Corporate Law of Malaysia : The Rules and Process of Winding up a

Company
Ng, May Yee
Heriot Watt University
m.ng@hw.ac.uk

Chang, Chee Fei

Sunway University
cfchang@sunway.edu.my

Abstract
This article discusses the various mode of dissolution; the procedure for winding up; and the
appointment, qualifications, powers and role played by liquidator in different types of winding
up. The rights, obligations and liabilities of creditors, contributory, directors and officers is also
explained. Lastly, the winding up process will be concluded with assets distribution to
stakeholders entitled to the distribution. The writing of this article employs the hermeneutics
analysis of relevant legislation(s). It provides a quick and simplified reference for students and
non-practitioner.

Introduction
Note that it is advised that this article be read together with the preceding article entitled
“Corporate Law of Malaysia : Resuscitating a distressed business entity”.

A winding up procedure is initiated when, upon evaluation, it is no longer viable for the venture
to be continued due to many reasons, e.g. pro-longed financial distress. The company may be
ended in one of the following ways:
1) Striking off a company
2) Voluntary Winding Up – by members or creditors
3) Involuntary Winding Up – by the court

Illustration 1 below roadmap the voluntary and involuntary winding up.

Illustration 1

• Note that the term “Winding up” and “Liquidation” may be used interchangeably.

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1) Striking off a Company
Sec.549(1) of the Companies Act 2016 (‘CA 2016’) of Malaysia provides that a company
may be struck off from the register of companies (hereinafter called the “register”) at the
Companies Commission of Malaysia (‘Registrar’) if :
a) The company has been inactive because it has not been carrying on any business
b) The company has been found violating the company law
c) The company has been carrying on activities that is either illegal; threatening peace and
national security; undermining welfare, order and interest of the public; or simply
immoral.

Upon such suspicion, the Registrar may send a show cause notice to the company
concerned. The notice seeks the company to explain why it should not be struck off the
register. Reply must be submitted to the Registrar within 30 days from the date of the
notice, failing which, the Registrar will proceed to strike off the company. The
consequence of striking off is that the company is effectively being dissolved and is no
longer in existence. Sec.555(1), CA 2016 provides that “Any person who is aggrieved by
the decision of the Registrar to strike off the Company may, within 7 years after the name
of the company has been struck off, apply to the Court to reinstate the name of the
Company into the register”.

2) Voluntary winding up
A company can be wound up voluntarily if a special resolution has been passed in an
Extraordinary General Meeting (‘EGM’). A special resolution requires the approval from
at least 75% of the members of the company. This right to dissolve the company is a
statutory right provided under the CA. Hence, this right cannot be negated by the
constitution of the company. In other words, the company’s constitution cannot contain a
provision that forbids members of the company from winding up the company. However,
the company loss the right to wind up the company voluntarily if an earlier petition has
been filed to the court to wind up the company by reason of its inability to honour its debt
(Sec.463, CA 2016).

There are 2 types of voluntary winding up, namely:

a) Members’ voluntary winding up
b) Creditors’ voluntary winding up.

a) Members’ voluntary winding up (‘MVW’)

Sec.432(2)(a) of CA 2016 allows members to wind up the company by passing a special
resolution at the members meeting, that is the EGM. This form of winding up is affected
when the company is still solvent i.e. the company is not financially distressed and is
still able to pay its debts. In that case, why is there a need to wind up the company? The
reason for doing so may be, for example:
• The purpose of which the company was established has been achieved and the
members find it unnecessary to maintain the business
• The members are no longer interested in the business venture
• The members foresee that the future of the business may not be encouraging due to,
say for example, intense competition, globalization, artificial intelligence or simply
because the goods produced by the company may no longer be in demand, e.g.
typewriter.

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The winding up process :
i) Board meeting
The exercise commences with the meeting among the board of directors to decide
if the company should be wound up. If it is so agreed by the majority number of
directors, the date of the EGM will be decided for the purpose to pass a special
resolution. The company secretary (‘CS’) will be instructed and authorized to issue
notice of EGM.

ii) Statutory Declaration of Solvency (‘SDS’)

SDS is made by the director (if there is only 1 director) or the majority of directors.
It effectively declares that they are of the opinion that the company will be able to
pay its debts in full for the next 12 months following the commencement of the
winding up process (Sec.443(1), CA 2016). This declaration is made following an
inquiry into the affairs of the company. A director who made the SDS without
reasonable grounds to believe that the company can really honour its debt for the
next 12 months is a serious offence. If proven guilty, he may be imprisoned for up
to 5 years, or be fined up to RM3 million, or both. In addition, he may face a further
penalty of up to RM500 per day for each day after the conviction that the company
continue to fail to pay its debt.

The SDS must be made and lodge with the Registrar before any notice of EGM is
sent to members. When is the official date of which the winding up process
commence? If an interim liquidator has been appointed earlier on, the company is
deemed to have embarked onto the winding up process by the date the SDS is
lodged with the Registrar (Sec.441(1)(a), CA 2016).

iii) Notice of EGM

A written notice will be sent by the company to members entitle to attend the
meeting. Every member, members’ representatives, director and auditor has right
to receive notice of the EGM. A minimum of 21 days notice is needed before the
EGM can be convened. This is to give the members enough time to weight the
proposal.

iv) Convening of the EGM

The EGM must be convened within 5 weeks from the date of the Board meeting.
During the EGM, two resolutions need to be passed:
• a special resolution that the company should be wound up voluntarily ; and
• a resolution to appoint a liquidator.
A copy of the resolutions is to be filed with the Registrar.
Official commencement of the winding up – if there is no interim liquidator being
appointed prior to this date, the winding up of the company is deemed to commence
from the date the resolution is passed in the EGM.

v) Public announcement
The director(s) shall make an announcement:
a) To the Bursa (if the company is listed) on the EGM day, after 5.00pm.
b) On one widely circulated Bahasa and English newspaper in Malaysia within 10
days after the date of the resolution (Sec.439(2)(b), CA 2016).

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 The word “in Liquidation” must be stated after the company’s name on all
documents issued by the company, e.g. invoice, letter heads, vouchers etc.
(Sec.516(1), CA 2016).

vi) Appointment of liquidator

As agreed in the EGM, a liquidator nominated by the members will be appointed.
All affairs of the company will rest with the liquidator. The directors and the
management cease to have any power, unless consented by the liquidator
(Sec.445(2), CA 2016).

The winding up process is summarized in Illustration 2 below.

Illustration 2

Converting into a Creditors winding up

If, in the course of liquidating the company, the liquidator discovers that the company
is unable to pay its debts as declared in the SDS, he may call for a creditors’ meeting.
A statement listing the assets and liabilities of the company will be presented to the
creditors. The liquidator shall advise the creditors of their right to appoint another
liquidator to continue with the liquidation exercise. However, it is not compulsory that
the current liquidator (who was appointed by the members) must be removed. The
creditors may resolve to allow the current liquidator to carry on with the liquidation
process (Sec.447(1), CA 2016).

Once a creditors’ meeting is summoned, the winding up shall officially be converted

into a creditors’ voluntary winding up, with effect from the date of the creditors’
meeting (Sec.448, CA 2016).

b) Creditors’ voluntary winding up (‘CVW’)

A company is insolvent when its assets is below its liabilities, rendering it unable to pay
its debt. The condition is made known to creditors and it is left to the creditors to decide
if the company should be wound up, upon which available assets will be sold to repay
the outstanding debts. There is no provision in the CA that compels a company to go
into liquidation in the event of insolvency. However, directors who direct a company

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to continues to trade despite its insolvency risk bearing personal liability for fraudulent
trading. Hence, the directors may invite the creditors to make the winding up decision.

Like the MVW, CVW is affected by a special resolution (Sec.432(2)(b), CA 2016).

There is no need for the Directors to make a SDS (Sec.444, CA 2016) as the company
is, in fact, insolvent.

The winding up process :

i) Board meeting
The directors hold a Board meeting to confirm if the company is unable to honour
its debt and that the creditors should be summoned to decide on the winding up of
the company. If it is so agreed by the majority number of directors, the date of the
EGM and creditors’ meeting will be decided for the purpose to pass a special
resolution and to appoint liquidator. The CS will be instructed and authorized to
issue notice to all relevant parties.

ii) Declaration of insolvency

The CA does not provide that the directors must make a declaration that it is
insolvent. As stated in Sec.443 of CA 2016, a winding up that is initiated without
a SDS will automatically be considered as a CVW. However, as a matter of clarity
for both members and creditors, it is not uncommon that directors will make a
declaration that the company is unable to continue its business due to its liabilities
exceeded its assets.

iii) Notice of EGM (Members’ meeting)

A notice will be sent to members to convene an EGM to pass a special resolution
to wind up the company.

iv) Notice of Creditors’ meeting

A notice will be sent to creditors to convene a creditors’ meeting. Notices shall be
sent out to both members and creditors simultaneously. A statement listing the
names of the creditors and the amount owed to them will be appended to the notice.
The notice of meeting should be advertised in one widely circulated Bahasa and
English newspapers 7 days prior to the meeting date.

v) Convening of the EGM

The purpose of convening the EGM is to obtain the members’ consent to wind up
the company voluntarily, by the creditor. Their consent will be recorded in the
special resolution of which one copy will be lodged to the Registrar and the Official
Receiver (‘Official Receiver’ means the Director General/ Deputy Director
General/ Directors/ Deputy Directors/ Senior Assistant Directors/ Assistant
Directors/ Officers of Insolvency, and any other officer appointed under the
Bankruptcy Act 1967 – Sec.2, CA 2016).

One of the directors and the CS shall present the company’s affair to the members.
Special resolution approved in this meeting marks the official commencement of
the winding up process (Sec.441(1)(b), CA 2016). Moratorium kicks off once the
winding up process commence (Sec.451, CA 2016). All proceeding taken against
the company after this date will be void unless with the court’s approval. The

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 members may nominate a liquidator to expedite the liquidation process. However,
this will subject to any nomination made by creditors, as discussed below.

vi) Convening of the creditors meeting

The creditors’ meeting shall be held on the same day after the EGM or on the next
day, at a time and venue that is most convenient for most creditors (Sec.449, CA
2016). The creditors may accept the liquidator nominated by the members.
Alternatively, they may nominate another liquidator to manage the affairs of the
company and to distribute the company’s asset. In that case, the creditors’
preference will prevail (Sec.450(1), CA 2016). After all, in a CVW, the creditors’
interest and control are primary.

vii) Public announcement

The director(s) shall make an announcement:
a) To the Bursa (if the company is listed) on the EGM day, after 5.00pm.
b) On one widely circulated Bahasa and English newspaper in Malaysia within 10
days after the date of the resolution (Sec.439(2)(b), CA 2016).
The word “in Liquidation” must be stated after the company’s name on all
documents issued by the company, e.g. invoice, letter heads, vouchers etc.
(Sec.516(1), CA 2016).

viii) Appointment of liquidator

Liquidator nominated by members at the EGM or by creditors at the creditors’
meeting will be appointed. As said above, the creditors’ choice is prioritized. The
liquidator may convene another meeting with the creditors and contributors to
determine if a Committee of Inspection need to be established to oversee the
winding up process (Sec.450(4), CA 2016).

Upon appointment of the liquidator, the directors ceased to be in power. The

management power rest with the liquidators. At times, the service of the directors
may continue if it is so approved by the Committee of Inspection or by the creditors,
if there is no such Committee (Sec.450(6), CA 2016).

Common matters
The following is applicable to both forms of voluntary winding up :
a) Cessation of business
Upon commencement of the winding up process, the company cease to carry on
business unless the liquidator is of opinion that it is beneficial for an effective winding
up (Sec.442(1), CA 2016). This may occur in circumstance, such as, it is necessary to
enter into a new contract to dispose the company’s asset; or a contract to improve the
asset so that to put it in a deliverable or saleable state.

b) Liquidator’s power
Powers of liquidator in a voluntary winding up is stipulated in the 11th Schedule of the
CA. A MVW and CVM liquidator may exercise any power given to a compulsory
winding up liquidator (as listed in the 12th Schedule) if it is approved by the members;
or creditors; or Committee of Inspection.

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 The liquidator’s list of contributories is an evidence of the liabilities of that person.
(Contributories will be discussed below). The liquidator may call for general meetings
to pass special resolution on matters that he thinks necessary. He may payoff the
company’s debts or modify the contributories’ right and even out the amount among
them.

3) Involuntary Winding up
Also known as compulsory winding up (‘CW’). This form of winding up is ordered by the
Court.

Grounds for winding up

The grounds upon which the court may issue a winding up order are provided in Sec.465(1)
of CA 2016.

Sec.465(1), CA 2016 – The Court may order the winding up if :

a) the company has by special resolution resolved that the company is to be wound
up by the Court;
b) the company defaults in lodging the statutory declaration under subsection 190(3);
c) the company does not commence business within a year from its incorporation or
suspends its business for a whole year;
d) the company has no member;
e) the company is unable to pay its debts; (see Elaboration 1 below)
f) 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;
g) 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;
h) the Court is of the opinion that it is just and equitable that the company be wound
up; (see Elaboration 2 below)
i) 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;
j) the company has carried on a licensed business without being duly licensed or the
company has accepted, received or taken deposits in Malaysia, in contravention of
the Financial Services Act 2013 or the Islamic Financial Services Act 2013, as the
case may be;
k) the company is being used for unlawful purposes or any purpose prejudicial to or
incompatible with peace, welfare, security, public interest, public order, good
order or morality in Malaysia; or
l) the Minister has made a declaration under section 590. (see Elaboration 3 below)

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Elaboration 1 :
Sec.466(1), CA 2016 defined “inability to pay debts” as follows :
A company is considered as unable to pay its debts if—
(a) the company has owed a debt of an amount exceeding the amount prescribed by the
Minister.
• Currently, this amount is fixed at RM10,000.
• A notice of demand has been served at the registered office of the debtor-company by a
creditor or by its assignee or agent, that require the company to pay the debt
• The debtor-company has to pay the debt within 21 days, failing which will trigger the
suspicion for “inability to pay debts”
(b) The company is ordered by the Court to pay the debt and it has failed to do so
(c) The Court is of opinion that it is proven that the debtor-company is not able to pay its
debts.

Note : this is the most common ground of winding up petition to the Court.

Elaboration 2 :
What is deem “just and equitable” ground ?

This provision leaves the Court with wide discretion to decide as it deems fit. Basically, as
long as the applicant can convince the court that it is unfair to allow the company to continue
to trade, the court may order the company to be wound up. The word “equitable” means
fairness to the society at large. It is a matter of public policy.
Here are some examples of circumstances where the court thinks that it is “just and
equitable” to cease the company. Note that these examples are shared from English common
law :
1) The purpose of which the company is formed can no longer be achieved – Re German
Date Coffee Co. (1882)
2) The company has been promoted in a fraudulent manner and the directors seems not to
intend to trade in good faith – Re London & County Coal Co. (1866)
3) A company that is formed to defraud others – Re Thomas Edward Brinsmead & Sons Ltd.
[1897]
4) There is loss of mutual trust and confidence
5) The company suffers management deadlock – Tay Bok Choon v. Tahansan Sdn. Bhd.
[1987]

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Elaboration 3 :
Sec.590, CA 2016 provides that the relevant Minister charged with the responsibility for
companies and businesses registration may instruct that the affairs of the company concerned
be investigated.

The Minister may do so :

a) On its own initiative if it is of the opinion that, inter alia, the operation of the company is
against interest of the public, fraudulent, management misconduct ; or
b) if requested by at least 200 members or members holding a minimum of 10% issued
shares in a company with share capital ; or
c) charged with the responsibility for the registration of companies, trust companies and
businesses
d) if requested by debenture holders holding at least 20% of the company’s debenture value ;
or
e) if requested by at least 20% of the total members, if the company does not has a share
capital

Who has standing to petition to the court ?

Application or petition to wind up a company is made to the High Court. The following
persons may petition to the court for an order to wind up the company (Sec.464, CA 2016) :
i) Members or his personal representative
ii) The Board of directors
iii) Any creditor – including a creditor who may foresee that the company is going to
default payment
iv) A contributory or his personal representative
v) A liquidator
vi) The relevant Minister
vii) The Bank Negara (in case of a company that is under the purview of the finance
services law)
viii) The Registrar
ix) the Malaysia Deposit Insurance Corporation (MDIC) (in case of a company that is
under the purview of the MDIC law)

On receiving the petition from the petitioner, the court may (Sec.469(1), CA 2016) :
i) dismiss the petition with or without costs;
ii) adjourn the hearing conditionally or unconditionally; or
iii) make any interim or any other order that the Court thinks fit.

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The winding up process
1) Petition to the Court
Upon presentation of the petition, all transaction involving disposition of the company’s
property, share transfer, changes made on members’ status, will be void unless
approved by the court (Sec.472(1), CA 2016). Granting of the approval is at the court’s
discretion and it will only be granted if it is of opinion that the transaction will be
beneficial to the company or the creditors. At this stage, moratorium (an order refraining
parties from taking legal action against the company) will not be available by default.
However, the company, contributory or creditors may apply for a stay and the court
may consider such application as it deems fit. (Sec.470(1), CA 2016).

2) Granting of the winding-up order and appointment of liquidator

Winding up commence from the date of the order. Moratorium is triggered
automatically. Proceedings against the company can only proceed subject to court’s
approval. All powers available to the directors and officers of the company will be
suspended. Management of the company will be vested on the liquidator

3) Statement of Affair
The directors and/or CS will submit a Statement of Affair to the liquidator. It lists the
following information :
i) the assets and liabilities of the company
ii) the list of debts
iii) list of creditors, with their names and addresses
iv) list of charges (names of the charge holder and date created)
v) any other information required by the liquidator
A copy of the statement must be filed with the Registrar and the Court

4) Liquidator’s report to the court

The liquidator causes a report to be submitted to the court that reports on the following :
i) The amount of assets and liabilities
ii) The capital structure of the company
iii) The reason for the corporate failure
iv) His opinion on whether further investigation need to be conducted to examine the
company’s operation since its promotion stage. This may be necessary if the
liquidator suspects that fraud may have occur at the promotion stage.
v) His opinion if any officer of the company has violated the CA
vi) Any other matter that the liquidator thinks necessary to be brought to the Court’s
attention.

5) Asset distribution
The primary task of the liquidator is to realize the company’s assets to pay off debts
and owing. Secured creditors who hold fixed charges over the company’s asset has
foremost priority to enforce their security(ies) to satisfy the debts owed to them. There
is no need to prove their debt. As such, secured creditors are outside of the liquidator’s
repayment list. If the security is insufficient to repay the debts owed to secured creditors
in full, they may submit claim for the residue. In this situation, the secured creditors no

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 longer enjoy any repayment privilege. Instead, they will be ranked equal to other
unsecured creditors (Sec.524(1)(b), CA 2016).

Vise versa, if there is surplus after repaying the secured creditors, the balance amount
will be returned to the liquidator to be distributed. Priority of payment is as per Sec.527
of CA 2016, namely :
1) Unsecured creditors (preferential debt) :
a) costs and expenses related to the winding up process, including the liquidator’s
remuneration
b) wages, salary and commissions owed to employees (with limit)
c) workers’ compensation (full amount)
d) employees’ vacation leave
e) employees’ provident fund
f) taxes
2) Debenture holders holding floating charge
3) Other unsecured creditors

If there is surplus after completing the distribution, a final dividend will be issue to
contributories. If there are unclaimed monies, the monies will be paid to the Official
Receiver (Sec.508, CA 2016).

6) Final meeting
Once the company has been fully wound up, the liquidator will (Sec.459, CA 2016) :
i) prepare an account to report on the assets disposal
ii) lay the account in a members’ or creditors’ meeting (which ever relevant)
iii) file a copy of the account and report of the meeting held with the Registrar and the
Official Receiver

7) Discharging the liquidator

The liquidator applies to the Court for an order to be discharged.

8) Struck off the company

The company will be struck off the register and cease to exist.

The Officers, Contributory and Liquidators

The following sections discuss the responsibilities of three important individuals in a winding
up process, namely :
a) The Officers;
b) The Contributory; and
c) The Liquidators

These apply to all form of winding up procedure.

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a) The Officers
‘Officer’ includes any directors, CS and employees of the company (Sec.2, CA 2016). It
also includes liquidators that is appointed by members/company under a MVW, but exclude
liquidator that is appointed by creditors under a CVW and by the court under compulsory
winding up.

Trading during insolvency may be an offence, unless it is necessary to expedite the winding
up of the company, such as realization of assets. Any officers of the company should not
direct the company to enter into further commercial transaction when they have reasonable
ground to believe that the company will not be able to honour its debt. Having knowledge
of the financial situation of the company, yet continue to enter into contracts, creating further
debts and without intention to pay those debt, is akin to defrauding creditors. It is a criminal
offence.

Besides, directors will also be liable for civil offence for breach of the fiduciary duties to
exercise reasonable care, skill and diligence. This poses heavy sanction on the officers who
direct the fraudulent trading, where upon conviction, may be held personally liable for the
debt created (Sec.540(1), CA 2016). There is no ceiling to this liability. This sanction cannot
be covered by any D&O insurance (i.e. Directors and Officers liability insurance). Moreover,
any other person who was knowingly a party to the fraudulent trading may also, if convicted,
face a fine of up to RM1 million or 10 years imprisonment or both (Sec.540(5), CA 2016).
Note that the wording in this subsection refers to every “person”, which extent the coverage
of this rule to literally anyone, not just the directors and officers of the company, who has
the knowledge that the company will have no ability to repay, yet took part in expediting
the transaction.

b) The Contributory
A contributory is individuals who are responsible to contribute to the assets of the company
in the event it goes into liquidation (Sec.2, CA 2016). Assets of the company includes cash
in bank. “Contribute to the assets of the company” literally means individuals making
payment to the company.

Who are responsible to contribute ?

1) Present members
Present members’ responsibility to contribute to the asset of the company is limited to
the amount unpaid (limited liability or limited by guarantee). If the present members have
paid up their shares in full, they will not be called to make further contribution.

For example :
Member A and B have acquired 3,000 ordinary shares each in Company XYZ, at the
price of RM2.00. As such, each of them will need to pay RM6,000.
Member-A has paid all the RM6,000. Member-B has paid only RM4,500. There is a
remaining RM1,500 unpaid. Upon winding up, Member A will not be called to pay
anything. But Member B will be called to pay the remaining RM1,500.

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2) Past members
i) Past members are liable for debts incurred within 1 year prior to the winding up and
before he ceases to be a member.
For example :
Company ABC failed to pay its debts and proceed to commence the winding up
process on 31st Dec 20X2. Those who remained as member as at 1st Jan 20X2 can
be called to make financial contribute to the company, with the hope to obtain
enough money to pay off the deficits. However, individuals who are no longer a
member on or before 31st Dec 20X1 cannot be called upon to contribute.

ii) Past members will not be asked to contribute to debts that are incurred after he ceased
to be a member.
Example :
Member-K is no longer a member of the company starting from 31st March 20X1.
Member-K may be liable, as per (i) above, for debt and liabilities incurred before
31st March 20X1.

iii) The past members will not be called to contribute if the court thinks that the present
members are able to satisfy the contribution themselves.

3) Deceased member – the liabilities of a deceased member will be discharged by his

personal representatives.

4) Bankrupt member – the liabilities of a bankrupt member will be discharged by his trustee.

5) Past or present directors.

Existing directors are liable for debts incurred within 1 year prior to the winding up while
they were still in office. Past directors will not be made liable for debts that were created
after he left office. Directors’ liability to make further contribute is not by default. This
liability must have been provided in the company’s constitution or if the court thinks that
it is necessary that they must contribute.

If it appears to the liquidator that the company’s assets will not be sufficient to satisfy its
debts, he may compile a list of contributories that is eligible to make contribution
(Sec.489(2)(a), CA 2016). The list will be a conclusive evidence of the contributories’
liabilities. The court may call some or all contributories on the list to make contribution
(Sec.496, CA 2016). Sec.504 gives the court wide power to order for a confiscation of
personal property or to arrest a contributory who attempts to avoid calls, examination or
obstruct the winding up proceeding by hiding, absconded (or about to abscond) or hide his
property

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c) Liquidators
The primary role of a liquidator is to expedite the liquidation process that will eventually
dissolve the company. Liquidators are appointed :
a) by the company or the members in a MVW
b) by the company or the creditors in a CVW
c) by the court in a CW

Qualification :
Generally, a person appointed as a liquidator or interim liquidation (Sec.433(1), CA 2016) :
a) Must be an approved liquidator – any person who is a member of a recognized
professional body may apply to the Finance Minister to be appointed as a liquidator
b) Must not owe the company (that is under liquidation) a debt of more than RM25,000
c) Cannot be an Officer of the company concerned.
d) Cannot be an employee or partner of the company concerned
e) Cannot be an employee or partner of an Officer of the company concerned.
f) Cannot be a bankrupt
g) Cannot have been convicted for any fraud or dishonesty offences that is punishable by
a jail sentence of 3 months or more.

In particular, a liquidator appointed in a MVW need not be an approved liquidator (criteria

(a) above) and he may be an Officer of the company (criteria (c) above).

Criteria (a) and (c) can also be availed with regards to liquidator appointed in a CVW if an
ordinary resolution to that effect has been passed in a creditors meeting.

The person nominated to be the liquidator must consent to the appointment in writing.
Otherwise, the appointment is invalid. (Sec.433(7), CA 2016).

Remuneration :
The liquidator is entitled to receive remuneration (Sec.454(1), CA 2016). The remuneration
of a liquidator in a CVW may be determined by the creditors or the Committee of Inspection,
if there is one. As for a liquidator or interim liquidator in a CW, their remunerate rate will
be determined by the court. The remuneration is calculated in percentage (Sec.479, CA
2016).

Power of the Liquidator :

a) Power to pay creditors
The liquidator should, as far as possible, pay creditors in full. If there are insufficient
fund to fulfill the debts, the liquidator may make arrangement to compromise with
creditors, say for example, to negotiate for a discount.

b) Handling of monies received by him

Liquidator shall deposit any money of more than RM10,000 received by him into a
prescribed bank account within 10 days from the receipt date (Sec.488, CA 2016).
However, the court may authorize him to hold an amount higher than RM10,000. If he
fails to deposit the money within 10 days, he will be liable to pay the company an interest
of 20% per annum on the excess amount held, calculated from the 11th day onwards. It is

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 an offence to use a bank account other than the one prescribed. This default in managing
the monies may render him liable to reimburse out of pocket for any loss or expenses that
arise from his failure or carelessness in handling the money, his remuneration be reduced
by the court or even be removed from office. The liquidator may invest surplus monies
in his possession in government bonds or deposit the monies with banks to earn interest
(Sec.507(1), CA 2016).

c) Managing the company’s property

The liquidator may gather the company’s property, dispose it and apply the proceeds to
pay off the company’s liabilities. He may obtain additional finance secured by the
company’s assets. Of course, this additional finance is sorted out of necessity to complete
the winding up process. The liquidator may apply to the court for an order to retrieve the
company’s assets that are held by trustees.

d) Carry on the business of the company

Normally, the company cease to transact on the date the winding up order takes effect.
By default, the liquidator has authority to continue the business of the company for a
further 6 months in order to complete outstanding obligations or contracts. However, if
6 months is not enough, the liquidator may seek approval from the court or the Committee
of Inspection to continue the business for a further period.

e) In addition to the above, the 11th Schedule and 12th Schedule listed further power of the
liquidator in a voluntary winding and a CW respectively.
Main powers provided in 11th Schedule are :
• Able to exercise all powers given to a liquidator under a CW (12th Schedule), subject
to approval from members (for MVW) and the court/Committee of Inspection (for
CVW)
• May settle a list of contributories and the list shall be prima facie evidence of the
contributories’ liabilities
• May adjust the contributories’ rights
• May call for meetings for any matters he thinks fit
• Pay the company’s debts

Main powers provided in the 12th Schedule are :

• bring or defend any legal action in the name and on behalf of the company;
• compromise any debts below RM10,000 that is owed to the company
• execute documents, bill of exchange or promissory notes on behalf of the company
and use the company’s common seal
• to claim from the estate of deceased debtors or contributories.
• to pay expenses incurred in ordinary course of business
• to appoint agent and lawyer to facilitate his duties

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Conclusion
The above explains the various mode of dissolution; the procedure for winding up; the
appointment, qualifications, powers and role played by liquidator in different types of winding
up; the rights, obligations and liabilities of creditors, contributory, directors and officers. The
winding up process concludes with assets distribution to stakeholders entitled to the
distribution. The winding up procedure is a costly and time consuming exercise in itself. Hence,
it should be of last resort. Businesses should identify early signs of distress and try to exhaust
other less drastic measures (i.e. scheme of arrangement, corporate voluntary arrangement and
judicial management) to rescue the company.

Other regulations concerning operating a business in Malaysia can be found in multiple articles
in this series of "Corporate law of Malaysia".

Note : The use of the word "He" in this article is for the sake of convenience. It does not indicate
preference or exclusivity to the male gender. It is therefore gender neutral.

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