L9. Winding Up

Professional Practice II
Multimedia University Trimester 1: 2010/2011
LECTURE 11 :- INSOLVENCY PART II : COMPANIES WINDING UP

11.1 Introduction
1. Governing law Companies Act 1965 (CA), Companies Winding up Rules (CWR) 1972,
procedure Rules of the High Court (HC)
2. Purpose of winding up is to dissolve the company, sell off its assets and settle all debts.
3. Types of winding up- voluntary winding up & involuntary winding up also known as compulsory
winding-up
11.2 Grounds for Winding up
s.218 (1) CA The Court may order a winding up if (a) the company has by special resolution resolved that it be wound up by the Court;
(b) default by the company in lodging the statutory report or in holding the statutory meeting;
(c) company fails to commence business within a year from its incorporation or suspends its business
for a whole year;
(d) the number of members is reduced to below two;
(e) the company is unable to pay its debts;
(f) the directors have acted in their own interests being unfair or unjust to other members;
(g) an inspector appointed under Part IX has reported that he is of opinion (i) that the company cannot pay its debts and should be wound up; or
(ii it is in the interests of the public or shareholders or creditors that the company be wound up;
(h) when the duration if any, of the company fixed by the memorandum or articles expires or the
occurance of any event, providing for the company to be dissolved;
(i) the Court is of opinion that it is just and equitable to do so;
(j) the companys licence under the Banking and Financial Institutions Act 1989 or the Islamic
Banking Act 1983 has been revoked or surrendered;
(k) the company has carried on Islamic banking business, licensed business, or scheduled business, or
it has accepted, received or taken deposits in Malaysia, in contravention of the Banking and
Financial Institutions Act 1989 or the Islamic Banking Act 1983, -[ now Financial Services Act
2013 and Islamic Financial Services Act 2013 not in force yet]
(l) the company has held a licence under the Insurance Act 1996 and(i) that licence has been revoked;
(ii) Bank Negara Malaysia has been petitioned for its winding up under subsection 58(4) of the
Insurance Act 1996; or
(iii) an order under para 59(4)(b) of the Insurance Act 1996 has been made in respect of it;
(m) the company is being used for unlawful purposes or any purpose prejudicial to or incompatible
with peace, welfare, security, public order, good order or morality in Malaysia; or
(n) the company is being used for any purpose prejudicial to national security or public interest.
(2) A company shall be deemed to be unable to pay its debts if (a) a creditor having a debt exceeding RM500/- has served on the company by leaving at the
registered office a demand requiring the company to pay the sum so due, and the company has for
3 weeks thereafter neglected to pay the sum ;
(b) execution or other process issued on a judgment, decree or order of any court in favour of a creditor
of the company is returned unsatisfied in whole or in part; or
Prepared by Gita Radhakrishna
(c) it is proved to the satisfaction of the Court that the company is unable to pay its debts; and in
determining this the Court shall take into account all liabilities of the company.
11.3 Voluntary winding-up s.254
1. This is done voluntarily by the members or creditors. The members winding up takes place when the
company solvent i.e. in a position to pay all its debts.
2. Company has to make a declaration of solvency stating that it will be able to pay all its debts within
12 months of commencing the winding up process.
3. the company needs to pass a resolution which may be done where:(i) the period fixed under the Memorandum expires ;
(ii) the occurrence of certain events which lead to dissolution
(iii) the company passes a resolution for voluntary winding up at the general meeting ;
(iv) the company resolves by special resolution to be wound up.
4. Appointment of liquidator
1) s.258 the company and the creditors may nominate a liquidator for the purposes of winding up the
company.
2) ss 268 - 269 set out duties and responsibilities of the liquidator .
Cheah Theam Kheng v. City Centre Sdn Bhd (In Liquidation) & Other Appeals[2012] 2CLJ 16
Issue was whether a liquidator could act alone without appointing committee of inspection &
whether directions of committee of inspection mandatory for sale of company's property.
CA: s. 237(1) CA1965 regulates the exercise and control of the liquidator's power. The exercise by
the liquidator of the powers conferred on him by s. 236 CA1965 was subject to the control of the
court as provided for in s. 236(3).
3) s.231 Court may appoint a provisional Official Receiver or liquidator at any time after the
presentation of the winding up petition
s.4 approved liquidator" means an approved company auditor who has been approved by the
Minister under section 8 as a liquidator and whose approval has not been revoked;
"Official Receiver" means the Official Assignee, Deputy Official Assignee, Senior Assistant
Official Assignee, Assistant Official Assignee, Bankruptcy Officer and any other officer appointed
under the Bankruptcy Act1967
s.227(1) where no liquidator has been appointed or nominated the Official Receiver(OR) shall be
appointed as the provisional liquidator and shall continue to act until an official liquidator is
appointed.
4. s.232(3) the liquidator is entitled to receive a salary by way of percentage or otherwise by agreement
with committee of inspection.
Representative Of The Estate Of Kuan Mei Ling, Deceased (Provisional Liquidator Of The
Respondent Company) V. Metroplex Bhd [2013] 3 CLJ 196
CA: In exercising its power to determine the salary or remuneration of a provisional liquidator, the
court applies the test of what is fair and reasonable remuneration to be awarded in the
circumstances of each particular case, taking into consideration, among others, the complexity of the
matter involved and the length of time taken to complete the task given to the provisional liquidator.
It is trite that the provisional liquidator may be reimbursed of the expenses properly incurred out of
the company's assets that were administered by the provisional liquidator and were held by them.
The burden was on the PL to show her entitlement to the fees and costs that she claimed and that the
remuneration was justified. The PL, once appointed, owed the respondent a fiduciary duty to act
fairly and objectively in the interest of the respondent. In breach of this fiduciary duty, the PL had
failed to ensure that the fees or prices obtained were competitive.
Goh Swee Oh & Ors V. Heng Ji Keng & Anor[2011] 6 CLJ 812
Issue whether remuneration of Liquidator must be approved by court.
CA: It would make no sense at all to impose a condition that the private liquidator appointed by the
court to take charge of a winding-up process, must in all instances approach the court first for
approval before being paid remuneration from available funds of the company under liquidation.
Sufficient safeguards under s.305CA1965 for shareholders to check the liquidator in so far as the
issue of reasonableness of their remuneration and expenses are concerned or generally their conduct
in that capacity.
5. Taman Sungei Dua Development S/B [1997]1 CA :- notwithstanding the appointment of
provisional liquidators, directors will still retain residuary powers eg. To instruct solicitors to
oppose the petition etc.
6. Where a winding up order has been made or a provisional liquidator appointed no action shall be
brought against the company without the leave of the court.
7. Stay of Proceedings in Winding up
1). s.222 once a petition for winding up has been presented to the court and before any order for
winding up has been made, a company, creditor or contributory may apply to court for a stay of any
proceedings in any pending actions against the company
2). s. 243(1) after an order for winding up has been made the court may upon the application of a
liquidator, creditor or contributory of the company stay proceedings at the courts discretion. The
court may require the liquidator to submit a report on the facts of the matter.
s.243 (2) a copy of the order shall be lodged with the RoC and OR within 14 days .
3). s.226(3) once a provisional liquidator has been appointed or a winding up order made, no action
shall be commenced or proceeded with without the leave of court.
11.4 Involuntary or Compulsory Winding up
1. This is the most common type of winding-up.
2. s.217 parties who may petition:(a) the company;
(b) any creditor,;
(c) a contributory or any person who is the personal representative of a deceased contributory or the
trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory;
(d) the liquidator;
(e) the Minister pursuant to s 205 or on the ground specified in paragraph 218 (1) (d);
(f a company which is a licensed financial institution,
(g) a company which is licensed under the Insurance Act 1996, Bank Negara Malaysia;
(h) the Registrar on the ground specified in section 218(1) (m) or (n);
1
[1997] 2MLJ 256

(i) institution under the Malaysia Deposit Insurance Corporation Act 2005 or of any two or more of
those parties.
(2) Notwithstanding anything in subsection (1) (a) a petition may not be presented on any of the grounds specified above unless:(i) the number of members of the is below 2; or
(ii) in the case of a contributor he has held the shares for at least 6 months
(b) default in lodging the statutory report or in holding the statutory meeting,
(c) the Court shall not hear the petition if presented by a contingent or prospective creditor until such
security for costs has been
(d) the Court shall not, where a company is being wound up voluntarily, make a winding up order
unless it is satisfied that the voluntary winding up cannot be continued with due regard to the
interests of the creditors or contributories.
3. s.219 winding up is deemed to have commenced the moment a petition for winding up is
presented.
4. s.218 circumstances for winding up [ same as in voluntary winding up]
The most common ground is under s.218(e) unable to pay debts.
5. Q. where judgment is more than 6 years old is leave required?
Wangsini S/B v Grand United Holdings Bhd. [1998] 2 judgment obtained on 19 Jan 1990 and
winding up petition filed on 30 Jan. 1996 clearly more than 6 years. However
HC Held: O.46r.2 RHC not applicable in a winding up as the winding up petition does not come
within a writ of execution. Not applicable to petitions under s.218
6. Test of Inability to pay debts commercial insolvency
Test is one of commercial insolvency - unable to meet current debts even if it has substantial
wealth which cannot be immediately realized.
Malayan Plant Pte. Ltd. v Moscow Narodny Bank Ltd. [1980] 3 respondent bank had proved
the debt and that the debt had not been paid.
Re Hong Huat Realty)M) S/B, UAB Bhd.v Hong Huat Realty (M)S/B[1987]4- folld.
MBF Finance Bhd. v Sri Hartamas Development S/B [1992] 5 SC 21 days 3 weeks stipulated
in s.218(2)(a) refers to the period of neglect to pay before the presumption of inability to pay
arises. It does not relate to the Notice of demand itself. Further even if a company has wealth
locked up not presently realizable and has no assets to meet its current liabilities it is commercially
insolvent.
6. s.218(2)(a) statutory notice of demand
There is no prescribed form. It has to relate to the specified debt, liquidated sum.
[1998]5MLJ345
[1980]2MLJ 53
4
[1987]2MLJ 502
5
[1992]1CLJ160
3
Ng Ah Kway v Tai Kit Enterprise[1986]6 serves to establish that there is a debt due and the
Company has not been able to pay it.
7. Service of Notice at registered office
r.18CWR sufficiently served if left or sent by prepaid post to the companys last known address
or that of the person to be served with.
Weng Wah Construction S/B v Yik Foong Development S/B [1994] 7 judgment debt of
RM2,284,627.94. Company raised 2 preliminary issues
(i) s.218(2) required service to be effected by leaving it at the companys registered office and not
by sending it by post.
(ii) There was no statutory presumption of insolvency.
Held:- what is important is proof of actual service or delivery by the creditor whether by physically
leaving it at the last known address , registered office or by post.
Cymun Development S/B v Supermax S/B [1996] 8 service effected at the companys place of
business instead of the registered address held to be good service. As the objective was to bring the
winding up petition to the attention of the company.
ET Mix S/B v Sun Steel Construction S/B [2005]9- to be deemed effective service within the
terms of s. 218(2)(a) was that there must be adequate proof of physical delivery to the recipient. In
this instance, the requirement had been fulfilled when the notice of demand was delivered to the
registered office of the respondent by registered post. Furthermore, the respondent had entered an
appearance and filed a notice to oppose the petition. Moreover, the respondent knew the case
against it and even if the notice of demand was not properly served, the respondent was not
prejudiced at all.
8. Irregularities in the Notice of Demand
1) Formal defects or irregularities will not invalidate the winding up proceedings unless that Court
is satisfied that substantial injustice has been caused by the defect or irregularity which cannot be
remedied by any order of the court under r.194
Kampat Timber Industries S/B v Bensa S/B [1990]10 Respondent opposed the petition on the
grounds that the notice was irregular as the sum was uncertain because of the inclusion of the
demand for interest and costs and because of this the amount demanded was more than what was
actually due.
Held:- Cost and interest was not additional to the sum demanded. It was the warning of the
possibility of incurring further amount if the demand was not met.
2) Mis- statement of the amount due.- not fatal as long as can be ascertained.
YPJE Consultancy Services S/B v Heller Factoring (M) S/B[1996]11 CA:- even if the notice
overstated the amount, owing, it is pertinent to look at the circumstances i.e.whether or not the
6
[1986] 1 MLJ 58
[1994] 2MLJ 266
8
[1996] 1CLJ 545
9
[2005] 6CLJ 163
10
[1990] 2MLJ 46
7
11
[1996]2MLJ 482
company is unable to pay the debts. There was no evidence to show that the appellant was capable
of paying his debts.
Malaysia Air Charter Co. S/B v Petronas Dagangan S/B [2000] 12 - The appellant disputed the
validity of the s 218 notice. The CA held that the failure to quantify the actual sum due in the s 218
notice did not render the demand invalid and, on the facts, the sum demanded in the respondent's
notice was not excessive. Issue before the FC was :- (i) whether s 218(2)(a) should be interpreted
literally and strictly or widely and liberally; and (ii) in the event it is the literal and strict
interpretation that ought to be adopted, whether the s 218 notice must quantify and specify the
exact and actual sum due as at the date of the demand and leave no further sums/amount to be
calculated/quantified or ascertained by the recipient of the notice.
FC:- (i) The court should adopt a liberal interpretation when considering the provisions of s 218(2)
(a) of the Act. The adoption of a literal interpretation would be difficult as it would compel the
court not to make a winding up order notwithstanding the existence of clear evidence that an
undisputed sum due exceeding RM500 has remained unpaid after a demand made without any
reasonable explanation for the failure to pay
(ii) A notice of demand under s 218 need not specify the exact sum due as at the date of demand.
So long the sum due exceeded RM500 and remained unpaid after a demand made without any
reasonable explanation
9. Applicability of s.6(3) Limitation Act 1953
Wangsani S/B v Grand United Holdings Bhd. [1998]5MLJ345 - In this case, since the petitioner
had in its statutory notice included a sum caught by s 6(3) Limitation Act 1953,
(i) the entire notice was bad in law. Therefore this petition ought to be dismissed as it was statute
barred.
(ii) However generally The RHC do not apply to a petition filed under s 218. Therefore, in respect of a
winding-up petition commenced pursuant to s 218, there is no requirement that the petitioner ought
to obtain leave of court pursuant to O 46 r 2 RHC
11.Where Debt is disputed on substantial grounds / Abuse of Process
Where a company disputes the debt on substantial grounds then it is NOT deemed to have
neglected to pay the debt. - Wangsani
Securicor (M) S/B v Universal Cars S/B[1985]13 - Where a company neglects to pay its debts after
issue of the notice of demand, it raises a rebuttable presumption that it is unable to pay. This gives
the court jurisdiction to order a winding-up.
Re London & Paris Banking Corpn.[1874]14 it is an abuse of the process of the court to petition
to wind up the court where the debt is being disputed.
12
[2000]4 MLJ 657

[1985]1 MLJ 84
14
LR 19Eq Cases444
13
Apirami S/B v Tamil Nesan (M) S/B[1986]15 petition dismissed with costs as it was not a bona
fide petition for relief but an attempt to cause embarassment to certain parties and was an abuse of
the process of the court.
Ann Joo Metal S/B v Pembenaan MY Chahaya S/B [2000]16 a company would not be protected
from a winding up order under s.218 simply by purporting to dispute a sum claimed in the notice of
demand without substantiating that it was a real bona fide dispute.
Dataran Rentas S/B v BMC Construction S/B[2007]17 - Company's failure to make payment under
architect's interim certificates issued under building contract Question was whether there was a right
of set off debt as alleged . Was it a bona fide substantial dispute.
CA Held:- Once the respondent had a debt due to it from the appellant that remained unsatisfied, it
was entitled to present a winding up petition. All issues that went to challenge the debt might be dealt
with at the hearing of the petition. Since the debt was not bona fide disputed on substantial grounds,
the High Court was entirely correct in directing that the appellant be wound up.
Asian Shield Warehouse Sdn. Bhd. v Darumalinggam Sinniah [2007] 18 - This was an application
by the P for an interlocutory injunction to restrain the D from presenting a winding up petition under
s 218CA on account that the P was unable to pay its debt. The D in this case claimed for a sum of
RM862,929/44 for services rendered and a loan that was extended to the CEO of the P (the debt).
The P sought an injunction on two grounds: (i) that the P was not commercially insolvent so as to
be unable to pay the debt; and (ii) that the debt claimed was disputed on substantial grounds. The P
contended that the debt did not exist as the debt had been repaid. It was further contended that the
letter of admission relied upon by the defendant to prove the debt though issued by a direct employee
of the P was in actual fact a person under the control of the D and therefore should not be relied upon
as proof of admission of the debt.
HC Held:- (i) Court not satisfied that the P was commercially insolvent
(ii) there were reasonable grounds to dispute the debt.
(iii) application allowed.
Pending Appeal
Pacific & Oriental 1 Insurance Co Bhd v Muniammah Muniandy [2011] 1 CLJ 947,
C/A held: The filing of an appeal does not revert the status of the judgement debt to its original
status as a disputed debt before judgement was obtained. The filing of an appeal does not make a valid
and enforceable judgement a disputed debt. Therefore, the respondent had the right to proceed to issue
a statutory notice under s. 218)2)(a) CA 1965.
See - Nobel Specialty Sdn. Bhd. v Sedap Food Industries Sdn. Bhd. 7 [2009] 1 LNS 72
application under s.222 for stay of winding-up pending appeal dismissed.
Sri Jeluda Sdn. Bhd. v Pentalink Sdn. Bhd. [2008] 128 LNS 190 as above
Shing Hup Construction Sdn. Bhd. v General Soil [1999] 1 MLJ 13 167,
15
[1986]1CLJ 493
[2000] 5 MLJ 709
17
[2007] 6 CLJ 613
18
[2007]4 MLJ 666
16
2 petitions for winding up against the same company.

Malaysian Assurance Alliance Bhd. v Comsa Properties Sdn Bhd [ CA 2011] 7 CLJ 942
The legal issues that arose in these appeals are:(i) Whether leave is required before any challenge can be mounted against a Winding-up Order?
(ii) Does a creditor have the right to appear in a second winding-up petition against the same
Company?
(iii) Is Comsas liability secondary in nature and therefore not subject to a winding-up petition;
(iv) Whether MAA as a secured creditor that opted not to proceed with foreclosure proceeding is
prevented from filing a winding-up petition; and
(v) Whether MAA is a substantial creditor of Comsa and entitled to participate in the appointment of
the liquidator of Comsa.
CA: (i) Requirement of leave before challenging a Winding-up Order s.253CA1965 cumulative
Sri Hartamas Dev. S/Bv MBF Finance[1991], Badiaddin bin Mohd Mahidin & Anor v.
Arab Malaysian Finance Bhd. [1998] 1 MLJ 393, Maril-Rionebel (M) Sdn. Bhd. & Anor v.
Perdana Merchant Bankers Bhd. & Other Appeals[2001] 3 CLJ 248 Co. has right of
appeal. As a corollary to that right a creditor should have an equal right to be heard. As such
Appellant not required to apply for leave to challenge winding-up order.
(ii) On the facts of the case, the Appellant is a secured creditor of Comsa. The Appellant has the right
to file the winding-up petition.s.212(2)CA1965 - The Court may on the petition coming on for
hearing .the application of .any person who has given notice that he intends to appear on the
hearing of the petition (f) give such directions as to the proceedings as the Court thinks fit. Boey
Oi Leng v. Trans Resources Corporation Sdn.Bhd. [2002] 1 CLJ 405. Creditor has right to
appear in the 2nd. winding up.
(iii) On the facts,there is sufficient evidence to show contractual clauses that make Comsa principally
liable for the debt owing to the Appellant.
(iv)
proof of debts in any winding-up proceedings s. 291CA1965 s.42 BA Proof by Secured
Creditors (9) If a secured creditor realizes his security he may prove for the balance due to him
after deducting the net amount realized.
(v)
Having concluded that the Appellant is a substantial creditor of Comsa, the Appellant has the
right in the choice of the liquidator of Comsa.
We find that the Appellant has indeed been denied its basic right of opportunity to be heard. The law is
very clear as to the rights of the Appellant, as a substantive creditor.
Sinarlim Sdn Bhd v. Waja Destinasi (M) Sdn Bhd [2012] 3 CLJ 678 [CA
Winding-up - Filing of more than one petition at any one time - Whether leave of court required
An order for winding up was granted by the Ipoh High Court. Subsequently the case was transferred
to the KLHC as the respondents registered was in KL. Meanwhile the respondent applied for a stay. At
the hearing informed by officer of Insolvency Department that there was a prior winding-up petition
vide another KLHC. Consequently the application for stay of the Ipoh HC order was dismissed and the
winding-up order set aside. Hence this appeal. The issues for the court's determination herein were,
inter alia,
i) whether the learned judge of the KL-D8 court had the jurisdiction to set aside the winding-up
order earlier made and perfected by the Ipoh High Court and
ii) whether the learned judge of the KL-D8 Court was right when he set aside the winding up
order earlier made by the Ipoh High Court.
Held allowing the appeal with costs
(1) The KLHC was functus officio and the matter was res judicata and the court therefore had no
jurisdiction to set aside or rescind a winding-up order earlier made and perfected by another
High Court.
(2) When the Ipoh Winding-Up Petition was filed, there was no winding-up order in existence against
the respondent in any court. The KL-D2 Winding-Up Order was only made about one month
after the Ipoh Winding-Up Petition was filed. (para 23)
(3) It is a settled legal principle that in law, there is nothing against the filing of more than one
winding-up petition against the same company at any one time. No leave was required for the
filing of the second and subsequent winding-up petitions if the company has not been woundup yet.
11.5 Winding up Procedure
1. A petition for winding up under s.218 is normally presented subsequent to a final judgment
2. A petition may also be presented without a judgment but after service of a Notice of Demand
pursuant to s.218 specifying the debt. s.218(2)(a) a company shall be deemed to be unable to pay
its debts if it has for 21 days thereafter neglected to pay the sum demanded or secure or
compound it to the reasonable satisfaction of the creditor.
3. Procedure r.23 CWR
(i)
Petition shall be presented to the HC
(ii)
Can be presented upon expiry of 21 days of the service of the Notice of Demand on the
Respondent
(iii)
r.26 every petition in Form 2 must be verified by affidavit in Form 7 by the petitioner, or
in the case of a company by its director, secretary or other principal officer
(iv)
r.26 The affidavit should be sworn and filed within 4 days of the petition being presented
(v)
Registrar shall appoint time and place of hearing written on the sealed copies
11.6 Issues for setting aside Petition
11.6.1 Date of Petition & Affidavit
Lim To Chiow v Dian Tong Credit & Development S/B [1994]19 Here an affidavit verifying
the petition was sworn before the petition was presented.
HC Held:- (i)the affidavit must be in relation to some matter that is pending in the court. It
cannot purport to verify something non existent at the time it is sworn.
(ii) An application for extension of time to file a subsequent affidavit to verify the petition ought
to be made under r.7(1)CWR.
(vi)the court could not exercise its discretion to allow the petitioners to re-swear a 2 nd. Affidavit
to verify the 1st.as this would amount to condoning the flouting of r.26
(vii)
petition struck off.
YPJE Consultancy Consultancy Service S/B v Heller Factoring (M) S/B [1996]20 the
affidavit and petition were dated 10 July 1995. Petition was filed the same day while the affidavit
was only filed on the 11 July 1995.
HC Held:- r.26 not infringed. No evidence that the affidavit was sworn before the petition was
presented.
19
[1994]2 MLJ 345

[1996]2MLJ 482
20
Sari Atlantic S/B v Aik Kim Enterprise [1998]21- petition was presented to the court to wind up
the respondent company on 15 Feb.1987. However, the affidavit verifying the petition was
affirmed on the 10 Feb,1987 about four days before the presentation of the petition itself, which
was a clear failure to comply with r. 26 CWR. At the hearing of the petition, the respondent
company contended that the non-compliance was a fatal defect and that the petition must be
rejected as this court had no power to cure such a defect.
Held: (1) in this case, none-compliance with r.26 does not render the petition a nullity and is
curable by the court under s.221(2) CA
(2) s.221(2) CA allows the court to cure a technical error which does no injustice to the
respondents.
Formis Network Services Sdn Bhd v. Johnson Controls (M) Sdn Bhd[2009] 9 CLJ 423
This was an application by the plaintiff for an injunction to restrain the defendant from proceeding to
present a winding up petition against the plaintiff pursuant to s. 218 of the Companies Act 1965. The s.
218 notice had already been served by the defendant on the plaintiff on 7 March 2007. This notice was
based on an alleged unpaid debt. The plaintiff's main contention was that it had a cross claim against
the defendant due to alleged defective/incomplete works. The question that arose herein was whether
the filing of a winding up petition was an abuse of process.
HC: Plaintiff's application dismissed:
(1) the defendant's rights to file the winding up petition - conferred by statute, s. 218 CA 1965 plaintiff had failed to satisfy this court that the intended petition, if proceeded with by the
defendant, would constitute an abuse of process.
(2). The plaintiff had appointed the defendant as a subcontractor in a building project in Putrajaya. On
the facts and evidence, which were substantially undisputed, the defendant by serving a s. 218
notice with the possibility of thereafter filing a winding up petition against the plaintiff was not
abusing the legal process.
(3) The plaintiff in the present application had also failed to disclose to the court certain material facts.
Since the plaintiff was alleging incomplete/defective works, it was significant that the plaintiff had
failed to inform the court about a retention sum of RM347,650 that they were withholding. There
was a failure to make a full and frank disclosure. Hence, the plaintiff's present application must fail.
r.28 notice of intention to appear at hearing Form 8 should be served at least by 12.00p.m. the day
before the hearing
r.28(3) a person who fails to comply with this rule shall with the special leave of the court be
allowed to appear on the hearing of the petition.
r.30 affidavit in opposition to be filed and served 7 days before hearing and affidavit in reply
within 3 days
Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd [1997]22
Affin- ACF Finance Bhd. v APMG Management S/B [2002]23
21
[1998]1 MLJ 201

[1997]2MLJ 756
23
[2002] 6MLJ 230
22
10
Delta Drive (M) Sdn Bhd v Hong Leong Finance Bhd.[2008]24 This was an appeal against
winding up order. The debt was not disputed. Appellant filed notice of intention to appear and of
intention to raise a preliminary objection, i.e. non-compliance of r 26. - since the affidavit was
filed together with the petition, the implication was that the affidavit was sworn earlier However
he failed to file affidavit in opposition. HC dismissed the preliminary objection on the grounds that
it could be rectified by re-swearing the affidavit and ordered the Respondent to do so. At the 2 nd.
hearing the appellant who had yet to file his affidavit in opposition applied for an adjournment on
the grounds that he was notified of the hearing date late. HC refused the adjournment and granted
the winding up order. On appeal to the CACA Held:- (i)The facts clearly showed that the appellant knew of the date of hearing of the petition
and had ample time to file the affidavit in opposition pursuant to r.30(1), but failed to do so. r.30(1)
clearly stipulates that an affidavit in opposition to wind up shall be filed and a copy thereof
served on the petitioner or his solicitors at least 7 days before the date fixed for the hearing of the
petition. Thus, it was unreasonable to suggest that r 30(1) of the Rules need not be complied
when raising a preliminary objection
(2) The power to grant an adjournment of the hearing of any matter or any trial is discretionary. On
the facts, the circumstances did not merit an adjournment. The appellant was already in breach
of r 30(1) at the 1st. hearing of the petition. The appellant could not now complain that it had
been deprived of its right to file an affidavit in opposition to the petition at the 2nd. hearing.
11.6.2 Address for Service
R.25(1) every petition shall be served at the companys registered office or if none, then at its
principal or last known place of business. It can be left with any member, servant or officer of the
company, if none leave it at the premises, or by such means as directed by the court.
r.25(2) Where voluntary winding up it should be served on the Liquidator appointed for the
purpose. Affidavit of service should be in Forms 5 or 6
Where petition is being presented by a person other than a liquidator, it should be shall be served
personally upon the liquidator
r.25(3) it should also be served on the OR/DGI and ROC
11.6.3 Advertisement of the petition Form 4 ;
r.24 at least 7 clear days before the hearing or such time as the court directs
r.24(a) advertisement in 2 daily newspapers and gazette
Re NKM Holding S/B [1985]25 winding up petition was filed and fixed for hearing for 12 Dec.
1983. Pursuant to r.24(a) advertised and gazetted on 24 Nov. 1983 but only circulated on 12
Dec.1983. A preliminary objection was raised that the petition had not been advertised at least 7
clear days before the hearing. R.194(1) proceedings shall not be invalidated by any formal defect
or irregularity unless court is of the opinion that there would be substantial injustice caused to the
respondent.
24
[2008] 4 MLJ 400
25
[1985] 2 MLJ 390

11
HC Held:- requirement of r.24(a) for publication 7 days before hearing in gazette not complied.
Irregularity not curable. A new date for hearing given and requirement for advertisement & gazette
for 2nd. hearing dispensed with.
NKM Holdings S/B v Pan Malaysia Wood Bhd.[1987]26
In this case the learned trial judge had exercised his discretion in dispensing with the
advertisements either in the Gazette or in the newspapers of a new date for the hearing of a
winding-up petition on the facts of the particular case . In his judgment the learned judge remarked
that "the need to gazette has indeed deteriorated into a mere formality and in the face of the
existence of widely circulated daily newspapers has perhaps become an anachronism." The
appellants appealed.
SC Held (1) advertisement of a winding-up petition in the Gazette is a statutory requirement and
deliberate noncompliance with this provision may result in adverse consequences;
(2) the duty of the Court and its only duty is to expound the language of the Act in accordance
with the settled rules of construction. The Court has nothing to do with the policy of the Act
which it may be called upon to interpret.
GKM Amal Bhd. v Bank Utama (M) Bhd[2004]27 - pursuant to a summary judgment, the
petitioner (respondent) filed a winding up petition to wind up the appellant company for failure to
comply with a notice of demand pursuant to s 218. A winding up order was granted to the
respondent. The appellant appealed on the ground that there was a breach of r 24 in that the
petition was not advertised 7 clear days before the date of the hearing on 17 September 1999. The
petition was instead advertised 22 days before the hearing date. The issue for consideration was
whether the breach of r 24 was an irregularity by virtue of r 194 curable defects
Held, dismissing the appeal:
There was no direction by the court under s 221(2) to have the petition advertised earlier than
seven days and hence the petition was advertised in breach of r 24 . There was however no
injustice caused by the breach as the object of giving notice to the creditors had been achieved. The
breach was therefore a technicality amounting to a mere irregularity curable under r 194
11.6.4. Attending the hearing
r.32 The petitioner or his solicitor should attend before the Registrar on the appointed day of
hearing.
r.32(a) Solicitor had to show that the petition was duly gazetted and advertised
r32(b) prescribed affidavit verifying the statements in the petition and affidavit of service
r.32(c) consent in writing of the approved liquidator has been obtained and filed.
r.32(d) the provisions of these Rules as to the petitions have been complied with.
r.32(e) RM300/- refundable deposited in court to cover fees and expenses incurred by approved
liquidator or OR
r.32(2) court shall not dismiss or adjourn the petition of any petitioner who has not prior to the date
of the hearing attended before the registrar
26
27
[1987]1 MLJ 39
[2004] 2 MLJ 12
12
r.34 when order for winding up is made the petitioner / Solicitor shall forthwith inform the
liquidator in Form 10 and within 14 days gazette and advertise in Form 12 the making of the order
and serve the order on the liquidator, OR and ROC
r.34(2) a copy of the winding up order under s.226(2) shall be served on the secretary of the
company either personally or by prepaid letter at the registered office or last known place of
business of the company.
r.32(3) the winding up order in Form 11 shall contain a footnote stating that it shall be the duty of
the person at the time or secretary or chief officer of the company to provide a Statement of Affairs
to the liquidator.
Director of a Company in Liquidation is Not a Party to Liquidation, rules Court
Zaitun Marketing Sdn Bhd v Boustead Eldred Sdn Bhd
Civil Appeal No. 02-47-2008(W); judgment of 16/07/2009 (Federal Court)
1
The real issue at the heart of this appeal is whether sanction may be granted by the Director General of Insolvency to
a former director of a company in liquidation who is also not a contributory or creditor to use the name of the company
to bring, continue or defend an action.
Once a limited company is wound up, its assets and liabilities vest in the liquidator. It is up to him to decide whether
to institute, continue the prosecution of or defend legal proceedings. However, there is jurisdiction in the court to
authorize other persons to conduct litigation in the name of the company.
Resort to the courts power to authorize someone other than the liquidator to institute, continue or defend proceedings
only arises where the liquidator refuses to do so and declines authority. But where the liquidator grants authorization,
there is no necessity to move the court. Once authority is given either by the liquidator or by the court, the person
authorized may appoint counsel of his or her choice to prosecute the proceedings in question. The only issue is whether
it is competent for the liquidator to authorize a former director of the company in liquidation to use the companys
name to commence, continue or defend proceedings.
Since a director, or more appropriately a former director, of a company in liquidation is not a party to the liquidation a
court will not authorize him or her to launch or to continue proceedings or indeed to defend them. A fortiori, the
liquidator has no power to confer such authority, since he cannot do what the court will not do on his default
A liquidator who wishes to appoint an advocate and solicitor to prosecute, continue or defend an action by or against
the company in liquidation may do so under section 236(2)(a) of the Companies Act without the leave of the court or
the committee of inspection.
SSM secures Conviction against Bankrupt Director

The Kuala Lumpur Sessions court has convicted Zulzurin Merican Bin Zaghlul Merican, a company
director, for committing an offence under section 125(1) of the Companies Act 1965. He had acted as a
director of a company whilst still an undischarged bankrupt. He pleaded guilty to the charge and was
sentenced to a fine of RM6,000 (4 months imprisonment in default).
Section 125(1) of the Companies Act 1965 provides that every person who being an undischarged
bankrupt act as director of, or directly or indirectly takes part in or is concerned in the management of,
any corporation except with the leave of court shall be guilty of an offence against this Act.
The Company and one of its director were fine a total of RM13,400 for committing 11 offences under
the Companies Act 1965. MLA Reference No: MLA-100510-N-12; Source(s): Bernama; Date(s) of
13
Publication: 22/04/10; Original Title(s): Company and Director convicted for Offences under
Companies Act (Bernama, 22/04/10);
Malaysia Building Society Bhd V. Merit Aim Sdn Bhd & Anor; Cameron Mall Sdn Bhd &
Anor (Interveners)HC, K L[ 2012] 4 CLJ 269
Chargor in liquidation - Whether charged property could be sold by private treaty after abortive
auctions
Chargee entered into private treaty with Cameron for sale at 12m and Cameron paid 1m. Active
Rhythm entered into SPA directly with DGI for 13m. Amount due to chargee under Order for Sale
almost thrice redemption sum it quoted to facilitate private sale - Whether chargee's acceptance of
smaller sum would adversely affect other creditors and contributories - Whether amounted to
compromise or arrangement requiring sanction of court - Whether property should be auctioned
according to procedure prescribed in National Land Code - Companies Act 1965, s. 236 - National
Land Code, ss. 257, 266, 267A
HELD: By accepting RM12m for redemption, MBSB was entering into a compromise or
arrangement to the detriment of other creditors and contributories. Being a compromise or
arrangement between the liquidator and MBSB, any failure to obtain leave of court under s. 236(1)
(c) of the Companies Act 1965 would render the sale void.
DGI as the liquidator could not proceed with the sale by way of private treaty with Active Rhythm.
A compromise had been effected without the court's approval under s. 236(1)(c) of the Companies
Act. There was nothing to prevent charger from applying for another date for a public auction sale
with a reduction, perhaps, of another 10% from the last reserve price. (paras 36 & 45)
All monies paid by Active Rhythm to DGI be refunded; all caveats lodged on land by Cameron
Mall and Active Rhythm be removed.
14
TUTORIAL 11
QUESTION 1
On 5 Jan. 2008 B Bank obtained final judgment against Mayflower S/B for the sum of RM450,000
in the High Court of Melaka. On 15 March. 2008 Solicitors for B Bank issued a s.218 CA 1965
statutory Notice signed by them to Mayflower S/B at their registered address which was the office
of Mayflower S/Bs Company Secretary. Mayflower S/B did not respond to the said Notice.
On 20 April 2008 Solicitors for B Bank presented a Winding up petition signed by one CS a
chambering student in the firm of B Banks Solicitors who was handling the matter and a
supporting affidavit affirmed by one LO a Legal Officer of B Bank dated 25 April 2008.
Mayflower S/B opposed the petition on the grounds that:(i)
it was defective as the affidavit was filed out of time.
(ii)
The signature in the petition and affidavit was not consistent
(iii)
CS was not an authorized signatory of B Bank
Advise B Bank.
QUESTION 2
Sometime in June 2008 P was appointed as R S/Bs (RSB) sub-contractor in a project. P on RSBs
request commenced works immediately although the parties had not agreed upon the sub-contract
price. P presented progressive claims for work undertaken on 30 Sept. 2008, 30 Oct. 2008 and 30 Nov.
2008 totaling a sum of RM 1.2 million which RSB disputed. However on 15 Jan. 2009 P served a s.218
CA 1965 statutory notice at RSBs office and as there was no response to the same P proceeded to
present a petition to wind up R on 20 Feb. 2009 which was again served at RSBs office. The hearing is
scheduled on the 1 April 2009.
RSB disputes the claim and seeks your advice.
QUESTION 3
P had granted credit facilities to one Y S/B (YSB) in Malaysia as well as to its associate company ASC
in Singapore. On 19 May 1998 P obtained judgment at the Melaka High Court against YSB for the sum
of RM1.5 million with interest and costs. Subsequent to the judgment YSB negotiated repayment terms
with the P whereby the benefit granted to ASC in Singapore in the form of 3 bills of exchange would
be utililsed towards the repayment of YSBs judgment debt. However the bills of exchange were
dishonoured. P sued ASC in Singapore for the recovery of all sums due under the facilities granted to it
which included the 3 bills of exchange and obtained judgment against ASC in Singapore. ASC
negotiated a settlement scheme with P.
Meanwhile on 22 Feb. 2007 an order for the winding up of YSB was made at the KL High Court and
P lodged its proof of debt with the liquidator for the judgment sum. However upon a director of YSB
informing the Liquidator that Ps claim had been satisfied the Liquidator rejected the proof of debt. On
15
18 April 2009 P appealed to the Melaka High Court on the Liquidators rejection of its proof of debt.
YSB contends that:(i)
there was accord and satisfaction of the judgment sum through the settlement reached with
ASC in Singapore;
(ii)
no arrears of interest could be claimed as it was now statute barred under s. 6 of the
Limitation Act.
Advice P
16

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Professional Practice II

Multimedia University Trimester 1: 2010/2011

LECTURE 11 :- INSOLVENCY PART II : COMPANIES WINDING UP

[1997] 2MLJ 256

[2000]4 MLJ 657

2 petitions for winding up against the same company.

[1994]2 MLJ 345

[1998]1 MLJ 201

[2008] 4 MLJ 400

[1985] 2 MLJ 390

Prepared by Gita Radhakrishna

SSM secures Conviction against Bankrupt Director

Prepared by Gita Radhakrishna

Prepared by Gita Radhakrishna

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