How to Liquidate a Company in Malaysia

Updated on Thursday 24th November 2022

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Businessmen who want to liquidate their company in Malaysia can perform this action by respecting a set of rules and regulations, prescribed by the commercial legislation applicable here. The process of liquidation is necessary when the company can no longer pay its debts; an investor can proceed to voluntary liquidation, which signifies that the Court did not have to intervene in order to close down the company. Alternatively, the liquidation can be ordered by Court or it can be a creditor’s voluntary liquidation instead of the member’s voluntary liquidation. The process itself will be carried out by an authorized liquidator, but it is advisable to receive the legal assistance of our law office in Malaysia, as the attorneys can offer specific details on the steps of the liquidation process.

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; our law firm can provide you with an extensive presentation on the entire procedure.

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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.

Creditor’s winding up takes place as per Section 433 of the Companies Act, and the creditors are required to submit a declaration for this purpose.

Legal assistance from one of our attorneys in Malaysia is recommended when winding up companies. having professional legal aid during the 12-month period, or as needed otherwise, is essential for ensuring that the steps are properly followed and that the company manages its duties toward its creditors accordingly. Interested individuals, either company directors or creditors who are considering the initiation of the winding-up process, can reach out to our lawyers for more details.

A special distinction is to be made between the processes described in the Companies Act 1965 and the Companies Act 2016 (that commenced on 31.1.2017). Our lawyers can provide complete details on how the winding up of a company is retained in the new Act.

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

The mandatory winding up of a company is also known as winding up by Court. This process starts with drawing up and presenting a petition in Court. The parties that may present the petition are the creditors, the liquidator or the Registrar of Companies as well as the Official Receiver (under Section 217 of the 1965 Companies Act or Section 464 of the 2016 Companies Act).

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, any 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.

The effects of company winding up in Malaysia

After a company is wound up, the following will take place:

the business activities will cease altogether;
the employment contracts will be terminated;
the company asset’s and its shares will no longer be able to be transferred or disposed of;
all of the powers of the company’s directors cease upon the winding up.

The role of the liquidator during the process is to take over the administration of the company during the process, essentially filling in some of the main attributes of the director. We remind interested individuals that a private liquidator may be appointed during the winding up of the company (he must be licensed for this purpose). Alternatively, and the Official Receiver may be appointed. One of our lawyers in Malaysia can provide more details.

Company liquidation statistics in Malaysia

The following statistics apply in case of liquidated companies in the country:

42,406: the total number of companies that have been wound up, both voluntary and compulsory, during the years 2014-2019.
25,950: between 2009 and December 2019 this was the number of compulsory companies for which the winding-up was administered by the Official Receiver.
1,067: the number of compulsory winding-up cases that have been administered by an appointed liquidator between 2009 and 2019.
15,389: the total number of voluntary winding-up cases between 2009 and 2019.
40,387: the total number of voluntary and compulsory winding-up cases administered between 2014 and December 2018.

The data was provided by the Malaysian Department of Insolvency.

If you need further information on the liquidation process of a Malaysian company, please contact our lawyers in Malaysia for legal representation on this matter.