Liquidation,

Arrangement &
Reconstruction

“ A company cannot die – it must be killed”

Team members

Muhammad
Muhammad Hafiz
Banjumaswira bin
bin Othman
Ishak
(2007242646)
(2007242686)

Mohd Fazle bin Muhammad Naim

Mohd Sahlan bin Tajudin
(2007242644) (2007242764)
Introduction
• Upon received Form 9, a company is officially exists
and it is called an artificial person (independent legal
entity).
• It can sue and be sued in its own name to enforce
its rights or liabilities owed by it.
Introduction
• According to the law, the company has perpetual
succession regardless of the changes in
management and membership.

• As an artificial person, a company’s existence can

be ‘killed’ under the law.
Deregistration
• Companies can be terminated if it is:
– Struck off by the CCM under Section 308 of Companies
Act 1965.

– Dissolved as a result of winding up either voluntary or

court order.
Section 308 of the CA 1965
• Confers power to the CCM to deregister if it is
satisfied that the companies is no longer in
operation.

• Requirement :-
– inactive / no longer in operation
– Not hold any asset & liability
– Not been put under receivership
Section 308 of the CA 1965
• Deregistration can be initiated by:-

– CCM’s initiative
– Written application from company
– In the process of winding up
Section 308 of the CA 1965
• CCM’s initiative
– Not lodge of annual return & other statutory documents for
six consecutive years
– Report by CCM’s IO that the company is no longer in
operation
– The Company & its directors no longer communicated &
cannot be traced by CCM
Section 308 of the CA 1965
• Application from the Company
– Written application made by directors, shareholders,
company secretary, accountant or lawyer of the company
– Can be made anytime after the Company not in operation
Section 308 of the CA 1965
• In the process of winding up
• No liquidator is acting
• The affair is fully wound up & the liquidator has been
defaulted in lodging return for 6 months, and no
assets / insufficient assets to obtain court order for
dissolution
Procedures
• File a SD signed by one of the directors
• Sent the SD to CCM together with a copy of latest
B/S
• If approved, Notice 308(1) will be posted at
registered address of company, copy to IRB
• After one month, Notice 308(2) will be issued if there
is no objection
Procedures
• After 3 month of Notice 308(2), Notice 308(4) will be
issued & posted to registered address of company,
copy to all directors. A copy also given to
Percetakan Nasional Bhd to be gazetted.
• Once published in the Gazette, the company
considered dissolved.
Winding Up
• 3 modes winding up:
• Members voluntary winding up
• Creditor’s voluntary winding up
• Compulsory winding up by the Court
Members’ Voluntary Winding
Up
• 2 circumstances in which company winding up
voluntarily:
– When a period fixed for the duration of the company by
then M & A expires
– If the company resolve by the special resolution
Procedures for members
voluntary winding up

FORM 66
Board Meeting CCM

FORM 11

EGM

FORM 71
Creditors voluntary winding
up
• If director are unable a file a declaration of solvency
• Creditors have control
• Creditor appoint the liquidator
Procedures for creditors
voluntary winding up
FORM 65A
Board Meeting CCM

FORM 11
• Resolution to wind up
EGM • Appointment of liquidator

FORM 71
• Appointment of liquidator
Creditors meeting • To appoint Committee of Indpection
EFFECT OF VOLUNTARY
WINDING UP
• Section 256.
• Effect of voluntary winding up. ACT 125
COMPANIES ACT 1965
The effect of winding up:
• Upon the commencement of the voluntary winding-up, the company will
cease to carry on business except that which may be required for the
benefit of winding- up smoothly. The legal status and powers of the
company will continue until it is dissolved.
• Furthermore, any transfer of shares (except a transfer made by the
liquidator or made with his/her approval), and any alteration to the status
of the members of the company which is made after the commencement
of a voluntary winding-up, will be void.
• Provide that the Corporate State and Corporate Powers shall continue
until it is dissolved.
• Other income like Interest & Rental- Company shall continue to be
assessed notwithstanding voluntary winding up.
• Employees will not dismissed unless the company is insolvent.
compulsory winding up
• The parties who are entitled by law to petition for the
compulsory liquidation of a company vary from
jurisdiction to jurisdiction, but generally, a petition
may be lodged with the court for the compulsory
liquidation of a company by:
• the company itself
• any creditor who establishes a prima facie case
• contributories
• the Secretary of State (or equivalent)
• the Official Receiver
Grounds for ordering
Compulsory liquidation
• Under section 218 of the Companies Act 1965
• The grounds upon which one can apply for a compulsory liquidation also vary
• between jurisdictions, but the normal grounds to enable an application to the court
for an order to compulsorily wind-up the company are:
• the company has so resolved
• the company was incorporated as a public company, and has not been issued
with a trading certificate (or equivalent) within 12 months of registration
• it has not commenced business within one year from incorporation, or has not
carried on business for more than one (1) year.
• the number of members has fallen below 2.
• the company is unable to pay its debts as they fall due
• the company has held a license under the Banking Act1965.
• it is just and equitable to wind up the company
Grounds for ordering
Compulsory liquidation
• The court is of the opinion that is just and equitable
that the company be wound up under any following
circumstances:
– where the main object of the company has failed
– where the company was formed for a fraudulent purpose.
– where the company was a bubble company
– Where the director had voting control and refused to hold
meeting, produce accounts an d dividend
Procedure for Compulsory
Winding Up
Presentation of a
HIGH COURT
petition

Winding up order

EGM Creditors’ Meeting

FORM 70

CCM
Procedure for Compulsory
Winding Up
• The procedure for compulsory winding up is as follows:
– Presentation of petition by your company (special resolution required),creditors,
contributories, the Official Receiver, the liquidator, the Minister of International Trade
and Industry or Bank Negara.
– Hearing by the court at which the winding up order is made.
– Separate meetings of your company and creditors summoned by the liquidator to
decide whether or not to appoint a Committee of Inspection to act with the liquidator. If
there is no liquidator appointed, the Official Receiver must summon separate meetings
of the creditors and contributors for the purpose of determining whether or not to apply
to court for appointment of a liquidator to replace the Official Receiver.
– Liquidator files notice of his appointment on Form 70 with the Companies Commission
of Malaysia (CCM) and the Official Receiver within 14 days from the date of his
appointment.
– Liquidator continues with the duties of winding up which will involve calling meetings of
the Committee of Inspections.
– Liquidator distributes assets in correct legal order.
– Liquidator applies to the court for an order for his release and the company is dissolved.
LIQUIDATOR
• A PERSON CANNOT BE APPOINTED AS
LIQUIDATOR UNLESS HE IS AN APPROVED
LIQUIDATOR
• SECTION 4(1) DEFINED AN APPROVED
LIQUIDATOR IS AN APPROVED COMPANY
AUDITOR THAT HAS BEEN APPROVED BY THE
MINISTER AND HAS GIVEN WRITTEN CONSENT
TO ACT AS LIQUIDATOR OF COMPANY
LIQUIDATOR
• CANNOT ACT AS LIQUIDATOR IF HE IS
– NOT AN APPROVED LIQUIDATOR
– INDEBT WITH COMPANY, HOLDING OR SUBSIDIARY
EXCEEDING RM2,500.00
– OFFICER OF THE COMPANY
– HAVE ANY RELATION WITH THE COMPANY
– BANKRUPTCY
– CONVICTED TO ANY OFFENCE
POWER AND STATUTORY
DUTIES OF LIQUIDATOR
• SECTION 269 OF ACT DEFINES THE POWER OF
LIQUIDATOR
– TO SETTLE ANY PARTLY PAID SHARES BY
CONTRIBUTORIES
– CONTROL OF ALL COMPANY BOOKS (DOCUMENTS
OF TITLE AND VALUE)
– DEAL WITH THE COLLECTION OF DEBT AND SECURE
ALL ASSETS
– ADVISING AND NOTIFYING DIRECTORS ABOUT THEIR
POWER
POWER AND STATUTORY
DUTIES OF LIQUIDATOR
– OPEN LIQUIDATION CASH BOOK AND REGULARLY
REVIEWED
– PAY THE DEBT OF COMPANY
• WAGES AND SALARY EMPLOYEES
• ORDINARY UNSECURED CREDITORS
• PAY MEMBERS ACCORDING TO RIGHTS AND ISSUE
– EVERY SUBSEQUENT PERIOD OF 6 MONTHS FROM
THE DATE OF APPOINTMENT THEY GET TIME WITHIN
1 MONTHS TO LODGE FORM 75 TO CCM
POWER AND STATUTORY
DUTIES OF LIQUIDATOR
– LIQUIDATOR WILL CALL MEMBERS OF THE COMPANY
AND THE CREDITORS
• CASES > 1 YEAR, EVERY 3 MONTHS HELD GEN. MEETING TO
BRIEF REPORT ON LIQUIDATION
• CASES CLOSE, FINAL MEETING TO SHOW HOW THE
WINDUNG UP PROCESS BEING CONDUCT
– WITHIN 7 DAY AFTER FINAL MEETING LIQUIDATOR
MUST LODGE FORM 69 TO CCM TOGETHER WITH
LIQUIDATOR STATEMENTS ACCOUNTS
POWER AND STATUTORY
DUTIES OF LIQUIDATOR
– WITHIN 1 MONTH FROM THE DATE OF FINAL
MEETING THE LIQUIDATOR WILL LODGE FORM 11 TO
CCM IF ORDINARY RESOLUTION HAS BEEN PASSED
– IF NO ORDINARY RESOLUTION THE BOOKS MUST BE
KEEPS FOR 5 YEARS FROM THE DATE OF
DISSOLUTION
– ON EXPIRATION OF 3 MONTHS, AFTER LODGE FORM
69, THE COMPANY IS DEEM TO BE DISSOLVED
REMUNERATION
• LIQUIDATOR REMUNERATION
– IF MEMBERS VOLUNTARY WINDING UP, THE
REMUNERATION IS FIXED BY THE COMPANY IN
GENERAL MEETING
– IF CREDITORS VOLUNTARY WINDING UP, THE
REMUNERATION IS FIXED BY COMMITTEE OF
INSPECTION OR THE CREDITORS IF NO COMMITTEE.
Company reconstruction

Definition
• A term used to describe the drastic formal changes
in a company’s capital structure as a result of certain
circumstances.

Type
• Internal reconstruction
• External reconstruction
Internal Reconstruction

1. Undertaken by companies that have surplus capital

or companies whose capital has been eroded by
trading losses.
2. In this type of internal reconstruction, companies
who wish to reduce their capital need to comply
with certain requirements of their local Companies
Act. This normally involves the following:
– The capital reduction scheme must be confirmed by the court
– The articles of association of the company must provide for such
reduction of capital and
– A special resolution must be passed by the company
Internal Reconstruction
• Three(3) situations where the Companies Act ( in
this case Malaysia) permits such capital reduction:-
– To reduce or write off uncalled capital on any of its shares;
– To cancel paid up capital not represented by assets; or
– To refund any surplus capital i.e. Capital in excess of the
needs of the company ( a company which has par value of
$1 applies to reduce to 50 cent per share so as to refund
50 cent per share to the shareholders.
External Reconstruction
• It is the process in which one existing company
reconstructs itself with new name and identity.
Internal vs External
reconstruction
Internal External
• No new company is • A new company is formed
formed. The existing by the existing
company continues as a shareholder of the old
going concern; company to take over the
• The ailing company will assets and liabilities;
not gave into liquidation • The ailing company goes
under the capital reduction into liquidation and
scheme and • There is no need to
• Involves complying the comply with particular
requirements under the clause in the Companies
Companies Act. Act.