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Dissolving a Company in Malaysia

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Dissolving a Company in Malaysia

2020-05-22T12:14:05+08:00September 16th, 2019|0 Comments

Company dissolution in Malaysia is a complex but often necessary process. There are many possible reasons as to why the owner of a company might choose to have the company dissolved. Whatever the reason for the dissolution, all of the rules regarding company dissolution must be followed during the entire process.

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Dissolving a Malaysia Company

Reasons Why Companies Are Dissolved

The decision to dissolve a company is certainly an important one which should never be taken lightly. In certain situations, it may be more beneficial for all parties involved to dissolve a company when compared to keeping it in operation. It is a fact that almost no company lasts forever. For any reason, an individual or group of people decide to dissolving a company. The dissolution of a company requires its removal from the registrar of companies where its information lies. A company can choose to dissolve its operations after it has remained dormant for a long period of time or after it has achieved its initial purpose of creation.

There are several other reasons may cause the dissolution of a Malaysian company. These reasons include the following: 

Financial difficulties

A business which does not have the necessary funds to be self-sufficient is likely to be dissolved. In some cases, a company’s financial situation might be extremely dire; the company might sometimes even be unable to pay for its debts and loans. A company that finds itself in such a situation might be legally required to dissolve. Companies which are compelled to dissolve by the law typically find it easier to make resolutions which will satisfy their creditors.

If your company is at risk of financial troubles, we at Paul Hype Page & Co are ready to be of service. We will work with you to form a viable financial plan for your company. By using the plan which we would have generated, you will be able to avoid significant financial problems and maintain the profitability of your company. 

 

Mismanagement

The success of a company is dependent on its management. The management of a company should create a well-crafted plan to ensure the success of the company. They also ought to have the necessary skills to drive improvement within all sectors of the company. However, if these essential managerial skills are absent, the company will begin to fail and might possibly be eventually forced to dissolve.

 

Non-compliance

Non-compliance may occasionally lead to involuntary dissolution of a company. If a company fails to comply with government requirements or company rules and regulations, this non-compliance might lead to the forced dissolution of the company by the authorities.

We at Paul Hype Page & Co do not want to see you suffer from the effects of non-compliance with regulations. Therefore, we will help you ensure that your company is compliant with all regulations which apply to it. We will even liaise with government authorities to aid with your company’s compliance matters, if such a course of action is necessary. 

 

Product liability claims

Dissolving a company can protect it from product liability claims. The sale of products which are defective might cause a business to dissolve. Although such situations can lead to a temporary closure, a temporary closure does not protect the business from a liability claim. Therefore, dissolution is a more suitable option which may be used to avoid the claims which would otherwise be made against the business.

 

Requirements for Company Dissolution in Malaysia

Not every company in Malaysia can be dissolved at any time. Only the companies which have fulfilled a specific set of criteria may be dissolved. One important requirement for the dissolution of a Malaysian company is that the company must neither be actively conducting any business operations nor be intending to carry out any business operations at any point in the future. The company to be dissolved also ought to have no liabilities or assets at the time of its dissolution. It should also have no outstanding debts or liabilities and must not owe the government any money in the form of unpaid taxes. The owner and directors of the company must also not have any pending legal cases; this is equally true of legal cases to take place within Malaysia and abroad. One final criterion is that at the time of the company’s dissolution, the company to be dissolved must not be a holding company. 

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Duration of Company Dissolution in Malaysia

The duration of a company’s dissolution in Malaysia is not static. The duration depends on various factors, including those related to the dissolution application that the company has made. In Malaysia, the complete duration of the period of time required for the dissolution of a company usually ranges from six to 12 months.

 

Methods Through Which a Company May Be Dissolved

The dissolution method to be used depends on whether the company is able to meet its legal obligations at the time of its dissolution. Furthermore, the reasons for the dissolution of the company will have a significant effect on the dissolution process and the method through which the company is to be dissolved. In Malaysia, there are two primary methods through which dissolution may take place. One of these is voluntary winding up; the other, compulsory winding up.

 

Voluntary Winding Up

Companies in Malaysia which choose to undergo voluntary winding up may do so through either of two methods; these are members’ voluntary winding up (MVWU) and creditors’ voluntary winding up (CVWU). 

 

Members’ Voluntary Winding Up (MVWU)

This dissolution method is typically used by companies which are solvent. Companies which opt for MVWU are able to pay off all their debts but are to be dissolved due to the desires of the owner or directors. MVWU is a common course of action taken when a business owner intends to venture into a new field or when a majority of the directors are soon to retire. Even if the company has outstanding debts, if the company expects to meet all its obligations within 12 months of the official date of dissolution, MVWU will be the form of voluntary winding up to be used.

 

Creditors’ Voluntary Winding Up (CVWU)

An insolvent company is usually dissolved through CVWUA company which is unable to pay its debts must be dissolved by using this methodThe process of CVWU requires the appointment of a liquidator who will compensate the creditors by using the available company assets. 

 

Compulsory Winding Up

Compulsory winding up takes place at the behest of the court. It is done through the presentation of a petition in front of court authorities. According to Malaysian laws, the petitioners may include liquidators, creditors, the Official Receiver, or the Registrar of Companies.

 

Aftermath of Company Dissolution

After a company in Malaysia has been dissolved, there are certain effects which are left behind. These effects must be properly managed so that the process of company dissolution can be completed in the most suitable manner. Once the company has been dissolved and its debts paid, its remaining assets are to be evenly distributed among all of the company’s shareholders. Furthermore, should it be required, the company owner can request that the liquidator investigate the cause of the company’s dissolution after the dissolution process has been completed. 

 

Government Agencies and Company Dissolution in Malaysia

In Malaysia, the dissolution process must be completed through a specific procedure which must be followed by all companies to be dissolved. To ensure compliance, various government agencies oversee the process of company dissolution in Malaysia. The main government agencies include the Securities Commission Malaysia (SC). Other agencies include the Companies Commission of Malaysia (SSM) and the Malaysian Anti-Corruption Commission (MACC). The Central Bank of Malaysia (BNM) is also involved in overseeing the process.

 

Conclusion

It can therefore be concluded that dissolution of a company may sometimes be the most preferable option. Regardless of the reason for the dissolution of a Malaysian company, all companies to be dissolved ought to follow the proper dissolution procedures so that the process will be completed in a suitable manner.

 

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Dissolving a Company in Malaysia FAQs

Can Foreign Companies be dissolved in Malaysia?2020-04-28T17:07:55+08:00

Malaysia has no laws which state that only Malaysian companies can be dissolved there. Foreign companies which are to be dissolved do not have to be dissolved in their country of origin. Therefore, it can be concluded that foreign companies can indeed be dissolved in Malaysia.

How can a dissolved Company in Malaysia be restored?2020-04-28T17:07:19+08:00

A dissolved company can be restored through the use of a court order known as a restoration order. A company can be restored by directors, creditors, members, liquidators, managers or trustees of the Employees’ Provident Fund of the company, or anyone with a legal claim against the company. Any of these people may use the restoration order to put the company on the path towards restoration. 

Are Companies in certain Industries easier to dissolve in Malaysia?2020-04-28T17:06:46+08:00

The dissolution process in Malaysia follows the same procedure regardless of the industry within which the company lies. However, the size of an individual company will determine the ease or difficulty during the dissolution process. If the company is large and there are many directors involved, such companies will undergo a more tedious dissolution process when compared to smaller companies which do not have as many directors when dissolving it. Hence, the difficulty of dissolution depends on the individual company and not the industry. 

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