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Liquidation

1. Who can be appointed as liquidator?

  • Official Receiver (Director General of Insolvency (DGI) in capacity as Official Receiver); or
  • Private liquidator (an individual person whom is licensed to be a liquidator).

2. What are the duties of a liquidator ?

  • To investigate into the affairs and assets of the company
  • To investigate the conduct of its directors and other related persons
  • To investigate claims made by of creditors and third parties;
  • To collect and realize the company's assets at the best possible price and in a manner that is to the best advantage of the company.

3. Who is an unsecured creditor ?

Any person who has lodged the proof of debt with the liquidator.

4. How does the unsecured creditors get paid ?

Initially, all priority matters and persons as listed under section 292 of the Companies Act 1965 will be paid. The remaining balance will then be divisible amongst all pari-passu (equally).
Priority matter and persons :
  • cost and expenses of the winding up including taxed costs of a petitioner
  • remuneration of the liquidator
  • costs of any audit carried out
  • employees compensation accruing under any written law before the commencement of winding up
  • employees remuneration etc

5. Can the property of the Society be vested in a new registered society ?

The DGI can apply to the Court for the vesting of all the assets and liabilities of the society to the new registered society upon request be made by the new society whose constitution is similar to the old society.

6. What are the duties of ex-directors of a company ?

Ex-directors of the company must co-operate with the liquidator to provide all of the company's information such as the company's assets and creditors. All information provided must be supported by relevant documents.
Ex-directors are required to complete a Statement of Affairs form which includes:
• A brief description of the company's history
• Trading details
• Details of the cause of the company's failure
• All company assets
• All company liabilities
• All shareholder information
• Any legal claims pending by or against the company

7. What is compulsory winding up ?

Normally company is wound up because of unable to pay its debts. The company is wound up under an order of the court on the petition of:
  • the company;
  • any creditor;
  • contributory;
  • the liquidator;
  • Minister of Domestic Trade and Consumer Affairs;
  • Minister of Finance;
  • Bank Negara Malaysia; or
  • Registrar of Company.

8. What is liquidation or companies winding up ?

It is a process whereby the assets of a company are collected and realized in order to pay debts to the creditors. There are two types of winding up namely, compulsory and voluntary winding up.

9. What is proof of debt?

It is a document that states the amount of debts owing by a company to a person ( secured and unsecured creditor) and the statement must be supported by relevant documents. For example, where there is an agreement, it would be advisable to attach it.

10. What is the effect of liquidation on secured creditor of the company?

  • Secured creditor retains the ability to enforce securities under the National Land Code where the company is in default. Liquidation is usually treated as default allowing secured creditor to uplift and sell company assets over which they have security.
  • When there is any shortfall, the secured creditor should file a proof of debt and in such an instance, the status is changed to an unsecured creditor. However, if there is any surplus after deducting the secured creditor's debts, the secured creditor has to give the remaining proceeds to the liquidator to be put in the company's estate.

11. What is the effect of winding up on a company ?

  • Cessation of company's business
  • Termination of contracts of employment
  • Avoidance of disposition of company's assets
  • Avoidance of transfer of shares
  • Avoidance of uncompleted execution
Prohibition on execution action against of company unless obtain leave of court
Stay of any legal action against the company

12. What is the effect of winding up towards contributory of the company ?

The contributory is not personally liable towards the company's debts. However, the liquidator has power to direct the contributory to pay any unpaid shares.

13. What is the effect of winding up towards directors of the company ?

All the powers of the directors shall cease upon the winding up of a company. The liquidator will take over the administration of the affairs of company's winding up.

14. What is voluntary winding up?

Voluntary winding up is whereby a company is wound up:
  • when certain period of time was fixed for the duration of the company by expiration of Memorandum of Association (MOA) or Article of Association (AOA);
  • when the MOA or AOA provide that the company is to be dissolved on certain events;
  • when the company general meeting has passed a resolution requiring the company to be wound up voluntarily; or
  • by special resolution in extraordinary general meeting.
Pari-Passu – Section 292 Companies Act 1965

Subject to this Act, in a winding up there shall be paid in priority to all other unsecured debts :
  • firstly, the cost and expenses of the winding up including taxed costs of a petitioner, remuneration of the liquidator and the costs of any audit carried out;
  • secondly, all wages and salary;
  • thirdly, all amounts due in respect of worker's compensation under any written law relating to worker's compensation accrued;
  • fourthly, all remuneration payable to any employee;
  • fifthly, all amounts due in respect of contributions payable during the twelve months next before the commencement of the winding up; and
  • sixthly, the amount of all federal tax assessed under any written law before the date of the commencement of the winding up or a assessed at any time before the time fixed for the proving of debts has expired.

15. What will happen to property of the trade union that has been cancelled by Director General of Trade Unions?

The property shall vest on the DGI who will realize the assets and pay the trade union's debts due to the creditors who have filed their claim.

16. What will happen to the surplus assets of the society after DGI has paid all debts and liabilities of the society ?

  • The surplus assets shall be paid to the consolidated fund if the registration was refused or cancelled by the Minister.
  • For registration of society that was cancelled by the Registrar of Societies, the surplus assets will be paid to the members of the Society in accordance to the rules of the society or according to the Court order base on the scheme submitted by the DGI.

17. What will happen to the surplus assets of the trade unions

The surplus assets will be paid to the members of the trade union in accordance:
  • to the rules of the trade union (if any);
  • equally amongst the members of the trade union; or
if there is difficulty in ascertaining the persons entitled to such assets, according to the Court order base on the scheme submitted by the DGI.

18. Where a society’s registration is cancelled by the Minister or Registrar of Societies, what is the consequences on the assets belonging to the society ?

The assets of the society will vest on the DGI who will realize the assets and pay the society's debts due to the creditors who have filed their claim.