Chapter 14 - Voluntary Winding Up

Question 1

VOLUNTARY WINDING UP

Overview

Answer 1

1) Types of voluntary winding up
2) Member’s Voluntary Winding Up
3) Creditor’s Voluntary Winding Up

Question 2

VOLUNTARY WINDING UP

Types of voluntary winding up

Answer 2

1) Member’s voluntary winding up

2) Creditor’s voluntary winding up

Question 3

MEMBER’S VOLUNTARY WINDING UP

Overview

Answer 3

1) What is MVWU
2) The law
3) The stages
4) The procedures
5) Miscellaneous

Question 4

MEMBER’S VOLUNTARY WINDING UP

What is MVWU

Answer 4

• As opposed to a CVW, companies opting for an Member’s Voluntary Winding-Up must be solvent and able to meet its liabilities.
• This type of winding-up is usually opted when members of the company have decided to close the company in a tax-efficient manner.
• In larger companies, this may mean a discontinuation of certain aspects of the operations to generate cash.

Question 5

MEMBER’S VOLUNTARY WINDING UP

The law

Answer 5

S.445 - 448

Question 6

MEMBER’S VOLUNTARY WINDING UP

The stages

Answer 6

1) Special Resolution: a Special Resolution to wind-up the company must be passed during a General Meeting of the company shareholders.
2) Filing the resolution: this special shareholder’s decision must be filed with the Registrar of Companies within seven days after it was issued.
3) Declaration of Solvency: must be prepared by the company directors within five weeks after the special resolution was filed.
4) The actual winding-up process: issuing notifications informing that the company is in liquidation and appointing a liquidator.

Question 7

MEMBER’S VOLUNTARY WINDING UP

The procedures

Answer 7

1) PASS RESOLUTION

Members of the company to pass a resolution for the winding-up of the company and the appointment of a liquidator.

2) WRITTEN DECLARATION OF SOLVENCY

• Written Declaration of Solvency to be prepared and executed at a Board of Directors meeting.
• Declaration of Solvency to be lodged with the Companies Commission of Malaysia

3) LIQUIDATOR

Members of the company to appoint a liquidator.

4) CESSATION OF OPERATION

The company ceases all operations save and except for functions necessary for the winding-up process.

5) TAKE-OVER

Liquidator takes over all affairs of the company and proceed with winding-up.

Question 8

MEMBER’S VOLUNTARY WINDING UP

Miscellanous overview

Answer 8

1) Declaration of solvency
2) Meeting of creditors
3) Statement of affairs

Question 9

MEMBER’S VOLUNTARY WINDING UP

Declaration of solvency

Answer 9

S.443:

• a declaration by the directors of the company that after having made an inquiry into the affairs of the company, the directors have formed the opinion that the company will be able to pay its debts in full within 12 months from the commencement of the winding-up.
• The Declaration of Solvency must be attached with the company’s Statement of Affairs.
• After the Declaration of Solvency is made, it must be lodged with the Registrar of Companies before notices are sent out to the members.

QB Khidmat Teguh Sdn Bhd v Pembinaan Legenda Unggul Sdn Bhd & Anor (HC, 2017):

• in the event a director is incapable of signing a Declaration of Solvency pursuant to S.433, then the company ought to proceed with a creditors winding up instead of a members one.

Question 10

MEMBER’S VOLUNTARY WINDING UP

Creditor’s meeting

Answer 10

S.443:

• It is mandatory to hold a meeting of directors in order to make declaration of solvency.
• The same applies even in the case of a single director.

Question 11

MEMBER’S VOLUNTARY WINDING UP

Statement of affairs

Answer 11

• The Declaration of Solvency must be attached with the company’s Statement of Affairs.
• The Statement of Affairs should contain the assets of the company (including how much is to be realized from the same), the liabilities of the company and the estimated expenses of winding-up.

Question 12

CREDITOR’S VOLUNTARY WINDING UP

Overview

Answer 12

1) What is CVWU
2) The law
3) The stages
4) The procedures
5) Miscellaneous

Question 13

CREDITOR’S VOLUNTARY WINDING UP

What is CVWU

Answer 13

• a voluntary process;

- an admission on part of the company directors that the business is insolvent and no longer viable.

Question 14

CREDITOR’S VOLUNTARY WINDING UP

The law

Answer 14

S.449 - 451

Question 15

CREDITOR’S VOLUNTARY WINDING UP

The stages

Answer 15

1) Special Resolution: a Special Resolution to wind-up the company must be passed during a General Meeting of the company shareholders.
2) Filing the resolution: this special shareholder’s decision must be filed with the Registrar of Companies within seven days after it was issued.
3) Declaration of Solvency: must be prepared by the company directors within five weeks after the special resolution was filed.
4) The actual winding-up process: issuing notifications informing that the company is in liquidation and appointing a liquidator.

Question 16

CREDITOR’S VOLUNTARY WINDING UP

The procedures

Answer 16

1) PROPOSAL

Members of the company to propose resolution for voluntary winding up.

2) CREDITOR’S MEETING NOTICE

• Give written notice by post to all creditors for a Creditors Meeting.
• Notice to be given at least seven (7) clear days before date of commencement of the meeting.

3) ADVERTISE
- Winding-up notice to be advertised in a widely circulated newspaper in Malaysia in both the national language and in English.
4) CREDITOR’S MEETING

Creditors Meeting to convene at a time and place agreed upon by majority attendees and to decide on:

• Appointment of Liquidator; and
• Appointment of Committee of Inspection (if necessary)

5) TAKE-OVER

Liquidator takes over all affairs of the company and proceed with winding-up.

6) WINDING UP RESOLUTION

• A copy of the resolution for winding-up is to be lodged with the Companies Commission of Malaysia within seven (7) days from the date the resolution was passed.
• A copy of the resolution for winding-up is to be posted in a widely circulated newspaper in Malaysia in both the national language and in English ten (10) days from the date the resolution was passed

Question 17

CREDITOR’S VOLUNTARY WINDING UP

Miscellaneous - overview

Answer 17

1) Liquidators
2) Effect of appointment of liquidator
3) Committee of Inspection

Question 18

CREDITOR’S VOLUNTARY WINDING UP

Liquidators

Answer 18

1) POWER TO SUMMON MEETINGS
- The liquidator may, or if requested by any creditor or contributory shall, summon separate meetings of the creditors and contributors for the purpose of determining whether or not the creditors or contributories require the appointment of a committee of inspection.
2) APPOINTMENT OF LIQUIDATORS
- Upon the appointment of the Liquidator all powers of the directors shall cease.
3) REMUNERATION OF LIQUIDATORS
- Liquidator shall be remunerated as prescribed in the rules and a member, creditor or the liquidator can apply to Court to review the remuneration.

Question 19

CREDITOR’S VOLUNTARY WINDING UP

Effect of appointment of liquidator

Answer 19

1) S.471(1):
- no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and in accordance with such terms as the Court imposes.
2) Taman Sungai Dua Development Sdn Bhd v Goh Boon Kim:

• BoD still retain residuary powers;
• i.e. they can still instruct solicitors to oppose petition or appeal against a winding up order.

Question 20

CREDITOR’S VOLUNTARY WINDING UP

Committee of inspection

Answer 20

The COI represents the interests of the Creditors during the on-going winding-up and can act as a check and balance to the powers of the liquidator and to protect the rights of the creditors.