Winding-up Proceedings

What are winding-up proceedings?

Winding-up proceedings are a legal process through which a company’s existence is brought to an end. The company’s assets are collected and sold, and the proceeds are used to pay off its debts. Any remaining funds are distributed among the shareholders. Winding-up can be either voluntary (initiated by the company) or compulsory (initiated by creditors or other interested parties through the court).

What are the grounds for compulsory winding-up in Malaysia?

The grounds for compulsory winding-up under the Companies Act 2016 include:

• Inability to Pay Debts: The company is unable to pay its debts as they fall due.
• Just and Equitable Ground: It is just and equitable to wind up the company, for example, due to deadlock in management or loss of substratum.
• Failure to Commence Business: The company has not commenced business within a year of incorporation or has suspended its business for a whole year.
• Special Resolution: The company has passed a special resolution requiring it to be wound up by the court.

Who can petition for winding-up of a company in Malaysia?

The following parties can petition for the winding-up of a company:

• Creditors: Including contingent or prospective creditors.
• Contributories: Past or present shareholders.
• The Company: The company itself through a special resolution.
• The Registrar of Companies: In certain circumstances, such as when the company is acting against the public interest.

What is the procedure for compulsory winding-up in Malaysian court?

The procedure for compulsory winding-up generally includes:

1. Filing a Petition: The petitioner files a winding-up petition in the High Court.
2. Serving the Petition: The petition is served on the company and advertised in a widely circulated newspaper.
3. Hearing: A court hearing is scheduled where the petitioner and any interested parties can present their arguments.
4. Winding-Up Order: If the court is satisfied that the grounds for winding-up are met, it will issue a winding-up order.
5. Appointment of Liquidator: A liquidator is appointed to manage the winding-up process, including collecting and selling the company’s assets, paying off debts, and distributing any remaining funds to shareholders.

What are the effects of a winding-up order on a company?

The effects of a winding-up order include:

• Cessation of Business Operations: The company must cease its business operations except for activities necessary for the winding-up process.
• Appointment of Liquidator: The liquidator takes control of the company’s assets and affairs.
• Stay of Proceedings: Any legal actions against the company are generally stayed unless the court grants permission for them to continue.
• Transfer of Powers: The powers of the company’s directors cease, and the liquidator assumes those powers.
• Void Transactions: Certain transactions made after the commencement of winding-up proceedings may be declared void by the court.

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Disclaimer

_{Articles published in this website are for general informational purpose only and shall not constitute any form of legal advice to any specific case. Kindly contact us if you are currently experiencing a legal dilemma related to this topic and need further legal consultation.}