How to Liquidate a Company in Malaysia
Reasons to liquidate a business in Malaysia
The local legislation provides a number of reasons for which a Malaysian company can be shut down. Some of the most important reasons are the following:
- the company did not have any business operations in Malaysia after its incorporation or has ceased all business activities in the country;
- the management considers there are no reasons to start any business activities or the management no longer shares mutual business goals;
- the company does not have funds to sustain its activity.
Our lawyers invite you to watch the following video on the company liquidation process in Malaysia:
Corporate Liquidation Law in Malaysia
The Companies Commission of Malaysia is the main regulatory body for the liquidation process; the institution applies the legislation available under the Companies Act 1965 which states that a Registrar can take out a company from its registration documents if the company is not carrying any operations. The Registrar can appeal to this measure when the documents registered by the company reveal the financial situation of the company; at the same time, the Registrar can also shut down a company if the directors/shareholders have submitted an application in this sense.
In order to commence the liquidation procedure, an investor should provide specific information, as prescribed by the Guidelines establish for the insolvency of a Malaysian company, under the provisions of the Companies Act.
Voluntary company liquidation in Malaysia
Investors who are interested in voluntary company liquidation in Malaysia should know that this process can be divided into two different types: the one initiated by the company members and the one initiated by the company’s creditors.
When the company’s members initiate the procedure, the directors are required to convene and determine that the company will have the necessary means to pay all of its due debts within a 12-month time limit after the winding-up process is commenced. This process is to take place as per the Companies Act, Section 257. Legal assistance from one of our attorneys in Malaysia is recommended when winding up companies.
The steps listed below are the main ones in case of voluntary company liquidation in Malaysia:
Special Resolution - a special Resolution to wind up the company must be passed during a General Meeting of the company shareholders.
Filing the resolution - this special shareholder’s decision must be filed with the Registrar of Companies within seven days after it was issued.
Declaration of Solvency - must be prepared by the company directors within five weeks after the special resolution was filed.
The actual winding-up process - issuing notifications informing that the company is in liquidation and appointing a liquidator.
These are just general descriptions of the steps that need to take place once the company owners have decided to cease the business activities. The procedure may differ according to the type of company and, its debts and obligations at the time of the liquidation and a number of other factors. The Malaysian Department of Insolvency is responsible for administering bankruptcy cases. Its activities include, among others, determining the debt and distributing the assets among the creditors. One of our lawyers in Malaysia can provide investors with more details about this government agency.
Compulsory company liquidation in Malaysia
In most cases, compulsory winding up takes place when the company is no longer able to pay its debts and a voluntary one, by its directors, has not taken place. In addition to the creditors who can file a petition for this to take place, the Minister of Domestic Trade and Consumer Affairs, the Minister of Finance, as well as Bank Negara Malaysia, can also file a petition for the court winding up.
When this process is commenced, the parties filing will need to bring forward proof of debt. This means that relevant documents must be prepared, and that can be issued to identify the due debt and/or the relationship between the creditor or the party filing the petition for winding up and the executed company. The documents can include invoices, agreements, and others. Our attorneys in Malaysia can provide complete details on the required documentation and the entire process of company liquidation in Malaysia.
Post voluntary winding up meeting in Malaysia
At this stage of winding up a company in Malaysia, the appointed liquidator must make a full report about the process itself, how it took place, and how the debts were extinguished. Reporting can be done in front of company shareholders during a meeting. Moreover, the company's creditors can also participate in this meeting, and it is even mandatory. The liquidator will present a detailed account report, with explanations regarding the financial status of the company to be closed. Here are the next steps:
The liquidator will notify the Malaysian Registrar of Companies and submit various documents, including the above-mentioned report. The official closure of the company takes place after 3 months from the date of notification of this institution.
We advise you to talk to our Malaysian lawyers and find out more about closing a company in Malaysia. The process can be quite complex, especially if you do not know the legislation in detail and that is why we recommend legal assistance for winding up a company in Malaysia.
A short conclusion about closing a company in Malaysia
Winding up a company in Malaysia requires attention and specialized legal advice. Thus, you can familiarize yourself with the legal aspects and financial considerations that must be taken into account for company liquidation in Malaysia.
Each case has its particularities, and according to the Companies Act of Malaysia 2016, the appointed liquidator has many responsibilities and is in open collaboration and communication with the owners of the company in question. Moreover, it is important that all debts are extinguished, so that the company can then be closed, following the legal procedures.
Therefore, considering the complexities of winding up a company in Malaysia, we invite you to contact our specialists for more information. We make sure that our clients have a well-organized and submissive winding up process in Malaysia.
Company liquidation statistics in Malaysia
- Data for 2022 showed that over 2,600 companies were closed in Malaysia.
- Of the 2,600 closed companies, around 227 belonged to the Malaysian government.
- Around 99% of the closed companies in Malaysia were due to the impossibility of paying debts.
In addition to the services offered for winding up a company in Malaysia, our local specialists can also help you with other information or guidance. For example, we can assist you with immigration to Malaysia. Those interested can opt for our services for getting residency in Malaysia. Moreover, those already established can apply for citizenship in Malaysia. In the case of those who have companies, our corporate lawyer in Malaysia can offer legal consultancy in terms of business and more If you need further information on the liquidation process of a Malaysian company, please contact our law firm in Malaysia for legal representation on this matter.