Winding up by the court
A winding up by order of the court commences at the date of presentation of the winding up petition. In a winding up by the court, a company may be wound up on petition of (Section 217):
1. the company itself
2. any creditor including a contingent or prospective creditor of the company
3. a contributory or any person who is the personal representative of a deceased contributory or the trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory
4. the liquidator
5. the Minister pursuant to Section 205 i.e., following the report of an inspector appointed under the Special Investigations provisions
6. the Central Bank (in the case of banks and finance companies) (Section 217)
7. the Registrar of Companies, on the grounds that:
a. the company is being used for unlawful purposes or any purpose prejudicial to or incompatible with peace, welfare, security, public order, good order or morality or
b. the company is being used for any purpose prejudicial to national security or public interest (Section 217(1)).
Grounds for compulsory winding up
The court may order a company to be wound up if (the use in Section 218 of “may” rather than “shall” gives the court a discretion whether to grant an order for the company to be wound up):
1. The company has by special resolution resolved that it be wound up by the court.
2. Default is made by the company in lodging the statutory report or in holding the statutory meeting.
3. The company does not commence business within a year from its incorporation or suspends its business for a whole year.
4. The number of members is reduced to (other than a company in which the whole of its issued shares is held by a holding company) below two.
5. The company is unable to pay its debts.
6. The directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever which appears to be unfair or unjust to other members.
7. An inspector appointed under Pt IX has reported that he/she is of the opinion:
a. that the company cannot pay its debts and should be wound up, or
b. that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up.
8. When the period, if any, fixed for the duration of the company by the memorandum or articles expires or the event, if any, occurs on the occurrence of which the memorandum or articles provide that the company is to be dissolved.
9. the court is of the opinion that it is just and equitable that the company be wound up (here, the mutual trust and underlying confidence which formed the basis of the association must have ceased).
10. The company has held a licence under the Banking Act 1973 or the Islamic Banking Act 1983 and that licence has been revoked or has expired and has not been renewed
11. The company has carried on with the banking business in contravention of Sections 3, 5 or 6 of the Banking Act 1973.
Inability to pay debts (Section 218(g) CA)
A company will be taken to be unable to pay its debts if:
1. A creditor whom the company is indebted in a sum exceeding RM500 serves on the company a statutory notice of demand for repayment of the sum and the company has neglected to pay the sum, or secure or compound it to the reasonable satisfaction of the creditor, within three weeks of the said demand, or
2. An execution or other process issued on a judgment, decree or order of court in favour of the creditor is returned unsatisfied, or
3. The court is satisfied, taking into account the contingent and prospective liabilities of the company, that the company is unable to pay its debts.
Statutory notice of demand
The most common ways of showing that a company is unable to pay its debts referring to Section 218 are:
1. The debt must be RM500 or more.
2. The debt must be due and not a contingent liability. However, there is no need for a judgment to precede this demand.
3. The debt must be due to the creditor making the demand.
4. The demand must be in writing.
5. It must be signed by the creditor or his/her (its) lawfully authorised agent.
6. It must specify the sum due.
7. It must be served by being left at the registered office of the company. Postal service will not do. Being delivered to a place other than the registered office (e.g., the office of the company’s accountant) is not sufficient.
Although the notice of demand in writing need not be in any special form, it must strictly comply with the requirements of Section 218(2)(a) of the Companies Act 1965. The whole purpose of the demand is to warn the debtor of an impending petition.
The presumption of inability to pay its debts only arises if the requirements of the section relating to the demand have been complied with and the company has for three weeks after service of the demand neglected to pay the sum or to secure or
compound for it to the reasonable satisfaction of the creditor.
The presumption of insolvency arises when the requirements of Section 218(2)(a) of the Act have been satisfied and it is for the company to prove that it is able to pay its debts. If the company does not have assets available to meet its current liabilities,
it is commercially insolvent and may be wound up.
Form of notice
The form of notice of demand might take the following form when the creditor is a person:
To (name of debtor)
TAKE NOTICE that I, Mohamed Ali trading as “Kedai Sukaramai” being person
Dated this ____________ day of ____________ 2000
Signed by ____________
When the creditor is a company the form is slightly different, i.e.:
To (name of debtor company e.g., Mahjong Berhad)
TAKE NOTICE that Siew Mai Sdn Bhd being a company to which the said
Dated this ____________ day of ____________ 2000