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C11: WINDING UP = liquidation. dissolved or struck off from CCM - Coggle…
C11: WINDING UP
= liquidation. dissolved or struck off from CCM
Types of winding up
S.432(1) & (2) co's assets are collected, debts are paid & surplus are distributed to members
a) Winding up by court/ compulsory
CWU: initiated by presentation of a petition to wind up the co
b) voluntary winding up
VWU
initiated by passing of a resolution by members of the co
a) members voluntary b) creditors' voluntary
VOLUNTARY WINDING UP
S.439(1)(a) wind up when expiry period is reached
S.439(1)(b) wind up by special resolution
members' voluntary winding up: if co is
solvent
& liquidator appointed by members (
MVWU
)
creditors' voluntary winding up: if co is
insolvent
& liquidator appointed by creditors (
CVWU
)
both need
declaration
Declaration: to determine if a co is solvent
S.443: Declaration of Solvency: written declaration that directors have made an into affairs of the co & check if co
could pay its debt within next 12 months
after commencement of winding up
if a co can pay debts: solvent
co has insufficient money to pay debts: insolvent
Aspects to consider S.443(3)
assets - liabilities - expenses for winding up
Who can wind up a co? S.464(1)
company
creditor (contingent or prospective)
a contributory
liquidator
Minister of Domestic Trade
BNM (for FSA and IFSA Institutions)
CCM
Malaysian Deposit Insurance Corporation
liquidator
: person in charge to liquidate asset before wind up
S.433(1) person cannot become liquidator except with the leave of court for following reasons:
not an approved liquidator
indebted to co/ related co >RM25,000
officer of the same co
partner, employer, employee of the co
partner, employee of an employee of the co
he assigns his assets for the benefit of his creditors
a bankrupt
convict for more than 3 months imprisonment for fraud/dishonesty
When does winding up start?
S.467
in MVWU: at time of passing the resolution
CVMU: upon the winding up order
both need Declaration of Solvency
Once winding up petition starts
S.442 co ceases to carry business from COMMENCEMENT of winding up unless liquidator opined otherwise
any alteration of shares/ transfer of shares shall be void from this point
S.439(2)
a) co shall lodge resolution with R of CCM within 7 days after resolution obtained
b) give notice in newspaper (BM & English) within 10 days after passing the resolution
failure to comply: RM10,000 and RM5,000 each day if continues
WINDING UP BY COURT
occurs in 2 situations
petition made by those entitled
as listed in S.464(1)
occurrence of
certain circumstances
under S.465
when petition to CWU has been presented to court of
insolvency
, the co can no longer pass a resolution to voluntarily wind up the co S.463
S.465 deals with circumstances:
co has special resolution agreed to be wound up by court ( SR: S.152 3/4 votes)
default in lodging meeting
co does not commence business within a year from incorporation or suspends its business for a whole year
S.465(1)
a) co has passed a special resolution
b) if co failed lodging statutory declaration
c) co has not commenced business within a year
d) has no member
e) co unable to pay debts (S.466)
f) directors unfair/unjust to member
g) as stated in Constitution
h) court thinks it it just & equitable to wind up the co
S.465(1)(F) directors unfair/unjust to member
Case: Re Cumberland Holdings Ltd (1976)
plaintiff does not need to prove that the whole BOD have acted in their own interests
it is sufficient if majority of BOD act in their own interest/act for the interest of only one director who has control over board
S.346 of CA 2016: members can apply for remedies in this situation
S.465(1)(H) court thinks it is just & equitable to wind up the co
a) oppression on member & winding up is the best solution (Case: Loch v John Blackwood Ltd (1924))
a man died after he set up his company. his trustee then ran the company as if it were his own & took shares for himself & paid huge salary to himself
other members had no confidence in the manner in which this trustee ran the co
Held: Court granted winding up order
b) breakdown of mutual trust (Case:: Ebrahimi v Westbourne Galleries Ltd (1973)
Mr. Ebrahimi & Mr. Nazar were business partners & then incorporated a co in London.
Mr. Nazar appointed his son as BOD. Mr. Ebrahimi & Mr. Nazar then transferred their shares to the son
however, Mr. Nazar & his son removed Mr. Ebrahimi as a director & exclude him from management of the business
held: both Mr. Ebrahimi & Mr. Nazar were business partners for a long time & mutual trust has been broken
c) Deadlock in management (Case: Re Yenidje Ltd (1916)
two directors who hold equal shares could not communicate except through a secretary
Held: only way to break the deadlock was to wind up the co
Provisions applicable to both types of winding up
S.452: property to be distributed equally among all members unless Constitution states otherwise
Effects of winding up:
notification that the co is in liquidation S.516(1)
invoice, order for goods must have words 'in liquidations' after name of company (for warning to those deal with co)
Cessation of co's business
VWU: stop business after winding up except as liquidator think is necessary S.442(1)
CWU: liquidator may carry on business up to 180 days after winding up S.486(1)(b)
avoidance of transfer of shares
CWU: any transfer is void S.472(1)
VWU: transfer without consent of liquidator is void S.442(3)
actions against the co put on hold
CWU: no legal action can be taken or proceeded with against a co at any time S.471(1)
VWU: no legal action can be taken or proceeded with against a co after commencement of VWU S.451(2)
cessation of directors' powers
in a VWU (whether members' VWU/ creditors' VWU) powers of directors cease on the appointment of a liquidator S.445(2)