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Striking Off and Liquidation

There are several reasons why a company will liquidate its assets. For example, an organisation becomes insolvent when it can no longer pay its obligations due to debt, capital flight, or lack of funds.

winding up of an Sdn Bhd company

Here are some other causes of company liquidation:

  • Management deadlock
  • The company is acting outside the scope of its activities
  • Breach of statutory provisions and other regulatory offenses
  • Corporate or financial restructuring
  • To minimise the tax liabilities
  • The organisation has ceased running its business activities
  • Suppression, which is defined by Sec. 181 of the Companies Act of 1965 as a dispute between shareholders

In Malaysia, a company can cease to exist by “Striking Off” or “Winding Up/Liquidation”. Both terms should not be confused with each other because they have different procedures. Ultimately, the end result is the closure of the company.

Striking off is a more straightforward process compared to Liquidation. The latter is categorised into three different types:

  • Voluntary Liquidation
  • Creditors’ Voluntary Liquidation
  • Court Winding Up

A liquidator will oversee the liquidation process in Malaysia. By definition, a liquidator is a person, officer, or entity with the expressed authority to handle the process of winding up an Sdn Bhd company or any of the company’s assets. The liquidator is tasked to dispose of the assets on behalf of the company. The funds arising from the sale will be used to pay off the company debts.

Section 269 of the Companies Act, 1965, outlines the powers and roles of the liquidator to:

  • Investigate the affairs and assets of the company, as well as the claims of the creditors, and third parties.
  • Recover or reuse the assets of the company on behalf of the company.
  • Adjudicate every claim of the creditors and guarantee an equitable distribution of the company assets.

Striking Off – Solvent Company

In this process, the directors must issue a declaration that the company has not commenced its business or has ceased its operations since the incorporation. They should present the declaration to the shareholders for approval. The entire process will take about 6-12 months from the date of submission of documents, subject to approval from SSM Malaysia. It will take 15 years from the strike-off date to reinstate the company, and only after obtaining a Court Order.

MVL (Members’ Voluntary Liquidation) – Solvent Company

The company’s shareholders and contributors can pass a resolution and assign a liquidator for a company wound-up. The liquidation starts at the time of the resolution’s approval and the appointment of the liquidator. It is the stakeholders who will initiate the MVL process. First, the official needs to submit a declaration of solvency at the Board of Director’s meeting and also inform the SSM formally. The liquidator is appointed to wind up the company’s affairs and also fulfill the requirements under the Companies Act with SSM and the Official Receiver.

The information regarding the process should be published in a widely circulated newspaper in Malaysia. Along with that, the liquidator must distribute the assets, settle the liabilities, and obtain clearance from IRB, COSCO, CUSTOMS, EPF, etc. The entire process can take two years to complete, but it will depend upon how fast you will receive the official clearance from the relevant authorities. After the company is dissolved, the Court may still void the dissolution at any time within two years after the date of the application of the liquidator or an interested party. Bestar Consulting can provide you with the best private liquidator in Malaysia, with an optimum fee of only RM15,000. The charge excludes the cost of a newspaper advertisement, courier, closure of bank account, photocopying, or the final tax submission.

Creditors’ Voluntary Liquidation – Insolvent Company

If the company doesn’t meet its liabilities, the directors have to convene a meeting with the creditors to consider the proposal of voluntary winding up. If the resolution is passed in favor of winding up, the company has to appoint a liquidator subject to the preference of the creditors. Contact us to get more information about this.

Compulsory Winding Up – Insolvent Company

Before winding up the company, shareholders, creditors, and the liquidator must present an application stating all grounds for the liquidation to the High Court, under Sec. 217 and Sec. 218(1) of the Companies Act. The common grounds stated by the Court include the inability to pay debts, among others. The liquidation allows the insolvent company to pay off its debts to the creditors. This is not a process of execution as it doesn’t benefit a particular creditor since the ultimate purpose is to benefit creditors on a pari passu basis. Therefore, whenever a company is about to be liquidated, the process implemented for one creditor will be similar in execution to all others.

Government Body Notifications

After the successful process of winding up, the company is supposed to notify the following authorities:

  • Companies Commission of Malaysia (SSM)
  • Inland Revenue Board (IRB)
  • Social Security Organisation (SOSCO)
  • Relevant Licensing Authorities
  • Royal Malaysian Customs Department (CUSTOMS)
  • Official Receiver
  • Employees Provident Fund (EPF)