be delivered by post to the creditors simultaneously with the delivery of the notices of the meeting of the company.


Final meeting and dissolution


As soon as the affairs of the company are fully wound up, the liquidator shall—


(a) prepare an account showing how the winding up has been conducted and the property of the company has been disposed of; and


(b) call for a meeting of members of the company and the creditors,


for the purpose of laying before the meeting the account and for giving any explanation.


The meeting shall be called by an advertisement published in one widely circulated newspaper in Malaysia in the national language and one widely circulated newspaper in Malaysia in the English language, which the advertisement shall specify the time, place and object of the meeting and shall be published at least thirty days before the meeting.


The liquidator shall lodge with the Registrar and with the Official Receiver a return of the holding of the meeting and of its date with a copy of the account attached to such return, within seven days from the meeting.


The quorum at a meeting of the creditors shall be two members and two creditors and if a quorum is not present at the meeting, the liquidator shall in lieu of the return, lodge a return with the account attached, that the meeting was duly summoned and that no quorum was present, and upon such a return being lodged, the provisions as to the lodging of the return shall be deemed to have been complied with.


On the expiration of three months after the lodging of the return with the Registrar and with the Official Receiver, the company shall be dissolved.


Costs


All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator shall be payable out of the assets of the company in priority to all other claims.


Investment of surplus funds on general account


Subject to the direction in writing of the committee of inspection, or if there is no committee of inspection, by the liquidator himself, whenever the cash balance standing to the credit of any company in liquidation is in excess of the amount which is required for the time being to answer demands in respect of the estate of the company, the excess sum may—


(a) be invested in securities issued by the Government of Malaysia; or


(b) be placed on deposit at interest or with return with any bank.


Any interest received in respect of the investment shall form part of the assets of the company.


Unclaimed assets to be paid to receiver of revenue


Where a liquidator has in his hands or under his control—


(a) any unclaimed dividend or other moneys which have remained unclaimed for more than six months from the date when the dividend or other moneys became payable; or


(b) after making final distribution, any unclaimed or undistributed moneys arising from the estate of the company, the liquidator shall forthwith pay those moneys to the Official Receiver to be placed to the credit of the Companies Liquidation Account and whose receipt shall be an effectual discharge in respect of the unclaimed moneys.


The interest or return arising from the investment of the moneys standing to the credit of the Companies Liquidation Account shall be paid into the Consolidated Fund.


Books and papers to be kept by liquidator


Every liquidator shall keep proper books and papers in which he shall cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, subject to the control of the Court, personally or by his agent inspect the proper books and papers.


Notice of appointment and address of liquidator


A liquidator or an interim liquidator shall lodge a notice of his appointment, the address of his office and any change of the address with the Registrar and the Official Receiver within fourteen days from the appointment or the change of address.


Liquidator’s accounts


Every liquidator shall, within thirty days from the expiration of the period of six months from the date of the liquidator’s appointment and of every subsequent period of six months and in any case within thirty days after the liquidator ceases to act as a liquidator shall immediately after obtaining an order of release, lodge with the Registrar and with the Official Receiver, an account of the liquidator’s receipts and payments and a statement of the position in the winding up and verified by statutory declaration.


The liquidator shall—


(a) give notice that the account has been made up to every creditor and contributory when forwarding any report, notice of meeting, notice of call or dividend; and


(b) in the notice, notify creditors and contributories at what address and between what hours the account may be inspected.


Notification that a company is in liquidation


Where a company is being wound up, the words “in liquidation” shall be added after the name of the company in every invoice, order for goods or business letter issued by or on behalf of the company, a liquidator of the company, a receiver or manager of the property of the company.


Books and papers of company


When a company has been wound up, the liquidator shall retain the books and papers of the company and of the liquidator for a period of five years from the date of the dissolution of the company and at the expiration of that period, may destroy the books and papers.


Notwithstanding above, when a company has been wound up, the books and papers may be destroyed within a period of five years after the dissolution of the company, as the committee of inspection, or, if there is no such committee, as the creditors of the company direct.


Rights and duties of unsecured creditors


Every creditor shall prove his debt immediately after the making of a winding up order.


A debt may be proved by delivering or sending an affidavit through the post in a prepaid letter to the liquidator.


The affidavit shall—


(a) verify the debt;


(b) be made by the creditor himself or by any person authorized by or on behalf of the creditor or his estate and if made by a person so authorized, it shall state his authority and means of knowledge;


(c) contain or refer to a statement of account showing the particulars of the debt and shall specify the vouchers, if any, by which the statement of account can be substantiated; and


(d) state whether the creditor is or is not a secured creditor.


The liquidator may at any time call for the production of the vouchers or books of account.


A creditor shall bear the cost of proving the creditor’s debt unless the Court otherwise specially orders.


Every creditor who has lodged a proof shall be entitled to see and examine the proofs of other creditors at all reasonable times.


A creditor proving his debt shall deduct from his debt all trade discounts, but he shall not be compelled to deduct any discount not exceeding five per centum on the net amount of his claim, which he has agreed to allow for payment in cash.


Priorities


In a winding up there shall be paid in priority to all other unsecured debts—


(a) firstly, the costs and expenses of the winding up including the taxed costs of a petitioner, the remuneration of the liquidator and the costs of any audit carried out;


(b) secondly, all wages or salary, whether or not earned wholly or in part by way of commission, including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment, of any employee not exceeding fifteen thousand ringgit or such other amount as may be prescribed whether for time or piecework in respect of services rendered by him to the company within a period of four months before the commencement of the winding up;


(c) thirdly, all amounts due in respect of worker’s compensation under any written law relating to worker’s compensation accrued before the commencement of the winding up;


This shall not apply in relation to the winding up of a company in any case where the company is being wound up voluntarily merely for the purpose of reconstruction or of amalgamation with another company and the right to the compensation has on the reconstruction or amalgamation been preserved to the person entitled thereto, or where the company has entered into a contract with an insurer in respect of any liability under any law relating to workers compensation.


(d) fourthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, accrued in respect of any period before the commencement of the winding up;


(e) fifthly, all amounts due in respect of contributions payable during the twelve months next before the commencement of the winding up by the company as the employer of any person under any written law relating to employees social security contribution and superannuation or provident funds or under any scheme of superannuation or retirement benefit which is an approved scheme under the federal law relating to income tax; and


(f) sixthly, the amount of all federal tax assessed under any written law (or the balance of any such amount remaining due after deducting from the balance the net amount realized from security given by a company for the payment or repayment of any tax amount) before the date of the commencement of the winding up or assessed at any time before the time fixed for the proving of debts has expired.


The debts in each class shall rank in the order specified but debts of the same class shall rank pari passu and shall be paid in full, unless the property of the company is insufficient to meet the debts, in which case the payment shall be reduced and the rate of reduction shall be in equal proportion.


Where any payment has been made to any employee of the company on account of wages, salary or vacation leave out of money advanced by a person for that purpose, the person by

whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee would have been entitled to priority in the winding up has been diminished by reason of the payment, and shall have the same right of priority in respect of that amount as the employee would have had if the payment had not been made.


So far as the assets of the company available for payment of general creditors are insufficient to meet any preferential debts and any amount payable in priority, those debts shall have priority over the claims of the holders of debentures under any floating charge created by the company, and shall be paid accordingly out of any property comprised in or subject to that charge.


Where the company is under a contract of insurance, entered into before the commencement of the winding up, insured against liability to third parties, then if any such liability is incurred by the company, either before or after the commencement of the winding up, and an amount in respect of that liability is or has been received by the company or the liquidator from the insurer, the amount shall, after deducting any expenses of or incidental to getting in the amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability or any part of that liability remaining undischarged in priority to all payments in respect of the debts.


If the liability of the insurer to the company is less than the liability of the company to the third party, nothing shall limit the rights of the third party in respect of the balance.


Subject to the above, all debts proved in a winding up shall be paid pari passu



If you would like to know more, please contact Bestar.





Recent Posts

See All