Strike Off Company

In the event that the company is dormant or has no intention of carrying on business, the directors/members may apply for striking off. The company must meet the following requirements in order to be struck off:

Closing Down Marquee Sign
  • No assets and liabilities
  • No outstanding charges
  • No outstanding penalties or compounds with the SSM
  • No outstanding tax or liabilities
  • Up to-date company information with the SSM
  • No legal proceedings within or outside Malaysia
  • Have not made any return of capital
  • Not a holding company or Guarantor Corporation

How To Close Down A Company: Strike Off Or Wind Up?

Strike Off and Wind Up are the two most common methods for closing a business. Find the difference between the two.

The economic downturn and rapid market changes are the primary causes of company closures. When business owners have decided to discontinue a company’s operations, or when it has gradually ceased to be operational or has become inactive.

So what is to expect next? There are two common methods for closure of a company:
1) Strike Off / De-registration
2) Winding Up (Compulsory winding up OR Voluntary winding up)

Strike Off / De-registration

A company may be struck off or deregistered from the register if the Registrar has reasonable cause to believe that the company is not carrying on business or is not in operation. The effect is the same as de-registration whereby a company makes an application to the Companies Commission Malaysian under Section 550 of the Companies Act 2016 to de-register their company which is to have its name struck off from the Register. 

This situation occurs when a company is dormant and has no intention to do business. A company will be considered dissolved once the Notice is published in the Gazette.

Striking Off

If the Registrar has reasonable grounds to believe that a company is not carrying on business or is not in operation, the company may be struck off or deregistered from the register. The effect is the same as de-registration, in which a company applies to the Companies Commission Malaysian under Section 550 of the Companies Act 2016 to to de-register their company, which is to have its name removed from the Register.

This occurs when a company is dormant and has no plans to conduct business. Once the Notice is published in the Gazette, the company is considered dissolved.

De-registration

Under Section 550 of the Companies Act, the Registrar has the authority to strike the name from the Register if there is reasonable cause to believe that the company has ceased to operate or is no longer operating in any other way. Following the publication of the striking off notice in the Gazette, it will be considered dissolved.

Normally, the Registrar will never use its powers under section 550, preferring to let companies take the initiative. It is strongly advised that company owners who do not intend to use the company for business do not simply abandon it, as this can result in a significant fine.

Conditions for Striking Off

Before a strike off exercise can commence, a company has to fulfill the following conditions:
• Dormant and inactive i.e: not receiving any revenue nor incur any expenses at all
• Consented from the majority of the shareholders
• No assets and liabilities
• No bank account
• No outstanding tax or other liabilities including compound with any government bodies such as EPF, SOCSO, LHDN, and etc.
• No outstanding penalties or compound due to SSM under CA 1965
• Updated the latest information with SSM
• Not involved in any legal proceedings within or outside Malaysia
• Does not have any charges in the Register of Charges
• Has not made any return of capital to shareholders
• Not a holding company or subsidiary of another corporate body
• Not a Guarantor Corporation

A company can be deregistered by applying to the Companies Commission under Section 550 of the Companies Act to have its name removed from the Register. If the application is approved and the company has met all of the requirements, the Registrar will strike the name from the Register.

Winding Up

Winding up is the process of dissolving a business. When a company’s business operations are terminated and the goal is to sell off all assets to pay off creditors in order of priority. Winding up can be forced by the court or initiated voluntarily by creditors or members.

Compulsory Winding Up (Company Winding Up by Court)

It all starts with the filing of a petition in court. Under section 217(1) of the CA 1965 or section 464 of the CA 2016, petitioners include creditors, liquidators, the Registrar of Companies, or the Official Receiver.

If a company is losing money or is insolvent, its creditors can petition the court to force it to liquidate. The company is usually insolvent, and a director issues a Statutory Declaration stating that the company cannot continue operations due to its liabilities and that creditors’ meetings have been scheduled for a date within one month of the date of the declaration.

Voluntary Winding Up

There are 2 categories:

  • Members’ voluntary winding up (MVWU)
  • Creditors’ voluntary winding up (CVWU)

In a members’ voluntary winding up, the company is solvent, and a majority of the directors declares its solvency. Directors must declare that the company will be able to pay its debts in full within twelve (12) months of the start of the winding up process. The company has the ability to settle all debts during the winding up process.

In the case of creditors’ voluntary winding up, if the company is unable to meet its liabilities, it can call a meeting with its creditors to discuss its proposal for voluntary winding up of the company.

Conditions for Winding up

In order for a company to wind up, a company has to fulfill the following conditions:

  • Solve/ insolvent and active company.
  • Special resolution to be passed or the court makes an order.
  • Latest mandatory submissions are completed with SSM (i.e. Annual Return and Audited Financial Statements) before commencement of winding up process.
  • Appointment of liquidator by the shareholders and/or the creditors or by the court.
  • Advertise winding up status in local newspaper (2 times, each on both Malay & English newspapers)
  • Any surplus after payment to creditors is distributed to the company’s members.

 

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