WINDING UPLoh Boon How, CA

B. H. Loh & AssociatesChartered Accountant

1. Compulsory winding up (Sec 217(1), Companies Act1965),

2. Voluntary winding up (Sec 254, Companies Act 1965),

a) Members’ voluntary winding up

b) Creditors’ voluntary winding up

WHAT TYPE OF WINDING UP

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COMPULSORY WINDING UP

Court Winding Up

- In insolvency

- On other ground

• The company,

• Any creditor,

• A contributory (a personal representative of a deceased contributory)

• The liquidator,

• The Minister (Under Sec 205 or para 218(1)(d)).

WHO CAN APPLY COMPULSORY WINDING UP?

1. Compulsory winding up

• Their duty are to take possession and protect theassets of the company with a view to subsequentrealisation and distribution of the proceedsamong the creditors and contributories. – Sec8(3) and Sec 227, CA 1965.

2. Voluntary winding up

• Not applicable to its members’ or creditors’voluntary winding up. - Sec 10(2), CA 1965.

WHO IS THE LIQUIDATOR?

• The company unable to pay its debts (A debts atleast RM500 due and payable by the company tothe creditor serving the form and demandingpayment within 3 weeks). - Sec 218(2)(a), CA1965.

• An application is made to the court for thecompany to the wound up in insolvency.

WHY WINDING UP?

• A resolution has to passed by the company forvoluntary winding up.

• The winding up shall be deemed to havecommenced at the company of the passing ofthe resolution and unless the court, on proof offraud or mistake, thinks otherwise allproceedings taken in the voluntary winding upshall be deemed to have been validly taken. (Sec219, CA 1965)

WHEN THE WINDING UP BEGIN?

• The application can be opposed by the companyor some of its creditors, for example, creditorsmay oppose the application on the basis thatthey believe the company will be able to tradeits way out of financial difficult.

• However, it is entire a matter for the court’sdiscretion as to whether or not to make awinding up order.

WHY THE WINDING UP PROCESS FAILED?

• Either the court

1. A liquidator

2. Official receiver.

• All the company’s properties are under thecontrol of the liquidator.

• The powers of the directors and other companyofficers are suspended and they cannot actwithout approval from the liquidator of thecourt.

WHAT ARE THE RESULT OF WINDING UP?

• Any disposition of company property, after thewinding up begins, is void unless the courtapproves – Sec 223, CA 1965.

• Any transfer of the company’s shares after thewinding up begins is void the court approves –Sec 226(3), CA 1965.

• Legal proceedings cannot be started orcontinued against the company unless the courtapproves – Sec 226(3), CA 1965.

WHAT ARE THE RESULT OF WINDING UP?

• Enforcement process against company propertycannot be started or continued – Sec 224, CA1965.

• A secured creditor’s right to enforce its securityis not affected – Sec 229, CA 1965.

WHAT ARE THE RESULT OF WINDING UP?

• When the winding up is completed, the company is deregistered.

WHAT HAPPEN AFTER WINDING UP

COMPLETED?

VOLUNTARY WINDING UP1. Members voluntary winding up (MVWU)

2. Creditors’ voluntary winding up (CVWU)

• The liquidation of a solvent company where thedirectors have formed an opinion that thecompany will be able to pay its debts in fullwithin the period of 12 months after thecommencement of winding up as started – Sec257, CA 1965.

WHAT IS THE MVWU?

• The liquidation of an insolvent company wheredirectors make a declaration stating that thecompany cannot, by reason of its debts andliabilities, continue its business. A meetingbetween the company and its creditors must besummoned within 1 month from the date of thedeclaration.

WHAT IS CVWU?

• If it passes a special resolution to take effect orwhen the period fixed for the duration of thecompany by the memorandum or articles expires(if any).

• A resolution of the general meeting requiring thevoluntary winding up of the company is passed.

• The company at general meeting would thenproceed to appoint its liquidators.

WHEN DOES VOLUNTARY WINDING UP BEGIN?

• The majority of the directors may before thenotice of meeting made a full inquiry into theaffairs of the company and they formed theopinion that the affairs of the company will beable to pay its debts in full within a period notexceeding 12 months after the commencementof the winding up.

HOW DOES VOLUNTARY WINDING UP TAKE

EFFECT?

• If the company unable to pay its debts within theperiod, the directors would have to make afinancial report to the creditors,

• The creditors themselves may appoint theliquidator.

WHAT HAPPEN IF THE COMPANY FAILED TO

PAY ITS DEBT WITHIN THE PERIOD?

WHAT IS THE PROCESS OF VOLUNTARY

WINDING UP?

BOD meeting –adopt declaration

of solvency

Filled Form 66 –Declaration of

Solvency

EGM – passed the special resolution

Lodge Form 11 within 7 days

Advertise the special resolution within 10

days from EGM

Lodge Form 71 within 14 days – (Appointment

of liquidator)

WHAT IS THE PROCESS OF VOLUNTARY

WINDING UP?

Instruct the banker transfer to liquidator

account

Notify the IRB & seek confirmation of the

company’s tax liability

Liquidator sell all its assets

Liquidator pay all creditor

Liquidator pay tax liability & seek a tax

clearance

Liquidator pay capital distribution(If any) to

the members

WHAT IS THE PROCESS OF VOLUNTARY INDING

UP?

Liquidator to prepare 6 months of

account

Lodge Form 75 within 1 month

Lodge Form 69 after meeting for 7 days aftrthe meeting.

Liquidator prepare the final account

• When the Form 69 submitted the expiration of 3month with the SSM, then the company isderegistered,

WHAT HAPPEN AFTER WINDING UP

COMPLETED?

THANK YOUB. H. Loh & Associates

Address :

No. 1-3-15, Goldhill Complex,

Tingkat Paya Terubong 1,

11060 Penang.

H/P No. : 016-4893382

Email : bhlohass@gmail.com

Web-site / facebook : bhloh.com.my

23B. H. Loh & Associates