TUTORIAL 10

QUESTION 2

First of all, the principles and procedure related to companies winding up and the role of the
liquidator in liquidation are dealt with in S.476 to S.490 for winding-up of company by court
order and the 12th Schedule Companies Act 2016 (hereafter known as CA). The first step
that the liquidator has to do in case a company is wound up would be to check the status of
the company which have been liquidated. Next, the liquidator would have to write the letters
to the company’s directors and secretaries to inform them about the winding up of the
company and send them the draft of the winding up order. The liquidators have to remind
them about the appointment of the liquidator and remind them about their duty to submit their
statement of affairs as stated under S.484 of CA.

Under S.484(3) of CA, it stated that the statement of affairs must be filed to the Court and
lodge with Registrar within 14 days from the date of winding up order. This is affirmed in
Dirga Niaga (Selangor) Sdn Bhd & Ors v Lim Chien Lang & Anor, which the court held
that before making the application of vesting order, the liquidator should have first obtained
the statement of affairs as that would have revealed the tru nature of the company’s assets and
liabilities.

The next duty is that the Company’s property will be vested upon him under S.483(1) of CA.
In Re Malaya bin Subuku; ex parte Kaya Karisma Sdn Bhd, the court held when a
liquidator is appointed, the company’s property shall be vested in and under the control of the
liquidator. In Lim Foo Choy & Ors v Synn Cheong Development Sdn Bhd (in liquidation)
& Anor, the court held that S.483 of CA mandates property of company under liquidation to
be vested to the liquidator. As the company had now been vested upon the liquidator, the
liquidator therefore has to defend any action relating to those property which effectuate the
winding up of the company recovering its property under S.483(2) of CA.
If the liquidator fails to vest such property under him to defend the Company’s property that
is need to effect the winding up, such as fail to lodge an office copy of the order with
Registrar and where the order relates to the land, lodge an office copy of the order with the
appropriate authority concerned with the registration or recording of dealings in that land,
then he would be regarded as to have committed an offence under S.483(5) of CA and
recognised in JB Precision Moulding Industries Sdn Bhd (In Liquidation) v Sime Diamond
Leasing (Malaysia) Sdn Bhd.

The liquidator should also open a bank account if he had received any money or property
belonging to the liquidated company under S.488 of CA. The liquidator may also commence
or defend action under S.486 of CA and 12th Schedule of CA. In Leopad Holdings Sdn Bhd
v Asian Shield Warehousing Sdn Bhd and Anor appeal, the court also held that only the
liquidator has the right to bring an action, or liquidator can grant sanction to a creditor or
contributor to commence or defend an action. Under S.486(1)(a) of CA, it stated the
liquidator has the power to exercise any general powers specified in Part 1 of the 12th
Schedule. These relates to commence or defend any legal proceedings involving the
company, transactions relating to the sale or otherwise of the movable or immovable property
of the assets and making payments in the ordinary course of business. Further, the liquidator
can now appoint an advocate to assist him and compromise any debts due to the company not
exceeding RM10,000.

Part 2 of the 12th Schedule of CA lists the circumstances where the liquidator would need
the approval of either the court or the committee of inspection in order to act. These include
carrying on the business of the company for more than 180 days arrangement with creditors,
debts, calls and liabilities where the amount claimed by the company is not less than
RM10,000 and not more than RM50,000. Under S.486(1)(b) of CA, the liquidator have to
obtain authority from the court first before exercising any powers listed under Part II of the
12th Schedule.

Under S.485(1) and S.485(2) of CA, the liquidator is required to submit preliminary report to
the Court. In Diara Niaga (Selangor) Sdn Bhd & Ors v Lim Chien Long & Anor and anor
appeal, the court held that the liquidator should submit the preliminary report once obtained
the statement of affairs and failing to do such had resulted in the Court to unable to verify the
steps taken by liquidator to identify the creditors before applying to the Court for vesting
order.
Moreover, the liquidator may also conduct investigation in regard to the affairs of the
Company. In Sunrise Megaay Sdn Bhd (dalam penggulungan) v Kathryn Ma Wai Fang,
the court held that the affairs of the company must be thoroughly and sufficiently investigated
by the liquidator. The liquidator must also arrange general meetings of the creditors or
contributors to ascertain their wishes under S.487(2) of CA or for purpose of obtaining
sanction of the company by special resolution under 11th Schedule of CA.

The liquidator must also complete the winding up process by realizing all the assets of the
company, distribute final dividend to the creditors, adjust mutual rights of the shareholder
and has made a final return to them under S.490 of CA. Lastly, the liquidator have to make
an application to the Court for his release from the office coupled with an application for an
order that the company is dissolved under S.491 of CA after the liquidator had completed his
duty.

Now, S.482 of CA stated a liquidator or interim liquidator appointed by court may a) resign
from office in accordance with the rules or b) on cause shown, be removed from office. by
the court. In Kong Long Huat Chemicals Sdn Bhd v Raylee Industries Sdn Bhd, the High
Court gave some guidelines on when a liquidator may be removed namely unfitness of
character, association with other parties, circumstances which liquidator was involved,
refuses to take action against recalcitrant directors, liquidator himself is miscreant, directors
are liquidated friend, conflicts of interest between liquidators duties and personal interests.
Under TR Hamzah & Yeans Sdn Bhd v City Centre Sdn Bhd, the High Court held that the
liquidator is an officer of the court and servant to the committee of inspection with a duty to
protect the interests of creditors and contributories. Therefore, if the liquidator fails to satisfy
with the creditors with the conduct, the creditors or contributories can actually apply to court
fro removal of liquidator provided the cause is shown.

As a conclusion, this showed that position of liquidator is very responsible. That is why the
amendments were brought in in 2019 under S.433 of CA to license the insolvency
practitioner and he must be from either accounting profession or legal profession and must
have several years of experience practising in the field and license will only be valid for 2
years to tighten the position of liquidator. If the creditors are unhappy with the way liquidator
is running it the creditors can applied to court to change the liquidator under S.482 and S.453
of CA, in some situation if liquidator commits fraud he may be personally liable as well.