Description
This publication provides the reader with the latest position on applications to wind up a company and the competing interests of the parties that may be affected by the said winding- up proceedings. This will encompass the position of the creditors, the Debtor Company, directors, shareholders, contributories and liquidators.
Sections 431 to Section 560 the Companies Act 2016 (Act 777) provide the ambit of the winding up provisions. All decisions on the Companies (Winding-up) Rules 1972 are also provided.
The role of the courts in the winding up process is well stated. The book examines the role of a winding up judge who remains’ the custodian of the interests of every class affected by the liquidation’.
In essence, this practical book examines the law and procedure and the authorities relating to the subject of winding up.
It provides the reader with the legislative changes brought about by the Companies Act 2016 (Act 777) while providing the reader with the application of general principles of winding up and the application of such principles within the context of decided authorities from all over the Commonwealth.
It is through decided cases that one interprets the intention of the legislature, and this publication provides all relevant cases. Extensive research has been embarked upon to present all the relevant principles garnered from decided cases from Malaysia, United Kingdom, Australia, New Zealand, Canada, India and Singapore. Extracts from key case law are provided where necessary.
An added feature of this publication is that it provides ease of reference in relation to the Comparative provisions of the Companies Act 1965 (Act 125) and the Companies Act 2016 (Act 777). The comparative sections appear next to each other and are added tools to further comprehend the changes brought about by the new legislation.
1. CHAPTER ONE- INTRODUCTION
– Companies Act 2016 (Act 777) – Interpretation
– Purpose and Principle of winding up
– Representation
– Derivative Action
– ‘Winding up’ and ‘Liquidation’
– Role of Judge in Winding Up
– The Court May Order the Winding up’ – Winding up Court –
– Discretion
– Setting Aside Order of Court
– Form of Notice to Registrar and Official Receiver
– Companies (Winding-up) Rules 1972
– Irregularities and Defects
– Procedural Objections
– Formal Defect not to Invalidate Proceedings
– Enlargement or Abridgment of Time
– Taking of Evidence for Certain Matters Relating to Winding Up
– Power to Issue Winding Up Order
– Voluntary and Compulsory Winding Up
– Registered and Unregistered Companies
– Unregistered Companies
– Costs of Winding up
2. CHAPTER TWO – GROUNDS FOR WINDING UP
– Default in Lodging Statutory Declaration
– Failure to Commence Business
– Absence of Member
– Unable to pay its debts
– ‘Prescription of Amount of Indebtedness of Company’
– Debt or Presumption
– Rebuttable Presumption
– Inability to Pay Debts – Commercial Insolvency – Meaning
– Deemed Inability to Pay Debts
– Modes of Proving Inability to Pay Debts
– Assets and Liability Tests
– ‘Insolvent’- Meaning of
– ‘Contingent and Prospective Liabilities’
– Presumption of Insolvency
– Presumption of Inability to Pay Debt
– Inability to Pay Debts – Positive & Direct Evidence v Statutory Presumption
– Disputed Debt
– Judgment in Default
– Judgment in Default – Arrears in Interest
– Costs of Winding Up
STATUTORY NOTICE
– Statutory Debt
– Form of Demand – Statutory Notice of Demand
– Statutory Notice – Registered Address
– Prescribed Form of Statutory Notice
– Statutory Notice – Validity of Notice
– Where the Directors have acted in the Affairs of the Company in the Directors’ Own Interests rather than in the Interests of the Members as a Whole, or acted in any other manner which appears to be unfair or unjust to members
– Fixed Duration of Company
JUST AND EQUITABLE GROUNDS
– ‘Just and Equitable’ – Meaning of
– Lack of Confidence in the Conduct and Management of the Company’s Affairs
– Loss of Substratum – Alleged Failure of Corporate Substratum
– Substratum – Lapse of Company’s Main Object
– Principal Objective of Company
– Main Object Unachievable
– Company’s Only Business is Ultra Vires the Company
– Relationship of the parties in the company has broken down irretrievably
– Breakdown of Mutual Trust
– Where the winding-up of the company would open the door to investigate the misconduct of the directors or promoters of the company
– Deadlock in the Management
– Persistent Breaches of the Company’s Articles
– Delay in Initiating Proceedings
– Shareholders Right to Winding Up
– Unlawful Purpose etc
– Declaration by Minister
3. CHAPTER THREE – VOLUNTARY WINDING UP
Introduction
– Commencement of Voluntary Winding Up
– Advertisement of the Resolution to Wind Up
– Application for Leave to Commence Voluntary Winding Up
– Stay
– The Declaration
– Directors’ Statutory Declaration
– The Resolution
– Effect of Commencement of a Voluntary Winding Up
MEMBERS VOLUNTARY WINDING UP
– Meeting of the Company’s Members
– Effect of Voluntary Winding Up
– Appointment of Liquidator
– Removal of a Liquidator
– Impact on Legal Proceedings
– Conversion from Members Voluntary Winding Up to a Creditors’ Voluntary Winding Up
CREDITORS VOLUNTARY WINDING UP
– Meeting of Creditors
– Consequences of Commencement of Creditors’ Voluntary Winding Up
– Liquidators – Creditors Voluntary Winding Up
– Interim liquidator
– Application to Appoint Interim Liquidator
– Account of Voluntary Winding Up
– Committee of Inspection
– Creditors’ Voluntary Winding Up – Impact on Legal Proceedings
– Competing Winding Up Proceedings
– Interference – Contempt of Court
4. CHAPTER FOUR -COMPULSORY WINDING UP
Introduction
– Creditor’s Petition – Object of Creditors Petition
– Collateral Purpose – Abuse of the Process of Court
– Locus of Petitioner 103
– Section 464 Petition of Winding Up
– Rights of the Creditor
– Discretion of Court
– Application for Winding Up by a ‘Creditor’
– Valid Debt
– Appeal against Judgment – Winding Up Petition does not render the judgment debt a disputed debt
– Bona Fide Dispute
– Contingent or Prospective Creditor
– Contributory
– Liquidator
– Minister
– Substitution of any person as Petitioner
– The Petition
– Winding Up Petition
– Res Judicata
– Notice of Motion
– Summons
– Application to Disqualify Solicitor
– Execution of Arbitrator’s Award by way of Winding Up Petition
– Service of Documents
– Cross Claim – Disputed Debt
– Settlement of Judgment Sum or Debt
– Employees
5. CHAPTER FIVE – WINDING UP PROCEEDINGS
– Introduction
– Jurisdiction – Cumulative Powers of Court
– Powers of Registrar
– Power to Issue a Winding Up Order
– Application of the Rules of Court 2012
– Presentation of Petition
– Application to Intervene
– Restraining Order pursuant to Section 470 of the Companies Act 2016
– Disputed Debt
– Discontinuance of a Petition
– Affidavit Evidence
– Date of Presentation of Petition
– Consequences of Presentation of Petition to Wind Up Company
– Avoidance of Disposition, Transfer of Shares and Attachment
– Transfer of Shares 146
– Attachment Proceedings
– Doctrine of Lis Pendens
– Settlement of Judgment Sum by Debtor Company
– Defective Winding Up Petition
– Affidavit Verifying Petition
– Service of Affidavit
– Service of Petition
– Advertisement of Petition
– Advertisement of Winding up Petition – Absolute Privilege
– ‘Seven Clear Days or such Longer Time as the Court may direct before the Hearing’
– Purpose of Rule 24 of the Companies Winding Up Rules 1978
– Delay
– Dispensation with the Advertisement
– Settlement of Debt Prior to Advertisement of Winding Up Petition – Whether Advertisement is Defamatory
– Advertise in Gazette
– Memorandum of Advertisements to be Filed
– Parties to Attend the Hearing of the Petition – Notice of Intention to Appear
– Application to Intervene
– List of Persons Intending to Appear
– Notice of Intention to Appear
– Opposing the Petition
– Affidavits in Opposition
– Opposition to Petition by Contributory
– Hearing of Petition – Appointment of Liquidator
– Certificate of Compliance
– The Registrar’s Certificate
– Withdrawal of a Winding Up Petition
HEARING OF THE PETITION
– Adjournment
– Opposing a Winding Up Petition – Issue of Solvency
– Opposing the Petition – Factors to be Considered
– Dismissal of Petition
– Orders that may be Granted by the Court
– Winding Up Order
– Refusal to Make Winding Up Order
– Null and Void Order of High Court – Challenge in Collateral Proceedings
– Power to Set Aside a Perfected Order
– Discretion of Court to Refuse Winding Up Order
– Action or Proceeding Stayed after Winding Up Order
– Lodgement of Winding Up Order
– Typographical Error
– Transfer of Winding Up Proceedings
– Impact of Winding Up – Employees
– Costs to be Awarded for Petition
– Unless Orders
– Damages
6. CHAPTER SIX – STAY AND INJUNCTION
Introduction
– Stay
– Stay of Further Proceedings
– Stay of Winding Up Petition and Stay of Winding Up Order
– Effect of Winding Up Order – Stay
– Stay after Winding Up Order
– Stay – Special Circumstances
– Fear Factor – Whether Special Circumstances
– Counterclaim – Not a Special Circumstance
– Contradictory Decisions/Findings by Two Different Courts
– Date of Effect of Stay Order
– Termination of Winding Up
– Stay and Termination of a Voluntary Winding Up
– Injunction to Prevent the Filing of a Petition
– Injunction to Restrain Presentation of Winding Up Petition
– Application for Injunction – Test to be Applied
– Malaysian Position
– Bound to Fail Test
– Fortuna Injunction – Abuse of Process
– Tort of Malicious Prosecution
7. CHAPTER SEVEN – LIQUIDATION AND DISSOLUTION OF THE COMPANY
The Liquidator
– Appointment of an Interim Liquidator in a Compulsory Winding Up
– Where no liquidator is Appointed in a Winding Up by the Court
MODES OF APPLICATION FOR APPOINTMENT OF INTERIM LIQUIDATOR
– Summons in Chambers
– Ex parte Summons in Chambers
– Service of Ex parte Application for the Appointment of an Interim Liquidator
– Ex parte Application for the Appointment of an Interim Liquidator-Non-Disclosure of Material Facts
– Grounds for Appointment of Interim Liquidator
– ‘Sufficient Ground’ for the Appointment of a Provisional Liquidator
– The Appointment of the Liquidator after the Winding Up Order
– Order Appointing an Interim Liquidator
– Persons who may be Appointed as an Interim Liquidator
– Duration of Appointment
– Appointment of Interim Liquidator in a Voluntary Winding Up
– Members’ Voluntary Winding Up – Section 433(2)(a) of the Companies Act 2016
– Members’ Voluntary Winding Up – Exercise of Liquidator’s Power
– Creditors’ Voluntary Winding Up
– Where a Party other than Official Receiver is Appointed
– Security for Appointment as liquidator
– Inducement to be Appointed Liquidator
– Consent to Act as Liquidator
– Powers of the Interim Liquidator
– Residual Powers of Directors upon Appointment of Liquidator
– Qualification of Liquidator
– Remuneration
– Remuneration – Voluntary Winding Up
– Remuneration – Compulsory Winding Up
– Disallowing a Liquidator’s Remuneration
– Cost & Expenses of Winding Up – Insufficient Funds
– Remuneration – Delay in Winding Up Process
– Loss of Remuneration
– Powers of a Liquidator in Winding Up by Court
– Effect of Directions from Court
– Powers Exercisable Without Authority
– Legal Proceedings – Powers of Liquidator – Prosecution and or Defending Legal Proceedings
– Leave of Court
– Liquidator’s Liabilities to Costs
– Powers Exercisable with Authority
– Application for Directions
– Liquidator May Seek Court’s Assistance
– Directions by Court to Liquidator
– Powers of Liquidator over Directors
– Powers of Liquidators – Restraint on Exercise of Power
– Powers of Liquidator to Conduct Public Examination
– Proceedings in the Public Examination
– Notes of Examination
– Duties of Liquidator
– Summary of Action and Preliminary Findings
– Duty to Maintain Impartiality
– Exercise of Skill
STATUTORY FUNCTIONS OF THE LIQUIDATOR
– Prepare the Statement of Affairs
– Carry on the Business of Company
– The Appointment of a Special Manager
– The Liquidator’s Six-monthly Reports
– Auditing a Liquidator’s Account
– Limitation of Liquidator’s Expenses
PROPERTY OF COMPANY
– Duties in Relation to Creditors and Contributories
– Duties in Relation to Collection of Company’s Property
– Liquidator’s Books
– Liquidators Power to Sell
– Liquidator and Vesting Order
– Custody and Control all Property and Things in Action
– ‘Things in Action’ – ‘Property’ that vests in the Director General of Insolvency
– Surplus Assets
– Order for Attachment – The Assets of the Company and the Liquidator
– Creditor’s Meetings
– Special Manager
– Appointment of Special Manager
– Accounting by Special Manager
ACTIONS AGAINST THE LIQUIDATOR
– Suits against Liquidators – Leave of Court
– Aggrieved by Any Act or Decision of the Liquidator
– No Prima Facie Case
– Pecuniary Loss
– Proper Plaintiff Rule
– Committal Proceedings
– Control of Liquidator’s Powers and Duties
– Proof of Debts
RESIGNATION AND REMOVAL OF LIQUIDATORS
– Removal of Liquidators
– Grounds for Removal of Liquidators
– Vacancy after Removal – Voluntary Winding Up
– Resignation of Liquidator
– Effect of Cessation of Office
– Statement of Affairs
– Extension of Time to File the Statement of Affairs
– Parties Who May be Required to Furnish Statement
– Statement of Affairs – Preliminary Report
– Further Reports
– Submission of Statement
– Personal Interview
– Costs of Preparing Statement of Affairs
– Default in Matters Relating to Statement
– Summary of Statement of Affairs
COMPANY PROPERTY
– Vesting of Property after Winding Up
– Discovery and Delivery of Company’s Property
– Disposition of Property Made After Presentation of the Petition
– Distribution of Property of Company in Voluntary Winding Up
CREDITORS AND CONTRIBUTORIES
– Contributories
– Debt Due from Contributory to Company
– List of Contributories
– Death of Contributory
– First Meeting
– Court Meetings
– Contributories – Surplus of Assets
– Power of Court to Make Calls on Contributories
– Calls by Liquidator – Meetings
– Power of Court to Make Calls
COMMITTEE OF INSPECTION
– Importance of Committee of Inspection
– Absence of Committee
– Duties and Powers of the Committee
– Appointment of Committee of Inspection in Winding Up by Court
– Appointment of Committee of Inspection in a Voluntarily Winding Up
– Constitution
– Proceedings
– Resignation and Removal of Member
– Vacancy in Committee
– Powers of Committee
DISSOLUTION
– Release of Liquidators and Dissolution of Company
– Release
– Orders of Release or Dissolution
– Final Meeting
– Power of Attorney
– Striking a Company Off the Register
COMPANIES WINDING UP IS AN INDISPENSABLE REFERENCE FOR DIRECTORS, LAWYERS AND ALL WHO ARE INVOLVED IN CORPORATE MATTERS.
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