Yeoh Mazlina & Partners

An Overview of Liquidation of Limited Liability Company in Malaysia

The liquidation of limited liability companies in Malaysia is comprehensively laid out in the Companies Act

There are three methods of dissolution of limited liability companies, namely by way of voluntary winding up (instituted either by members or creditors); compulsory winding up (by court); and striking off by the Registrar.

(A) Voluntary winding up

If a company is solvent, it may be wound up by the shareholders. If a company is insolvent, it may be wound up by its creditors. The difference between members’ voluntary winding up (“MVWU”) and creditors voluntary winding up (“CVWU”) are set out in the table below:

Effected when the company is solvent and the liquidator is appointed by the members at the members’ meeting. Effected when the company is insolvent and the liquidator is appointed by the creditors at the creditors meeting.
Company’s directors are required to make a declaration of solvency of the company that the company will be able to pay its debts in full within the period of 12 months after the commencement of winding up. Declaration of solvency of the company is not made.
Decision to commence process of winding up rests with the company (directors and shareholders). Decision to commence process of winding up rests with the company (directors and shareholders).
Creditors will have the power to decide the appointment of the liquidator of the company in order to protect their interest.

(B) Winding up by court (also known as Compulsory Winding Up)

The process begins with the presentation of a petition in court.

The petition may be commenced by the company itself; any creditor; a contributory or his representative, a liquidator and some government ministries or agencies.

There are a few grounds where a company may be ordered the winding up, amongst others:

  1. The company has by special resolution resolved that the company is to be wound up by the Court.
  2. The company does not commence business within a year from its incorporation or suspends its business for a whole year.
  3. The company has no member.
  4. The company is unable to pay its debts.
  5. The Court is of the opinion that it is just and equitable that the company be wound up.

(C) Striking off

The Registrar of Companies may strike off a company either on his own motion or through the application by a director, member or liquidator of a company to the Companies Commission of Malaysia. A company that has not carried out business or is not in operation may apply for striking off.

It is to be noted that the claim against a wound-up company is subject to any leftover assets of the company and the type of debt (secured or unsecured). Secured creditors are entitled to realize their security regardless of the winding up process. Unsecured creditors however are required to submit proof of debt to the liquidator by way of a sworn affidavit verifying and specifying the debt. The said proof of debt may then be accepted and admitted by the liquidator.

Contributor: Mr. Jeremy Tang, Senior Associate
Supervisor: Ms. Khor See Lin, Senior Partner, Head of Corporate, ASEAN & China Desk