Closing a company is not as easy as you think it is: It actually requires more time and effort to de-register a company than to register one. We’re talking about Sendirian Berhad (Sdn Bhd) entities here. You should probably ignore the rest. Your company could be dormant due to insolvency (lack of financial resources to pay debts or provide a sustainable business) or maybe your partners couldn’t agree and decide to go their own ways. Either way, there’s still one more entity to face: The Law.
Your visit to your favourite legal consultant could’ve already paved a string of information for you – But it’s often never really enough. Well, if you’re reading this, you’re definitely at the right place already.
The big question follows: Should I strike off or wind up my company? Wait – How are they different anyway? In terms of company legal laws in Malaysia, they are quite different.
If you’ve dropped by any consulting firms that offer striking off or company wind up services, they’ll probably advise you based on your situation. And usually, they’ll give you choices to make before they actually offer you a consulting service. Let KLM give you some information so that you make an informed decision.
Understanding ‘dead’ businesses
No, they aren’t literally dead. Although dormant companies (companies with no more operations and business transactions) have already stopped its business processes, it doesn’t mean that SSM (Suruhanjaya Syarikat Malaysia or Companies Commission of Malaysia) will automatically remove this company from its ROC (Registrar of Companies) list.
It’s still registered, and holds a license to conduct business in whatever legal form it is capable of. Also, keep in mind that for dormant companies:
* It’s directors still hold a legal responsibility to conduct yearly ‘reports’, in which includes filing annual returns, auditing, keep proper accounts and transactions, taxes, etc. All the standard duties every private limited company has to perform annually.
So even if you forgot all about your dormant company, keep in mind that SSM will not.
Striking off a company
In many ways, striking off a company is a much faster way as compared to winding up one. When you voluntarily ask SSM to strike your company off under Sectiion 308 of the Companies Act 1965 titled “Power of Registrar to strike defunct company off register, this enables the Registrar to strike off your company, or in another term, dissolve the company that you ask for.
Here are some of the requirements to strike off a company:
1. Shareholders’/Directors’/Stakeholders’ unanimous resolution.
2. The company has no outstanding balance/amount owed by penalties or compounds to SSM or any government departments.
3. Does not own any unsatisfied charges.
4. No outstanding tax balances.
5. Not a holding company or a subsidiary of another holdings company.
6. Not a Guarantor Corporation.
7. No assets or liabilities during strike off.
8. Not made any return of capital to its shareholders/directors/stakeholders.
9. Not involved in any legal issues pertaining the company inside and outside of Malaysia.
10. Information is tip-top and up-to-date.
Of course, after thinking about all of these, striking off a company may not look like a viable choice. Imagine if your business operations were once big: You’ll have to take a lot of time to settle small little things like these yourself. And sometimes when you face insolvency, there could be a problem striking off your company. Because requirements are often not met and companies cannot be struck off.
Good thing about striking off a company is that it’s much faster, requires less hassle and it’s a lot cheaper. That is what you get IF you’ve solved all the main problems in the company yourself. If you’re looking to liquidate your company with tonnes of problems such as debts and legal issues, it’s best to leave it to a liquidator.
The cons in striking off a company is that there are vast amounts of perfection needed just to apply for a strike off. Striking off works best for small companies. Any bigger would altogether be a different story.
Here’s a neat trick to striking off your company: Should you change your mind or maybe decided to run your business again, SSM allows you to reclaim and restore your struck off company 15 years within the date of striking off. (Companies Act 1965 Section 308 (5)
Winding up a company
There are two ways to wind up a company: By court or voluntarily. It seems pretty understandable at this point.
When Form 65(A) is submitted to the Registrar, a provisional liquidator will already be appointed beforehand. Then feedback is required by the Registrar to when is this ‘winding up resolution’ is to be approved.
What does a liquidator do: To wind up a company by distributing assets to the creditors (and other parties involved); and anything left will be given to the company shareholders. When a liquidator steps in and take control, all of the company’s directors and shareholders power will cease and it’s the liquidator’s duty to ensure the company that’s handled by him or her is properly dissolved.
A court order can also be served, and a company is being directed to be dissolved due to:
1. Insolvency. Company is unable to pay huge debts or clear a satisfactory amount of debt owed to a financial institution, supplier or any other related entities.
2. One or more of its directors has acted in his/her personal interest or being unjust to other directors or acted against the interest of the company and has being served a court order.
3. The court is convinced that it is equitable that this company should be dissolved.
4. The number of directors or shareholders is reduced to one (a private limited company in Malaysia requires two or more shareholders).
5. No business operations started since the day of registration (period of one year) or suspends business operations for one year.
6. Where the MoA (Memorandum and Articles of Association) of the company sets an expiry date of the business.
7. The company has performed an unlawful business that threatens national security or is against the law of Malaysia.
To find out more about company wind up, tell us your story and let us help you out.