Lecture Winding Up

8/9/2019 Lecture Winding Up

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Winding Up


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Statutes/ Governing Law

Companies Act 1965

Companies (Winding up) u!es 19"#

u!es o$ Court #%1#


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Defnition:

WU &nown as liquidation

't is collective insolvency process !eading to te end o$compan*s e+istence (proceedings ,een ta&en -oint! , tecreditors to ,ene.t tem in return)

Method o dissolving a business , se!!ing o itsassets and satis$ing te creditors $rom te proceeds o$

te sa!e

'n te process o WU: A liquidator wi!! ,e appointed to co!!ect and se!! o te

compan*s assets and distri,utes te proceeds o$ sa!e to pate compan*s de,ts to creditor(s)

'$ tere are $unds !e$t0 a !iuidator wi!! distri,ute it to mem,erso$ te compan ,ut in compu!sor winding up must o,tain!eave $rom te court


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Objective:

's to disso!ve te compan0 to se!! o te assets and to pa te creditorsde,t owed , te compan

The end result is2 te co e+istence comes to an end wen te compan is deregistered

What is deregistered?

3eregistered or deregistration is an action that brings the cose!istence to an end4 s.308CA 1965 -ie.to stri&e out te name o$ tecompan o register

ecause a wu does not comp!ete! &i!! o te co but on! deregistrationwi!! &i!! te co comp!ete!

tis act is ,eing carried out , te CC74 s8%(1) CA 19650 or order o$Court4 s#:% CA 1965 or vo!untar deregistration4 s#"# CA 1965

CC72 te CC7 as power to deregister/ stri&e a de$unct co ( use!essco) o te register i$ te CC7 as reasona,!e cause to ,e!ieve tat te co

is not carring on ,usiness or is not in operation Court2 te CC7 must deregister a co i$ te Court orders te co

deregistration $o!!owing te comp!etion o$ te co*s wu

;o!untar2 is te automatic conseuence o$ te comp!etion o$ wuprocess4 co wi!! automatica!! ,e disso!ved in 8 monts time $rom tedate o$ te order o$ Court


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"#ect o deregistration2

te co ceases to e+ist

i$ te co as an propert0 it a!! vests in te CC74 s.310(1)CA 1965

$an the cos registration be reinstated?

$an

e done by $$M ,


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>arties to WU proceedings

$reditors* secured+ unsecured+preerential

$o* debtor (una,!e to pa de,t)

,iquidator- O.cial /eceiver

$ourt- $$M


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$reditor:

is a person wo cou!d en$orce is c!aim against te compan, an action o$ de,t4 i$ ou are not a creditor ou are nota!!owed to .!e wu petition as ou a s no !ocus standi 2

Jurupakat Sdn. Bhd (1988) 3MLJ 49

0ecured $reditors securit in ands

1eed not prove their debts2 te %ay reali2e tesecured assets and prove $or de.cienc (sortage) i$ an

A SC a!so as an option o$ surrendering its security to

the liquidator $or te ,ene.t o$ creditors genera!!0 andproving $or its de,ts as unsecured creditors

/eali2e its security and i it does not produceenough %oney to pay o# its debt0 ten prove $or te,a!ance owing , fling proo o debt


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Unsecured creditors2 =e &ill be paid ater te co*s

assets ave ,een used to pa te

secured creditors ?owever i$ te unsecured creditorso,tain -udgment $or te de,t againstte compan beore the 3oating

charge crsta!!i@es te unsecuredcreditor wi!! ,e paid ,e$ore teoating carge o!ders


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Preferential creditors

they are unsecured creditors and normally

be paid after the secured creditors

However if the company has preferential

creditors, they have priority over the

holders of the debentures of the company

secured by a floating charge- s.191 &

s.292(4) CA 1965


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,iquidator

e$er s.4 CA 1965- !iuidator to inc!ude oBcia!receiver ie 3G'

An approved compan auditor wo as ,eenapproved , te 7inister o$ inance unders.8 aste !iuidator and wose approva! as not ,eenrevo&ed

1ot eligible to ,e !iuidator4 s.10 CA 1965

e$er a!so to s.58 ( co and creditors are givenpower to nominate a !iuidator ! "(1) i$ noappointment is made te


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Types o WU

=wo tpes o$ w/up2 ;o!untar w/up (mem,ers /creditors* w/up)

Compu!sor w/up (, court)

4oluntary &-up D s.54 CA 19652 's done , %e%bers - creditors

ta&es p!ace were te co%pany is solvent and te creditors wi!! ,epaid in $u!!

=o initiate a vw/up a resolution 5special resolution6 o the

%e%bers must ,e passed and !iuidator wi!! ,e appointed at temeeting

?ere dec!aration o$ so!venc is reuired to ,e made , te co*sdirectors stating tat te compan wi!! ,e a,!e to meet witin a periodnot e+ceeding 1# monts a$ter commencement o$ te w/up process

rom te time o$ reso!ution te co stops carring on its ,usiness

un!ess wit te permission o$ te !iuidator2 te !iuidator wi!! carrout teir $unctions to rea!i@e te co*s assets and distri,ute to temem,ers/ creditors

'$ tis dec!aration is re-ected , !iuidator/no dec!aration is made4w/up as to ,e creditors* w/up


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A creditors v- &u 'ssi%ilar to %e%bers v-&u

"!ceptere2 te co is inso!vent (una,!e

to pa te de,t)

=ere is proposa! to wu te covo!untari! 2 ,ut te directors do not

ma&e and !odge a dec!aration o$so!venc under s.5"

=ere$ore te creditors wi!! appoint a!iuidator to proceed wit wu # s.60 !

s.61 CA 1965


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The steps involved:

i a co*s directors ( ma-orit) dec!are in writing and !odge wit CC7

dec!aration o$ so!venc (ie a,i!it to pa de,t)4 s.5" CA 1965ii Co*s mem,ers in genera! meeting pass specia! reso!ution (#/8) $or

te co to ,e wound up vo!untari!4s.54(1) ($)

iii 7em,ers appoint a !iuidator in genera! meeting4 s.58(1) CA 1965! s.58() : d%r&'tr ss p*&rs &+'&pt ,&t appra r/ %u%datr

iv Liuidator wi!! carr out is duties4 te co stops carring on ,usiness

and are not a!!owed to trans$er sares un!ess wit !iuidatorpermission4 s.56(1) CA 1965 % dn& *%thut %u%datr appra %t%s %d- s.56() CA 1965

v Liuidator wi!! co!!ect0 rea!ise0 ascertain c!aims and distri,ute it tote co*s creditors

vi '$ te !iuidator0 ,e!ieves tat te co cou!d not pa witin 1# montsperiod0 wi!! ca!! $or a co*s creditors meeting

viiSo te wu wi!! proceeds as i$ it were creditors wu4 s.59(1) CA 1965

viiiWu comp!eted 0 co ten is deregistered


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ot creditors 7 %e%bers v &-up

reuires reso!ution to ,e passed and tisreso!ution ma ta&e p!ace2 Wen te period .+ed under te 7


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W-up by the $ourt This is &u o insolvent co that is triggered ro%

the $ourt Order

The application is %ade by parties listed undersection 217 CA 1965 : co, creditor, liquidator etc

The petitioner %ust establish ground o &u as insection 18(1) CA 1965: at &ast n& ,rund

e$er s.18 (1)( a- n) ! ()

'na,i!it to pa de,ts Ds#1(1)(e) (co%%on ground6 i$2 A creditor0 to wom te compan is inde,ted in a sum

e+ceeding 75%%0 serves a E


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Una,!e to pa de,tHH

$ase 2 2t& aa Sdn. Bhd. (1990) 1 MLJ 1 'n tis case te prase 8unable* give two

interpretations2 i =at a co is una,!e to pa its de,t i$ it is sown to ,e

fnancially insolvent in te sense tat its !ia,i!ities(de,ts) e+ceeds its assets

ii 'nso!venc in te co%%ercial sense* ie ina,i!it tomeet current demands irrespective o$ weter te

compan is possessed o$ assets wic i$ rea!i@ed wou!dena,!e it to discarge its !ia,i!ities in $u!!

?ere te court wi!! !oo&2 weter te co a,!e to meet tedemand/ o,!igation on te date!ine made

'$ te co as !iuidit (cas/assets) ,ut teir mone is tigt upin assets ( to se!! assets) D te compan is sti!! inso!vent


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Under s#1(#) CA 19652

Co is deemed to ,e una,!e to pa its de,t $or tepurpose o$ s#1(1) in 8 situations2

=e co $ai!s to pa a de,t a$ter ,eing served wit a E


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Cas ow test2

=e $act tat cos assets e!ceed itsliability5 debts6 is irre!evant0 i$ te co cou!d not ma&epament 0 te co is considered inso!vent0 there is noreason te creditors sou!d ,e e+pected to wait $orte co to rea!ise assets and pa tem 5 nor%ally i co

could not pay the debts &hen its all due5 duedate6 it is assu%ed to be insolvent)

a!ance Seet test2 Were te cos assets are insu.cient to

discarge its !ia,i!ities( not enoug $or te coto rea!ise and to meet te o,!igation i$ its tota!!ia,i!ities is more tan assets)


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)ter the fling o &u application and beore the%a9ing o &u order+ the $ourt %ay appoint a

provisional liquidator ( temporar) to protect co*s assets4s.31 CA 1965

Once appointed+ the directors po&ers are suspendedand they could not act &ithout approval o provisionalliquidator

?owever rebuttable presu%ption o$ ina,i!it to pa tede,t is accepta,!e and te co %ay dispute te de,t at a!ater stage2

A co can app! to te Court $or te statutor E


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Set aside orma! deect- irregularities wi!! not inva!idate te wu

proceedings unless te Court is satis.ed tat substantialinjustice as ,een caused , te de$ect or irregu!arit&hich cannot be re%edied , an order o$ court # r.194

a/pat %/$&r 7ndustr%&s (1990) MLJ 46

' 1otice not quantiying the a%ount o interest and

costs D weter va!id or notH J Cnsutan' S&r%'& Sdn Bhd. (1996) MLJ 48

7sia Air Carter (#%%%) : 7LI 65"

valid

At !east as to sow ow to reac at te sum c!aim

=e amount due must e+ceed 75%% and remained unpaid a$ter E


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;0ervice o statutory 1OD=ere must ,e adeuate proo$ o$ psica! de!iver o$ demand to

te co*s registered oBce4 r.18(a) C *u ru&s 19" Weng Wa Construction Co Sdn d (199:) # 7LI #66

Cmun 3eve!opment Sdn d (1995) # 7LI #88


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= Disputed debts on substantial ground

(eg !ocus standi0 c/c!aim etc)=e Court/ creditor cannot ma&e a presumption tat te cois una,!e to pa te de,t0 i$ te de,t is disputed onsu,stantia! grounds

Ann Ioo 7eta! Sdn d (#%%%)5 7LI "%9

Securicor (195) 1 7LI : A co wou!d not ,e protected $rom a wu order under s#1 simp! ,

purporting to dispute a sum c!aimed in te notice o$ demand witoutsu,stantiating( proving) tat it was a rea! ,ona .de dispute

So i$ te co rea!! want to dispute te c!aim te evidence must ,e ,rougt,e$ore te Court to support te ground

"gte co as a c/c!aim against te petitioner ,ut tese c!aims not wo!!e+tinguis te petitioner*s de,t0 even i$ success$u!0 te petition wi!! not ,edismissed ( sti!! owed 75%%)

=e court as power / discretion to decide on weter te grounds ,rougt$orward is ,ona .de or not and can ,e accepta,!e or not

=e court as power to order sta pending reso!ution o$ dispute or i$ courttin&s te ground is not ,e accepta,!e wi!! proceed wit petition


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)buse o process '$ te Court .nds tat te wu petition is an a,use o$ process0

Court ma sta a!! proceedings or dismiss te petitionAp%ra/% Sdn. Bhd. ( 1986) 1 CLJ 493

Were te petition was dismissed wit costs as it was not a ,ona .de attempt

to o,tain te re!ie$ sougt ,ut was $or co!!atera! purpose o$ em,arrassing tede$endant

ecause great damage can ,e caused to a compan tat is so!vent/

reputation o$ te compan , improper proceedings to wu te co

So a petition &hich a%ounts to abuse o process %ay also be struc9out under /O$

?ere te Court as no power to order damages to ,e paid to te compan

wen e+ercising its -urisdiction to stri&e out te petition0 damages ma on!,e o,tained in a separate suit $or ma!icious prosecution / a,use o$ process

KK can .!e more tan one petition Dgita notes pg 94S%nar%/ Sdn. Bhd. (01) 3 CLJ 6"8


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Commencement o$ w/up2 S#19(#) Co Act

w/up shall be dee%ed to haveco%%enced at the ti%e o thepresentation o the petition

?owever i$ te petition is pendingconsideration , te court0 tecompan*s ,usiness and manageria!aairs need not come to a standsti!!

un!ess a !iuidator as ,een appointedwit speci.c tas& assigned to im , teCourt

Genera!! once a petition is .!ed0 te

compan wi!! going on wit te ,usiness


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0ervice 1OD E


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>rocedures2 Served notice under s#1 ( creditor serve to te de,tor*s compan)

=e notice is served a$ter .na! -udgment is o,tained/ i$ it is I'32 it is a good

-udgment un!ess it is set aside , te Court on app!ication ,ased on merit4O=;r'< /O$ 2 8%das to set aside -udgment2 i$ not crsta!!ise as .na!

-udgment

=e co ten was given 8 wee&s to comp! wit te notice under s#1 ai!ure to comp! witin te stipu!ated period tere is presumption tat te co is

una,!e to pa te de,t/ to meet te o,!igation/ !ia,i!ities o$ te co against tecreditor

=ere$ore te creditor as a rigt to proceed and .!e a petition( winding up petition) =ere is presumption tat te co is una,!e topa te de,t

?owever i$ witin #1 das0 te co as a c/c!aim0 set o or crossdemand or i$ te co argued or disputed te de,t c!aim , te creditor

ten te app!ication as to ,e .!ed , te so to set aside2 S'C aBdavit ( /crt) E


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Winding up petition

'ssue o$ aBdavit

Lecture Winding Up

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