Chapter 15 - Winding Up By The Court Flashcards
WINDING UP BY THE COURT
Overview
1) The law
2) Circumstances which the companies may be wound up by the court
3) Meaning of inability to pay debt - definition & test
4) Main stages for compulsory winding up
5) Procedures for compulsory winding up
WINDING UP BY THE COURT
The law
S.464 - 475
WINDING UP BY THE COURT
Circumstances which the companies may be wound up by the court - general
S.465, inter alia:
- company has no member;
- the company defaults in lodging the statutory declaration under subsection 190(3);
- the company does not commence business within a year from its incorporation or suspends its business for a whole year;
- company is unable to pay debt.
WINDING UP BY THE COURT
Circumstances which the companies may be wound up by the court - most common
S.465(1)(e):
- the company is unable to pay its debts.
WINDING UP BY THE COURT
Meaning of inability to pay debt - definition & the law
S.466(1), inter alia:
1) INDEBTED IN SUM EXCEEDING STATUTORY AMOUNT
- the company is indebted in a sum exceeding the amount as may be prescribed by the Minister and a creditor (i.e. RM10k) by assignment or otherwise has served a notice of demand, by himself or his agent, requiring the company to pay the sum due by leaving the notice at the registered office of the company, and the company has for 21 days after the service of the demand neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor; or
2) UNSATISFIED JUDGMENT
- 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
3) PROVEN INABILITY TO PAY DEBTS
- it is proved to the satisfaction of the Court that the company is unable to pay its debts and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company.
WINDING UP BY THE COURT
Meaning of inability to pay debt - COVID temporary measures
- COVID threshold: RM50k
- COVID notice: 6 months, i.e. a debtor company now has six months to respond to a statutory demand.
WINDING UP BY THE COURT
Meaning of inability to pay debt - test for commercial insolvency - no available assets
MBf Finance Bhd v Sri Hartamas Development Sdn Bhd (1992):
- a company may be commercially insolvent and may be wound up even though it may have wealth locked up in investments not presently realizable, but no assets available to meet its current liability.
WINDING UP BY THE COURT
Meaning of inability to pay debt - test for commercial insolvency - wealthy yet insolvent
Malayan Plant (Pte) Ltd v Moscow Narodny Bank Bhd (1992):
- a company may be commercially insolvent and yet wealthy at the same time.
- It may have wealth locked up in investments not presently realizable, although it may be so, yet it may have no assets available to meet its current liability it is commercially insolvent and may be wound up.
WINDING UP BY THE COURT
Meaning of inability to pay debt - test for commercial insolvency - presumption of insolvency
FC, 2020
Affin Bank Bhd v Abu Bakar Ismail:
- Presumption of insolvency arises when the requirement for the inability to pay debts under the Act have been satisfied;
- It is then for the company to prove that it is able to pay its debt.
- The test for commercial insolvency followed the test in Malayan Plant.
- i.e. if it have not assets available to meet its current liabilities it is commercially insolvent and may be wound up.
WINDING UP BY THE COURT
Main stages for compulsory winding up
1) Statutory Notice
2) Winding up petition
3) Post winding up
PROCEDURES FOR COMPULSORY WINDING UP
Overview
1) Statutory notice & service
2) Winding up petition
3) Affidavit
4) Service of petition & affidavit
5) Advertise
6) Appear
7) Oppose
