Winding Up of a Sdn Bhd Company
Winding up also ends the existence of a Sdn Bhd company. Winding up involves the selling of the company’s assets, the paying of its liabilities, and the distribution of the remaining revenue to the shareholders. In Malaysia, a company can either be wound up voluntarily or compulsorily. A voluntary winding up takes place through a mutual agreement between the shareholders and company owner. A compulsory winding up takes place if the company can no longer meet its obligations.
Voluntary Winding Up
Voluntary winding up of a Sdn Bhd company involves several filings to SSM as well as numerous directors’ and shareholders’ meetings. This process usually lasts for anywhere between nine and 18 months. The cost of voluntary winding up in Malaysia is usually between RM10,000 and RM20,000. In Malaysia, the winding up process is guided by the Companies Act.
There are two types of voluntary winding up. One type takes place if the company is solvent but the shareholders agree to wind up the company and distribute the assets to the owners. This method is known as members’ voluntary winding up or members’ voluntary liquidation. Voluntary winding up also takes place if the company is insolvent. In such a situation, the directors and shareholders agree to wind up the company. However, it is the creditors who have the final say on who should liquidate the company. This method is known as creditors’ voluntary winding up or creditors’ voluntary liquidation.
Voluntary winding up allows for fair distribution of the company’s assets among the shareholders, removes a loss-making business from the industry, allows for proper investigation to discover the cause of the company’s financial troubles, identifies any wrongdoing, and holds those at fault accountable.
Compulsory Winding Up
Compulsory winding up takes place if a company cannot settle its debts. This is a process that is facilitated through court actions. The law allows any creditor owed a debt of more than RM500 to send a demand note that is to be paid within 21 days. If the demand note is not settled within this period, the creditor can invoke ‘Section 218 Notice’ simply known as ‘Section 218’ which is derived from Section 218 of the 1965 version of the Companies Act. The creditor can then make a request to the court which would cause the company to be declared insolvent and forced to wind up.
Liquidators are independent entities which are mandated to oversee the winding up of a Sdn Bhd company. A liquidator takes control of the company’s assets, oversees its winding up, and manages the distribution of the remaining revenue to the shareholders.
When the liquidator takes over, the powers of the directors with regard to the management of the company’s affairs are no longer applicable. However, the company continues to exist as a legal entity. The liquidator is also mandated to conduct internal investigations to discover the cause of the insolvency.
When the liquidator finishes paying off the company’s liabilities and distributing the residue assets, the winding up is complete. The court can then declare the company dissolved.