If you are intending to close your Malaysian Sdn. Bhd. Company, there are generally two ways to approach it as per the Malaysian Companies Act 2016. Both approaches for Closing Down A Malaysia Company have their pros and cons and differ in terms of the timelines and costs involved.
TWO WAYS TO CLOSE DOWN A MALAYSIA COMPANY
THE STRIKE-OFF METHOD
To qualify for the strike-off method as per section 551 of the Malaysian Companies act. A private limited “Sdn. Bhd.” the company has to meet the following requirements. The company directors have to obtain a written resolution from all of the shareholders to approve the initiation of the striking-off application.
This is usually fairly easy for an Sdn. Bhd. company is owned by an individual shareholder or a small group of shareholders. In the event, there is a large group of shareholders, the majority of the shareholders must provide written consent by way of resolutions before proceeding.
According to Section 308 of the Companies Act, a company may be deregistered by submitting an application to the Companies Commission to have its name removed from the Register.
If the application is approved and the company meets all conditions, the Registrar will subsequently remove the name from the Register.
The company must meet the following requirements in order to apply under Section 308:
- It has not started doing business or stopped doing business
- It has no intention of doing business in the future
- It has no property or assets and has no liabilities to creditors
- It is not a guarantor corporation and has not been placed under receivership.
Requirements Of Strike Off Method
It is also mandatory that the Malaysian company meets the following requirements in addition to those mentioned above.
The Sdn Bhd company has not commenced business since incorporation and is NOT carrying on business or has ceased business operation for at least 6 months.
The Company and the management have no intention to commence or carry-on business operations in the future.
The Company has no assets nor liabilities as of the strike-off application date. Hence the company has to settle all its outstanding creditors and collect all its outstanding receivables and prepare a final set of management accounts or audited accounts which has no asset or liabilities.
The company needs to ensure it also has no outstanding charges at the date of strike-off application and thereof. (i.e there is no charge over the company or any of its assets)
The company also must ensure that there are no outstanding penalties or similar types of compounds. As per the Companies Act 1965, the company has to also ensure there is no legal proceeding against the company in or outside of Malaysia. Nevertheless, a strike-off application with an ongoing legal case will be rejected by the SSM.
Aside from the key requirements above, the company has to also take note that the company is not a Guarantor corporation, and it’s not a holding company or a subsidiary of another company and the Malaysia Company has also not made any return of capital to the shareholders.
TIMELINES AND OTHER OF STRIKE OFF METHODS
Assuming all the conditions above are met, and the company operations have ceased their operations for some time with no assets and liabilities. The entire strike-off process would usually take 6 to 12 months if all the documents submitted during the strike-off application to SSM are complete and accurate.
One of the main drawbacks of the strike-off method is that a court may/can reinstate a company that has been struck off. Any individual or shareholders who are unhappy or satisfied with the decision can apply to the court to request reinstatement of the company’s name to the register. As per Malaysian law, a company’s name is incorporated into the Register within seven years from the date it was legally stuck off.
THE WINDING-UP METHOD
The winding-up method involves a few types of approaches. Depending on the type of approach it could be more complex and time-consuming and more costly than the striking off approach. Winding up methods are mainly as below.
As and when the company cannot settle its debts. The law will permit the creditors to sue the company in Court and initiate a compulsory winding up. As per the Malaysian law a creditor who is owed more than RM 500 can request the company to make payment within 21 days. If the company fails to fulfil the debts by this period a creditor may then sue the company and initiate compulsory winding up. However, because of the excessive legal cost involved. Usually a creditor/group of creditors will only take a company to court if there are million dollars involved.
This process will usually take at least 10 months to 18 months. A Voluntary winding up will involve at least a few shareholder’s meetings and fillings with Suruhanjaya Syarikat Malaysia (SSM). If a company is solvent and the shareholders wish to opt for voluntary winding up, the members will be able to decide and distribute the assets to the owners. However, if the company is insolvent and the directors and shareholders agree to Voluntary wind up then the ultimate power and decision make will be the creditors. It is more commonly known as creditors winding up and creditors liquidation of the company.
For a voluntary winding up, there are two possible options available according to the law. These involve the following:
Section 257: Voluntary winding up or liquidation by the Members
When the directors or the members of a company declare that the firm can pay off all existing debts or liabilities in full within 12 months of initiating the winding-up process, the company has started the winding up process. Companies that are still financially stable must follow this procedure.
The company must call a meeting of the company’s members once the declaration of solvency has been made in order to secure shareholder permission for voluntary liquidation and to name a liquidator who will oversee this process.
After taking these actions, the business will open a bank account that is used only for depositing the revenues from the sale of liquidated assets. The liquidator is also responsible for informing any relevant stakeholders that the firm is being wound up as soon as this procedure gets going. These individuals could be auditors, tax office agents, additional board members, customs agents, members of the Malaysian Social Security Organization, the Malaysian Royal Customs, and other relevant government organizations.
Until the winding-up process is complete, the liquidator must also regularly submit “Liquidator’s accounts” statements to the Official Receiver and the Malaysian Companies Commission.
Section 433: Voluntary winding up or liquidation by the creditors
Section 433 involves creditors since it applies to insolvent businesses. In this situation, a liquidator is also appointed, but by the creditors, and as the firm is liquidated, any money obtained from the sale of assets is distributed to the creditors until all unpaid debts have been paid.
Requirements for Winding-up
A business must meet the following requirements in order to wind up:
- Solve/ insolvent and active company.
- A special resolution must be approved, or the court must issue a verdict.
- Before the winding-up process begins, the most recent obligatory submissions (such as the annual return and the audited financial statements) are completed with SSM.
- appointment of a liquidator by the court, the shareholders, the creditors, or both.
- Advertise winding up status in local newspaper (2 times, each on both Malay & English newspapers)
- After paying creditors, any leftover money is distributed to the company’s shareholders.
This is the process whereby the company submits an application to the court and the appointment of a liquidator to liquidate (dissolve) the company. The shareholders/members will not have any rights or say during the process and the appointed liquidator will be fully responsible for all the decisions. The cost to wind up a company will at least cost RM15,000 and above.
CLOSING A MALAYSIAN BRANCH OFFICE OF A FOREIGN CORPORATION
This option is only available for foreign companies having a branch office in Malaysia.
By submitting Form 578 (1) – Notice by Foreign Company of Cessation of Business to the CCM within seven (7) days of the branch’s closure, business owners can close a foreign company’s branch.
CCM will remove the branch office name from the registry after twelve (12) months from the submission of the paperwork.
What happens after the winding up order is made in Malaysia?
The winding up order has the effect of ending the company’s operations and appointing a liquidator to manage all of the winding up company’s activities.
How long does it take to dissolve a company in Malaysia?
Deregistration and liquidation are the two primary methods in Malaysia for dissolving a solvent business. A corporation that has no assets and no liabilities can often be deregistered or dissolved within 6 to 9 months.
What is the role of liquidator in winding up Malaysia?
In Malaysia, a liquidator is a person who is hired to handle the business affairs of a company in a winding-up situation. They are brought in to make sure that, prior to the company’s winding-up, all of its assets are sold to as nearly fully satisfy its debts as possible.
How much does it cost to wind a company in Malaysia?
Depending on how complicated the company status is, it might cost between RM2,500 and RM3,500 to strike off a firm. A company’s dissolution will cost from RM10,000 and more.