CLOSING DOWN A COMPANY: STRIKE OFF OR WIND UP?
Company closures have increased significantly, mainly precipitated by the economic downturn and rapid market changes. When the business of a company reaches the stage of closure, the business ...of a company will gradually stop being operational and eventually become inactive. So what happens next?
In these circumstances, there are two common methods for closure of a company, which are Striking Off Or Winding Up.
STRIKING OFF A COMPANY
Striking off a company requires you to make an application to Suruhanjaya Syarikat Malaysia (SSM). Many say that striking off a company is a simple and efficient way of closing down a company. However, there are some criteria that need to be fulfilled prior to striking off a company, which may make striking off not an easy process.
To strike off, a company:
i) must be dormant and not in operation;
ii) must get consent from the majority of the shareholders;
iii) has no assets and liabilities;
iv) has no bank account;
v) has no outstanding tax or other liabilities including compound with any government bodies such as EPF, SOCSO etc.;
vi) has no outstanding penalties or compound due to SSM under Companies Act 1965;
vii) has updated the latest information with SSM;
viii) is not involved in any legal proceedings within or outside Malaysia;
ix) does not have any charges in the Register of Charges;
x) has not made any return of capital to shareholders;
xi) is not a holding company or subsidiary of another corporate body;
xii) is not a Guarantor Corporation.
One of the benefits of striking off a company is that directors of a company are allowed to change their mind regarding the previous closure of their company. Directors can apply to the Court for recommencement of their business within 15 years after the name of their company has been struck off.
WINDING UP A COMPANY
The winding up of a company is known as ‘liquidation’. It is the process by which a company is brought to an end whereby the assets and property of the company will be redistributed. The responsibility of winding up of a company lies with the liquidator. When a liquidator has already been appointed, all the powers of directors and shareholders shall cease. The liquidator will take charge to ensure that the company is properly dissolved.
There are two types of winding up:
i) Court-Ordered Winding Up (also known as Compulsory Winding Up)
ii) Members’ Voluntary Liquidation (MVL or also known as Voluntary Winding Up)
The court-ordered winding up is where the winding up process of an insolvent company is triggered by a court on the application of one or more parties. The circumstances that may direct a company to be dissolved by court order include:
i) The company is unable to pay debts owing to financial institutions, suppliers or any other related entities;
ii) One or more of its directors has acted in his/her personal interest or unjustly to other directors or acted against the interest of the company and has been served a court order;
iii) No business operations have been started since the day of registration (period of one year) or business operations are suspended for one year.
The Members’ Voluntary Liquidation (MVL) is the liquidation of a solvent company where the directors must form an opinion that the company will be able to pay its debts in full within a period of twelve (12) months after the commencement of winding up of a company. Once the liquidation is commenced, it will be advertised in the local newspaper in order to inform the public about the status of the company.
TO SUMMARISE
Based on the details as shared above, I believe you know your choices when dealing with the closure of a company.
Company closures have increased significantly, mainly precipitated by the economic downturn and rapid market changes. When the business of a company reaches the stage of closure, the business ...of a company will gradually stop being operational and eventually become inactive. So what happens next?
In these circumstances, there are two common methods for closure of a company, which are Striking Off Or Winding Up.
STRIKING OFF A COMPANY
Striking off a company requires you to make an application to Suruhanjaya Syarikat Malaysia (SSM). Many say that striking off a company is a simple and efficient way of closing down a company. However, there are some criteria that need to be fulfilled prior to striking off a company, which may make striking off not an easy process.
To strike off, a company:
i) must be dormant and not in operation;
ii) must get consent from the majority of the shareholders;
iii) has no assets and liabilities;
iv) has no bank account;
v) has no outstanding tax or other liabilities including compound with any government bodies such as EPF, SOCSO etc.;
vi) has no outstanding penalties or compound due to SSM under Companies Act 1965;
vii) has updated the latest information with SSM;
viii) is not involved in any legal proceedings within or outside Malaysia;
ix) does not have any charges in the Register of Charges;
x) has not made any return of capital to shareholders;
xi) is not a holding company or subsidiary of another corporate body;
xii) is not a Guarantor Corporation.
One of the benefits of striking off a company is that directors of a company are allowed to change their mind regarding the previous closure of their company. Directors can apply to the Court for recommencement of their business within 15 years after the name of their company has been struck off.
WINDING UP A COMPANY
The winding up of a company is known as ‘liquidation’. It is the process by which a company is brought to an end whereby the assets and property of the company will be redistributed. The responsibility of winding up of a company lies with the liquidator. When a liquidator has already been appointed, all the powers of directors and shareholders shall cease. The liquidator will take charge to ensure that the company is properly dissolved.
There are two types of winding up:
i) Court-Ordered Winding Up (also known as Compulsory Winding Up)
ii) Members’ Voluntary Liquidation (MVL or also known as Voluntary Winding Up)
The court-ordered winding up is where the winding up process of an insolvent company is triggered by a court on the application of one or more parties. The circumstances that may direct a company to be dissolved by court order include:
i) The company is unable to pay debts owing to financial institutions, suppliers or any other related entities;
ii) One or more of its directors has acted in his/her personal interest or unjustly to other directors or acted against the interest of the company and has been served a court order;
iii) No business operations have been started since the day of registration (period of one year) or business operations are suspended for one year.
The Members’ Voluntary Liquidation (MVL) is the liquidation of a solvent company where the directors must form an opinion that the company will be able to pay its debts in full within a period of twelve (12) months after the commencement of winding up of a company. Once the liquidation is commenced, it will be advertised in the local newspaper in order to inform the public about the status of the company.
TO SUMMARISE
Based on the details as shared above, I believe you know your choices when dealing with the closure of a company.
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