winding up

Compendium of Companies Act 2016 Cases: Part 1

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With the Companies Act 2016 in force for more than a year, I thought it is useful to set out a compendium of cases and transactions that have applied the Companies Act 2016 provisions.

As a summary, in terms of the reported cases, many of the cases relate to winding up based on the inability of the company to pay debts. This is under section 466 of the Companies Act 2016 (the old section 218 of the Companies Act 1965). Other cases also relate to other areas of winding up or shareholder disputes. I also highlight below examples of capital reduction and schemes of arrangement. Continue reading →

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Case Update: Winding Up Petition Cannot be Stayed Pending Reference to Arbitration

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In an earlier article ‘Arbitration and Liquidation: Never the Twain Shall Meet?‘, I had examined the possible tension between the contractual bargain to arbitration and the statutory right to bring winding up proceedings based on a debt. Would an arbitration agreement trump the statutory winding up process?

The recent High Court decision in NFC Labuan Shipleasing I Ltd v Semua Chemical Shipping Sdn Bhd [2017] MLJU 900; [2017] 1 LNS 943 found that there cannot be a stay under the Arbitration Act 2005 (AA 2005) of a winding up petition. A winding up petition is not a claim for payment. It is a class action in the public interest as part of a statutory regime. Therefore, it was held that a winding up petition is not a ‘proceeding’ that is susceptible to a stay pending arbitration. Further, a winding up petition does not concern a matter that is subject to an arbitration agreement. Continue reading →

Case Update: Malaysia’s Court of Appeal Confirms Power to Set Aside a Winding Up Order

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In the Court of Appeal’s grounds of judgment dated 10 August 2017 of Gan Bee San v Malayan Banking Berhad, the Court of Appeal allowed an appeal and set aside a winding up order. The decision confirms the growing list of appellate authorities where the Court has the inherent jurisdiction to set aside a winding up order. The brief facts are below.

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5 Key Legal Issues from the Closing Down of True Fitness Malaysia

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On 9 June 2017, True Fitness Malaysia announced that it would close its True Fitness and True Spa centers in Malaysia on 10 June 2017. It cited that its businesses were no longer financially viable due to evolving market conditions.

Credit: Picture from True Fitness website

 

It was reported that the True Fitness Malaysia gym members were left in the lurch and with uncertainty on their long-term memberships. The reports suggested that there may have even been new members being recruited for the gym very shortly before the announcement on the closure.

I address 5 key legal issues that arise from the closing down of the True Fitness business in Malaysia. I touch on the corporate restructuring of the True Fitness group, the impact of any winding up proceedings against True Fitness, and who may be liable for any claims by the gym members or creditors. Continue reading →

10 Common Issues Arising from the Companies Act 2016

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With the coming into force of the Companies Act 2016, a number of practical issues and questions have since cropped up. The Companies Commission of Malaysia (SSM) did release its helpful FAQ document. This document has been updated from time to time (presently, it has been updated up until 3 April 2017) and helps to answer the most frequently asked questions.

Nonetheless, there are still other common issues arising from the Companies Act 2016. I come across these queries in my practice or at the talks that I give. I set out below 10 of these key issues. Companies can consider seeking further clarification or advice. These issues range from the constitution, dividends, director-related issues, and transitional matters.

Continue reading →

Speaking at the Companies Commission: Closing of Companies and LLPs

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On 23 February 2017, I will be speaking at the Companies Commission of Malaysia for a talk entitled Closing of Companies and Limited Liability Partnerships. I am an associate speaker for COMTRAC, the Companies Commission of Malaysia Training Academy.

ssm-closing

There has been overwhelming response for this talk and the registration has already closed unfortunately. My co-speaker will be Puan Norhaslinda Salleh, Head of the Insolvency in the Registration Services Division of the Companies Commission.

The talk will be based on all the new provisions of the Companies Act 2016 as well as the Limited Liability Partnerships Act 2012. The focus will be the closing down of a business, whether it is the winding up of a company or a LLP. We will be sharing from our practical experience, and in particular, my co-speaker will be able to share from the regulator’s perspective.

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 We will cover areas on:

  1. Understand the process of winding up and its impact on the company, creditors and liquidators.
  2. Appreciate the difference in the two voluntary winding up processes.
  3. Identify the different effects of voluntary winding up on legal proceedings.
  4. Recognise the different grounds to initiate the court winding up process.
  5. Understand the court winding up process from the statutory demand until the winding up order.
  6. Be aware of the striking off procedure and to avoid striking off.
  7. How to apply for the striking off for a dormant company.
  8. Applying for the reinstatement of a struck off company.
  9. Learn on the practical issues arising from the management of assets of dissolved companies.
  10. Understand the winding up and striking off procedure for LLPs.

3 Pitfalls that Directors May Face in Winding Up

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In my earlier post, I had set out a summary of the winding up law in Malaysia. Now, I touch on the three possible pitfalls and liabilities which directors may face if their company is wound up.  The list is by no means exhaustive but I will only deal with three topics:

  1. The impact on the director’s credit rating.
  2. The need to cooperate with the liquidator.
  3. The possibility of being personally liable for the debts of the wound up company.

Tightrope Walker

As an introduction, the term ‘director’ means any person who holds the position of director by whatever name called. A question I am sometimes asked, especially by the director in trouble, is whether the law will differentiate between an “ordinary” director, and a managing director or executive director. For the purposes of the potential risks and liabilities, the law will not differentiate between any of such directors. All directors can potentially face the same level of liability. Continue reading →