Bidding farewell: Closing down a Company with SSM

Closing down a company may be a decision that a business owner may have to make one day if one no longer needs a company, or maybe if there is a significant drop in income and closing down the company is the better option to prevent further costs incurred to maintain the company. In Malaysia, there are two major methods to close down a company: Strike off or Wind up. 

Both methods are usually long and may take place for a long time, and even up to several years. It is subject to the volume of applications with the Companies Commission of Malaysia (SSM) at that point of time as well. We have outlined what you can expect in both methods of closing down below: 

Striking off the Company

One of the ways one can close a company is by striking the company off SSM. It is usually the more cost-effective option and also can be done in a shorter amount of time. 

How can one end up in this situation?
There are a few scenarios that may result in the company being eligible to be struck off: 

• The company is not in operation anymore and not carrying on business activities. 
• The company has contravened Companies Act 2016 (CA 2016).
• The company is being used for illegal activities or other unlawful purposes.
• The company has failed to lodge Annual Return for three or more consecutive years.

What are the requirements? 
There are several requirements to the application of the closure of a company pursuant to Section 550 of CA 2016: 

• A resolution is needed to be passed from the company’s shareholders for the initiation of the application to strike the company name off the Registrar, on the basis that the company is not carrying on business or not in operation. 
• The company does not have assets and liabilities at the time of when the application is made. 
• The company does not have outstanding charges in the Register of Charges. 
• The Company has no outstanding penalties or compounds under the CA 2016.
• The company also should not have outstanding tax or other liabilities with any Government Departments or Agencies. 
• The information of the company should be up to date with the Registrar. 
• The company is not involved in any legal proceeding, within or outside of Malaysia. 
• The company has not made any return of capital to the shareholders.  
• The company is not a holding company to other subsidiary companies, or a guarantor corporation.

What is the procedure to strike off a company? 

The procedure to initiate an application to strike off a company can be conducted by the director, shareholder or company secretary of the company. The applicant(s) must complete the Declaration Form – Application form to Strike Off Company under Section 550 and supported by the following documents: 

1. Cover letter which states the reason(s) to support the application to strike off the company 
2. Declaration by applicant (to demonstrate that the company is not involved in any investigation or prosecution by any authority within Malaysia or outside Malaysia)
3. See the table below:

4. Latest Management Accounts (Balance Sheet and Profit & Loss Statement), which has to be certified by the Director on each page
5. Waiver letters from directors/ creditors (to demonstrate that directors or creditors will not take legal actions against the company)
6. Tax clearance (if applicable) 
7. Company print-out

The application fee to the procedure is RM100. Directors of the company have the duty to retain all registers, books, statutory and accounting records and documents for a period of seven years after the company has been struck off and should be made available to be inspected upon request by the Registrar. 

Winding up the Company

The other method to close off a company in Malaysia is to wind up the company. This method is more complex and will take a longer period of time to conclude, typically over a year. This method is also more costly and usually costs more than RM 10,000.00. There are several modes of winding up as per CA 2016:

1. Members’ Voluntary Wind Up

What are the circumstances that qualify for a Members’ Voluntary Wind Up? This mode of winding up occurs under the following circumstances: This mode of winding up occurs under the following circumstances: 

1. if the company has set out a period fixed for the duration of the company in the Company Constitution, or
2. if the company came across an event which the Company Constitution provides that the company to be dissolved, or 
3. if the company came across an event which falls under a circumstance that the company has passed a resolution that requires the company to be wound up voluntarily, or 
4. if the company resolves by special resolution that the company be wound up voluntarily. 

A company can undergo Members’ Voluntary Wind Up when the company does not want to operate anymore, but the company is not facing financial difficulties. In its application, the company may cite any reason for wanting to close down, except for financial difficulties. 

What are the procedures and documents needed?

1. The director (or majority) of a company that intends to wind up the company voluntarily is required to lodge with SSM a written Declaration of Solvency as pursuant to Section 443 of CA 2016, which should state that the company will be able to fulfill its debts in full payment within 12 months. A Statement of Affairs that indicates the following particulars of latest dates should also be submitted as a supplementary document to the declaration of solvency: 
   • the assets of the company at expected realisable value 
   • the liabilities of the company, including the estimated expenses of winding up
2. A resolution to wind up the company is also to be passed and a liquidator is to be appointed at an Extraordinary General Meeting (EGM) of the company.

3. The following documents will need to be lodged with SSM: 
   • Notice of Resolution as pursuant to Section 439 (2)(a) of CA 2016 within seven days after the resolution has been passed
   • Notice of Appointment and Address of Liquidator as pursuant to Section 513 (1) of CA 2016 within 14 days after the appointment
4. The liquidator then shall proceed to inform his or her appointment to the company’s auditor, solicitor, insurers, bankers, employees, suppliers and customers. The liquidator also takes over the company’s assets and is named the authorised signatory. 
5. If the liquidator has a formed opinion that the company is unable to provide payments as stated in the Declaration of Solvency, it is likely that the following process will be treated as if it was a Creditors’ Voluntary Wind Up. The liquidator will then need to summon a meeting with the company’s creditors and lodge a notice with SSM within seven days from the day of the meeting to convert the wind up to Creditors’ Voluntary Wind Up. 
6. If the process of winding up exceeds one year, the liquidator shall hold a meeting with the members of the company to present an account of the proceedings and dealings related to the wind up of the company.
7. Once the affairs of the company have been wound up, the liquidator has to prepare an account that demonstrates how the wind up is conducted, including how the assets are disposed of, which is to be shown in a meeting with the members. The liquidator will then have to lodge a return of holding the meeting, together with the account attached, with SSM within seven days from the day the meeting was held. 
8. The company shall be dissolved within three months after the lodgement.

2. Creditors’ Voluntary Wind Up

What are the circumstances that qualify for a Creditors’ Voluntary Wind Up?
This mode of winding up typically occurs when the company is facing financial difficulties. The distinct difference between a Creditors’ Voluntary Wind Up and a Members’ Voluntary Wind Up is that directors of the company cannot file a declaration of solvency in the event of a Creditors’ Voluntary Wind Up.

What are the procedures and documents needed? 

1. The director (or majority) of the company is required to make a Statutory Declaration of Inability of Company to Continue Business and that Meetings of the Company and its Creditors have been summoned, as pursuant to Section 440 of CA 2016. The company is required to hold two meetings: EGM followed by a creditors’ meeting. These two meetings are to be held within one month from the date of the Statutory Declaration. 
2. At the EGM, the directors of the company need to pass a special resolution to wind up by way of creditors’ winding up because of the inability to continue business because of its liabilities. An interim liquidator is to be appointed during the meeting for the purpose of winding up the company. In this mode of wind up, the liquidator has to protect the interest of the creditors. 
3. As it is in Members’ Voluntary Winding Up, a Notice of Resolution as pursuant to Section 439 (2)(a) of CA 2016 has to be lodged with SSM within seven days after the resolution has been passed. The Notice of Resolution shall be published in any local newspaper within 10 days after the resolution has been passed. 
4. At the Creditors’ Meeting, a representative director of the company shall disclose the company affairs and circumstances leading to the proposed winding up. A list of creditors together with an estimated amount of claims must be laid before the meeting as well. A liquidator shall be selected by the creditors, and a Committee of Inspection of not more than 5 members is to be appointed as well, to supervise the act of the liquidator. 
5. A Notice of Appointment and Address of Liquidator as pursuant to Section 513 (1) of CA 2016 is to be lodged with SSM and Official Receiver (aka the Director General of Insolvency) within 14 days after the appointment. 
6. Once the affairs of the company have been wound up, the procedure would be the same as a Member’s Voluntary Wind Up, except that the meeting to be held should also include creditors. The liquidator has to prepare an account that demonstrates how the wind up is conducted, including how the assets are disposed of, which is to be shown in a meeting with the members. The liquidator will then have to lodge a return of holding the meeting, together with the account attached, with SSM within seven days from the day the meeting was held. 
7. The company shall be dissolved within three months after the lodgement. 

3. Involuntary Wind Up or Winding up by Court

Court Compulsory Winding Up involves the Court’s intervention as suggested in the title. This mode of winding up is typically more demanding and involves more formality.

What are the circumstances that qualify for a Creditors’ Voluntary Wind Up? As per Companies Act 2016, a company may be ordered by the Court to be wound up on petition, typically under the following circumstances by the following petitioners:

What are the procedures and documents needed? 

1. The wind up of the company commences upon the date of the winding up order. The petitioner will need to present to SSM, the Official Receiver as well as an interim liquidator (if the Official Receiver is not the acting liquidator) on details of the petition order within seven days of when the wind up order was made. The wind up order shall operate in favour of all creditors and contributories of the company. 
2. Upon hearing, the wind up of the company carries on if proposed liquidation is deemed suitable by the Court. 
3. If there are no liquidators appointed, the Official Receiver must summon separate meetings of creditors to determine whether to apply to Court for appointment of liquidator. 
4. The appointed liquidator shall file Notice of Appointment and Address of Liquidator as pursuant to Section 513 (1) of the CA 2016 within 14 days from his or her appointment. 
5. Directors of the company must submit a Statement of Affairs that includes particulars of the company such as assets, liabilities and list of creditor to the liquidator within 14 days from the appointment of the official liquidator. 
6. The liquidator must file a copy of the Statement of Affairs with SSM within seven days, and proceed to carry on the duties on winding up. 
7. A preliminary report shall then be submitted to the Court from the liquidator, which should include the estimated assets and liabilities, the causes of failure of the company if any and if any further investigation would be necessary. Once the practicality of the winding up is completed, the liquidator would settle a list of contributories of the company. 
8. The liquidator can then apply to the Court for his or her release and that the company be dissolved. There are further complex situations that could take place during a winding up by the Court which may involve many other stakeholders and may take a longer period of time.

Helping Hand 

The decision to end the journey of a company is not just difficult but also extremely important. It is advisable to speak to your company secretary as well as business advisors, if any, to help you come to your decision. Other aids like government loans may be applicable to your situation as well. Quadrant Biz Solutions provides company secretarial services and helps entrepreneurs to register new companies. Speak to us today!