Unless otherwise indicated, the company stated in this article refers to the private company incorporated in Malaysia in accordance with the Malaysian Companies Act 2016 (CA 2016).

A company may undergo dissolution at the hands of the Registrar of the Companies Commission of Malaysia ("CCM") or its various stakeholders, which may include directors, shareholders, creditors, or liquidators. This dissolution can occur for a variety of prevalent reasons, such as lack of business activities, prolonged dormancy of the company, absence of assets or liabilities, lack of profitability, or the presence of outstanding debts owed to creditors.

In Malaysia, companies can be closed through two main methods, namely striking off or winding up. Both approaches result in the company being removed from the registrar, but their execution and suitability may vary. Therefore, comprehending these options and their implications is crucial for company closure in Malaysia.

1. Striking off
   
   The company can be eligible for a strike off if it is not carrying on business or no longer operating. The Registrar may also initiate the striking off if the company has violated CA 2016, is used for illegal purposes, or has failed to lodge an annual return for three (3) or more consecutive years.
   
   Striking off a company is a quick, cost-effective, and straightforward method for dissolving a company. It usually takes a minimum of six (6) months to complete, with lower cost compared to winding up. It is only available for solvent companies, and it requires an application from either a director or shareholder of the company.
   
   Shareholders are required to approve a resolution for the purpose of striking off the company’s name from the registrar. This approval is sought based on the basis that the company:
   (a) is no longer carrying out any operational activities;
   (b) has no assets, liabilities, or outstanding charges listed in the Register of Charges;
   (c) has no pending penalties or compounds incurred under the CA 2016;
   (d) has no outstanding tax obligations or other liabilities with any government authorities;
   (e) the company’s details in the registrar’s records must be up-to-date;
   (f) is not be engaged in any legal proceeding;
   (g) has not made any return of capital to the shareholders; and
   (h) is not a holding company or a guarantor corporation.
   
   The application must be filed with the CCM together with a prescribed fee. Once the application has been reviewed by the Registrar and if he finds the documents in order, it will serve on the company a notice of intention to strike off the company. A notification to the public will be published on CCM’s website if an answer showing cause to the contrary is not received within 30 days from the date of the notice of intention from CCM. Assuming no objection to the strike off application during the 30 days’ publication period, CCM may strike the name of the company off the register and will publish the name of the company in the Government Gazette. Upon publication in the Government Gazette, the company shall be dissolved.
   
   This closing down method can have potential pitfalls, such as the CCM having final say in the strike off decision and the court having the power to reinstate the name of a struck off company if an application is made within seven (7) years by any person aggrieved by the striking off. Directors are responsible for retaining all registers, books, statutory and accounting records for seven (7) years after the company is struck off. However, its liability for directors, officers, or shareholders, if any, remains unaffected even if the company is dissolved after being struck off the register. In other words, any past misconduct or legal breaches against them can still be enforced as if the company had not been dissolved.
   
   
2. Voluntary Winding Up
   
   Winding up a company is a complex process that occurs when a company ceases trading, incurs debt or statutory defaults. It involves the termination of business operations,  collection of debts, disposing of company assets, paying off creditors, and distribution of any surplus to the company’s shareholders. The process requires a longer duration, often exceeding a year or more, and the process incurs more expenses as compared to striking off. The liquidator is responsible for overseeing the winding up of the company and ultimately leading to its dissolution.
   
   In a voluntary winding up, the decision to wind up is made internally, either by its members or creditors. The CA 2016 outlines two (2) distinct types of voluntary winding up, namely Members' Voluntary Winding Up and Creditors' Voluntary Winding Up. The selection of the appropriate type is contingent upon the financial status of the company, whether it is solvent or insolvent. Members' Voluntary Winding Up (“MVWU”) is for solvent companies and Creditors' Winding Up (“CVWU”) is for insolvent companies.
   
   

   (1)

   MVWU A company can choose the MVWU method when it is no longer operating, is not facing financial difficulties, and can cover its liabilities. The directors can issue a written declaration to CCM stating they have conducted an inquiry into the company's affairs and believe it will be able to settle its debts for the next 12 months following the commencement of the winding up. After which, a shareholder meeting will be held to pass a resolution and appoint a liquidator, and MVWU will commence on the passing of the resolution. The liquidator plays a vital role in the process of winding up by assuming control of the company’s operations and administering the winding up process. If a company has commenced MVWU and subsequently become insolvent, the winding up may be treated as a CVWU. The liquidator is required to schedule a meeting with the creditors of the company and submit a notification to the CCM within 7 days in order to convert the winding up process to a CVWU.

   (2)

   CVWU CVWU is used when a company is insolvent due to huge liabilities incurred and is no longer viable. Directors have to make a statutory declaration that the company cannot continue operations due to its liabilities and a meeting of the company and its creditors have been called for a date within thirty (30) days of the date of this declaration. Upon making such declaration, the directors must appoint an interim liquidator. The appointment of the interim liquidator will continue for thirty (30) days or such longer period as the Official Receiver may allow or until the appointment of a liquidator, whichever occurs first. The company must hold a creditors' meeting on the same day or the day following the general meeting in which the resolution for voluntary winding up is propose at the time and place most convenient to the majority of the creditors. The notices of creditors’ meeting must be sent to creditors at least seven (7) clear days before the meeting together with a statement showing the names of all creditors and the amounts of their claims. At the meeting of the creditors, a statement showing the affairs of the company must be tabled. Another function of the creditors’ meeting is to confirm the appointment of liquidator nominated by members at the general meeting or to nominate a liquidator of their own choice. If the two (2) meetings nominated different liquidators, the creditors’ nomination prevails. If no nomination is made by the creditors, the company's nominee will be appointed.

   
   
3. Compulsory Winding Up
   
   Compulsory winding up is initiated by an application to the court by a person listed in Section 464(1) of the CA 2016, including but not limited to the company, creditors, contributory, liquidator or the Registrar of Companies. The applicant has to establish a ground for winding up, such as:
   
   (1) Company’s own resolution
   (2) Default in lodgement of statutory report
   (3) Failure to commence business within one (1) year
   (4) Company has no members
   (5) Inability to pay debts
   (6) Directors acting in own interests
   (7) Specific event envisaged in the constitution has occurred requiring the company to be dissolved
   (8) The court is of the opinion that it is just and equitable that the company be wound up
   
   At the hearing of the application, the court will determine whether to issue a winding-up order. The winding-up process is considered to have commenced when the application for winding up is filed.
   
   
4. Conclusion
   
   The CA 2016 requires companies to strictly follow legal procedures during the dissolution process, with different methods for various business scenarios like striking off for dormant companies and winding up for complex cases. Hence, companies must thoroughly assess their situation in terms of legal, financial, strategic, and obligation factors to ensure the interests of all parties involved are safeguarded.
   

Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.