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COURSE TITLE : COMPANY SECRETARIAL PRACTICE

COURSE CODE : CRG 530 / 660

TOPIC : LIQUIDATION

REFF. : CHAPTER 11 MCSP (ZZA)


CHAPTER 26 HCSP (KSM)

LECTURER : PATRICK ATAN


LIQUIDATION

Areas to be covered:-
Deregistration of companies
Procedures for deregistration
Modes of winding up
Members voluntary winding up
Creditors voluntary winding up
Compulsory winding up
Procedure for winding up
Liquidator
Qualification
Notice of appointment and situation of office
Remuneration
Power and duties of liquidator
Resignation
Removal
Committee of Inspection
LIQUIDATION

Deregistration of companies
LIQUIDATION
Deregistration of companies

Dissolution of company
The existence of a company only can be terminate in two ways:-
Struck off (i.e. Deregistration under section S308)
Dissolved as a result of liquidation or winding up
proceeding.

Deregistration of companies
If a company is no longer in operations, its registration should be
cancelled. The CCM empowered to strike off a defunct company (not
useful anymore) from the register of company where he has
reasonable cause to believe that the company has cease to operate.

This method of terminating the company existence is normally use by


small private company to avoid the liquidation costs. Normally
company which carried this method of termination are dormant since
incorporation and the company cease operation with no assets
and liability. E.g.

A defunct company considered dissolved upon the publication in


the Gazette (Warta Kerajaan) of the notice of striking off by the CCM.
LIQUIDATION
Deregistration of companies

What is deregistration?
CCM deregister the name of companies from the Register. Section 308
give power to CCM to do so if he is satisfied and has reasonable cause that the
companies are no longer carrying any business. (i.e. cease operation and
become dormant or dormant since inception).

What are the reasons for deregistration?


The company inactive, no longer carrying any business or not in
operation
The company does not hold any assets
The company does not have any liabilities
The company is not put under receivership

How to initiate deregistration under S308?


1. At the initiative of CCM
2. Application from company
3. Company in winding up process.
LIQUIDATION
Deregistration of companies

How to initiate deregistration under S308?


Initiate by CCM on the following circumstances:-

1. The company not filling annual return and other statutory


records for more than 6 consecutive years.
2. A report from investigation officer of CCM shown that the
company is no longer in operation
3. The company cannot be contacted (unless registered office) and
the directors cannot be traced.
4. CCM will sent the company a letter and asking the company to
respond. If not respond by the company, CCM will proceed
with the de-registeration of the companys name.

Written application by company


Deregistration also can be through written application from
directors or shareholders or company secretary or accountant
or lawyer of the company.
The application can be made at any time (without waiting for 6
years) so long the companies are inactive.
LIQUIDATION
Deregistration of companies

How to initiate deregistration under S308?

The company is in the process of winding-up:.

CCM may initiate deregistration of companies in the process of


winding-up if:-
1. No liquidator being appointed

2. The affair of the company is fully wound up and the


liquidator is not lodging any return within the period of 6
months. (i.e. Form 69 Return By Liquidator Relating To Final
Meeting; within 7 days after final meeting need to be lodge with
CCM)

3. The affair of the company is fully wound up and there is no


assets or insufficient assets to obtain order of the court
for dissolution of the company.
LIQUIDATION
Deregistration of companies
Procedures of Deregistration of companies
Statutory Declaration and Balance Sheet (Statement of Financial
Position): the company is required to file a Statutory Declaration
(Exhibit 12-1 page 255) signed by one of the directors with CCM
together with the latest Balance Sheet(Statement of Financial Position).

Notice 308 (1): If application being approved, CCM will post the
Notice 308 (1) to latest registered address of the company and a copy
sent to the Inland Revenue Board. Notice 308 (1) a letter from CCM
asking the company to respond within one month if there is any
objection to striking off the company (i.e. the company is still in
business or still in operation).

Notice 308 (2): After expiration of one month and no objection


received, CCM will post Notice 308 (2) to the company and the notice
will expired within 3 month. Notice 308 (2) a notice stating that the
name of the company will be struck off the register and the
company will be dissolved.

Notice 308 (4): After 3 month, Notice 308 (4) will be sent to the
company, to all the directors and Percetakan Nasional Berhad to
be Gazetted (in warta kerajaan). The companys name then, will be
struck off from the Register and the company is considered dissolved.
LIQUIDATION
Deregistration of companies

Procedures of Deregistration of companies


However, before the above procedures can be taken by the company,
they should first:-
Settle all debts or a letter of waiver of debts by creditors (if any)
Finalize the taxation position with income tax office
Prepare latest management account which should indicate nil
assets and liabilities (after settle the liabilities)
The board to pass the necessary resolution pertaining to the
statutory declaration verifying the requirement for striking off.
Consent from shareholders by passing special resolution
Submit an application letter/Statutory Declaration requesting
the CCM to strike off the company.

The application to CCM for striking off may be made without need to file
any outstanding Annual Return and Audited Account.

Any director or officer giving false or misleading information commits an


offence under the CA 1965 s 364 (2) and the penalty: imprisonment up
to 10 years or a fine of RM250,000 or both.
LIQUIDATION
Deregistration of companies

Deregistration Procedures

SD AND LATEST BS
COMPANY CCM

Seek for any


objection 1 month notice
NOTICE 308 (1)

Name will be
deregistered 3 month notice
NOTICE 308 (2)

Notice that the


Name have de-listed
NOTICE 308 (4)
LIQUIDATION

Winding up or Liquidation
LIQUIDATION
Winding Up

Winding up or liquidation is the process by which a company is


dissolved i.e. where the business is closed, its assets will be
realised, the creditors to be paid from the proceeds of the realization of
assets and any surplus to be return to the members and ultimately the
company cease to exist.

Modes of winding up-s 211 CA 1965


Voluntary
Members voluntary winding up

Creditors voluntary winding up

By court - compulsory winding up

Date commencement of voluntary winding up procedures will be on:-


the date where related resolution passed in the general meeting,
or
the date of lodgment Form 65A (the statutory declaration of inability
to continue business) for the case where a liquidator need to appoint
before resolution being passed.
LIQUIDATION
Winding Up
Voluntary Winding Up
What are the circumstances that lead to voluntary winding up? - p248
1. Expiration of a period fixed by M&A, or on occurrence of
an event that M&A provide the company to be dissolved; and
2. Resolved by the shareholders, which is normally the case.

What are the effects of voluntary winding up? - p248


1. The company is required to cease the operation of the
company from the date of commencement of winding up
procedures. However, corporate state and power of the
company shall continue until it the company dissolved.
2. The powers of the directors cease on the appointment of
the liquidator
3. Transfer of shares and alteration in status of a member
after commencement of winding up shall be void unless
sanctioned (official orders) by the liquidator
4. Employees will not be dismissed unless the company
insolvent.
LIQUIDATION

Members Voluntary Winding Up


LIQUIDATION
Members Voluntary Winding Up

Members voluntary winding up


A company can go into members voluntary winding up if the
directors is confident that the co is solvent (i.e. has the ability to
pay its debt in full within a period of 12 months from the date of
passing resolution for winding up). The creditor will paid in full
and they play no part in this winding up.

If the company is insolvent, may resolve to wind up the company by


a special resolution and it is called a creditors voluntary
winding up.

Procedures for members voluntary winding up


Board meeting to make a Declaration of Solvency Form 66 (page
256). If 2 directors, signed all and if more, signed majority of the
directors. The Form 66 must
Be made 5 week before passing of the resolution for
voluntary winding up
Be lodged to CCM before notice for the related
shareholders meeting be sent to the shareholders
Include the statement of affairs of the company (Page 257)
LIQUIDATION
Members Voluntary Winding Up

Procedures for members voluntary winding up


Shareholders meeting-EGM to pass Special Resolution for
voluntary winding up and appointment of liquidator. The date
of passing resolution is considered as the date for commencement
of winding up procedures.
Lodge form 11 within 7 days after EGM

Advertise notice of resolution in newspaper circulating throughout


Malaysia within 10 days after EGM
Appoint the Liquidator: The liquidator within 14 days after his
appointment lodge with CCM notice of his appointment and
situation of his office (Form 71).
The liquidator will notify all related parties concern and
from then, he will take over the affairs of the company assets.
LIQUIDATION
Members Voluntary Winding Up

Company CCM

Form 66
Board Meeting

EGM
Form 11
Resolution for Winding Up
Form 71
Appointment of Liquidator
Advertisement
LIQUIDATION

Creditors Voluntary Winding Up


LIQUIDATION
Creditors Voluntary Winding Up
Creditors voluntary winding up
If the company unable to file a declaration of solvency (the
company is insolvent), the winding up may proceed as a creditors
voluntary winding up.
Creditors meeting to be convened after passing special
resolution for winding up in EGM (one the same day or a day after
EGM). Mostly happen during financial crisis and the company unable to
get court approval for protection under s176.

Management during the winding up process will be shared by


the member and the creditors with creditors have control. The
creditors will appoint the liquidator and decide the composition of
the Committee of inspection.
Procedures for creditors voluntary winding up
Board meeting to decide the date of EGM and creditors
meeting. These two must be held within one month from the
date of Form 65A (Page 259).
Shareholder meeting -EGM: Pass a special resolution to wind
up the company by way of creditors voluntary winding up and to
nominate a liquidator
Form 11 lodged with CCM within 7 days
LIQUIDATION
Creditors Voluntary Winding Up

Procedures for Creditors Voluntary winding up


Advertise notice of resolution in newspaper circulating throughout
Malaysia within 10 days after EGM

At the creditors meeting (on the same day or after the EGM):
The directors explain the purpose of meeting and the cause for
winding up. To compromise with creditors the repayment
amount. E.g. RM0.30 every RM1.
Statement of the companys affair with list of creditors and their
claims must be tabled at the meeting
To nominate a liquidator but appointment is by creditors
To appoint a committee of inspections which consist of not
more than 5 members and for the purpose to supervise the act
of the liquidator.

Appoint the Liquidator: The liquidator within 14 days after his


appointment lodge with CCM Form 72 (A Notice of Appointment and
Situation Office of Liquidator in Creditors Voluntary Up).
LIQUIDATION
Creditors Voluntary Winding Up

Company CCM

Form 65A
Board Meeting

Form 11
EGM

Resolution for Winding Up

Creditors Meeting

Appointment of Liquidator and Form 71


Committee of Inspection
Differences between Members Voluntary Winding Up
and Creditors Voluntary Winding Up

Members voluntary w/up Creditors voluntary w/up


The company is solvent and to make a The company is insolvent
declaration of solvency

Creditors will be paid in full before No payment in full to creditors before


winding up process commence winding up process

Both the management and liquidation Management is shared between


process will be under the control of member and creditor however
members liquidation process will be under the
control of creditors
Members appoint liquidator Creditors appoint liquidator

No committee of inspection Creditors decide the committee of


inspection
LIQUIDATION

Compulsory Winding Up
LIQUIDATION
Compulsory Winding Up

By Court - compulsory winding up (S218) (E.g. Paper cutting)

What are the reasons for compulsory winding up?


Under s 218 of CA 1965, the court may wind up the company on
any of the following ground:-
1. Default in holding a statutory meeting and not filing
statutory report
2. Not commence business within one year after
incorporation or suspends business for more than one year
3. Member of the company below than 2 (except for
corporate shareholders)
4. The company unable to pay debt and this is the most
common.
5. Etc (page 319)

Commencement of the winding up: the date of petition date.


(Transfer of assets after this is void).
LIQUIDATION
Compulsory Winding Up

Procedures for compulsory winding up.


1. Presentation of the petition by the company (a member) or
creditors or contributories or the Official Receiver or the liquidator or
the Minister of Trade and Industry or Bank Negara. (A Contributory
is a person liable to contribute to the assets of a company in the
event of winding up).

2. Hearing at the High Court to obtained the winding up order

3. Liquidator to convene a company meeting and creditors


meeting (separate meeting) to decide whether to appoint a
Committee of Inspection or not.

4. Liquidator files Form 70 (Notice of his Appointment for


Compulsory Winding Up) with CCM and the Official Receiver within
14 days of his appointment

5. Liquidator proceeds with winding up procedures until


complete.
LIQUIDATION
Compulsory Winding Up

Presentation of
High Court Winding Up Order
a petition

EGM

Appointment Inspection
Committee

Liquidator - Form 70
Creditors Meeting

CCM
LIQUIDATION

Liquidator
LIQUIDATION
Liquidator

Liquidator
A person shall not act as a liquidator of a company if he is:-
Not an approved liquidator
Indebted to the company in amount exceeding RM2,500
An officer of the company
A partner, employee or employee of an officer of the company
Becomes bankrupt
Convicted any offence
LIQUIDATION
Liquidator

Liquidator
An approved liquidator
An approved auditor who has satisfied the Minister of Finance
that he has the experience and capacity to be a liquidator and to
be paid the prescribed fee under section8(3).

However, the appointment of an approved liquidator does not


apply to members voluntary winding up because a director or
secretary or any officer of the company may be appointed as
liquidator.

The court is given an overall power under the CA 1965 to


appoint a liquidator in a voluntary winding up if at any time
no liquidator is acting and also to remove a liquidator and
appoint another liquidator.
LIQUIDATION
Liquidator

Liquidator
A liquidator shall within 14 days lodge with the CCM and the Official
Receiver (if any) after his appointment, Notice of appointment and of
office of Liquidator, i.e.:
Form 70 for the case of Winding up by the court
Form 71- for the case of members voluntary winding up
Form 72- for the case of creditors voluntary winding up

For any changes in the situation office, the liquidator need to lodge with
CCM Form 73 (Notice of the change).

Form 74 (Notice of resignation or removal) for Resignation or removal of


liquidator.
LIQUIDATION
Liquidator
Power and Statutory Duties of Liquidator -(S269)- p321-2
1. Settle a list of contributories if there are any partly paid shares and call up
the amounts payable by the contributories

2. To take control of the companys seal and all books and papers
particularly documents of title

3. To deal with the collection of debts due to company and to control the
other companys assets

4. To inform director of the cessation of their power and duties.

5. To open and properly maintained the liquidation cash book

6. To pay creditors and member (for any surplus)

7. Within one month after the expiration of the period 6 month of his
appointment and every subsequent period of 6 month thereafter,
the liquidator shall prepare and Lodge Form 75 (Page 262) i.e.
Liquidators Account of Receipts and Payments and Statement of the
Position in the Winding Up.
LIQUIDATION
Liquidator
Power and Statutory Duties of Liquidator -(S269)- p321
8. If winding up more than one year, the liquidator need to table the
Liquidators Statement of Receipt and Payments (Form 75) in
General Meeting (in members voluntary winding up) and in
creditors meeting (in creditors voluntary winding up) within 3
month after each anniversary of the commencement of winding up.

9. After all the affairs of the company fully wound up, the Liquidator
shall call for a final meeting to table the account showing how the
winding up has been conducted and the property has been disposed
off to the member or creditors (as for the case may be).

10. Within 7 days after final meeting, liquidator shall lodge Form 69
(Return By Liquidator Relating to Final Meeting) with CCM

11. On the expiration of 3 month after the lodgment of Form 69 with


CCM, the company is deemed to be dissolved.

12. (Please refer Page 321 2).


LIQUIDATION
Liquidator
Power and duties of liquidator -(S269)-p859-860 (KSM)
With the sanction of a special resolution for members
voluntary and sanction of the court or committee of
inspection, the liquidator may:
1. Pay any classes of creditors in full subject to priority of
payment under S292 of CA 1965

2. Make any compromise or arrangement with creditors

3. Appoint an advocate to assist him in his duties


LIQUIDATION
Liquidator
Remuneration of liquidator-p860 (KSM)
Who may fix the remuneration of liquidator in members voluntary
winding up and creditors voluntary winding up?
Members voluntary winding up Shareholders in general
meeting
Creditors voluntary winding up Committee of Inspection
or creditors if no committee

Under s 292 (1), the company should put first priority to pay the
liquidator remuneration

Any member, creditor or the liquidator may at any time before


the dissolution of the company apply to the court to review the
remuneration of the liquidator and the decision of the court shall
be final and conclusive.
LIQUIDATION

Committee of Inspection
LIQUIDATION
Committee of Inspection
Committee of Inspection-p862 (KSM)
Main function is to assist and supervise the act of liquidator.
The committee is formed under creditors voluntary winding up.
The appointment of committee member is made by the creditors
and by the company.
The composition is not more than 5 persons representing equal
number of creditors and contributories.
The court may on any application under S262 (2) appoint other
persons to act as members for committee of inspection in place
of the persons appointed by the company who were rejected by the
creditors.
A member of the committee is in fiduciary position (good faith)
and cannot for example buy any assets from liquidator.
The committee may act by a majority of their members
present at every meeting.
LIQUIDATION
Committee of Inspection
Committee of Inspection-p862 (KSM)
A member may resign by notice in writing signed by him and
delivered to the liquidator.
A member may be removed by an ordinary resolution at a
meeting of creditors (if he represent creditors) or meeting of
contributories (if he represent contributories).

The office of a member of the committee shall become vacant:


If he becomes a bankrupt or assign his estate for the benefits of
his creditors or makes an arrangement with his creditors pursuant
to any law relating to bankruptcy or:

If he is absent from five consecutive meetings of the


committee without approval of creditors or contributories
(as the case may be).
LIQUIDATION
Committee of Inspection
Committee of Inspection-p862 (KSM)
A vacancy in the committee can be filled by the appointment by
the creditor or contributory or by a person holding:
A general power of attorney from a creditors or contributory or;
Have a special authority from creditors or contributory
authorizing him.

The liquidator within 7 days after the request in writing by a creditor or


contributory convene a creditor meeting or contributory meeting to
consider the appointment of a new member in Committee of
Inspection. During the meeting, the creditors or contributories may
confirm or revoke the appointment.
END OF LIQUIDATION

GOOD LUCK
AND
MAY GOD BLESSED YOU ALL

MEET YOU SOMEWHERE IN TIME