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Definition:
WU known as liquidation
It is collective insolvency process leading to the end of
companys existence (proceedings been taken jointly by the
creditors to benefit them in return)
Method of dissolving a business by selling off its
assets and satisfying the creditors from the proceeds of
the sale
In the process of WU:
A liquidator will be appointed to collect and sell off the
companys assets and distributes the proceeds of sale to pay
the companys debts to creditor(s)
If there are funds left, a liquidator will distribute it to members
of the company but in compulsory winding up must obtain
leave from the court
Objective:
Is to dissolve the company, to sell off the assets and to pay the creditors
debt owed by the company
The end result is:
the co existence comes to an end when the company is deregistered
What is deregistered?
Deregistered or deregistration is an action that brings the cos
existence to an end- s.308CA 1965 -i.e. to strike out the name of the
company off register
Because a wu does not completely kill off the co but only deregistration
will kill the co completely
this act is being carried out by the CCM- s.308(1) CA 1965, or order of
Court- s.240 CA 1965 or voluntary deregistration- s.272 CA 1965
By CCM: the CCM has power to deregister/ strike a defunct co ( useless
co) off the register if the CCM has reasonable cause to believe that the co
is not carrying on business or is not in operation
By Court: the CCM must deregister a co if the Court orders the co
deregistration following the completion of the cos wu
Voluntary: is the automatic consequence of the completion of wu
process- co will automatically be dissolved in 3 months time from the
date of the order of Court
Effect of deregistration:
the co ceases to exist
if the co has any property, it all vests in the CCM- s.310(1)
CA 1965
Can the cos registration be reinstated?
Can
Be done by CCM by Order of Court
The application can be made within 15 years after
the name has been struck off from the register
If the Court satisfied, the Court will order for the company
to be reinstated- s.308(5) CA 1965
After reinstated:
The co is taken to have continued in existence as if it had
not been deregistered
The court can make order to place the company and all
other persons back in the same position they were in
before the company was deregistered
Parties to WU proceedings
Creditors- secured, unsecured,
preferential
Co- debtor (unable to pay debt)
Liquidator/ Official Receiver
Court/ CCM
Creditor:
is a person who could enforce his claim against the company
by an action of debt- if you are not a creditor you are not
allowed to file wu petition as you ha s no locus standi :
Jurupakat Sdn. Bhd (1988) 3MLJ 49
Secured Creditors
security in hands
Need not prove their debts: they may realize the
secured assets and prove for deficiency (shortage) if any
A SC also has an option of surrendering its security to
the liquidator for the benefit of creditors generally, and
proving for its debts as unsecured creditors
Realize its security and if it does not produce
enough money to pay off its debt, then prove for the
balance owing by filing proof of debt
Unsecured creditors:
They will be paid after the cos
assets have been used to pay the
secured creditors
However if the unsecured creditors
obtain judgment for the debt against
the company before the floating
charge crystallizes the unsecured
creditor will be paid before the
floating charge holders.
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
Liquidator
Refer s.4 CA 1965- liquidator to include official
receiver i.e. DGI
An approved company auditor who has been
approved by the Minister of Finance under s.8 as
the liquidator and whose approval has not been
revoked
Not eligible to be liquidator- s.10 CA 1965
Refer also to s.258 ( co and creditors are given
power to nominate a liquidator & 227(1) if no
appointment is made the OR shall be appointed
as provisional liquidator ( temporary) to protect
and preserves the assets of the company
Types of WU
Two types of w/up:
Voluntary w/up (members /creditors w/up)
Compulsory w/up (by court)
A creditors v/ wu
Is similar to members v/wu
Except here: the co is insolvent (unable
to pay the debt)
There is proposal to wu the co
voluntarily : but the directors do not
make and lodge a declaration of
solvency under s.257
Therefore the creditors will appoint a
liquidator to proceed with wu s.260 &
s.261 CA 1965
two
Here the court will look: whether the co able to meet the
demand/ obligation on the dateline made.
If the co has liquidity (cash/assets) but their money is tight up
in assets ( to sell assets) the company is still insolvent
The court will do the test: cash flow/ balance sheet test
A co can apply to the Court for the statutory NOD to be set aside
or other creditors may oppose if they are not been named as
creditor in the petition
Grounds that can be used:
Set aside
Formal defect/ irregularities will not invalidate the wu
proceedings unless the Court is satisfied that substantial
injustice has been caused by the defect or irregularity
which cannot be remedied by any order of court r.194
1.
Notice not quantifying the amount of interest and
costs whether valid or not?
YPJE Consultancy Service Sdn Bhd. (1996) 2 MLJ 482
Msia Air Charter (2000) 4 MLJ 657
valid
At least has to show how to reach at the sum claim
The amount due must exceed RM500 and remained unpaid after NOD is
served and no reasonable explanation on failure to pay on the part of
the debtor= valid
Re Perusahaan Jenwatt (1990) 2 MLJ 178
Sri Hartamas Development Sdn. Bhd. (1992) 1 MLJ 313
The NOD was valid since the sum and interest could easily be
ascertained, although the exact amount of the costs was not mentioned
Abuse of process
If the Court finds that the wu petition is an abuse of process,
Court may stay all proceedings or dismiss the petition
Apirami Sdn. Bhd. ( 1986) 1 CLJ 493
Where the petition was dismissed with costs as it was not a bona fide attempt
to obtain the relief sought but was for collateral purpose of embarrassing the
defendant
Because great damage can be caused to a company that is solvent/
reputation of the company by improper proceedings to wu the co.
So a petition which amounts to abuse of process may also be struck
out under ROC
Here the Court has no power to order damages to be paid to the company
when exercising its jurisdiction to strike out the petition, damages may only
be obtained in a separate suit for malicious prosecution / abuse of process
** can file more than one petition gita notes pg 9Sinarlim Sdn. Bhd. (2012) 3 CLJ 678
Commencement of w/up:
S.219(2) Co Act
w/up shall be deemed to have
commenced at the time of the
presentation of the petition
However if the petition is pending
consideration by the court, the
companys business and managerial
affairs need not come to a standstill
unless a liquidator has been appointed
with specific task assigned to him by the
Court
Generally once a petition is filed, the
company will going on with the business
Service NOD
NOD is a letter or form setting out a debt worth at least
RM500 due and payable to creditors within 21 days
This NOD is served to warn the debtor of impending
petition- s.218(2) (a) and to make sure justice and fair
play as creditors will give chance to the company to make
payment or to settle the debt within 21 days
R.18(a) : sufficiently served if left/ sent by prepaid registered
post to the cos last known address or to the person to be
served with ( director of the co)
To make payment
To ignore ( and after 3 weeks there will be presumption of unable to
pay the debts, unless the NOD is bad in law)
Procedures:
The co then was given 3 weeks to comply with the notice under s.218
Failure to comply within the stipulated period there is presumption that the co is
unable to pay the debt/ to meet the obligation/ liabilities of the co against the
creditor
Upon received the application the registrar must give a (H) date to
hear the application before he can proceed to hear wu petition/ allow
creditor to file petition
Sometimes it is filed late by the co- but the court will allow it with reasonable
grounds ( to ensure justice been done)
Winding up petition
Issue of affidavit