WINDING UP

MEANING OF WINDING UP
A process where a company is dissolved.
Where the business is closed down, all assets are sold-off
to pay the creditors, and balance goes to the members.
Company ceases to exist.
Also known as liquidation.
Winding up the company must through legal process
because it exists through same manner.
There is Shelves Compan! or Dormant Compan!,
which means the company is not active any more but
remain in the existence or still alive.
t is cheaper to be bought from the !egister of Company
"!#C$ and the buyer can choose such shelves company,
which is suit to their business.
"#PES OF WINDING UP
There are $ tpes o% &'n('ng up of the company,
namely%
)* +oluntar W'n('ng Up
a. Mem,ers &oluntary Winding 'p
"(&W'$
b. Cre('tors &oluntary Winding 'p
"C&W'$
$* Compulsor W'n('ng Up
a. Application made to the court by
those people listed under Sect'on $)- .a/ up to .h/
i.e. ) types of persons*classes, which has 0ocus
Stan('! .r'ght/ to (o so.
b. The winding up of the company due
to circumstances which listed under Sect'on $)1 .a/
up to .n/*
+O0UN"A2# WINDING UP
a* Mem,ers +oluntar W'n('ng Up .M+WU/
"Liquidation of a solvent company$
2elevant sect'ons o% Compan'es Act )345
Sect'on $56 Circumstances company voluntary w*up.
Sect'on $56 .)/ .a/ 7 +assed ordinary resolution
Sect'on $56 .)/ .,/ 7 +assed special resolution
Sect'on $5- 7 ,eclaration of -olvency
Sect'on $51 7 (embers appoint a li.uidator
Sect'on $48 7 (eeting of creditors
Sect'on $55 .4/ .a/ +rovisional li.uidator appointed
before resolution for w*up was
passed.
Sect'on $51 .4/ .,/ W*up commence after passed
!esolution
Sect'on $56 up to Sect'on $-4 of CA /012
'nder Sect'on $56 7 C'rcumstances o% compan
voluntar &7up stated that . ) / A company may be
wound up voluntarily3
.a/ When the per'o( %'9e( in the MoA or AoA has
been e9p're(...4therefore,5company in general
meeting has passe( a resolut'on re.uire the
company to be wound up voluntarily.
- n AoA inserted clause
for internal matter.
- n AoA may state within
2 years if the company does not gain profit up to
/66 million the company should w*up.
- 7or instance one
company had pro8ect in China where the pro8ect
should be over within 9 years.
- (eans after 9 years the
company will be wound up voluntarily.
.,/ Company resolve by spec'al resolut'on.
- !esolution will be made by
-5 : or ;<6 vot'ng of the members.
- 'nder Sect'on $5- -
Declarat'on o% solvenc
Solvent
- The members of company
makes petition to winding up the company by members:
consent due to solvent to the company.
- Terms of solvent being used
to carry out mean'ng that compan asset are more
than the (e,t*
- When company had
problems, members passed declaration of solvency.
- Company will hol( meet'ng
.AGM = EGM$ to pass special resolution that company
in solvency.
- Afterward, the directors will
prepare declaration of solvency of the company.
Wh'le prepar'ng the
solvency the ('rectors &'ll %'n( out e'ther the company is3
a. The
company is solvenc
f
solvent its come under Sect'on $56 . ) / . a /
(
embers &oluntarily Winding 'p
t
called as consent by the company:s members through
resolution then declared the company is solvent.
b. The
company is 'nsolvenc
f
insolvent its come under Sect'on $56 .3 ) / . , /
t
called as consent by the company:s members then call
creditor for meeting to pass special resolution to declare
the company winding up.
- Then announcement will be
made the company meeting under Sect'on $56 .)/ .a/
or .,/.
'nder Sect'on $51 7 Mem,ers appo'nt a l'>u'(ator
- Through this section
members give power to appo'nt l'>u'(ator*
- ;i.uidator may appointed
from independent accountant, legal practitioner etc.
- 7or small company they will
appoint assignee.
- At this stage all compan
assets ,ecome %'9e( "stagnant$ and li.uidator will pick-
up all the assets.
- ;ater, appointed li.uidator
&'ll ('str',ute the company:s assets to the particular
parties, i.e. secured creditor and fixed charge including
debtors.
1

'nder Sect'on $48 7 Meet'ng o% cre('tor
- Creditor summoned for
meeting for voluntarily winding up.
- (eeting should be held
within < clear day "minus public holiday$
- f confirm insolvent creditor
will appoint li.uidator under Sect'on $4).
'nder Sect'on $55 . 4 / 7 Commencement o% &'n('ng up
- . 4 / A voluntary winding up
shall commence%
.a/
At the time of declaration .Mem,er +WU/
.,/
At the time of passing the resolution for voluntary
winding up .Cre('tor +WU/
Surplus<,alance
- f there is any balance
ordinary member will entitle for any surplus assets.
O&ner o% compan
- f there is no any surplus
the company:s owner will get nothing.
,* Cre('tors +oluntar W'n('ng Up .C+WU/
"Liquidation of an insolvent company$
Insolvenc
- Not 'n't'ate( , the cre('tors.
- nitiated by members but converted into
Creditor &oluntary w*up "C&W'$ because the company
is insolvent.
- Insolvent means compan has more (e,t
than the assets*
- (ember converted into creditor called for
meeting due insolvency of the company.
- Creditor will appoint the li.uidator.
Pr'or't asset ('str',ut'on
- +ay or distribute first to secured creditor and
fixed charge.
- 'nsecured and floating charge will leave
without any payment.
Cla'm , unsecure( cre('tor
- Corporate lawyer will find the director and try
claim from them due to breach of duty by the director,
i.e. statutory duty, fiduciary duty = skill, care and
diligence.
- f they incurred loss of profit to the company,
they will be liable to the unsecured creditor.
2elevant sect'ons o% Compan'es Act )345
- Sect'on $48 5 a company:s members in
general meeting pass a special resolution
- Sect'on $48 .6/ 5 a meeting of the
company:s creditors the same day or the following day
"of the members meeting$
Cre('tor +WU occurs '%?
- No (eclarat'on o% solvenc "means the
company is insolvent$
#!
- f at ant'me the l'>u'(ator v'e&e( that the
compan 's 'nsolvent*
Other matters
- Sect'on $54 5 7rom the commencement of
the winding up the compan cease ,us'ness ,ut the
corporate state and corporate po&er cont'nues unt'l
't 's ('ssolve(
- When the w*up is completed, the company is
normally (ereg'stere(
)* COMPU0SO2# WINDING UP
2elevant sect'ons o% Compan'es Act )345
- Sect'on $)- @ "hose people &ho can
appl to court %or &'n('ng up*
- Sect'on $)1 @ Groun(s o% compan
compulsor &'n('ng up*
- Those persons listed in Sect'on $)- with
val'( cause o% act'on can pass resolut'on an(
maAe appl'cat'on to the court to winding up the
company.
- Application made to the court by those
people listed under Sect'on $)- .a/ up to .h/ i.e. )
types of persons*classes, which has 0ocus Stan('!
.r'ght/ to (o so.
- The court ma or(er winding up '% the
c'rcumstances of the company is &'th'n those
l'ste( in Sect'on $)1 .a/ to .n/
- Example scenario of compulsory winding
up.
o Sect'on $)- . ) / . , / 7 Pet't'on ,
cre('tor
Sect'on $)-, > Appl'cat'on
for winding up.
Su,7Sect'on . ) /B >
Company ma &oun( up un(er an or(er o% the
Court on the position of,
Su, su,7Sect'on . , / An
('rectors, including a contingent or prospective
creditor, of the company.
C D E
o Sect'on $)1 . ) / . e /
Sect'on $)1,
C'rcumstances in which company may wound up.
Su,7Sect'on .)/, the Court
ma or(er &<up if.
Su, su,7Sect'on .e/, the
compan 's una,le to pa 'ts (e,ts.
C D E
o Sect'on $)1 . $ / . a / >
Sect'on $)1B (e%'n't'on o%
'na,'l't to pa (e,ts.
Su,7Sect'on .$/B A
compan shall ,e (eeme( to be una,le to pay its
debts if,
Su, su,7Sect'on .a/B A
cre('tor , ass'gnment ? otherwise to whom the
company is 'n(e,te( in a sum e9cee('ng 2M
588*88 F@
0'>u'(ator &'ll ,e appo'nte( , the court*
2

Sect'on $)1 .)/ .e/ 7@Una,le to pa 'ts (e,ts
Sect'on $)1 .$/ 7 Fa'ls to compl &'th a statutor
(eman(
- An execution issued on a 8udgment of any
court in favour of a creditor returned unsatisfied.
- Court taking into consideration company:s
liabilities, satisfied that it was not able to pay its debts.
Sect'on $)1 .$/ .a/ 7 2M 588<G 'n(e,te(
Sect'on $)1 .)/ .%/ - D'rectors acte( 'n the'r o&n
'nterests or 'n a manner 's un%a'r to mem,ers*
Case% Re ational !iscounts Ltd
A% f directors act in the interests of another company,
which they control, they can be said to be acting in their
own interest
Sect'on $)1 .'/ 7 Court 's o% op'n'on 't 's Hust an(
e>u'ta,le compan to ,e &oun( up*
'/ Dea(locA
Case% Re "enid#e $o%acco &o ltd
A% #rder winding up, though company made profit
Case% Re 'emantan Estate Ltd
C#A% !efused to order winding up. The company could
still be carried on and there was a reasonable hope of
reconciliation.
''/ Frau( or m'scon(uct
Case% Loch v (ohn )lac*wood Ltd
7% ,irectors failed to provide the minority members with
financial reports as re.uired by the law.
A% Allowed the petitioned
'''/ O,Hect o% the compan cannot ,e ach'eve(
Case% Re +erman !ate &offee &o
7% the company was formed to manufacture a coffee
substitute out of dates. 7ailed to ac.uire the patent for
that purpose.
A% The Company was wound up because it was set up
for a specific purpose and that purpose failed to be
achieved.
Case% Re $ivoli ,reeholds Ltd
A% Company was wound up on the ground of 8ust and
e.uitable.
'v/ Pet't'oner has ,een e9clu(e( %rom the management
'n contravent'on o% an un(erstan('ng*
E%rahimi v -est%ourne +alleries Ltd
EFFEC" OF WINDING UP
'/ Cre('tors
- Cannot enforce any 8udgment or order
obtained after the commencement of winding up
''/ Compan
- Cannot carry on business except for the
purpose of winding it up
- All document issued have the words B in
li.uidation:
- ,irectors lose power to manage = members
lose rights to transfer shares
'''/ Compan Emploees
- +ublication of winding up might serve as a
notice of dismissal
'v/ 2ece'ves
- !estrict their powers
+OIDAI0E "2ANSAC"ION
- Transactions entered in the period leading to
company winding up
- Sect'on $3;3 transfer, mortgage
- ;i.uidator may apply to Bavoid: the
transaction and this will increased the company:s fund
Note? Sect'on &'ll ,e teste( 'n the )
st
"est*
.'/ Sect'on $)1 .)/ .%/
7 D'rectors acte( 'n the'r o&n 'nterests or 'n a
manner 's un%a'r to mem,ers*
.''/ Sect'on $)1 .)/ .'/
7 Court 's o% op'n'on 't 's Hust an( e>u'ta,le
compan to ,e &oun( up*
3

Example scenario of compulsory winding up Sec. 218.
o Section 217 ( 1 ) ( b ) - Petition by
creditor
Section 217 ! "##$ic%tion &or
'indin( )#*
S)b-Section ( 1 ) ! +o,#%ny
,%y 'o)nd )# )nder %n order o& t-e +o)rt on t-e #o.ition o&
S)b .)b-Section ( b ) "ny
director. inc$)din( % contin(ent or #ro.#ecti/e creditor o& t-e
co,#%ny*
0 1 2
o Section 213 ( 1 ) ( e )
Section 213 +irc),.t%nce. in
'-ic- co,#%ny ,%y 'o)nd )#*
S)b-Section (1) t-e +o)rt ,%y
order '4)# i&*
S)b .)b-Section (e) t-e
co,#%ny i. )n%b$e to #%y it. debt.*
0 1 2
o Section 213 ( 2 ) ( % ) !
Section 213 de&inition o&
in%bi$ity to #%y debt.*
S)b-Section (2) " co,#%ny
.-%$$ be dee,ed to be )n%b$e to #%y it. debt. i&
S)b .)b-Section (%) " creditor
by %..i(n,ent 5 ot-er'i.e to '-o, t-e co,#%ny i. indebted in
% .), e6ceedin( 78 9::*:: ;<
=i>)id%tor 'i$$ be %##ointed by
t-e co)rt*
Section 213 (1) (e) -?@n%b$e to #%y it. debt.
Section 213 (2) - A%i$. to co,#$y 'it- % .t%t)tory de,%nd
- "n e6ec)tion i..)ed on % B)d(,ent o& %ny co)rt in
&%/o)r o& % creditor ret)rned )n.%ti.&ied*
- +o)rt t%Cin( into con.ider%tion co,#%nyD.
$i%bi$itie. .%ti.&ied t-%t it '%. not %b$e to #%y it. debt.*
Section 213 (1) (f) ?
Eirector. %cted in t-eir o'n intere.t. or in % ,%nner i. )n&%ir to
,e,ber.*
+%.eF Re National Discounts Ltd
GF H& director. %ct in t-e intere.t. o& %not-er co,#%ny '-ic- t-ey
contro$ t-ey c%n be .%id to be %ctin( in t-eir o'n intere.t
Section 213 (i) - +o)rt i. o& o#inion it i. B).t %nd e>)it%b$e
co,#%ny to be 'o)nd )#*
i) Ee%d$ocC
+%.eF Re Yenide !o"acco #o ltd
GF Irder 'indin( )# t-o)(- co,#%ny ,%de #ro&it
+%.eF Re Semantan Estate Ltd
+I"F 7e&).ed to order 'indin( )#* J-e co,#%ny co)$d .ti$$ be
c%rried on %nd t-ere '%. % re%.on%b$e -o#e o& reconci$i%tion*
ii) Ar%)d or ,i.cond)ct
+%.eF Loc$ % &o$n 'lac(wood Ltd
AF Eirector. &%i$ed to #ro/ide t-e ,inority ,e,ber. 'it-
&in%nci%$ re#ort. %. re>)ired by t-e $%'*
GF "$$o'ed t-e #etitioned
iii) IbBect o& t-e co,#%ny c%nnot be %c-ie/ed
+%.eF Re )erman Date #offee #o
AF t-e co,#%ny '%. &or,ed to ,%n)&%ct)re % co&&ee .)b.tit)te
o)t o& d%te.* A%i$ed to %c>)ire t-e #%tent &or t-%t #)r#o.e*
GF J-e +o,#%ny '%. 'o)nd )# bec%).e it '%. .et )# &or %
.#eci&ic #)r#o.e %nd t-%t #)r#o.e &%i$ed to be %c-ie/ed*
+%.eF Re !i%oli *ree$olds Ltd
GF +o,#%ny '%. 'o)nd )# on t-e (ro)nd o& B).t %nd
e>)it%b$e*
i/) Petitioner -%. been e6c$)ded &ro, t-e ,%n%(e,ent in
contr%/ention o& %n )nder.t%ndin(*
KAAK+J IA LHMEHMN @P
i) +reditor.
- +%nnot en&orce %ny B)d(,ent or order obt%ined
%&ter t-e co,,ence,ent o& 'indin( )#
O

ii) +o,#%ny
- +%nnot c%rry on b).ine.. e6ce#t &or t-e #)r#o.e o&
'indin( it )#
- "$$ doc),ent i..)ed -%/e t-e 'ord. P in
$i>)id%tionD
- Eirector. $o.e #o'er to ,%n%(e Q ,e,ber. $o.e
ri(-t. to tr%n.&er .-%re.
iii) +o,#%ny K,#$oyee.
- P)b$ic%tion o& 'indin( )# ,i(-t .er/e %. % notice o&
di.,i..%$
i/) 7ecei/e.
- 7e.trict t-eir #o'er.
RI=@MJ"7S LHMEHMN @P
8e,ber. Ro$)nt%ry Lindin( @# (8RL@)
(Li+uidation of a sol%ent company)
7e$e/%nt .ection. o& +o,#%nie. "ct 1TU9
Section 29O +irc),.t%nce. co,#%ny /o$)nt%ry '4)#*
Section 29O (1) (%) - P%..ed ordin%ry re.o$)tion
Section 29O (1) (b) - P%..ed .#eci%$ re.o$)tion
Section 297 - Eec$%r%tion o& So$/ency
Section 293 - 8e,ber. %##oint % $i>)id%tor
Section 2U: - 8eetin( o& creditor.
Section 299 (U) (%) Pro/i.ion%$ $i>)id%tor %##ointed
be&ore re.o$)tion &or '4)# '%. #%..ed*
Section 293 (U) (b) L4)# co,,ence %&ter #%..ed
7e.o$)tion
Section 29O )# to Section 27U o& +" 1TU9
+reditor. RL@
(Li+uidation of a insol%ent company)
Sec 29O (1)(b) - P%.. .#eci%$ re.o$)tion
- Eec$%r%tion o& Hn.o$/ency
Sec 2U: - S),,on creditor. &or ,eetin(
Sec 2U: - 8eetin( %t .%,e d%y 5 ne6t d%y
Sec 2U: - +reditor. ,%y no,in%te $i>)id%tor
Sec 29U ? Sto# biV
Sec 297 - Eec$%r%tion o& in.o$/ency 'i$$ be
&ind o)t '-i$e t-e director. #re#%re t-e dec$%r%tion.
doc),ent
Sec 29T - +reditor %##oint $i>)id%tor
Sec 299 (U) - +o,,ence,ent o& 'indin( )#
)#on #%..ed o& re.o$)tion*
9